The woes of these economic times are well known; but in some regards, this is excellent news for advanced estate planning and gifting programs. From January 1991 through March 2009, the Section 7520 interest rate averaged more than 6.3%, with a peak of 9.4%. In October 2011, the IRS set the Section 7520 interest rate at just 1.4%!
If you have an estate that will likely be taxable for federal taxes due when you die, now is the time to consider advanced planning and gifting programs.
Advanced Planning Techniques that Work Well in a Low Interest Environment
- Grantor Retained Annuity Trust to get assets out of your estate and in the hands of loved ones.
- Sale to Intentionally Defective Grantor Trust to get assets out of your estate and in the hands of loved ones. You pay the income taxes on any trust income which is equivalent to you making an additional, non-taxable gift.
- Chartable Lead Annuity Trust which gets assets out of your estate and into the hands of your loved ones, provides an income tax deduction and lower overall taxes, and benefits a charity.
- Make Loans to family members and forgive loan payments each year using your annual $13,000 (or $26,000 if you are married) gift tax exclusion. You can also use your lifetime unified credit exemption which is currently $5,000,000 (or $10,000,000 if you’re married) to forgive loans.
Gifting Programs for 2011 and 2012
- Superfund a 529 plan for grandchildren. You can use 5 year’s worth of annual gift tax exclusion at once – which is $65,000 (or $130,000 if you’re married). You can gift to as many 529 plans as you would like, as long as they have different beneficiaries.
- Give away up to $5,000,000 (or $10,000,000 if you’re married).
If it’s possible that you will have a taxable estate for federal estate tax purposes when you die, consult with a qualified estate planning attorney. Now is an excellent time for some advanced planning tools and gifting programs.