Estate Strategy: Trusts

• The Estate Strategypage is used to:
  • define the distribution of the estate as either a dollar or percentage value.
  • define bequests of specific assets on the client’s or co-client’s death.
  • define the details of any testamentary trusts applicable for a scenario.
• Bequests and testamentary trusts cannot be entered in Simple Will type scenarios.
• Use the Trusts subtab to enter trusts that will take effect during the client's lifetime.
  Note: Only the unallocated portion of each account is available for transfer.

• You can enter the following types of trusts:
  • Irrevocable trusts
  • Irrevocable life insurance trusts (ILIT)
  • Family limited partnerships^‡
  • Grantor retained trusts (GRT)^‡
  • Charitable remainder trusts (CRT)^‡
  • Charitable lead trusts (CLT)^‡
  • Rolling grantor retained annuity trusts (GRAT)^‡

  ^‡ These trusts can only be entered in plans created using the Detailed Tax Method that also include the Advanced Estate module.

1. From the Trusts subtab, select for Add Trust and make a selection from the menu.

From here, your steps will vary based on what type of trust you want to add.

Select one of the following:
Irrevocable Trust	ILIT - Existing Insurance	ILIT - New Insurance
FLP	QPRT	GRT
CRT	CLT	Rolling GRAT

continued steps for Irrevocable Trust...

2. Enter basic trust information.
   • Enter a name for the trust under Description.
   • Select the person whose assets fund the trust from the Grantor menu.
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
   • Enter the tax rate that is levied on any returns that are held within the trust (i.e., those returns that are not distributed to the member or heirs) prior to the reinvestment of that money in the trust under Trust Tax Rate.
   • Use the Crummey Trust option to indicate whether a Crummey trust provision applies. In order for life insurance premiums to be eligible for the annual gift exclusion, a Crummey trust provision must be in place. This provision permits the transfer of funds to the trust to pay for life insurance premiums.
3. Define the End Date for the trust. You can define this date in the following ways:
   • A specific date: Enter the date into the End Date field.
   • A term in years: Enter a number of years into the (years) field.
   • An event: Select the second option under the End Date section, choose an event and a client. Additionally, you can use the years field to offset this date.
     For example: To define the End Date as two years after <client>'s retirement, select Retirement Date, <Client>, and enter 2 under years.
4. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
5. For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
   OR
   Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
6. If the trust has income beneficiaries and if any trust income is to go to the surviving client, enter this percentage under the Income Beneficiaries container.
   Note: In joint analyses, the Surviving Client is automatically included in a separate Income Beneficiaries container.
7. If applicable, go to the Return Rates subtab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
8. When you are satisfied with these options, click OK.

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continued steps for ILIT - Existing Insurance...

2. Enter basic trust information.
   • Enter a name for the trust under Description.
   • Enter the tax rate that is levied on any returns that are held within the trust (i.e., those returns that are not distributed to the member or heirs) prior to the reinvestment of that money in the trust under Trust Tax Rate.
   • Use the Crummey Trust option to indicate whether a Crummey trust provision applies. In order for life insurance premiums to be eligible for the annual gift exclusion, a Crummey trust provision must be in place. This provision permits the transfer of funds to the trust to pay for life insurance premiums.
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
   • Enter the survivor income policy that is to be transferred to this trust, all survivor income policies that were entered on the Insurance Coverage page.
   • Enter the percentage of the Death Benefit Payable to Trust.
3. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
4. For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
   OR
   Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
5. If the trust has income beneficiaries and if any trust income is to go to the surviving client, enter this percentage under the Income Beneficiaries container.
   Note: In joint analyses, the Surviving Client is automatically included in a separate Income Beneficiaries container.
6. If applicable, go to the Return Rates subtab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
7. When you are satisfied with these options, click OK.

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continued steps for ILIT - New Insurance...

