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Using Estate Planning Tools to Transfer Stocks and Equity Awards

Passing down wealth in the form of stock options, restricted stock, restricted stock units, ESPPS, other kinds of equity awards, or holdings of company shares requires unique estate planning considerations. A recent article, “Estate and Charitable Planning for Stock Options, RSUs, and Company Stock” from Forbes, presents insights on navigating this complex estate planning area.

Tax law changes are coming soon. However, the provision on the exemption amounts for estate tax and gift tax won’t impact the core strategies of these types of planning tools.

Think of revocable trusts, also called living trusts, like baskets to be filled with assets. By placing assets into a revocable trust, you avoid probate, maintain privacy and streamline asset distribution to beneficiaries. The revocable trust is flexible and can be altered in any way you want while living.

An irrevocable trust is different. The grantor cannot modify it once it is established and funded. However, the irrevocable trust comes with more tax advantages and asset protection. Assets in an irrevocable trust have better protection from creditors and may not be counted for Medicaid purposes. Your estate planning attorney will help determine which assets are best placed in this trust.

Beneficiary designations allow assets to be left directly to beneficiaries for financial instruments, such as life insurance policies, investment accounts and retirement funds. Depending upon the terms of your employer’s stock plans and procedures, it may be possible to have beneficiaries designated for equity awards, including RSUs (Restricted Stock Units) or NQSOs (Non-Qualified Stock Options).

The account your shares go into from an RSU vesting, options exercise, or ESSP purchase may have separate forms for beneficiary designations. The beneficiary designations you may have elected for stock grants do not automatically apply to the actual shares received. You’ll need to take extra steps to be sure that these assets go to the right people.

Each company’s stock plan has its own rules for what happens to any outstanding equity awards upon death. It’s possible for unvested stock options and RSUs to be forfeited. Read the grant agreement carefully. In some companies, the grant agreement allows vesting to continue or even to accelerate the vesting, and in the case of options, extend the exercise period for vested options.

Don’t neglect tax planning for gifting and wealth transfer. You may gift up to $19,000 every year to any individual without impacting your lifetime exemption or paying gift tax. Once you exceed the annual amount, your lifetime exemptions are reduced.

With gifts of assets like company stock, tax basis and holding periods carry forward. This lifetime gifting is helpful for all income levels, including gifting shares to people who would have a lower tax rate than gifts or on capital gains when stocks are sold.

Be mindful of the kiddie-tax rules before gifting shares to children to sell. Check with your estate planning attorney to clarify how this might impact tax liabilities.

Donating company stocks held for at least one year to charities is more tax-efficient than selling the stock and gifting cash proceeds. A tax deduction for the fair market value is created at the time of the stock donation. Appreciated investments are an excellent way to support charities, avoiding capital gains for the donor, which would otherwise be realized at the time of sale.

Other estate planning tools used for wealth transfer are Grantor-Retained Annuity Trusts (GRATs), Intentionally Defective Grantor Trusts (IDGTs) and Charitable Lead Trusts (CLTs). Your estate planning attorney can help guide you in which of these numerous tools will be most effective for your own estate plan.

Reference: Forbes (May 14, 2025) “Estate and Charitable Planning for Stock Options, RSUs, And Company Stock”

Fashion Designer Takes Uniquely Named Approach to Her Will

Get ready because this is a doozy, or more accurately, a floozy. Minkoff, founder of a global handbag and clothing empire, has a “floozy clause”—a provision in her will stating if she predeceases or divorces her husband, her assets all go into a trust for her children. This is to prevent a second spouse from gaining access to her wealth, reports the article “Fashion Designer Rebecca Minkoff Reveals She Has ‘Floozy Clause’ In Will” from mondaq.

Minkoff says her mother came up with the idea, long before she or her husband had any money. However, Minkoff counted on becoming highly successful. She maintains that she trusts her husband implicitly. She doesn’t trust what someone else might do if she dies. Her goal is to prevent her children from needing to go to court against an unscrupulous person.

While the title of this provision is admittedly unique, it’s very common for individuals to want to have specific directions carried out after their death, from wishes for the administration of their estate or distribution of assets. Some want to restrict who their beneficiaries marry or even dictate the religion of a spouse.

