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WealthManagement.com: New Delaware Law Expands Use of Trusts for Well-Being Programs
The Delaware Trust Act 2024 introduces groundbreaking changes to estate planning and wealth management, enabling families to establish trusts that include “well-being” and education programs for beneficiaries. This new law allows trusts to fund programs like seminars, coaching, retreats, and financial literacy training, preparing beneficiaries for inheritance while fostering family values, governance, and mental well-being.
Key highlights of the law include:
- Beneficiary Well-Being Programs: Trustees can fund and provide educational and personal development programs for beneficiaries, with some programs becoming mandatory trustee duties.
- Expanded Trustee Powers: Trustees now have discretionary authority to provide well-being services.
- Codification of Letters of Wishes: Trustors can guide trustees on trust intent, requiring precise drafting to avoid future disputes.
- Broadened Beneficiary Representation: The law expands who can be represented in trust matters, including minors and unascertainable beneficiaries, and clarifies rules for virtual representation.
- Simplified Asset Transfers: Changes to the Uniform Transfer on Death Security Registration Act allow for easier registration of assets like LLCs in beneficiary form.
The Trust Act 2024 isn’t limited to the ultra-wealthy; it appeals to any family wanting heirs to gain financial literacy and a connection to their family legacy. While the law offers innovative opportunities, advisors and families must carefully consider its complexities to maximize its benefits.
Read the full article on WealthManagement.com: New Delaware Law Expands Use of Trusts for Well-Being Programs
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Client success story
How one couple solved their massive estate tax problem & saved millions
Meet Bob and Carol* Bob, a successful entrepreneur, and his wife, Carol, are in their mid-70s. They have two grown children and two grandchildren. Bob has worked hard to build a thriving $20 million business from scratch. Over the past few years, he has been selling the company to partners in stages. He has $4 million remaining to sell. The couple’s net worth is $35 million. In addition to their $4 million stake in the business, Bob and Carol own investments and real estate. Bob also has $3.5 million in an IRA, which is not needed for lifestyle purposes. They do not own life insurance, but they do have old trusts that were done long before they accumulated their current wealth. Their existing trusts and planning do not account for their current objectives—which include charitable giving, asset protection and leaving a legacy to loved ones. Bob and Carol are very concerned about taxes. If both of them died today, they would be facing $6 million in estate and income taxes. If they lived to their respective life expectancies, assuming reasonable growth, taxes would increase to as much as $14 million.
TOP CHALLENGES
MAIN GOALS
Net worth very illiquid
Outdated estate plan
Faced significant tax problem of $6 million (today) and $14 million (life expectancy)
Sell remainder of business
Leave a legacy to heirs and charity
Protect assets and minimize tax impact
TOP CHALLENGES
Net worth very illiquid
Outdated estate plan
Faced significant tax problem of $6 million (today) and $14 million (life expectancy)
MAIN GOALS
Sell remainder of business
Leave a legacy to heirs and charity
Protect assets and minimize tax impact
SOLUTION
In close collaboration with Two Hawks, the couple created a comprehensive wealth preservation plan in three steps.
STEP 1
- Converted $3.5 million IRA to $12 million of life insurance and removed it from estate
- Saved $950,000 in taxes
STEP 2
- Gifted $4 million to an IGNIT PlanTM, an intergenerational net income trust, which ultimately becomes a $17 million gift to charity
- Created creditor-protected income streams for children and grandchildren
- Saved $2.1 million in income taxes
STEP 3
- Established an LLC and transferred $9 million of assets
- Sold to a family trust for a note and moved all future growth out of the estate
RESULT
Bob and Carol now have greater peace of mind and confidence knowing that they have a tax-efficient wealth preservation plan in place. They also are relieved that their plan is finally aligned with their values–and that they’re leaving true legacy to loved ones, rather than a major tax burden.
$950,000
estate tax savings
$2.1 million
income tax savings
$20 million
to children & grandchildren
$17 million
to charity
$0
to IRS