In 2022, the cap on the annual exclusion for federal gift taxes was raised to $16,000 per individual annually. How that affects you will depend on the exact nature of your estate plan because the way beneficiaries receive gifts has a significant impact. In no case is this more true than when a minor receives a gift. If you are considering bestowing direct gifts to minors in your trust, please read on, then contact an experienced Rockland County trusts attorney to learn what you should know about direct gifts to minors in New York estate planning.
What are the dangers of direct gifts to minors in New York estate planning?
Creditors attempting to collect money may swoop in when a beneficiary receives a direct gift. Minors might not have the resources or capacity to repel or assuage these creditors, especially if your estate plan was insufficient and gave assets to beneficiaries who did not expect them. More than anything, minors receiving direct gifts will require structure so that they do not squander the assets or lose them in business dealings they do not fully comprehend.
Before you consider whether or not to give a minor a direct gift, you should reach out to a skilled Rockland County wills, trusts and estates attorney to discuss how to protect your beneficiaries.
How can you protect minors receiving direct gifts in New York?
In the Empire State, you have a few options at your disposal, most stemming from the establishment of custodial accounts and/or trusts. Some of your options are as follows:
- Custodial account: This method can be adapted to fit your needs, but it provides structure to when and how the minor receives the assets until he or she reaches the age of 18 or turns 21, upon which time the assets are directly passed on to the recipient, including all investment and management choices.
- Irrevocable trusts: This method lets assets be utilized for a wide range of needs, including medical costs or the purchase of real estate, but a trustee can manage the assets even after the recipient reaches the age of majority.
- Minor trusts: This method applies assets for minor beneficiaries with limited exceptions and, once the beneficiary turns 21, affords him or her the opportunity to withdraw assets from the trusts. Any assets not withdrawn can be kept in the trust, which can then be converted to another type of irrevocable trust that permits continued annual exclusion gifts to be made to a beneficiary.
Let our firm help you determine which is the best option for you and your beneficiary. Please give us a call today.
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The Lauterbach Law Firm is proud to serve clients throughout Rockland County who are faced with legal matters related to estate planning, real estate, foreclosure defense, landlord-tenant law, business law, and criminal defense. If you require the services of an experienced team of attorneys, contact The Lauterbach Law Firm today to schedule a consultation.