Another somewhat unusual provision is the Special Trustee for Hostile Acts. In one case, it was used by a mother who wanted to bring harmony to her five children’s relationship after she died. She appointed a Special Trustee to limit trust determinations to any child engaging in a hostile act. However, controlling from the grave doesn’t always work. Litigation ensued between the siblings, and the case made its way up to an Appellate Court, which upheld the provision but declined to limit the application despite the request of several of the children. This mother knew her children very well.

A provision attempting to control the religious marriage requirement can be expected to be enforced if it doesn’t impose a total restraint on marriage in general or promote divorce. On the other hand, a provision providing a financial benefit for an illegal act will always be found invalid.

Back to Minkoff’s strategy: it’s got at least one flaw. If funds or assets pass directly to her husband at some point in time and he hasn’t moved on to a “floozy” with someone five years after her death, he can do whatever he wants with those assets. A better solution would be to put the assets in an Irrevocable Trust containing the limitations and restrictions she wants.

Her plan also creates a tax issue. A gift in trust for the surviving spouse passing to the children if the spouse remarries means the trust won’t qualify for the estate tax marital deduction. There is a way around this, however. The trust can be structured so that the surviving spouse receives the net income of the trust during their lifetime.

The plan isn’t a bad one. However, an irrevocable trust might be a better way to achieve the desired end in cases like this.

There is another aspect to consider when planning to control assets after death. Children are happier when their parents are happy. If a second marriage would make a surviving spouse happier, having to live under the constraints of a “floozy clause” could create resentments and tensions within the family.

Talk with your estate planning attorney about creating an estate plan to achieve your goals while you are living and after you have passed. If controlling assets after you have passed is important to you, they’ll be able to come up with a plan. You don’t have to create a new name for it—unless your mother is as clever as Minkoff’s.

Reference: mondaq (April 10, 2025) “Fashion Designer Rebecca Minkoff Reveals She Has ‘Floozy Clause’ In Will”

What Will Happen to O.J. Simpson’s Assets?

A wrongful death lawsuit in 1997 found O.J. Simpson liable for the deaths of ex-wife Nicole Brown-Simpson and her friend Ron Goldman. Yet, their families have received little of the $33.5 million judgment levied by a California civil jury. According to an article from The Washington Post, “If O.J. Simpson’s assets go to court, Goldman, Brown families could be first in line,” we may find out soon whether or not Simpson had done any estate planning.

If Simpson had only a will, the estate would go through the probate process in court. Probate laws vary from state to state, but generally, the estate is filed in the person’s state of residence. Simpson resided in Nevada but might have owned assets in California or Florida, where he resided at different times. If that’s the case, separate probate cases will also be opened in those states.

The Nevada probate rule requires an estate to go through probate if its assets exceed $20,000 or the decedent owns any real estate. Probate must take place within 30 days, so things may happen quickly.

If no documents are filed, creditors can file claims to recover assets. The Goldman and Brown families may not be alone in filing for assets, but they’ll undoubtedly have a higher visibility than a credit card company or bank.

In California, the law holds that creditors with a judgment are considered to have “secured debt” and take priority over other creditors. In one instance, a family was awarded $9 million by a jury, but the debtor subjected them to a prolonged series of appeals and delays. When the debtor died, the estate paid the $9 million plus accrued interest of $3 million.

Did Simpson leave an estate big enough to cover his debts? At the time of the civil lawsuit, the court seized many of Simpson’s possessions. He was forced to auction his Heisman Trophy, which brought $230,000. He claimed to only have income from pensions, one from the NFL and the other a private pension.

Whether Simpson had a structured estate plan with trusts could affect how his creditors will be compensated. The creation and funding of the trusts will also affect their accessibility. Irrevocable trusts are robust legal entities but may not always be 100% impenetrable.

A transfer of assets made to avoid paying creditors is considered fraud, so any trust could be deemed invalid. If this occurs, the Goldman and Brown families may file separate lawsuits to attach assets in the trust.

You don’t have to be famous to have creditors trying to get assets from your estate. Seeking advice from an estate planning attorney about structuring your estate to shield inheritances from creditors is always advisable.

