During the 1930s, there was a spike in the number of trusts created as wealthy families responded to steep increases in federal gift and estate tax rates. These trusts are now approaching mandatory termination dates and advisors must consider how best to help beneficiaries prepare for a new influx of wealth.
Much focus has been placed on the implications of wealth transfer between members of the baby boomer generation and their heirs. For certain families, there may be a more pressing task at hand—many dynasty trusts that date back to the Depression Era are on the cusp of expiring, putting the classic tasks of planners into fascinating historical context.
Tax law reform can influence human behavior, a phenomenon we all experienced in 2012, when many wealthy individuals funded irrevocable trusts in response to the threat of the estate and generation-skipping transfer tax exemptions reverting to $1 million. There was a similar spike in trust creation during the 1930s and early 1940s.
Advisors should consider the following six issues as trusts approach termination.
This gallery was adapted from the original Trusts & Estates article, Depression-Era Trusts Come Home to Roost.