IN THIS ISSUE

MIGRATION PATTERNS

THERE IS STILL TIME TO MAKE

A 2024 IRA CONTRIBUTION

THE LAW IS PLAYING CATCH UP

ARTICLES OF INTEREST

First, on behalf of all of us at Garden State Trust Company let me wish a very Happy, Healthful, and Prosperous New Year to you and yours. The beginning of a new year is a perfect time to review your current estate plan or to embark on preparing your estate plan with an estate planning attorney for your first time. One key question you will want to know the answer to is, should I use a corporate (read, professional) trustee in my plan and will it be worth the cost? Let me assist you with the answer.

Choosing the right trustee for your estate plan is one of the most critical decisions you'll make. Many individuals initially lean toward appointing a family member due to familiarity or cost-saving assumptions. However, this decision can lead to unintended challenges. Instead, selecting a corporate trustee, such as Garden State Trust Company, can provide long-term benefits for your family and your legacy. Here's why we at Garden State Trust Company are the better choice:

1. Professional Expertise and Experience

Managing a trust requires specialized knowledge of tax laws, fiduciary responsibilities, investment management, and estate planning. Garden State Trust Company has a dedicated team of professionals, some with decades of experience, who are well-versed in trust administration. By contrast, a family member may lack the expertise to navigate complex financial, legal, and regulatory issues, potentially leading to costly mistakes.

2. Objectivity and Impartiality

Family dynamics can be complicated, and appointing a family member as trustee may create conflicts of interest or lead to disputes among beneficiaries. A family member trustee might struggle to remain neutral when making difficult decisions, especially when balancing competing interests. Garden State Trust Company serves as an impartial third party, ensuring decisions are made in the best interest of all beneficiaries, free from personal bias or emotional influence.

3. Continuity and Longevity

Family members may face unforeseen circumstances, such as illness, death, or changes in their personal circumstances, that prevent them from fulfilling their duties as trustee. Garden State Trust Company offers stability and continuity, ensuring the trust is administered effectively for its full duration, even if it spans generations.

4. Reducing the Burden on Family Members

Serving as a trustee is a demanding role that requires time, attention, and responsibility. Family members may already have busy lives, careers, and personal obligations, making it challenging to devote the necessary focus to trust administration. By choosing Garden State Trust Company, you relieve your loved ones of this burden, allowing them to focus on their relationships and personal lives without added stress.

5. Comprehensive Services

Garden State Trust Company offers a full suite of services, including investment management, tax preparation, and estate planning guidance. Their team takes a holistic approach, ensuring that the trust is managed effectively and aligned with your overall financial goals. A family member trustee may lack access to these resources, potentially compromising the trust's performance.

6. Fiduciary Responsibility

As a corporate trustee, Garden State Trust Company is legally obligated to act in the best interests of the trust and its beneficiaries. This fiduciary duty ensures a high standard of care and accountability. While family members may have good intentions, they may not fully understand or meet the stringent fiduciary requirements, exposing themselves to legal risks.

7. Minimizing Family Conflict

Entrusting a family member with the role of trustee can inadvertently create tension or resentment among beneficiaries, particularly if there are disagreements about how the trust is managed. Garden State Trust Company acts as a neutral party, fostering harmony by handling disputes professionally and transparently.

8. Transparent Fee Structure

While some may assume that appointing a family member is a cost-effective choice, hidden expenses can arise, such as legal fees to resolve mistakes or disputes. Garden State Trust Company offers a clear and predictable fee structure, ensuring that your trust is managed efficiently without unexpected costs.

Conclusion: A Trusted Partner for Your Legacy

Selecting the right trustee is not just about today, it's about ensuring your wishes are honored and your loved ones are cared for in the years to come. With our expertise, impartiality, and dedication to excellence, Garden State Trust Company provides peace of mind that your trust will be managed with the utmost professionalism and care.

While appointing a family member may seem like a natural choice, it often comes with challenges that can be avoided by choosing a corporate trustee. Let Garden State Trust Company be your partner in preserving your legacy and securing your family's future.

MONTHLY QUESTION & ANSWER

Q. Without being overly technical can you please tell me the difference between a First Party Special Needs Trust and a Third Part Special Needs Trust.

A. Sure thing, the main difference lies in who funds the trust and what happens to the remaining assets after the beneficiary's death:

1. First-Party Special Needs Trust: Funded with the beneficiary's own assets (e.g., settlement, inheritance). It allows the beneficiary to maintain eligibility for benefits like Medicaid and SSI. After the beneficiary's death, any remaining funds must reimburse Medicaid for services provided.
2. Third-Party Special Needs Trust: Funded with assets belonging to someone else (e.g., parents, family). It also protects the beneficiary's government benefits. However, there is no Medicaid payback requirement, and remaining funds can be distributed to other heirs.

Special needs trusts are technical and should be drafted by a qualified attorney. To be effective, they must be carefully structured and administered. A special needs trust certainly is an excellent solution when a disabled beneficiary is involved. Our professionals at Garden State Trust Company have years of experience working with special needs trusts.



HAVE A QUESTION ON TRUSTS, WILLS, OR INVESTMENT MANAGEMENT?

For general informational purposes only. This information does not constitute legal advice.

According to a recent study from the Tax Foundation, income tax rates are a factor when people decide to relocate to another state along with other key factors like job opportunities, family situations, and lifestyle changes, such as retirement. Read some interesting statistics about this in one of this month's Informational Articles, Migration Patterns.

Reminder, you have until the tax-filing deadline to make your IRA contribution for the 2024 tax year, and it would be wise to go ahead with your 2025 contribution as soon as practical for maximum tax-deferred growth. Read more about this in the Informational Article, There Is Still Time To Make A 2024 IRA Contribution.

Let me leave you with the words of Wendell Berry. 

You Think Winter Will Never End, And Then, When You Don't Expect It, When You Have Almost Forgotten It, Warmth Comes And A Different Light.

Happy New Year,

When people decide to relocate, how do they choose a destination? Key factors will include job opportunities, family situations, and lifestyle changes, such as retirement. According to a recent study from the Tax Foundation, income tax rates are also a factor, especially for upper income folks who have more resources to draw upon in making their decisions [ "Americans Moved to Low-Tax States in 2024" ]. The data comes from the U.S. Census and from industry moving companies United Van Lines and U-Haul.

The Census data show that the five states losing the most population in 2024 were Hawaii, New York, California, Alaska, and Illinois. Those that gained the most were South Carolina, Idaho, Delaware, North Carolina, and Tennessee. The moving company data offered slightly different rankings, but in general confirmed the census data.

Digging deeper into the tax differences among the states, the study observed:



• Of the 26 states that had per capita state and local tax burdens below the national average in 2022, 18 had population growth in 2024. Conversely, of the 25 with above average taxes, 17 lost population.
• The top one-third of states gaining population had an average top state income tax rate of 3.5%. The bottom one-third, the population losers, had an average top tax rate of 6.7%, nearly double.
• Six states in the top one-third have no income tax at all.
• Twelve states have a flat-rate income tax, rather than a progressive system with escalating tax rates as income goes up. Of those 12, eight experience population growth in 2024.

The pandemic altered employment patterns, enabling remote and hybrid work environments. According to the study, three states with "highly uncompetitive tax codes" enacted reforms to compete better with their lower-tax neighbors for jobs and businesses. These were Iowa, Louisiana, and Arkansas.

Whether other states join the tax-cutting movement remains to be seen. One of the advantages of federalism is that the states can serve as laboratories for new ideas in governance.

(January 2025)

© 2025 M.A. Co. All rights reserved.

In recent years, Congress revisited the rules for qualified retirement plans and IRAs, with an eye toward boosting retirement savings. To that end, the old age limit of 701/2 for making a contribution to a traditional, deductible IRA was eliminated, beginning in 2020. However, one still must have "earned" income to make any IRA contribution--income from investments, pensions, gifts, and Social Security benefits does not count.

In addition, the age at which required minimum distributions must be made from IRAs was lifted, first to 72 and now to 73. 

The amount that may be contributed to traditional and Roth IRAs has not changed for 2025, $7,000, as it was in 2024. Those 50 and older may make an additional $1,000 "catch-up" contribution. The "catch-up" contribution will be indexed for inflation, but no change was made for the 2025 tax year. You have until the tax-filing deadline to make a contribution for the 2024 tax year, and it would be wise to go ahead with your 2025 contribution as soon as practical for maximum tax-deferred growth.

A contribution is one thing, the deduction is something else. Those who have no employer retirement coverage are permitted a full deduction for IRA contributions, regardless of income. Those who have such coverage will find the deduction phases out as their modified adjusted gross income (MAGI) grows, as shown in the table below. A person whose spouse has an employer-provided retirement plan also has limits on the deduction.

The Roth IRA should be considered, especially by those whose income exceeds the deductibility threshold. There is no deduction for the contribution, but there is the possibility of complete tax freedom for all distributions. Income limits apply to Roth IRAs as well, but those limits are higher than for deductible IRAs.

Key IRA Boundaries

Source: IRS Notice 2024-80; M.A. Co.

(January 2025)

© 2025 M.A. Co. All rights reserved.

Dan Abitol provided for his disabled daughter, Ava, with a special needs trust. He also had a will, so Dan's estate plan would seem to be in order. Then Dan divorced and remarried. He amended his will to make a provision for his new wife, Hasnaa.

The couple decided to have children, but evidently had trouble conceiving, and so turned to in vitro fertilization. This effort succeeded in creating several fertilized embryos, and the couple chose one for implantation. Before that medical step was taken, Dan unexpectedly died from a heart condition that had gone untreated because of the COVID-19 pandemic.

Hasnaa went ahead with the implantation after Dan's death, and their son, Noah, was born 10 months and six days after Dan's death. DNA tests confirmed Dan's paternity.

Dan's will poured the residue of his estate into the special needs trust. He also had a $1 million life insurance policy, which was intended to go to the trust.

What about Noah's inheritance?

Under relevant local law, a child of a decedent born after the decedent's death has the right to share in the decedent's estate as if there had been no will. The theory is that the decedent most likely would have wanted an inheritance for the child. However, the law also stipulates that it applies to children born within 10 months of the decedent's death, a rule that was logical at the time of its adoption.

A lawsuit was filed to secure an inheritance for Noah, and it was resisted by the trustee of the special needs trust. The lower court dismissed the lawsuit, holding that the law was clear, and the 10-month limit had been breached. The appellate court reversed, agreeing that the law only provides a presumption of paternity for children born within the time limit, and that other evidence must be permitted.

The case is not yet resolved, as of this writing, it has been sent back to a lower court for further deliberations.

(January 2025)

© 2025 M.A. Co. All rights reserved.

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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2025. All rights reserved.