Crafting Your Family’s Financial Future: The Power of Family Trusts

A family trust is a pivotal tool in estate planning, offering a strategic way to manage and protect assets for the benefit of family members. Understanding the intricacies of establishing a family trust can ensure financial stability and peace of mind for you and your loved ones.

What Is a Family Trust?

At its core, a family trust is any trust established to benefit your family members. This type of trust allows for the management and protection of assets, ranging from bank accounts to real estate, and ensures that these assets are used for the benefit of family members.

Purpose of a Family Trust

The primary purpose of a family trust is to manage and protect family assets for current and future generations. By placing assets in a trust, you can provide for loved ones, protect assets from creditors and, in some cases, avoid estate taxes.

Types of Family Trusts

There are different types of family trusts, each serving unique purposes. The most common types include:

  • Living Trust: A living trust is established during your lifetime and can be either revocable or irrevocable.
  • Revocable Trust: This type of trust allows you to retain control over the trust assets and make changes to the trust as needed.
  • Irrevocable Trust: Once set, an irrevocable trust cannot be easily altered. It offers benefits like protection of assets from creditors and potential tax advantages.
  • Testamentary Trust: This trust is set up as part of a will and only comes into effect upon death.
  • Special Needs Trust: Created to provide for a family member with special needs without disqualifying them from government benefits.
  • Marital Trust: Designed to benefit a surviving spouse and offer tax advantages.

Establishing a Family Trust

Establishing a family trust involves several steps:

  1. Decide the type of trust that best suits your needs.
  2. Draft the trust agreement detailing the terms of the trust.
  3. Transfer assets into the trust.

Consulting with an estate planning attorney to set up your trust ensures that it is established correctly and meets your needs.

Benefits of a Family Trust

A family trust offers several benefits, including:

  • Asset Protection: Protects assets from creditors and legal judgments.
  • Tax Advantages: Can help minimize estate and gift taxes.
  • Control over Assets: Allows you to specify how and when assets are distributed to beneficiaries.
  • Avoiding Probate: Helps transfer assets without probate, which can be time-consuming and costly.

Parties Involved in a Family Trust

The key parties involved in a family trust include:

  • Settlor: The person who creates the trust and transfers their assets.
  • Trustee: Responsible for managing the trust assets according to the trust agreement.
  • Beneficiaries: The family members or other entities benefiting from the trust.

Revocable Trust vs Irrevocable Trust

Choosing between a revocable and an irrevocable trust depends on your goals:

  • Revocable Trust: Offers flexibility as you can make changes during your lifetime. It does not provide asset protection from creditors.
  • Irrevocable Trust: Provides asset protection and tax benefits but is less flexible since you cannot easily alter the trust once it is established.

Trust vs Will

A trust and a will serve different purposes in estate planning:

  • Trust: Provides for managing and distributing assets during your lifetime and after your death.
  • Will: Comes into effect only after death and dictates how your assets should be distributed.

Family Trust vs Other Trusts

Family trusts are specifically designed to benefit family members. They differ from other trusts, such as charitable trusts, which are set up to benefit a charity or the public.

Creating Your Family Trust

Creating a family trust involves thoughtful planning and understanding of your financial goals. Working with an estate planning attorney or financial advisor is advisable to ensure that your trust is set up according to your wishes.

Conclusion

Establishing a family trust can be a crucial step in protecting your assets and ensuring the financial well-being of your family. If you’re considering setting up a family trust, contact an experienced estate planning attorney to explore your options and create a plan tailored to your needs.

Key Takeaways

  • Family trusts offer asset protection, tax advantages and control over the distribution of assets.
  • Different types of family trusts cater to various needs, including living trusts, irrevocable trusts and special needs trusts.
  • The choice between a revocable and irrevocable trust depends on your specific goals and the level of control you wish to maintain.
  • Working with an estate planning attorney is essential in establishing a trust that meets your family’s unique needs.

What Should I Do to Get My Affairs in Order?

Estate planning is one of the most important tasks you can do for your family. It has many different steps. Using a checklist can help be sure your wishes are met and simplify the process for loved ones, according to an article from Forbes, “Estate Planning Checklist: Get Your Affairs In Order.” Every plan is different. However, there are several primary steps everyone needs to take to protect their future and secure their legacy.