2. Enter basic trust information.
   • Enter a name for the trust under Description.
   • Enter the tax rate that is levied on any returns that are held within the trust (i.e., those returns that are not distributed to the member or heirs) prior to the reinvestment of that money in the trust under Trust Tax Rate.
   • Use the Crummey Trust option to indicate whether a Crummey trust provision applies. In order for life insurance premiums to be eligible for the annual gift exclusion, a Crummey trust provision must be in place. This provision permits the transfer of funds to the trust to pay for life insurance premiums.
   • Enter the percentage of the Death Benefit Payable to Trust.
3. From the Policy subtab, define basic information for the new insurance policy associated with the ILIT.
   • Select the Policy Type for the new insurance policy.
   • Select the Insured under the new policy.
   • Enter the Cost Basis for the new policy.
   • Enter the Effective Date for the new policy.
4. From the Policy subtab, define Benefit Details for the new insurance policy associated with the ILIT.
   • Enter the Death Benefit amount for the new policy.
   • Define the Cease Coverage date for the policy using either the At Age or On Date field.
     Note: You can also use the to set the date as an event in the client's/co-client's life.
5. From the Policy subtab, define Premiums for the new insurance policy associated with the ILIT.
   • Select the Payer of the premiums for the new policy.
   • Enter the premium Amount and the Frequency with which premiums are paid.
   • Define the Cease Premiums date for the policy using either the At Age or On Date field.
     Note: You can also use the to set the date as an event in the client's/co-client's life.
   • If a disability waiver is in effect, select the Waived at Disability option.
6. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
7. For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
   OR
   Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
8. If the trust has income beneficiaries and if any trust income is to go to the surviving client, enter this percentage under the Income Beneficiaries container.
   Note: In joint analyses, the Surviving Client is automatically included in a separate Income Beneficiaries container.
9. If applicable, go to the Return Rates subtab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
10. By default, NaviPlan calculates the premium schedule, future values of death benefits, and prospective cash surrender value for an insurance policy each year.
    However, if you wish, you can make changes to NaviPlan's calculated values.
    • From the Future Values subtab, select Modify the Calculated Values and enter new data in the appropriate fields.
      OR
      You can use the Fill Values section to quickly populate fields in the Future Benefits section. From the Fill Values section, click Clear Column Values, enter data for all relevant fields, then click Fill. The selected column populates with data per your specifications.
    • You can repeat these steps for each period shown at the bottom of the Future Benefits section, select each link to view and/or modify calculated values for that period.
11. When you are satisfied with these options, click OK.

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continued steps for FLP...

2. Enter basic trust information.
   • Enter a name for the trust under Description.
   • Enter The discount rate that will be applied because of a lack of secondary market in which to sell the interest under Marketability Discount Rate.
   • Enter the discount available within a family limited partnership when transferring partnership interests to a family member under Minority Interest Discount Rate.
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
3. Enter partners for the FLP under the Partners subtab.
   • From the Partners container, select for Add Partner and select <client>, <co-client>, <dependent>, <family member>, Charity, or Other.
   • Repeat this step until all partners have been added to the FLP.
4. Define distributions of income from the Income Distribution subtab.
   • From the Income Distributions container, select Add Income Distribution.
   • Define the distribution Amount and the Frequency with which the distributions are paid.
   • If applicable, define an Increase Amount for the distribution, this is the amount by which the distribution will increase over time.
     • Use the Before Start Date Infl and +/- Add'l options to indicate that the distribution will increase by the rate of inflation and/or by an
   • Define the Start Date and End Date for the distribution.
   • Use the In Today's Dollars option to specify if the fixed amount is to be inflated by the default inflation rate for the plan. The fixed amount will be indexed from today until the effective date when the distribution is made.
5. Define any asset transfers for the trust from the Asset Transfers subtab.
   • From the Asset Transfers container, select for Add Asset Transfer and select an asset from the menu.
   • Enter the portion of the asset that is to be transferred to the trust under $ or % of Market Value.
     Note: The market value displayed on the Asset Transfers tab is not reduced based on the transfer percentage entered here.
6. Define any gifting from the trust under the Gifting subtab.
   Note: NaviPlan determines the gifted amount according to the ownership percentages of the transferor. Partners with ownership percentages can have multiple gifting strategies that span different date ranges.
   • Select Add Gift to add a gifting strategy.
   • Make a selection for Gifted By, Gifted To, and Frequency. This will define who gives the gift to whom and how often.
   • Select one of the following options for Gift Amount:
     • Maximum Exclusion: Specifies that the beneficiary will receive the maximum allowable tax-free gift each year.
     • Fixed Amount: Allows you to enter a dollar amount for gifting.
     • % of Market Value: Allows you to enter a number to gift a percentage of the market value of the partnership interest.
   • Enter a Start Date and End Date for the distribution.
   • If applicable use the Claim Cost Basis for charitable deduction (instead of Market Value) option to determine the value of the gift as a percentage of the cost basis rather than a percentage of the market value. This option is available only when the amount is gifted to a charity.
7. If applicable, go to the Return Rates tab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
8. When you are satisfied with these options, click OK.

