• Riley Carbone Kern

Low Interest: The Right Time for Advanced Trust Planning

The IRS has announced new Section 7520 rates, the rates that are used to determine the values of certain important gifting and estate planning techniques, such as charitable gifts, private annuities, and transfers to charitable trusts and intentionally defective trusts. These planning tools are critical for reducing or eliminating estate taxes and creating asset protection during the grantor's lifetime.

The rate for May 2020 is at an historic low: 0.8%.

This is an incredibly attractive time to transfer assets to an Intentionally Defective Grantor Trust (IDGT) or, as we sometimes call it, a Family Bank. Other options that become attractive with low rates are promissory notes for family loans, Grantor Retained Annuity Trusts (GRATs), Charitable Lead Annuity Trusts (CLATs), and Spousal Lifetime Access Trusts (SLATs).

If your current net worth is above the lifetime estate and gift tax exemption of $11.58 million for an individual (or the $23.16 million for couple, if electing portability), then you need to consider these planning techniques right now.

Even if your net worth isn't near that amount, but is still considerable, you might think about this type of planning while the rates are so low. Once assets are transferred under one of these techniques, they grow "outside" of your estate. Meaning, your asset picture continues to increase, but in a way that will not be taxable at death.

The current estate and gift tax exemption amounts are automatically set to be cut in half in 2025, but Congress can always reduce the amounts at any time. With the current deficits caused by the response to COVID19, it is entirely possible that the estate and gift tax exemptions will be lowered to allow the Federal Government to increase revenue. This means that many more families, or estates, will owe taxes at death. Unless, that is, they have planned appropriately.

Here's the stuff we always put at the end: If you want to know more, we would love to talk with you about it. Best part, the conversation about how it could benefit you doesn't cost anything. Call us at (918) 770-8940 or send an email to to set up a free consultation.

Disclaimer: Reading this blog post does not create an attorney-client relationship, and it is not formal legal advice. This is for information purposes only. It is always best to speak with an attorney about your questions, assets, concerns, and needs.

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