Identifying What Needs to Happen to Protect Wealth: Asset protection is crucial to estate planning. One way to do this is to create a Medicaid protection plan. Nursing home care is expensive and not covered by Medicare or other medical insurance, except in very limited situations. Medicaid does cover custodial care in a nursing home. However, you need limited assets to qualify. A Medicaid plan helps ensure that you can access care while protecting wealth. Ask your estate planning attorney about a Medicaid Asset Protection Trust.

You may also need to protect assets against creditor claims, be sure an irresponsible heir doesn’t burn through any inheritance, or take steps to limit or avoid estate taxes. All of these can be accomplished with the help of an experienced estate planning attorney.

Consider Your Heirs and Their Needs: You may face unique circumstances impacting the people who inherit your wealth or your ability to provide for them. For instance, a direct inheritance could jeopardize their eligibility if your family includes a special needs individual who receives government benefits such as Supplemental Security Income (SSI) or Medicaid. You may need to have a Special Needs Trust (SNT) created.

Other issues to consider when creating your estate plan include leaving money or other assets to minor children not old enough to inherit or manage funds or leaving money to someone you don’t trust to manage it. By thinking about who you wish to provide for, you can make informed choices about the strategies and tools used to create your estate plan.

A Plan to Transfer Assets: Once you’ve clarified your heirs’ needs and any potential threats to your wealth, you’ll be better positioned to create an estate plan to facilitate the transfer of your property to the people or charities you want after death.

Your estate plan will likely include the following:

  • A last will and testament.
  • Pay-on-death accounts.
  • Jointly owned property.
  • Revocable Trusts.
  • Irrevocable Trusts.

Prepare for Incapacity: Preparing for possible incapacity should be a key part of your estate planning checklist. This includes:

  • Creating a durable power of attorney—to allow someone of your choosing to act on your behalf in managing assets and making decisions for you.
  • Naming a healthcare proxy—giving someone the power to make medical decisions for you.
  • Creating a living will—allowing you to convey your wishes for medical care regarding being kept alive by artificial means.

Address Other Issues: If you have minor children, your will is used to name a guardian. You may also mention your pets and designate a person to care for them and arrange financial support for their lifetime. You can also include instructions for your funeral, although the will may not be reviewed for a while after your passing. Talk with your estate planning attorney about how to best handle this in your jurisdiction.

Reference: Forbes (Dec. 25, 2023) “Estate Planning Checklist: Get Your Affairs In Order”

Addressing Vacation Home in Another State in Estate Planning

Many families have an out-of-state cabin or vacation home that’s passed down by putting the property in a will. While that’s an option, this strategy might not make it as easy as you think for your family to inherit this home in the future.

Florida Today’s recent article entitled “Avoiding probate: What is the best option for my out-of-state vacation home?” explains the reason to look into a more comprehensive plan. While you could just leave an out-of-state vacation home in your will, you might consider protecting your loved ones from the often expensive, overwhelming and complicated process of dealing both an in-state probate and an out-of-state probate.

There are options to help avoid probate on an out-of-state vacation home that can save your family headaches in the future. Let’s take a look:

  • Revocable trust: This type of trust can be altered while you’re still living, especially as your assets or beneficiaries change. You can place all your assets into this trust, but at the very least, put the vacation home in the trust to avoid the property going through probate. Another benefit of a revocable trust is you could set aside money in the trust specifically for the management and upkeep of the property, and you can leave instructions on how the vacation home should be managed upon your death.
  • Irrevocable trust: similar to the revocable trust, assets can be put into an irrevocable trust, including your vacation home. You can leave instructions and money for the management of the vacation home. However, once an irrevocable trust is established, you can’t amend or terminate it.
  • Limited liability company (LLC): You can also create an LLC and list your home as an asset of the company to eliminate probate and save you or your family from the risk of losing any other assets outside of the vacation home, if sued. You can protect yourself if renting out a vacation home and the renter decides to sue. The most you could then lose is that property, rather than possibly losing any other assets. Having beneficiaries rent the home will help keep out-of-pocket expenses low for future beneficiaries. With the creation of an LLC, you’re also able to create a plan to help with the future management of the vacation home.
  • Transfer via a deed: When you have multiple children, issues may arise when making decisions surrounding the home. This is usually because your wishes for the management of the house are not explicitly detailed in writing.
  • Joint ownership: You can hold the title to the property with another that’s given the right of survivorship. However, like with the deed, this can lead to miscommunication as to how the house should be cared for and used.