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continued steps for QPRT...

2. Enter basic trust information.
   • Enter a name for the trust under Description.
   • Select the person whose assets fund the trust from the Grantor menu.
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
   • Enter the IRS-determined rate used to calculate the remainder interest (taxable gift) at the end of the term under the IRC 7520 Rate field.
   • Enter the Term in Years for the trust.
   • Enter the trust's Growth Rate.
3. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
4. For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
   OR
   Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
5. Define any asset transfers for the trust from the Asset Transfers subtab.
   • From the Asset Transfers container, select for Add Asset Transfer and select an asset from the menu.
   • Enter the portion of the asset that is to be transferred to the trust under $ or % of Market Value.
     Note: The market value displayed on the Asset Transfers tab is not reduced based on the transfer percentage entered here.
6. When you are satisfied with these options, click OK.

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continued steps for GRT...

2. Enter basic trust information.
   • Enter a name for the trust under Description.
   • Select the person whose assets fund the trust from the Grantor menu.
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
   • Enter the IRS-determined rate used to calculate the remainder interest (taxable gift) at the end of the term under the IRC 7520 Rate field.
3. From the Income Distribution section, enter details for the income distribution for the trust.
   • Select one of the following options for the trust's Type:
     • Annuity: Periodic fixed payments over a set time.
     • Unitrust: Periodic payments based on a fixed percentage of the value of the assets in the trust.
     • Income: Periodic payments based on the investment income generated from the assets in the trust.
   • Enter the amount of income (in dollars) that the payment beneficiaries are receiving each year from the trust under Annual Payment Amount.
     Note: This field only applies to annuity and income type distributions.
   • Enter the percentage of the trust’s market value that is distributed as income in the Trust Payment % field.
     Note: This field only applies to Unitrust payments.
   • Enter a Payment Frequency for the distribution.
   • Define the transfer strategy for the trust using the following fields:
     • In Kind:If selected and the income earned by the trust assets is not enough to cover the trust payment, NaviPlan Select will transfer similar assets from the trust (in-kind) instead of selling principal and creating capital gains within the trust.
       If not selected, the balance of the trust payment is made by selling trust assets that may result in the realization of capital gains and tax consequences.
     • To Account: Account selected to receive the in-kind transfer.
       Note: This menu is only available when the In Kind option is selected.
     • Account Details: Allows you to enter additional details about the in-kind account. See the Account Details Help page for more information.
4. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
   2. For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
      OR
      Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
5. Define any asset transfers for the trust from the Asset Transfers subtab.
   2. From the Asset Transfers container, select for Add Asset Transfer and select an asset from the menu. Enter the portion of the asset that is to be transferred to the trust under $ or % of Market Value.
      Note: The market value displayed on the Asset Transfers tab is not reduced based on the transfer percentage entered here.
6. If applicable, go to the Return Rates subtab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
7. When you are satisfied with these options, click OK.

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continued steps for CRT...

2. Enter basic trust information.
   • Enter a name for the trust under Description.
   • Select the person whose assets fund the trust from the Grantor menu.
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
   • Enter the IRS-determined rate used to calculate the remainder interest (taxable gift) at the end of the term under the IRC 7520 Rate field.
3. From the Income Distribution section, enter details for the income distribution for the trust.
   • Select one of the following options for the trust's Type:
     • Annuity: Periodic fixed payments over a set time.
     • Unitrust: Periodic payments based on a fixed percentage of the value of the assets in the trust.
     • Income: Periodic payments based on the investment income generated from the assets in the trust.
   • Enter the amount of income (in dollars) that the payment beneficiaries are receiving each year from the trust under Annual Payment Amount.
     Note: This field only applies to annuity and income type distributions. Enter the percentage of the trust’s market value that is distributed as income in the Trust Payment % field.
     Note: This field only applies to Unitrust payments.
   • Enter a Payment Frequency for the distribution.
   • Define the transfer strategy for the trust using the following fields:
     • In Kind: If selected and the income earned by the trust assets is not enough to cover the trust payment, NaviPlan Select will transfer similar assets from the trust (in-kind) instead of selling principal and creating capital gains within the trust.
       If not selected, the balance of the trust payment is made by selling trust assets that may result in the realization of capital gains and tax consequences.
     • To Account: Account selected to receive the in-kind transfer.
       Note: This menu is only available when the In Kind option is selected.
     • Account Details: Allows you to enter additional details about the in-kind account. See the Account Details Help page for more information.
4. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
   • For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
     OR
     Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
5. If the trust has payment beneficiaries, information for these beneficiaries will be displayed in the Payment Beneficiaries container.
6. If applicable, go to the Return Rates subtab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
7. When you are satisfied with these options, click OK.

