Year End Estate Planning

Congress is back in session and the big question is whether this lame duck Congress is going to do anything on the tax front before the end of the year? Whether they do or do not, there are still some things that folks should consider:

1. Making taxable gifts in 2010. This year there is a "blue light special" on taxable gifts of 35% made in 2010. Next year the rate goes to 45%. And, if one does die next year or thereafter the death tax rates will be 55%. If there was ever a time to consider this option it is now.
2. Use of Rolling Grantor Retained Annuity Trusts ("GRATs"). While Congress has debated sticking a knife in this technique by requiring a minimum 10 year lifetime term (i.e. if a donor sets up a GRAT and dies within 10 years it gets sucked back into one's taxable estate) right now short term GRATs are still possible. This is a win-win situation that may not be with us much longer.
3. The Section 7520 rate dropped to 1.8% in December. This is a historic all time low rate of interest that makes some techniques like Charitable Lead Annuity Trusts very attractive for people looking to avoid the payment of Federal Estate taxes on estates over $1M in 2011.
4. Irrevocable Gift Trusts for children and grandchildren are still favorites to provide asset protection planning for future generations.
5. IRA Roth conversions from traditional Individual Retirement Accounts ("IRAs") in this month may be an appropriate move for many people with with the right mix of investment assets that can be used to pay the income taxes on the conversion. Coupled with a Retirement Benefits Trust as a Qualified designated beneficiary, one can get "stretch" IRA tax treatment for the beneficiary and asset protection planning under the right circumstances.

Our calendar is filling rapidly for planning in December. If you need help or assistance, please call soon.