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This is the first blog in a four-part series that focuses on estate planning strategies.
The Tax Cut and Jobs Act of 2017 has provided a valuable incentive to review existing estate plans and implement new family wealth transfer plans. When planning for the transfer of your wealth, you’ll likely be faced with an array of options. Whether you are leaving a treasured asset to a loved one or a legacy of trusts that will be used for future generations, specific strategies can be implemented to make the most of your assets.
A grantor retained annuity trust (GRAT) is an irrevocable trust in which the grantor makes a gift of property in trust while retaining a right to an annual payment (annuity) from the trust for a specified term of years. GRATs can be used for a variety of assets, including concentrated positions and assets expected to appreciate significantly. Key characteristics of this strategy include:
The installment sale to grantor trust strategy takes advantage of the significant differences between the income and transfer tax treatment of irrevocable trusts. The goal of this strategy is to transfer anticipated appreciation of assets at a reduced gift tax cost. Key characteristics of this strategy include:
The creation and use of a family limited liability entity is a strategy that can provide income tax, asset protection, and estate planning benefits. These entities can hold business, personal or investment assets. Though they are not for everyone, their flexibility often makes them attractive, as the structure, ownership and documents can be modified to respond to changes in the family over time. Key characteristics of this strategy include:
A lifetime credit shelter trust, also known as a spousal lifetime access trust (SLAT), may be appropriate for people who are hesitant to give away significant assets now but want to take advantage of the increased lifetime exemption amount. Key characteristics of this strategy include:
Under rules set forth in the Internal Revenue Code, an individual can make loans to family members at lower rates than commercial lenders without the loan being deemed a gift. Key characteristics of this strategy include:
There are many variations to the strategies outlined above, as well as additional planning opportunities. Since these strategies can be complex, it’s critical to work with a qualified professional. For more information on lifetime gift planning strategies, visit our Lifetime Gift Planning resource page.
Theresa Marx is a senior wealth strategist for CIBC Private Wealth Management in Chicago, with 15 years of industry experience. In this role, she is responsible for developing integrated wealth management solutions and providing comprehensive estate and financial planning services to high net worth clients.
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