Estate Planning

What has taken an entire lifetime of sacrifice, hard work, risk taking, focus, and dedication to develop can experience a devastating blow in a moment due to what has been commonly termed "confiscatory" estate taxes and inflated IRS valuations. Through proven advanced estate planning techniques, this investment of your life's blood can be preserved.

Preserving your legacy for your loved ones

The Basics

Simple Will

If you die "intestate," that is, without a will, the government has one for you. It determines who raises your minor children, who inherits your assets, and that you do not wish to take any measures to reduce your tax liabilities. These default measures may not fit your objectives.

Living Trust

Also known as an "Intervivos Trust." Some of the many benefits include avoiding probate of trust assets, establishing medical directives, conservatorship, power of attorney, successor trusteeship, and asset protection for heirs.

Special Needs Trust

To assure that funds will be available for heirs with disabilities and special needs, these trusts can provide for them without disqualifying them from social insurance and government benefits.

Estate Discounting Techniques

QPRT

Qualified Personal Residence Trust

To discount the value of highly appreciated residential real property for estate tax purposes with the goal of preserving the property and passing it on to heirs.

Caveat - The trust grantor must survive the term of years chosen for the duration of the trust to prevent the trust assets from reverting back to their estate. In addition, if the grantor survives the term of years then ownership is assumed by the trust beneficiaries, which means the grantor must either vacate the property or pay rent to the beneficiaries. For high value real property rental fees could be exorbitant, especially 5 or 10 years into the future.

GRAT

Grantor Retained Annuity Trust

An irrevocable trust that can transfer the appreciation of an asset to heirs effectively "freezing" the asset's current value. Generally used so the gain on highly appreciating assets can be realized outside the estate. Caveat - If the grantor does not survive the term of years established in the trust, then the trust assets revert back to the grantor's estate. The effect would be an increase in the value of the estate including the payments made and the appreciation brought back into the estate. Multiple trusts with varying durations can be used to minimize this risk.

SCIN

Self Cancelling Installment Note

Heirs can purchase assets from the estate on a systematic or "installment" basis. Generally applied when the "Lender" (usually a parent) is assumed to have a short life expectancy - advanced in age or in poor health, but not terminally ill or expected to die within one year. The note or payment requirement ceases upon the lender's death, and the asset is excluded from the lender's estate. Caveat - If the lender survives the installment period the cumulative payments would exceed the value of the transferred asset, which would nullify the intended benefit to the estate and to heirs.

Private Annuity

Available to individuals not in the business of selling annuities. Similar to SCINs in their effect. Payments are made by the beneficiaries to the annuitant (usually a parent) based on their life expectancy. "Life Only" annuity tables are used to determine the payments. Caveat - The older the annuitant, the higher the payment. In addition, if the annuitant survives beyond the period where cumulative payments plus interest equals or exceeds the value of the transferred asset, there was no benefit to the heirs, however, it will escape inclusion in the annuitant's estate.

Estate Conservation Techniques

ILIT

Irrevocable Life Insurance Trust

Typically, Life Insurance is individually owned. For estates whose value exceeds the federal estate tax exemption or Applicable Amount, the added death benefit will increase the value of the gross estate accordingly. This could subject the insurance proceeds to the 40% federal estate tax by driving the value of the estate above the exemption threshold or by adding to a larger estate valuation already beyond the exemption amount. The trust is most commonly used to own new Life Insurance policies designed to cover the estate tax and keep the proceeds out of the taxable estate. Caveat - There must be no Incidents of Ownership retained by the trust grantor or settlor or the insurance proceeds will be brought back into the estate and hence included along with other estate assets to determine the estate tax liability.

SLAT

Spousal Lifetime Access Trust

An irrevocable trust that can ultimately transfer assets to heirs while the grantor retains an indirect income interest during the life of their spouse beneficiary. A common use for a SLAT is to lock in the estate tax exemption at current high levels in anticipation of a potential decrease such as the sunset provision built into the 2017 TCJA. The act states that the increases in the exemption will not be "clawed back" when the sunset occurs at the end of calendar year 2025. All appreciation occurs outside the grantor's estate. Caveats - The grantor retains the income tax liability for trust income until the trust assets pass to the ultimate beneficiaries upon the income spouse's death. This liability continues in the event of a divorce from the income spouse and large capital gains from the sale of trust assets. If the income spouse dies first the grantor's indirect income ceases. In addition, the appreciation on trust assets will not receive a step up in basis upon the grantor's death.

IDGT

Intentionally Defective Grantor Trust

An irrevocable trust with an intended flaw that effectively escapes inclusion in the grantor's estate while retaining the tax liability for trust income and capital gains. The purpose is to enhance the appreciation of the trust assets outside the grantor's estate, further reduce the taxable estate by the tax payments, and remove the burden of the potentially high tax bill from the heirs.