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continued steps for CLT...

2. Enter basic information for the trust.
   • Enter a name for the trust under Description.
   • Select the person whose assets fund the trust from the Grantor menu.
   • Non-Grantor
   • Enter the tax rate that is levied on any returns that are held within the trust (i.e., those returns that are not distributed to the member or heirs) prior to the reinvestment of that money in the trust under Trust Tax Rate.
   • Use the Payment Distribution to specify how the income from the trust is distributed (Unitrust or annuity method).
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
   • Determine the percentage of the trust's market value that is distributed as income. Using one of the following methods:
     Note: this only applies to Unitrust payments.
     • Enter a value into the Trust Payment % field.
     • Select the Zero-Out CLAT option to have NaviPlan calculate the value to enter into Trust Payment % such that the remainder interest value is as close to $0.00 as the field allows.
       Note: This option is only available if Annuity is selected from the Payment Distribution menu.
   • Enter the Annual Payment Amount, as well as the Payment Frequency and Payment Period for the trust.
   • Enter the trust's duration under Term in Years.
   • Enter the IRS-determined rate used to calculate the remainder interest (taxable gift) at the end of the term under the IRC 7520 Rate field.
3. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
   • For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
     OR
     Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
4. From the Payment Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
   • For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
     OR
     Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
5. Define any asset transfers for the trust from the Asset Transfers subtab.
   • From the Asset Transfers container, select for Add Asset Transfer and select an asset from the menu.
   • Enter the portion of the asset that is to be transferred to the trust under $ or % of Market Value.
     Note: The market value displayed on the Asset Transfers tab is not reduced based on the transfer percentage entered here.
6. If applicable, go to the Return Rates subtab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
7. When you are satisfied with these options, click OK.

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continued steps for Rolling GRAT...

2. Enter basic trust information under the Setup tab.
   • Enter a name for the trust under Description.
   • Select the person whose assets fund the trust from the Grantor menu.
   • Enter the date on which the asset will be moved to the trust in the Transfer to Trust field.
   • Enter the IRS-determined rate used to calculate the remainder interest (taxable gift) at the end of the Rolling GRAT term under the IRC 7520 Rate field.
   • Enter the total GRATs in Series.
     • For example, the number “2“ means that a total of two GRATs would be modeled: GRAT 1 being the original GRAT, and GRAT 2 being one additional GRAT that is funded from the first trust payment of the original GRAT.
       Note: This field includes the total number of GRATs in the original series only. This includes any GRATs that may have already terminated, which means the first GRAT may not necessarily be GRAT1.
   • Enter the GRAT Term in Years for each individual GRAT in the series.
     Note: Each GRAT can only be 2 or 3 years maximum; the intent of the Rolling GRAT is to allow for a series of shorter-term GRATs versus one longer-term GRAT.
   • NaviPlan will now calculate the Total Years Remaining indicating the number of years remaining for the GRAT series using the following calculation:
     (GRATs in Series + GRAT Term in Years) - 1
3. Define Final Payment Transfer information for the trust.
   • Select the In Kind option to indicate that income earned by the trust assets is not enough to cover the trust payment. NaviPlan will transfer similar assets from the trust (in-kind) instead of selling principal and creating capital gains within the trust.
   • If you selected In Kind, use the To Account menu to select an account to receive the in-kind transfer.
   • Account Details: Allows you to enter additional details about the in-kind account. See the Account Details Help page for more information.
4. From the Remainder Beneficiaries container, select for Add Beneficiary and add all relevant beneficiaries for the trust.
5. For each beneficiary, enter the percentage of the remainder income attributable to the selected beneficiary.
   OR
   Select Pro-Rata to split the remainder equally among all beneficiaries added to the trust.
6. If applicable, go to the Return Rates subtab and enter the expected return rates for each field. By default, the investment income is reinvested into the trust.
7. Review the GRATs you have added on the GRAT Series tab.
   • If desired, you can select for both the funded or future GRAT. From the GRAT Details dialog box you can edit details about specific GRATs in the series.
8. When you are satisfied with these options, click OK.

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