Estate Tax Planning
Many attorneys like to talk about their clients' estate tax "problem" and recommend strategies to "minimize the damage" caused by the IRS. We take a different approach.
Start Building Wealth For Your Family Now
Our view is that you have an amazing opportunity to begin building wealth today for your children and grandchildren. And while building that wealth, you should be able to reduce or eliminate your possible estate taxes.
There are several ways to build wealth for your family, but they all have a few things in common:
- Building wealth takes time. There's no magic bullet, just the yearly accumulation of income and growth. So the sooner you start, the more you can pass on tax free to your children or grandchildren.
- You don't have to give up control. You can still manage your assets or run your business the same way you always have. But now you're not just doing it for yourself, you're also doing it for your children or grandchildren.
Give to Charity First And Your Family Second
The IRS looks very favorably on charitable giving, and with good reason. No matter which way you look at it – from accounting to just doing the right thing – philanthropy makes sense.
Philanthropy also offers the chance to give your wealth to your children or others entirely free of gift and estate taxes. Here again, the key is time.
A charitable lead annuity trust (CLAT) makes fixed payments to charity for a certain number of years and then leaves the rest to your beneficiaries. If the charitable payment term is long enough, you will pay absolutely no gift or estate taxes on the amount passing to your beneficiaries.
An example may best show how the CLAT works:
Assume that you have property worth $1,000,000 that is expected to (and does) produce a return of 7% per year).
You then give that property to a CLAT that lasts for 18 years and pays %7 annually to the charity of your choice.
Assuming an IRS rate of 3.2% for calculating your gift and estate tax liability:
- Your charity will receive $70,000 per year for 18 years (a total of $1,206,000)
- Your children or other beneficiaries will receive the property remaining in the trust at the end of the 18th year ($1,000,000 before expenses)
- If the trust property can achieve more than a 7% return, the wealth transfer to your children would be even larger.
- Your taxable gift for the creation of the trust would be $37,255 (resulting in a maximum tax at 45% of $16,765).
How Can We Assist You?
A CLAT can be an effective way to transfer wealth while satisfying your charitable goals.
To start a conversation about how we can help you achieve your goals, call us at (888) 909-1414 or contact us online to schedule a no-fee Discovery Session.
