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Estate Planning Opportunities Under Current Conditions


Low interest rates, low valuations on assets, down markets – current conditions may feel turbulent for investors, but they offer some excellent estate planning opportunities. And with federal gift and estate exemptions higher than they’ve ever been, it’s time to think about gifting. Here are some strategies that may pay off big as the markets and economy recover.

Annual Exclusion Gifting

  • Make your annual exclusion gifts early and use distressed stock instead of cash. This could include funding 529 savings plans for children and grandchildren.

Grantor Retained Annuity Trusts (GRATs)

  • GRATs are a type of trust where the Grantor (person establishing the trust) is repaid the full value of the original assets contributed over a certain number of years. The repayment to the Grantor is tied to an interest rate, which is historically low right now at 0.8%. Any appreciation above that rate will pass to the Grantor’s beneficiaries – both estate and gift tax free.

Sales to Intentionally Defective Grantor Trusts (IDGTs)

  • IDGTs are a type of trust disregarded by the IRS so the Grantor is treated as the owner. With this planning technique, a Grantor sells an asset to an IDGT on a note using a low AFR. No gain is recognized because the Grantor is still considered the owner while appreciation passes on to the trust beneficiaries. Sales to IDGTs require more steps than a GRAT, but also offer more flexibility on repayment.

Charitable Lead Annuity Trusts (CLATs)

  • A CLAT is a split interest trust. A charity receives an annuity payment for a set number of years. After the charity’s term ends, the remaining assets, and any appreciation, goes to the remainder beneficiaries (usually family members of the Grantor). When interest rates are low, CLATs can be an effective strategy to pass assets to the next generation while also making a charitable donation.

Not only is it a good time to undertake new planning, but 2020 also presents an opportunity to revisit previous planning.

Refinancing Intra-Family Loans

  • With lower interest rates, it is a good time to review any outstanding intra-family loans and determine if refinancing is appropriate.

Revisit Existing Trusts.

  • Already have a GRAT or IDGT? It’s a great time to look at those trusts and determine if anything can be done to enhance their performance. For example, if you retained the ability to replace the assets in a trust for other assets of the same value, known as a “swap power,” it may make sense to utilize that option now. If you have a life insurance trust with a guaranteed product, it’s important to adjust assumptions on illustrations so you have an updated review of how the policy is performing.

In the current economic climate it’s advantageous to review your estate planning options. Effective estate planning can help you feel more confident about the future, knowing your loved ones will be taken care of and that you are leaving behind your desired legacy.

Let the experts at Berntson Porter guide you with comprehensive planning and consulting services to ensure your wealth and legacy are safeguarded. For more information, contact Elizabeth Stephan, JD, Senior Manager and Director of Estate and Transition Planning Services at or 425.289.7665 to get started. We’re here to help!


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