Read more about the article How Wealthy People Save on Taxes—Can Regular People Do the Same? – Annapolis and Towson Estate Planning

How Wealthy People Save on Taxes—Can Regular People Do the Same? – Annapolis and Towson Estate Planning

As a direct result of tax cuts made in recent years, Americans can give nearly $13 million in assets without paying any federal estate taxes. Only 0.2% of all tax payers worry about federal estate taxes these days, explains the article “Here are six ways the rich save big on taxes, from putting houses in trusts to guaranteeing inheritance for future generations” from Business Insider. Could some of their tactics work for “regular” people too?

Among these tax avoidance techniques include putting homes and vacation homes in trusts lasting decades and any appreciation in the property’s value doesn’t count towards their taxable estate. Qualified Personal Residence Trusts, or QPRTs, basically freeze the value of real estate properties for tax purposes. The home is placed in the trust, which retains ownership for however many years desired. When the trust ends, the property is transferred out of the taxable estate. The estate only pays the gift tax on the property’s value when the trust was formed—regardless of the appreciation of the home.

Dynasty trusts allow taxpayers to pass wealth to generations who haven’t been born yet and are only subject to the 40% generation-skipping tax once. Florida and Wyoming allow these trusts to last up to 1,000 years, which spans about 40 generations. Heirs don’t own the trust assets but have lifetime rights to the trust’s income and real estate.

Charitable Remainder Trusts (CRTs) can be funded with various assets, from yachts to closely held businesses. Taxpayers put assets in the trust, collect annual payments for as long as they live and get a partial tax break. Only 10% of what remains in the CRT must be donated to a charity to qualify with the IRS.

Taking loans to pay estate taxes is scrutinized by the IRS and has many hoops to jump through. Asset-rich people use this method but are cash-poor and facing a big estate tax bill. The estate can make an upfront deduction on the interest of “Graegin” loans, named after a 1988 Tax Court case. Suppose illiquid assets comprise at least 35% of the estate’s value. In that case, families can defer estate tax for as long as 14 years, paying in installments with interest and effectively taking a loan from the government. However, Graegin loans are prime targets for IRS auditors and can lead to legal battles.

Private-placement life insurance, or PPLI, can pass on assets without incurring any estate tax. A trust is created to own the life insurance policy, which has been created offshore. This strategy is only for the very wealthy, as it usually requires $5 million in upfront premiums and a small army of professionals to set up and administer.

A down market has one silver lining for high-net-worth individuals: it’s an excellent time to create new trusts, as people can transfer depressed assets at a lower tax basis. The Grantor-Retained Annuity Trust (GRAT) pays a fixed annuity during the trust term; any appreciation of the asset’s value is not subject to estate tax.

An experienced estate planning attorney will know which of these strategies might work for your family, along with many others used by “regular” people.

Questions? Contact us to schedule an initial call with one of our experienced estate planning attorneys.

Reference: Business Insider (June 12, 2023) “Here are six ways the rich save big on taxes, from putting houses in trusts to guaranteeing inheritance for future generations”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Estate Planning for Changing Economic Times – Annapolis and Towson Estate Planning

Estate plans created during a historically low interest rate environment may need to be re-examined and new techniques considered, according to a recent article titled “Estate Planning For A New Day” from Financial Advisor.

Inflation changes the future value of assets and the value of real estate and taxes due on distributions. For an estate plan to succeed, it is critical to know the value of the assets and how the value of those assets change over time. Accurately determining the value of an estate is necessary to measure any potential estate tax liabilities and plan for their payment.

Inflation may also impact how much is gifted during life or after death without paying federal estate taxes. These exemption levels are reevaluated every January 1 and increase, if warranted, by inflation.

Inflation will cause the federal estate and gift tax exemptions to increase significantly in January 2023, which will give wealthier clients the ability to make large gifts in 2023. For 2022, the exclusion for gifts other than those for medical or educational purposes is $16,000 per donor. However, gifts over that amount count towards the lifetime exemption, currently at $12.06 million per person. The lifetime exemption works jointly with the estate tax exemption and also covers transfers gifted through the estate.

How much these amounts are adjusted is determined by federal inflation estimates, which are not always accurate. If real inflation exceeds the government’s projections, an estate could become taxable due to inflation alone. Once the 2017 Tax Cuts and Jobs Act expires in 2025, the exemption amounts are set to take a nosedive.

Unless Congress acts, on Jan. 1, 2026, the lifetime exemption amount will revert to its old level, or even lower. Now is the time to look into using those exemptions.

Some professionals believe inflation has little impact on estate planning, which is by its nature a long-term matter and not subject to daily ups and downs of markets or news cycles. However, inflation is tied to interest rates, and rising interest rates need to be considered since they impact estate planning strategies.

Charitable remainder trusts (CRTs) are more attractive now because of higher interest rates. The initial donation to the trust is partially tax-deductible and any income generated by the trust is tax exempt. The trust, which is irrevocable, then distributes income to the grantor or beneficiary for a specified period of time. At the conclusion of the time period, the remainder is donated to charity.

GRATS and QPRTs are less advantageous, since they rely on declining interest rates. GRATS allow assets to be locked into irrevocable trusts for a set period of time, during which the beneficiaries can draw an annual income at interest rate set by the IRS. When the term expires, any appreciation of the original assets, minus the payout rate, passes to heirs with little or no gift taxes.

Qualified personal residence trusts (QPRTs) allow users to lock away the value of a residence in an irrevocable trust for a period of time. The grantor can remain in the home and keep partial interest in its value. Afterwards, the rest of the value, determined by the IRS, is transferred to heirs. The goal is to remove the family home from the estate and decrease the gift tax incurred by otherwise transferring the asset. However, if the grantor dies before the trust expires, the value of the residence is included in the estate and taxed with it.

Your estate planning attorney will be able to review your current estate plan with an eye to rising interest rates and inflation and deem which strategies still work, which don’t and how best to move forward. This has been a general overview and individual counsel is critical.

Reference: Financial Advisor (Oct. 1, 2022) “Estate Planning For A New Day”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Do Single People Need Estate Planning? – Annapolis and Towson Estate Planning

In evaluating your needs for estate planning, look at what might happen if you die intestate – that is, without a last will and testament. Your assets will likely have to go through the probate process, which means they will be distributed by the court according to the state intestate succession laws, says Hood County News’ recent article entitled “Even ‘singles’ need estate plans.”

Even if you do not have children, you may have a few nephews or nieces—or children of cousins or friends— to whom you would like to leave some of your assets. This can include automobiles, collectibles and family memorabilia. However, if everything you own goes through probate, there is no guarantee that these individuals will end up with what you wanted them to have.

If you want to leave something to family members or close friends, you will need to say this in your will. However, you also may want to provide support to one or more charitable organizations. You can just name these charities in your will. However, there may be options that could provide you with more benefits.

One option is a charitable remainder trust. With this option, you would transfer appreciated assets – such as stocks, mutual funds or other securities – into an irrevocable trust. The trustee, whom you have named (note that you could serve as trustee yourself) can then sell the assets at full market value, avoiding the capital gains taxes you would have to pay if you sold them yourself, outside a trust. If you itemize, you may be able to claim a charitable deduction on your taxes. The trust can purchase income-producing assets with the proceeds and provide you with an income stream for the rest of your life. At your death, the remaining trust assets will pass to the charities you have named.

There is also a third entity that is part of your estate plans: you. Everyone should make arrangements to protect their interests. However, without an immediate family, you need to be especially mindful of your financial and health care decisions. That is why, as part of your estate planning, you may want to include these two documents: durable power of attorney and a health care proxy.

A durable power of attorney allows you to name a person to manage your finances, if you become incapacitated. This is especially important for anyone who does not have a spouse. If you become incapacitated, your health care proxy (health care surrogate or medical power of attorney) lets you name another person to legally make health care decisions for you, if you cannot do so yourself.

Reference: Hood County News (Dec. 17, 2021) “Even ‘singles’ need estate plans”

 

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What Should I Know about Charitable Gifts? – Annapolis and Towson Estate Planning

Sometimes as individuals and families increase in wealth, they want to give more to charities.

Some charitable donations may be tax deductible or be able to reduce tax liabilities. Let’s look at some suggestions if you decide you want to make charitable donations, according to WMUR’s recent article entitled “Money Matters: Considerations when making charitable gifts.”

First, it might be the time to establish a giving plan. The first step is to decide how much your family wants to give. When researching a charity, look at how the contributions will be used. Charity Navigator, a charity assessment organization, has a site to help you get started at charitynavigator.org. Each charity has a rating with additional information.

