Trust & Estate Planning

An irrevocable trust is a trust that cannot be modified or dissolved without the permission of the beneficiary (or beneficiaries). The grantor of an irrevocable trust gives up all rights of ownership to the trust and the assets therein. The assets put in irrevocable trusts are not considered part of the grantor’s estate for estate tax purposes, which can offer the heirs of sizable estates significant tax benefits.

Step-up in basis refers to a provision in the U.S. tax code that allows for the cost basis of an inherited asset to be adjusted to its fair market value on the date of the decedent’s death. When an asset is sold, its cost basis (i.e., the price it was bought for) is subtracted from its sale price to determine the investor’s taxable gain or loss. Step-up in basis significantly reduces the taxes owed on capital gains from inherited assets, which is why it is often criticized for shielding the rich from fair tax treatment and exacerbating wealth inequality.

Per stirpes is a Latin term meaning “by branch.” In the context of wills, it is a legal term stipulating that should a beneficiary predecease a testator—the person who has made the will—the beneficiary’s share of the inheritance goes to the beneficiary’s heir rather than the testator’s other beneficiaries.

Conservatorship is a legal arrangement in which a court appoints a party, the conservator, to manage the personal and financial affairs of a minor or person deemed incapacitated. Conservatorships came to public attention in 2021 when singer Britney Spears sued to end a 13-year conservatorship overseen by her father that she decried as exploitative and abusive.

Probate is the legal process in which a will is evaluated to determine if it is valid and authentic. Probate also involves assigning the executor or (if there is no will) the administrator of the estate. States will often exempt estates below a certain size from probate. And some assets, like retirement accounts with a designated beneficiary or the contents of a trust, are not required to go through probate.

A special needs trust is a fiduciary arrangement that provides people with physical or mental disabilities or chronic illness with income that does not impact their eligibility for disability benefits offered through Social Security, Medicare, or Medicaid. Assets—the beneficiary’s and/or a third party’s—are put in trust and managed by a trustee, who dispenses the money according to the terms of the trust.