US equivalent to a deed of variation?

[Taxing Matters]

hi tm,

i guess the reason i was asking is because it would be a way to do what the op wants to do.

Actually, no it would not accomplish what the OP wants to do. His situation is that is that his father is named as the beneficiary of his aunt's estate. His father does not want the inheritance and wants other relatives that he chooses to get the stuff while also avoiding the gift tax consequences of that.

What you suggest does not deal with that situation. If the OP's aunt had the trust you described and named her brother (the OP's father) as only having the power to decide who gets the trust assets, there are one of two possibilities. The power could include the power to give the assets to himself as well as to others, in which case the same gift tax problem arises. And really, that just amounts to the same thing the father can do now: take the inheritance and then make gifts to whomever he wanted to have them if he decides he doesn't want it.

Or the aunt's trust could give her brother the power to decide who gets the assets but prevent him from making himself one of the beneficiaries. That would avoid the gift tax problem for the father, but would also mean that her goal of making him the primary beneficiary would not be achieved.

have you ever come across a trust in which someone else was selected, to decide who to give the assets to ?

Yes. It's not common, but it does happen.

if the aunt had let the brother (op's dad) make his selection, he could have chosen his 6 nieces and nephews, himself, or a combination ?

He could do that if the trust terms permit it, though he'd want to be mindful of any estate/inheritance/generation skipping taxes that get triggered by the choices he makes.

 

[Taxing Matters]

I didn't say that it was necessarily a trustee or successor trustee.

You said:

What you describe is simply a successor trustee.

That implies that all the persons fitting what he described would be a successor trustee; so in short, you implied that the person so designated would necessarily be a successor trustee.

 

[Zigner]

You said:


That implies that all the persons fitting what he described would be a successor trustee; so in short, you implied that the person so designated would necessarily be a successor trustee.

Oh, I agree that it could be inferred...but it was, after all, a hypothetical scenario.

 

[zddoodah]

My dad is her last surviving sibling, and is her sole beneficiary.

Please explain exactly what you mean by "her sole beneficiary."

Technically and legally, my cousins appear to not be entitled to anything since my dad is the sole heir after their dad died.

How do you figure?

First of all, your follow up post #3 indicates that your aunt had a will and that you don't know what it says. And, if she didn't have a will, and assuming your father and his brother were your aunt's only siblings (and assuming that your common grandparents are both dead, your father would be entitled to half of the estate, while his deceased brother's children would be entitled to the other half.

The UK has something called a deed of variation, where all or part of an inheritance can be redirected by the heir to someone else they choose, and it legally looks just as if the deceased had left it to them directly. Is there anything equivalent in US law?

I'm not sure why, if your father is caring for your mother, he wouldn't want the money to make her life better (I'm making assumptions here). In any event, the answer to the question is no, but he could assign his interest in the estate or simply disclaim it.

Is there a reason we don't have a similar law in the US?

Yes. There's a reason for everything. The reason for this is because no state legislature has seen fit to enact a law providing for the thing you described. You are, of course, free to lobby members of the California Legislature to enact a law in this regard.

 

[TrustUser]

hi tm,

i guess what i am getting at is that it is possible for someone to allow someone else to decide who gets what. had never heard of it, or even thought about it !!

so had the aunt discussed it with her brother, she could have written it up, such that her brother have the situation exactly as he wanted it.

taking the inheritance and gifting to others is not exactly the same as never getting it, in the first place. there may be reasons why both situations could be more desirable, depending upon the circumstances.

but it seems like a pretty smart way of giving your assets away. giving your beneficiaries the ability to choose who gets their share. they can still choose to keep it. but in this case, when the beneficiary does not want it, he can have someone else directly inherit it.

 

[ALawyer]

Just a minor point but for most of us mortals the Federal Estate Tax and Federal Gift Tax is NOT an issue. The Estate tax exemption and gift tax exemption are now $11,580,000, and although there is a 40% tax on amounts in excess of that, few estates are subject to the tax. (True, a gift tax information return may have to be filed if a gift exceeds $15,000, but that's only used to whittle down the $11+ million exemption.) Some states also have a State Estate Tax, but even in New York there is no estate tax until the estate exceeds $5,850,000.

 

[Taxing Matters]

hi tm,

i guess what i am getting at is that it is possible for someone to allow someone else to decide who gets what. had never heard of it, or even thought about it !!

Yep, you can do that if you choose.

taking the inheritance and gifting to others is not exactly the same as never getting it, in the first place.

If the person has the power to choose to either take it himself or designate who gets it if he does not want it then in practical terms there is no difference.

but it seems like a pretty smart way of giving your assets away. giving your beneficiaries the ability to choose who gets their share. they can still choose to keep it. but in this case, when the beneficiary does not want it, he can have someone else directly inherit it.

In most cases I see little value in it. It is no different than taking the inheritance and giving out the stuff to others if you want to do that. There are some situations in which providing some third person to make the choice of who gets what makes sense, but just to allow the beneficiary the choice of taking it himself or giving it to others provides no significant advantage over the beneficiary just taking the inheritance and giving the stuff away. No special trust or will provision is needed for that.

 

[Taxing Matters]

Just a minor point but for most of us mortals the Federal Estate Tax and Federal Gift Tax is NOT an issue. The Estate tax exemption and gift tax exemption are now $11,580,000, and although there is a 40% tax on amounts in excess of that, few estates are subject to the tax. (True, a gift tax information return may have to be filed if a gift exceeds $15,000, but that's only used to whittle down the $11+ million exemption.) Some states also have a State Estate Tax, but even in New York there is no estate tax until the estate exceeds $5,850,000.

Well, as a technical point, on the federal level what you are referring to is the unified credit against federal estate and gift taxes, not an exemption. For reasons I won't go into there, that distinction between a credit and exemption does matter in some circumstances. But you are correct that most people will not have estates large enough to use up that credit. Note though, that the credit goes back down to something over $5 million after 2025 when the Trump 2017 tax act changes expire. As one never knows how his or her own circumstances may change or how the tax laws will change, I still counsel people not to carelessly use up their unified credit. They might regret that later.

While a lot of states have eliminated most of their death taxes, some states still have inheritance or estate taxes that apply to much smaller estates than the federal estate tax does. State death taxes are one of the factors many people take into account when deciding where they want to go when they retire to the place they'll spend their final years.

 

[TrustUser]

hey tm,

are you seriously stating that the tax law may change in the future ?????????

LOL

 

[Taxing Matters]

are you seriously stating that the tax law may change in the future ?????????

Of course. Tax law changes all the time. Fun fact: there are more bills introduced in each session of Congress to change the tax law than in any other single area of law. Tax law changes so quickly that I subscribe to a tax news service to get the updates on every tax law, regulation, court decisions and agency actions that are enacted/issued/released. If the Democrats succeed in taking control of Congress and the White House they have promised a wide range of tax law changes they want to make, including a number of proposals to hit the wealthy and upper middle class up for more revenue to fund the various social and economic programs they want to pursue. One of those proposals would drastically lower the unified credit, making many, many more estates subject to estate and gift taxes. All the more reason to still be prudent on the use of that credit.

 

[TrustUser]

you knew i was teasing ??