One of the most important aspects of any estate planning package is the creation of a system by which one's heirs are able to inherit wealth with as little taxation as possible. For Oklahoma families who have amassed a level of wealth that exceeds the current estate tax exclusion amount, it is important to create a plan that will protect assets from excessive taxation. One such solution is found in the creation of Generation-Skipping Trusts (GST).
A GST allows an individual, known as the "settlor," to create and fund a trust that is intended to preserve wealth for the settlor's grandchildren. The settlor's children can be given the right to access any earnings that come from the trust, but the original funds are protected. When structured properly, the income from the base funds can be significant, and more than sufficient for the needs of the adult children. When the settlor's children pass away, the grandchildren will inherit the trust, and those funds will not be subject to the estate tax.
A GST is also useful in situations in which a settlor wishes to protect against losses sustained related to divorce. For example, if an adult child has children from a first marriage, then later remarries and has additional children, that new spouse may not have an interest in passing down inherited wealth to the children from the initial marriage. A GST would protect the inheritance and ensure that all grandchildren receive the inheritance that was intended for them.
A Generation-Skipping Trust is a powerful tool for long-term wealth preservation, and offers a good fit for many families. These types of trusts are usually used in conjunction with other estate planning measures intended for asset protection and estate tax savings. While no two Oklahoma families will have the exact same set of needs, there is an estate planning solution available for everyone.
Source: Forbes, "Do You Need A Trust For Your Estate Plan?", Gary Plessl and Kevin Houser, May 14, 2015