Assume Logan and Veronica had Lily today and Logan wanted to create a trust for Lily's future benefit. Logan would like to create a trust that allows him to make use of the annual exclusion. He wants the trust to accumulate income until Lily reaches age 21, at which point the entire trust will be distributed to Lily. Which type of trust would be appropriate to accomplish Logan's goals?

LOGAN AND VERONICA BACKGROUND Logan, age 42, and Veronica, age 33, have been married for about two year. Logan and Veronica met when Logan was on a vacation in Vancouver. Veronica is a beautiful Canadian actress who was employed full-time by the Hallmark network making made-for-television movies when she met Logan. After a month-long romance, Logan asked Veronica to return to the United States with him. Although not a United States citizen, she has maintained residence in the United States for 15 months. Logan and Veronica recently found out that Veronica is expecting their first child together. When they found out Veronica was pregnant, Veronica and Logan moved into the 4 bedroom home that Logan owns as separate property so they could prepare for the baby, whom they plan to name Lily. To prove to Veronica that he was serious about them being a family, Logan gave Veronica $2,015,000 in a money market account in January 2018. Logan also purchased a $5,000,000 life insurance policy on his life and named Veronica as the beneficiary. Logan was previously married and has three sons from that marriage, Duncan, age 24, Cassidy, age 22, and Wallace, age 12. All three children are happy and healthy. Duncan is happily married to Meg and has two small children of his own. Cassidy is a single college student who is pursuing a degree in film production at USC. Wallace is a seventh grader at Walter Reed Middle School in Los Angeles. Logan and his first wife, Bonnie, have been divorced for eleven years and have a strained relationship. After their divorce, Logan was required to pay Bonnie alimony in the amount of $10,000 per month. When the court order expired at the end of 2016, Logan felt guilty about the dissolution of the marriage so he continues to give Bonnie $15,000 per month on the first of each month. Although Logan has had a few skin cancer spots removed stemming from his years of sun exposure, he is otherwise healthy. Veronica has never been married before her marriage to Logan. She is in excellent health, and learned just a few days ago that they are having a baby girl, who is expected to be healthy. Logan is an active businessman and owns The Neptune Grand, a local luxury hotel, while Veronica is currently taking a break from acting. Logan and Veronica live in a community property state. Logan's mother, Lynn, also lives with Veronica and him. Lynn is 68 and in failing health. She was recently diagnosed with ALS (also known as Lou Gehrig's disease). While she is unable to feed or bathe herself, she is expected to live for several more years. Lynn has already spent all of her retirement assets and relies exclusively on Social Security. The only substantial asset she owns is a life insurance policy covering her life. The policy has a $100,000 death benefit. The policy does not have a named beneficiary. For estate planning purposes, Logan estimates the following expenses at his death: 1. The last illness expenses are expected to be $100,000. 2. Estate administration expenses are estimated at $180,000. 3. Funeral expenses are expected to be $120,000.WILL Veronica does not have a will. Logan has written two wills in his lifetime. The first will was a statutory will executed during his marriage to Bonnie, and dated September 1, 2005. The second will is a handwritten will he wrote right after his divorce. For the second will, Logan did not want to seek advice from an attorney so he basically copied the first will in his own handwriting and replaced the names and added Wallace (who was not born when the first will was drafted). The second will is only signed and dated by him and was not witnessed. Bonnie still has an executed copy of the first will and the second will is in the bottom of Logan's sock drawer. No one, other than Logan, knows the second will exists. Logan's Last Will and Testament drafted and executed during his marriage to Bonnie. I, Logan, being of sound mind and wishing to make proper disposition of my property in the event of my death, do declare this to be my Last Will and Testament. 1. I have been married but once, and only to Bonnie with whom I am presently living. Out of my marriage to Bonnie, two children were born, namely Duncan and Cassidy. I have adopted no one nor has anyone adopted me. 2. I leave all assets to my wife Bonnie. 3. In the event that Bonnie predeceases me or fails to survive me for more than six (6) months from the date of my death, disclaims, or otherwise fails to accept any property bequeathed to her, I give my estate to my children. 4. In the event that any of my children should predecease me, die within six months from the date of my death, disclaim, or otherwise fail to accept any property bequeathed to him or her, then such interest will pass to the said legatee's descendants, otherwise his or her share of all of my property of which I die possessed shall be paid equally among my surviving children. 5. I name my wife, Bonnie, to serve as the executor of my estate with full seizin and without bond. 6. I direct that the expenses of my last illness, funeral, and the administration of my estate shall be paid by my executor as soon as practicable after my death and allocated against the residual estate. LOGAN'S LAST WILL AND TESTAMENT HANDWRITTEN AFTER HIS DIVORCE: I, Logan, being of sound mind and wishing to make proper disposition of my property in the event of my death, do declare this to be my Last Will and Testament. 1. I have two children, namely Duncan, Cassidy, and Wallace. I have adopted no one nor has anyone adopted me 2. 3. I leave all assets to my children. In the event that any of my children should predecease me, die within six months from the date of my death, disclaim, or otherwise fail to accept any property bequeathed to him or her, then such interest will pass to the said legatee's descendants, otherwise his or her share of all of my property of which I die possessed shall be paid equally among my surviving children. 4. I name my son Duncan, to serve as the executor of my estate with full seizin and without bond. 5. I direct that the expenses of my last illness, funeral, and the administration of my estate shall be paid by my executor as soon as practicable after my death and allocated against the residualGIFTS TO CHILDREN in 2016 Logan made the following gifts to his children during 2016: Logan gave $150,000 of separate property to Duncan. Logan paid $58,000 to USC for Cassidy's film school tuition. Logan gave Cassidy a Land Rover valued at $68,500 to celebrate his success in film school to date. GIFTS TO GRANDCHILDREN in 2017 Logan made the following gifts to his grandchildren during 2017: Seeing how Logan's mom outlived her assets, Logan is afraid his grandchildren may have the same fate. To assist them with their retirement income, Logan decided to establish a trust for the grandchildren. The trust is an irrevocable trust and he funded it in the current year with $800,000. The trust will accumulate income until each grandchild reaches age 50. When a grandchild reaches age 50, he/she will begin receiving an annuity for their life. When all of the grandchildren die, if there is any remaining assets then the trustee may distribute those assets to a charitable organization of his choosing. Logan sent a check in the amount of $16,000 directly to Casa Montessori preschool to pay tuition for the grandkids. Logan also gave each grandchild $15,000. Assume Logan paid gift tax of $2,300,000 in 2016 for taxable gifts in the amount of $11, 180,000 made in 2015. These were his first taxable gifts. LOGAN'S STATEMENT OF FINANCIAL POSITION (AFTER THE GIFT TO VERONICA) ASSETS LIABILITIES AND NET WORTH Cash & Cash Equivalents Liabilities Cash $820.000 Primary Residence $2,000,000 Total Cash / Cash Equiv. $820,000 AMEX Black $325,000 Total Current Liabilities $2,325,000 Invested Assets The Neptune Grand $25,000,000 Investment Portfolio $8,000,000 Qualified Plan $4.230,000 Total Investments $37,230,000 Personal Use Assets Net Worth $42.373.000 Primary Residence $4,500,000 Vacation Property $1,350,000 Auto 1 $73,000 Yacht $725.000 Total Personal Use $6,648,000 Total Assets $44.698,000 Total Liabilities and Net $44.698.000Notes to Financial Statements: 1. Assets are stated at fair market value (rounded to even dollars). 2. Liabilities are stated at principal only (rounded to even dollars). 3. The Neptune Grand was valued in January 2018 for insurance purposes. The valuation includes $10,000,000 for the land and $15,000,000 for the business. 4. The qualified plan has Bonnie listed as the designated beneficiary. The Investment Portfolio is a Transfer on Death (TOD) account with Duncan, Cassidy, and Wallace as the listed beneficiaries. 5. The adjusted basis of the personal residence is $2,500,000. 6. Logan received the vacation property as a gift from his grandfather, Aaron. Aaron purchased the vacation property for $100,000 and the FMV of the property at the date of transfer was $730,000. The FMV when Grover died was $760,000. The annual exclusion did not apply to the transfer and the gift tax paid was $140,700. 7. The yacht is owned joint tenancy with rights of survivorship with Bonnie. They each contributed 50% of the purchase price. The Statement of Financial Position only reflects Logan's interest. 8. Logan's state does not have any statutes that invalidate bequests or beneficiary designations to prior spouses. 9. This statement is prepared after all the gifts were made, including the one to Veronica, to Logan's children and grandchildren, and the gift tax has been paid for the 2015 gifts