The ABCs of Advanced Estate Planning

The ABCs of Advanced Estate Planning

Planning your estate can lead to a lot of decisions and even more emotions. Figuring out how to divide your assets, and how best to protect your beneficiaries from a tax burden are just a couple of the challenges. Fortunately, estate-planning lawyers have vast experience in determining which outcome may be best for you. While no situation is simple, the attorneys at Heritage Law, LLP want you to know that they can help navigate you through these difficult decisions, leaving you with peace of mind that your estate is properly handled.   Here are some of the options available to you:

(FLP)Family Limited Partnerships

When members of a family want to pass on wealth to a younger generation, they often turn to a Family Limited Partnership (FLP). FLPs are ideal for assets that will continue to grow in value such as real estate. The FLP consists of two classes of partners: general and limited. The general partner controls all of the money within the partnership and when distributions are made. Typically the general partner is the parent or grandparent, and they gift the limited partnership interests to the younger generation. The value of these gifts are “reduced” since it is a closely held partnership, thus removing the property from your estate at a significant discount.

(IDIT)Intentionally Defective Irrevocable Trusts

An intentionally defective irrevocable trust (IDIT) is a trust where someone sets up to provide for a benefactor, typically children or grandchildren. Once configured, this trust cannot be undone. The grantor of the trust continues to pay income taxes on the asset, however, the asset is “sold” to the IDIT in exchange for a promissory note. An IDIT is one way to set up a trust to lessen estate taxes upon death and reduce gift tax liability.

(SLAT)Spousal Lifetime Access Trusts

A spousal lifetime access trust (SLAT) benefits the donor’s spouse and children in an irrevocable trust. This type of trust helps eliminate some of the estate tax burdens at death by utilizing the gift tax exemption. There are strict guidelines to follow when establishing SLATs. If spouses want to implement SLATs for the benefit of each other, you must proceed carefully to avoid issues with the reciprocal trust doctrine, which applies to interrelated trusts that have substantially identical terms.

(QPRT) Qualified Personal Residence Trusts

If you want to give your children your home while living in it, you can do a qualified personal residence trust (QPRT). In this scenario, you gift the home to your children, but you remain the occupant. The grantor can continue to claim an income tax deduction for any real estate taxes paid. Effectively, you are removing the property from your estate while also passing it to your beneficiaries at a significant discount.

When it comes to planning your estate, you have many options. At Heritage Law, LLP, our lawyers advise individuals, business owners and families about the best ways to plan for their future security through wills, trusts, gifts and other estate planning tools. If you would like to talk to estate planning lawyers with experience planning estates and trusts, contact the Heritage Law, LLP team.