Besides annual giving, charitable giving can play a role in estate planning. Your estate planning documents can state these wishes, and sometimes, giving can reduce estate taxes. The federal government taxes wealth transfers during life and at death. Currently, these types of taxes are imposed on lifetime transfers exceeding $12.06 million per spouse at a top rate of 40%. States may also impose these types of taxes. Ask an experienced estate planning attorney about it.

To give to charity, you could include a bequest in your will or trust. Another option is to name a charity as a beneficiary on life insurance policies. Retirement plans such as IRAs, 401(k)s, and 403(b)s may also have a charity listed as beneficiary. If these plans are tax-deferred, then an advantage to using them to make charitable gifts is that a charity can get money tax-free that would otherwise be taxed.

You might also ask an estate planning attorney about a charitable lead or a charitable remainder trust.

Another option for giving is to use donor-advised funds, which gives the donor the tax benefit for making the gift all in one year but the option to make the actual gift later on.

A donor-advised fund is particularly useful for taxpayers who itemize deductions. This is an agreement between the donor and a host organization, which then becomes the legal owner of the assets.

You can tell the fund how to invest the contribution and how the money is disbursed. The fund controls the assets but usually will honor the donor’s requests.

Finally, you could set up a private family foundation. These are more complex but give you and your family control over the investment and distribution of the money. They work best when a significant amount of money is involved.

Reference: WMUR (Dec. 30, 2021) “Money Matters: Considerations when making charitable gifts”

 

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Should I have a Charitable Trust in My Estate Plan? – Annapolis and Towson Estate Planning

Charitable trusts can be created to provide a reliable income stream to you and your beneficiaries for a set period of time, says Bankrate’s recent article entitled “What is a charitable trust?”

Establishing a charitable trust can be a critical component of your estate plan and a rewarding way to make an impact for a cause you care deeply about. There are a few kinds of charitable trusts to consider based on your situation and what you may be looking to accomplish.

Charitable lead trust. This is an irrevocable trust that is created to distribute an income stream to a designated charity or nonprofit organization for a set number of years. It can be established with a gift of cash or securities made to the trust. Depending on the structure, the donor can benefit from a stream of income during the life of the trust, deductions for gift and estate taxes, as well as current year income tax deductions when the assets are donated to the trust.

If the charitable lead trust is funded with a donation of cash, the donor can claim a deduction of up to 60% of their adjusted gross income (AGI), and any unused deductions can generally be carried over into subsequent tax years. The deduction limit for appreciated securities or other assets is limited to no more than 30% of AGI in the year of the donation.

At the expiration of the charitable lead trust, the assets that remain in the trust revert back to the donor, their heirs, or designated beneficiaries—not the charity.

Charitable remainder trust. This trust is different from a charitable lead trust. It is an irrevocable trust that is funded with cash or securities. A CRT gives the donor or other beneficiaries an income stream with the remaining assets in the trust reverting to the charity upon death or the expiration of the trust period. There are two types of CRTs:

  1. A charitable remainder annuity trust or CRAT distributes a fixed amount as an annuity each year, and there are no additional contributions can be made to a CRAT.
  2. A charitable remainder unitrust or CRUT distributes a fixed percentage of the value of the trust, which is recalculated every year. Additional contributions can be made to a CRUT.

Here are the steps when using a CRT:

  1. Make a partially tax-deductible donation of cash, stocks, ETFs, mutual funds or non-publicly traded assets, such as real estate, to the trust. The amount of the tax deduction is a function of the type of CRT, the term of the trust, the projected annual payments (usually stated as a percentage) and the IRS interest rates that determine the projected growth in the asset that is in effect at the time.
  2. Receive an income stream for you or your beneficiaries based on how the trust is created. The minimum percentage is 5% based on current IRS rules. Payments can be made monthly, quarterly or annually.
  3. After a designated time or after the death of the last remaining income beneficiary, the remaining assets in the CRT revert to the designated charity or charities.

There are a number of benefits of a charitable trust that make them attractive for estate planning and other purposes. It is a tax-efficient way to donate to the charities or nonprofit organizations of your choosing. The charitable trust provides benefits to the charity and the donor. The trust also provides upfront income tax benefits to the donor, when the contribution to the trust is made.