Plan for the future to help make certain that the property continues to be a place where cherished memories can be made for years to come. Talk to a qualified estate planning attorney for expert legal advice for your specific situation.

Reference: Florida Today (July 2, 2022) “Avoiding probate: What is the best option for my out-of-state vacation home?”

Is Putting a Home in Trust a Good Estate Planning Move?

A typical estate at death will include a personal residence. It’s common for a large estate to also include a vacation home, or family retreat. Leaving real property in trust is common.

Estate plans that include a revocable trust will fund the trust by a pour-over, says Kiplinger’s recent article entitled “Should You Own Your Home in Your Trust?”

A settlor (the person establishing a trust) often will title their home to the revocable trust, which becomes irrevocable at death.

Another option is a Qualified Personal Residence Trust, which is irrevocable, to gift a valuable home to a trust for the settlor’s children. With a QPRT, the house is passed over a term of years while the original owner continues to live there, so the gift passes with little or no gift or estate tax.

Some trusts arising from a decedent estate will hold the home belonging to the settlor without any instructions for its disposal or retention. Outside of very large trusts, a requirement to actually purchase homes for beneficiaries in the trust is far less common.

It is more common in a large trust to have terms that let the trustee buy a home for a beneficiary outside the trust or keep the settlor’s home in the trust for a beneficiary’s use, including purchasing a replacement home when requested.

The trustee will hopefully propose a plan that will satisfy the beneficiary without undue risk to the trust estate or exceeding the trustee’s powers. The most relevant considerations for homeownership in a trust are:

  • The competing needs of other trust beneficiaries
  • The purchase price and costs of maintaining the home
  • The size of the trust as compared to those costs
  • Other sources of income and resources available to the beneficiary; and
  • The interests of the remaindermen (beneficiaries who will take from the trust when the current beneficiaries’ interests terminate).

The terms of the trust may require the trustee to ignore some of these considerations.

Each situation requires a number of decisions that could expose the trustee to a charge that it has acted imprudently.

Those who want to create a trust should work with an experienced estate planning attorney to avoid any issues.

Reference: Kiplinger (Feb. 8, 2022) “Should You Own Your Home in Your Trust?”

Must I Sell Parent’s Home if They Move to a Nursing Facility?

If a parent is transferring to a nursing home, you may ask if her home must be sold.

It is common in a parent’s later years to have the parent and an adult child on the deed, with a line of credit on the house. As a result, there’s very little equity.

Seniors Matter’s recent article entitled “If my mom moves to a nursing home, does her home need to be sold?” says that if your mother has assets in her name, but not enough resources to pay for an extended nursing home stay, this can add another level of complexity.

If your mother has long-term care insurance or a life insurance policy with a nursing home rider, these can help cover the costs.

However, if your mom will rely on state aid, through Medicaid, she will need to qualify for coverage based on her income and assets.

Medicaid income and asset limits are low—and vary by state. Homes are usually excluded from the asset limits for qualification purposes. That is because most states’ Medicaid programs will not count a nursing home resident’s home as an asset when calculating an applicant’s eligibility for Medicaid, provided the resident intends to return home

However, a home may come into play later on because states eventually attempt to recover their costs of providing care. If a parent stays a year-and-a-half in a nursing home—the typical stay for women— when her home is sold, the state will make a claim for a share of the home’s sales proceeds.

Many seniors use an irrevocable trust to avoid this “asset recovery.”

Trusts can be expensive to create and require the help of an experienced elder law attorney. As a result, in some cases, this may not be an option. If there’s not enough equity left after the sale, some states also pursue other assets, such as bank accounts, to satisfy their nursing home expense claims.

An adult child selling the home right before the parent goes into a nursing home would also not avoid the state trying to recover its costs. This because Medicaid has a look-back period for asset transfers occurring within five years.

There are some exceptions. For example, if an adult child lived with their parent in the house as her caregiver prior to her being placed in a nursing home. However, there are other requirements.

Talk to elder law attorney on the best way to go, based on state law and other specific factors.

Reference: Seniors Matter (Feb. 25, 2022) “If my mom moves to a nursing home, does her home need to be sold?”

Where Do You Score on Estate Planning Checklist?

Make sure that you review your estate plan at least once every few years to be certain that all the information is accurate and updated. It’s even more necessary if you experienced a significant change, such as marriage, divorce, children, a move, or a new child or grandchild. If laws have changed, or if your wishes have changed and you need to make substantial changes to the documents, you should visit an experienced estate planning attorney.

Kiplinger’s recent article “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?” gives us a few things to keep in mind when updating your estate plan:

Moving to Another State. Note that if you’ve recently moved to a new state, the estate laws vary in different states. Therefore, it’s wise to review your estate plan to make sure it complies with local laws and regulations.

Changes in Probate or Tax Laws. Review your estate plan with an experienced estate planning attorney to see if it’s been impacted by changes to any state or federal laws.

Powers of Attorney. A power of attorney is a document in which you authorize an agent to act on your behalf to make business, personal, legal, or financial decisions, if you become incapacitated.  It must be accurate and up to date. You should also review and update your health care power of attorney. Make your wishes clear about do-not-resuscitate (DNR) provisions and tell your health care providers about your decisions. It is also important to affirm any clearly expressed wishes as to your end-of-life treatment options.

A Will. Review the details of your will, including your executor, the allocation of your estate and the potential estate tax burden. If you have minor children, you should also designate guardians for them.

Trusts. If you have a revocable living trust, look at the trustee and successor appointments. You should also check your estate and inheritance tax burden with an estate planning attorney. If you have an irrevocable trust, confirm that the trustee properly carries out the trustee duties like administration, management and annual tax returns.

Gifting Opportunities. The laws concerning gifts can change over time, so you should review any gifts and update them accordingly. You may also want to change specific gifts or recipients.

Regularly updating your estate plan can help you to avoid simple estate planning mistakes. You can also ensure that your estate plan is entirely up to date and in compliance with any state and federal laws.

Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?”

If I Buy a House, Should I have an Estate Plan?

There’s been an unprecedented surge in home sales during the pandemic. A recent National Association of Realtors report revealed that since July, existing home sales have increased year over year reaching a pandemic high of over 25% in October. Forbes’s recent article entitled “Pandemic Home Buyers: Have You Set Up Your Estate Plan?” asks the important question: How has this past year’s surge in home sales impacted estate planning?

Estate planning is a way to protect your assets and your loved ones, no matter your age or income level. If you place your home into a trust, you ensure that the ownership of your home will be properly and efficiently transferred to a loved one, if anything happens to you unexpectedly. If your home isn’t included in your estate plan, it will go through probate. However, consider the potential pitfalls of a trust:

  1. Creating a trust, when you really only need a will. If you have less than $150,000 in assets and you don’t own a home, a trust likely isn’t really needed.
  2. Thinking that you automatically have asset protection. A trust can help to avoid probate. So, an irrevocable trust may be the right option for people who really need true asset protection.
  3. Not taking trust administration into account. The trustee must do many tasks when the creator of the trust dies. These aren’t much different from what an executor does, but it can be extra work.

If you already have an estate plan, you should review your estate planning documents every three to five years. Moreover, purchasing a home should also make you revisit your documents. When doing a review, take a look at the terms of the trust. Make certain that you have your house referenced by address and that you transfer the house to your spouse by name.

Most mortgages have a “due on sale” clause. This means if you terminate your ownership of your home, you have to immediately pay back the mortgage proceeds to the bank. If you place your home in a revocable trust, it lets you smoothly transfer ownership to your beneficiary. This prevents the bank from demanding payment, and your beneficiary would keep making the mortgage payments after you’re gone. However, it may be prudent to contact the lender in advance of the transfer, if you want to be sure.

If you bought a home in the pandemic and have not placed it in a trust yet, talk to an experienced estate planning attorney sooner rather than later.

Reference: Forbes (June 2, 2021) “Pandemic Home Buyers: Have You Set Up Your Estate Plan?”

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