Why a GST?

Technical topics regarding tax preparation.
#1
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A lower-earning client of mine (family income of about $60,000) is inheriting a condo that just sold for $360,000 and a brokerage account with abo0ut $200,000 in stocks. The family is not particularly wealthy.

The client received instructions for their lawyer as follows:

Can you please call to make an appointment to come in to sign your respective documents to set up your GST Exempt Trusts? Once you have signed, I can obtain an Employer Identification Number (like an social security number) for your Trust. From there, I will email you all the documents you need to set up your GST Exempt Trust at your chosen bank. You can then deposit your distribution check into the account in the name of your trust.

You are trustee of your trust, and have full and sole access to your trust account. You can take as much as you need to from your trust account for your or your descendants' health, education and support. You will need to file annual tax returns for your GST Exempt Trust, so please let your accountant know of its setting up. I can also speak to your accountant if needed.


Please go easy on me as my experience with trusts is elementary (I'm actually taking an extensive online course right now)...

Why a GST? Isn't that for families with more than ~$12,000,000?

Is GST tax return preparation specifically challenging and filled with traps and pitfalls as compared to the run-of-the-mill revocable/non revocable trust?
 

#2
sjrcpa  
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Makes no sense to me for $560K.

Just lay out their wishes in their wills.
 

#3
CO CPA  
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Maybe they're hedging on estate exemption being reduced in the future? Seems kind of aggressive though.
 

#4
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I could see "why a trust" given her close "family" situation.


The husband is.......... "blue collar" ..............is that a good word?....... And there are babies "here and there".

I'm not judging.

But I just don't see why a "GST" other than for what CO says.

I'm having trouble wording my humble question to the lawyers without seeming passive aggressive or like I'm second guessing them.

Perhaps I'll just prepare the 1041 (it is relatively simple) when the time comes and not say anything?
 

#5
JAD  
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The attorneys have boilerplate. They probably also have liability if they don't prepare GST exempt trusts and client wins the lotto. I think key is making sure that the client has the ability to simplify at the time of funding.

The other thing is that when the trusts fund, the amount of the estate will determine the # of trusts. If the assets are less than ~ $12M, then who cares if the trust is GST exempt or not? It is only when you have more than that that what would have funded only one trust winds up funding two trusts - GST exempt and non-GST exempt.

Please go easy on me as my experience with trusts is elementary (I'm actually taking an extensive online course right now)...


I find this stuff really challenging. It is different from income tax. I have to sit down with the trust document and draw pictures of what will happen under different scenarios. Doing that might help.
 

#6
Dennis2  
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Basically what Jessica says. Push the button and a ream of paper comes out of the machine. Changing default parameters is akin to one of you overriding your software.

Number one reason for a trust is probably asset protection.
 


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