| BUSINESSWEEK ONLINE : SEPTEMBER 27, 1999 ISSUE | ||||||||
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| BUSINESSWEEK INVESTOR
A Trust for Minors: 'It Gives You Control' Joanne E. Johnson, a trust and estate lawyer at J.P. Morgan's Private Bank, often counsels clients on the best way to set up trusts for their children. She shared some tips with staff editor Anne Tergesen. Q: What are the advantages of a minor's trust? A: It gives you control over when a child gets the money. You can actually say they don't get anything until age 50 or 60. Q: How do generation-skipping trusts work? A: There is a 55% generation-skipping tax on money left to grandkids. But the government gives each person a $1 million exemption. I suggest that married clients put $2 million into a generation-skipping trust. Q: When should you establish one? A: If you wait until you die to transfer the money, all you have given the grandkids is $1 million of future value. But if you give now, you will shield your $1 million contribution -- plus any investment gains. Even though you can make your children beneficiaries of these trusts, don't allow them to withdraw all the money. The power of this is that it can shield trust funds from gift and estate taxes forever. Q: What other kinds of trusts do you recommend? A: I suggest that my clients incorporate philanthropic giving into their plan. It is a way of giving children another legacy -- a socially conscious legacy. You can set up a foundation and have the children run it. Even more creative is the charitable lead trust. Income goes to a charity for a period of years and then, afterward, to the kids. You get a deduction--and can save on gift taxes, too. Q: When do these trusts end? A: An ordinary trust agreement says the trust ends when there are no more living relatives. But the family may want to make a donation to charity. Or the trust may have gotten so small that it is no longer economically feasible to maintain. Allow the trustee to distribute the money to heirs if it is no longer viable to continue the trust. Q: If you have more than one heir, how should you divide a trust? A: Divide the money into shares yourself. You can split it unequally. Some children feel they are entitled to an inheritance. But the people who own the money have complete control over how it's apportioned: It's their money. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Gifts with Strings Attached TABLE: Tips for Setting Up Trusts A Trust for Minors: ``It Gives You Control'' INTERACT E-Mail to Business Week Online | |||