Donating highly appreciated assets, such as stocks, ETFs, and mutual funds, to the charitable trust can help avoid paying capital gains taxes that would be due if these assets were sold outright.  Donations to a charitable trust can also help to reduce the value of your estate and reduce estate taxes on larger estates.

However, charitable trusts do have some disadvantages. First, they are irrevocable, so you cannot undo the trust if your situation changes, and you were to need the money or assets donated to the trust. When you establish and fund the trust, the money is no longer under your control and the trust cannot be revoked.

A charitable trust may be a good option if you have a desire to create a legacy with some of your assets. Talk with an experienced estate planning attorney about your specific situation.

Reference: Bankrate (Dec. 14, 2021) “What is a charitable trust?”

 

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How Can I Protect Assets from Creditors? – Annapolis and Towson Estate Planning

Forbes’ recent article entitled “Three Estate Planning Techniques That Protect Your Assets From Creditors” explains that the key to knowing if your assets might be susceptible to attachment in litigation is the fraudulent conveyance laws. These laws make a transfer void, if there is explicit or constructive fraud during the transfer. Explicit fraud is when you know that it is likely an existing creditor will try to attach your assets. Constructive fraud is when you transfer an asset, without receiving reasonably equivalent consideration. Since these laws void the transfer, a future creditor can attach your assets.

Getting reasonably equivalent consideration for a transfer of assets will eliminate the transfer being treated as constructive fraud. Reasonably equivalent consideration includes:

  • Funding a protective trust at death to provide for your spouse or children
  • Asset transfer in return for interest in an LLC or LLP; or
  • A transfer that exchanges for an annuity (or other interest) that protects the principal from claims of creditors.

Limited Liability Companies (LLCs) can be an asset protection entity, because when assets are transferred into the LLC, your creditors have limited rights to get their hands on them. Like a corporation, your interest in the LLC can be attached. However, you can place restrictions on the sale or transfer of interests that can decrease its value and define the term by which sale proceeds must be paid out. An LLC must be treated as a business for the courts to treat them as a business. Thus, if you use the LLC as if it were your personal property, courts will disregard the LLC and treat it as personal property.

Annuities are created when you exchange assets for the right to get payment over time. Unlike annuities sold by insurance companies, these annuities are private. These annuities are similar to insurance company annuities, in that they have some income tax consequences, but protect the principal against attachment.

You can also ask an experienced estate planning attorney about trusts that use annuities, which are called split interest trusts. There is a trust where you (the Grantor) give assets but keep the right to receive payments, which can be a fixed amount annually with a Grantor Retained Annuity Trust (or GRAT.)

Another trust allows you to get a variable amount, based on the value of the assets in the trust each year. This is a Grantor Retained Uni-Trust or GRUT. If the assets are vacant land or other tangible property, or being gifted to someone who is not your sibling, parent, child, or other descendant, you can keep the income from the assets by using a Grantor Retained Income Trust (or GRIT).

Along with a trust where you make a gift to an individual, you can protect the trust assets and get a charitable deduction, if you make a gift to charity through trusts. There are two types of trust for this purpose: a Charitable Remainder Trust (CRT) lets you keep an annuity or a variable payment annually, with the remainder of the trust assets going to charity at the end of the term; and a Charitable Lead Trust (CLT) where you give a fixed of variable annuity to charity for a term and the remainder either back to you or to others.

To get the most from your asset protection, work with an experienced estate planning attorney

Reference: Forbes (June 25, 2020) “Three Estate Planning Techniques That Protect Your Assets From Creditors”

 

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How a Charitable Remainder Trust Works – Annapolis and Towson Estate Planning

The least popular beneficiary is almost always the federal government. Most people are concerned that their estate will need to pay taxes and do what they can through estate planning to keep federal estate tax liability to a minimum. However, with federal estate and gift tax exemptions at $11.58 million per person this year, and twice that when properly used with the spousal exemption, most people do not need to worry about the federal estate tax, explains The News Enterprise in the article “New federal law resurrects Charitable Remainder Trust.”

The passage of the SECURE Act, effective January 1, 2020, made big changes in how we need to plan for taxes for beneficiaries. Federal estate and gift tax exemptions did not change, but anyone who inherits a retirement account is likely to find fewer options than before the SECURE Act.

