The Protection Plan: Protects from Losses and Saves Taxes

A Protection Plan at Borchers Trust Law is centered around a living trust instrument and includes some pretty cool provisions for your future needs.

Beyond the basic documentation that every estate plan should have, namely power of attorney, health care proxy and other health forms, and a last will and testament, and even beyond a Legacy Trust Plan, the Protection Plan trust is thorough in anticipating life’s complications.

The Protection Plan fulfills all of the goals of clients that are typically either (a) in the $2 million to $10 million range of wealth, or (b) have concerns around protecting assets for themselves, their heirs, or both.

The Protection Trust may be revocable or irrevocable, depending on your needs.

We summarize the typical needs and concerns of our families in the acronym CAPS – Caring for loved ones; Anticipating incapacity; Protecting assets; and Saving time, taxes and trouble in the estate. The reason that the Protection Plan stands out as a solution is because of its – wait for it – protection against possible losses and taxes.

Tax Savings

Federal estate taxes have been around since 1913. By the 1990s, every state had an estate tax with a patchwork of minor differences. When the federal tax code took away the credit for state taxes, all that remained was a deduction. This meant that the states could compete for retirees by phasing out their estate tax. Roughly 35 states got rid of the estate tax altogether. The remaining jurisdictions vary widely in their version of the death tax. Massachusetts raised its exemption from $1 million to $2 million effective January 1, 2023, leaving a wide swath of the population still slated to pay the tax given high real property values and a relatively high net worth among Bay Staters.

The federal exemption from estate tax, although up in recent years, has been much lower in the past, and there is always talk about lowering it significantly. Depending on who controls the purse strings in the government every 2 and 4 years, changes up or down in the exemption are bandied about constantly. The exemption is now set at $15 million effective January 1, 2026, and will be adjusted for inflation thereafter. Married couples are allowed an effective exemption of $30 million. At 40%, we need to be vigilant to avoid this estate tax, even though the vast majority of the population will not lose any sleep over it.

Folks who have (or are likely to have) an estate of $2 million dollars or more in Massachusetts would do well to have provisions in their plan to save estate taxes at death. The Protection Plan anticipates this by:

• Maximizing the state and federal estate tax breaks with revocable trusts
• Preserving favorable income tax treatment for you and your beneficiaries on capital gains, IRA distributions, and investment income
• Allowing inheritances to skip estate taxes at the death of your children
• Using lifetime gifting to irrevocable trusts to reduce your estate for tax purposes, in some plans

Protecting Against Loss

The protections offered in the Protection Plan are in the following optional categories:

• Sheltering inheritances for beneficiaries: At the time of your passing, children will receive their inheritance sheltered from claims of creditors, divorcing spouses, government agencies that would otherwise turn off their benefits, mismanagement, and so forth.
• Remarriage of the surviving spouse: Shielding the trust from being taken by the next spouse in divorce or at death
• Powerful tools known as the Trust Protector and administrative trustee
• Irrevocable trust options:
  • You can shelter your assets against having to be spent on long term care (to possibly qualify for Medicaid to pay instead)
  • Protection of life insurance proceeds from estate taxes

Our trusts are thorough but still easy to read when taken in small bites, which is how we work. 

The Protection Plan is by far the most commonly used in our office. All of the Legacy Plan elements are included in the Protection Plan. An Advanced Plan offers even more tools to address life’s slightly more complex problems and uncertainties. 

If you’d like to learn more about our advanced plans, schedule a complimentary appointment with one of our paralegals: