Recent economic hardships have created unique opportunities to save estate taxes. These opportunities will be gone once the economy recovers, so prompt action should be considered by everyone.
Some of the most promising opportunities include:
Loans to Family Members
Interest rated have remained low this year, but they will eventually increase. You may give your family members or other loved ones the benefit of borrowing money at interest rates lower than those available from commercial lenders. For example, without gift taxes a loan of less than 3 years can be made at 0.19%, a loan of 3-9 year at 1.20%, and a loan of more than 9 years at 2.67%. Existing loans may also be refinanced.
Sophisticated Estate Planning Techniques
Those who have been fortunate enough to create large taxable estates (more than $5 million) may find additional advantages in strategies that perform best in a low interest rate environment such as GRATs, installment sales to grant or trusts and charitable lead annuity trusts.
Gifts of Business Interests
Business owners have the chance to use historically depressed prices (and loans at historically low rates) to help younger family members purchase portions of the business at low rates. This strategy shifts wealth to younger family members when the business prospers during the economy's return to growth.
Even if your situation is uncomplicated by estate tax issues, it is still necessary to have basic estate planning documents like a will and powers of attorney. If you have estate planning documents but they have not been updated or reviewed in the last 3 years, it is important to make sure they remain effective, given the number of changes to the law in recent years.
As year-end approaches, please consider whether income and estate tax savings techniques can be of value to you. Because it can take time to put these techniques into effect, we recommend that you promptly call us to arrange a time to speak with an expert in our estate planning department. You can either call your Krasnow Saunders Kaplan & Beninati lawyer, Francis Beninati, or Karin Prangley of our estate planning department to set up an appointment.