Charitable remainder trusts have been used for many years to avoid high capital gains taxes on appreciated assets. Appreciated assets are placed into trusts and no taxes are due on the transfer.  The donor also gets a charitable tax deduction. The amount in the trust grows, while paying out a small amount to beneficiaries in installment payments.

With the passage of the SECURE Act, non-spousal beneficiaries, with certain exceptions, must withdraw the entire amount of the qualified retirement account within ten years. Generally, beneficiaries may not roll the account into their own qualified account, and there are no required annual distributions. However, there is a ten-year window to empty the account. Taxes are due on every withdrawal, whether it takes place over ten years or as a single withdrawal.

By using a CRT, the full amount of the account may be transferred into the CRT, no taxes are due, and the donor (or the donor’s estate) gets a charitable deduction.

The trust is simply an instrument created, so that a beneficiary may receive regular payments, which may include the donor, beneficiaries or multiple beneficiaries, over the span of their lives, or in a set number of years, with the remainder interest of at least ten percent of the initial contribution paid to a qualified charity at the end of the trust.

This effectively creates a stretch for the IRA, with withdrawals being taxed to the beneficiary, over a longer time span. With only ten percent being required to be donated to a charity, those who plan on making a donation to a charity anyway receive a benefit, and their beneficiaries can receive a lifetime income stream.

Speak with your estate planning attorney to learn how a CRT could be part of your estate plan.

Reference: The News Enterprise (June 2, 2020) “New federal law resurrects Charitable Remainder Trust”

 

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Don’t Shrink Your Estate with Last Minute Tax Planning – Annapolis and Towson Estate Planning

In the best-case scenario, you would start talking with your estate planning attorney early on about your overall goals and the various tools available to minimize tax liability and transfer wealth to the next generation. Whether your estate is modest or significant, the article “A Recipe for Risk—Last-Minute Tax Planning for Estates” from The Legal Intelligencer explains how a last-minute plan failed on a grand scale. A recent memorandum opinion from the U.S. Tax Court provides a cautionary tale.

Howard Moore owned a large amount of property and ran a successful farm. He was admitted to the hospital late in 2004, was discharged to hospice and told he only had six months to live. He created an estate plan that included a family limited partnership (FLP), a living trust, a charitable lead annuity trust, a trust for the adult children, a management trust that acted as the general partner of the family limited partnership and an “Irrevocable Trust No. 1” that was created to act as a conduit for the transfer of funds from the FLP to a charitable foundation.

The primary focus of the plan was to transfer the farm to a living trust and then to transfer 80% of the farm property to the FLP. The management trust was to serve as a partner to the FLP, with the living trust owning almost all the limited partnership interests and with each of the decedent’s children owning a 1% partnership interest. The FLP was to offer protection against liabilities from the use of pesticides, potential bad marriages, creditors and the fact that the family was a bit dysfunctional and would need to work together to manage the FLP. The FLP had many transfer restrictions and the limited partners were not given any rights to participate in business management or operational decisions regarding the FLP.

The trust known as “Irrevocable Trust No. 1” was nominally funded at the time of the decedent’s death and received funding from the FLP. Those funds, in turn, were transferred to the charitable trust to gain a charitable deduction by the estate. Just before he died, Moore used FLP funds to make large transfers to his children that were designated as loans. He also made outright gifts to the children and to one grandchild.

The estate filed an estate tax return and a gift tax return after Moore’s death. The IRS issued a notice of deficiency for nearly $6.4 million and the case went to tax court. The U. S. Tax Court agreed with the IRS’ findings. The defense of the estate plan, the tax court maintained, was form over substance and the only reason for the estate plan and the numerous transactions was to save estate taxes.

There were a lot of hurdles in this case, in addition to the short time period for the estate plan to have been created. At the time of the decedent’s hospitalization, the sale of the farm to a neighbor was being negotiated. A contract to sell the farm was executed within days of transferring it to the living trust. There were numerous transfers and distributions made between trusts and the FLP, and the court concluded that all decisions about the FLP after its formation were made unilaterally by the decedent. An FLP is supposed to function as a true partnership. Many other issues and errors occurred in the rush to have this estate structured in such a short period of time.

Had Moore engaged in planning five or ten years earlier, there would have been time to create a plan in which both the substance and execution of the plan were sound and the family would have been able to save millions of dollars in taxes. By waiting until his death was imminent, the plan attempted to establish transfer requirements without the opportunity to execute them properly.

Reference: The Legal Intelligencer (May 18, 2020) “A Recipe for Risk—Last-Minute Tax Planning for Estates”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Can I Add Charitable Giving to My Estate Planning? – Annapolis and Towson Estate Planning

One way many people decide to give to charity, is to donate when they pass away. Adding charitable giving into an estate plan is great way to support a favorite cause.

When researching this approach, you can easily become overwhelmed by all of the tax laws and pitfalls that can make including charitable gifts in your estate plan seem more complex than it needs to be. Talk to an experienced estate planning attorney to help you do it correctly and in the best way for your specific situation.

West Virginia’s News explains in “Estate planning and charitable giving,” that there are several ways to incorporate charitable giving into an estate plan.

One way to give is to dictate giving in your will. When reading about charitable giving and estate planning, many people might begin to feel intimidated by estate taxes, feeling their heirs will not get as much of their money as they hoped. Including a charitable contribution in your estate plan will decrease your estate taxes. This helps to maximize the final value of your estate for your heirs. Speak with your estate planning attorney and make certain that your donation is properly detailed in your will.

Another way to leverage your estate plan to donate to charity, is to name the charity of your choice as the beneficiary on your retirement account. Charities are exempt from both income and estate taxes, so going with this option guarantees the charity will receive all of the account’s value, once it has been liquidated after your death.

You can also ask your estate planning attorney about a charitable trust. This type of trust is another vehicle by which you can give back through estate planning. For instance, a split-interest trust allows you to donate your assets to a charity but keep some of the benefits of holding those assets. A split-interest trust funds a trust in the charity’s name. You receive a tax deduction any time money is transferred into the trust.

However, note that the donors will continue to control the assets in the trust, which is passed onto the charity at the time of your death. You have several options for charitable trusts, so speak to an experienced estate planning attorney to select the best one for you.

Charitable giving is an important component of many people’s estate plans. Talk to your probate attorney about your options and go with the one that is most beneficial to you, your heirs and the charities you want to remember.

Reference: West Virginia’s News (Feb. 27, 2020) “Estate planning and charitable giving”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Low-Interest Rates Create Estate Planning Opportunities – Annapolis and Towson Estate Planning

One result of the global health crisis is that interest rates are lower now than they have been in many, many years. The April 2020 AFRs (Applicable Federal Rates), which are used to determine the least amount of interest that has to be charged for below-market loans and are often used for intrafamily lending, have decreased to 0.91 percent for loans less than 36 months, 0.99 percent for loans of 36 months or more and less than nine years, and 1.44 percent for loans of nine years or longer.

The article, titled “Estate Planning in a Low Interest Rate Environment,” from The National Law Review Journal, explains that for families where intrafamily lending has already occurred, these low rates provide a chance to amend the terms of current promissory notes to obtain these rates.

There are two opportunities presented:

  • The amount that the borrower needs to repay is reduced, thereby easing the burden on a borrower who has a cash flow problem.
  • If a parent has already lent money to a child who will eventually inherit assets from the parent, this lower interest rate will help to facilitate wealth transfer. The parent will receive lower payments under the note, minimizing the assets that are added back to the lender’s taxable estate.

Here are a few situations where these loans are typically used:

  • Parents extend a loan to adult child, who is going through a challenging financial period.
  • Parent lends money to a child with the understanding that the child will invest the money at a higher rate of return than the interest charged under the note, thus allowing growth to occur in the child’s estate rather than in the parent’s estate.
  • Complex estate planning, where a sale is made to an intentionally defective trust, where the seller’s goal is to freeze the value of the estate for a price at which the asset was sold on an installment basis. This allows future growth to take place outside of the seller’s taxable estate.

These intrafamily loans are usually part of sophisticated estate planning. Other methods include Grantor Retained Annuity Trusts (GRATs), or Charitable Lead Trusts (CLTs), which also become more attractive in a low interest rate environment.

With a GRAT, there is a transfer of assets to a trust, in which the settlor retains an annuity payment for a certain number of years. At the end of the term, the remaining assets pass to the trust beneficiaries with no estate tax implication. The CLT operates in a similar way, except that the payment for a specified number of years is made to a charity.

Speak with an experienced estate planning attorney about how your estate could benefit from the current low interest rate environment.

Reference: The National Law Review (April 13, 2020) “Estate Planning in a Low Interest Rate Environment”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys