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Triple Crown of Estate Planning & Wealth Transfer Opportunities

The COVID pandemic has caused many changes in our lives.  Some of these are lasting and some may be short lived, however there is little doubt to us that this could be one of the best times in history for affluent families to update their estate plans

In fact, these conditions create an opportunity where the “TRIPLE CROWN OF ESTATE PLANNING” is now available.

Excited?  Well, let us elaborate on three items making up the triple crown and how together they combine for very powerful wealth transfer opportunities for affluent families:

1.      Estate Exemptions

Federal Transfer Tax exemptions are still at all-time highs…at least until the end of 2025 under current law.  In our opinion all families with total net worth’s exceeding $10 million should evaluate whether and how to use these exemptions.

A Spousal Lifetime Access Trust has been a favorite of many of our clients.  These trusts provides an opportunity to gift between spouses and still potentially benefit from the assets.  Careful drafting by competent counsel is key, however this works well if you want to “have your cake and eat it too.”

2.      Low interest rates

With all of the stimulus and the Fed dropping interest rates to almost zero a couple unique opportunities exist;  Sales to Grantor Trusts can be done at 0.45% (July mid-term AFR).  You did not misread that.

If you have assets growing at a rate over the next 9 years above 0.45% that is a tax free gift and YES you can generation skip the trust too.  WOW!  The 2nd huge advantage of low interest rates is premium financed insurance.  It is possible to borrow money at a fixed rates for 7+ years around 3%.  The insurance products often utilized in this strategy have a fairly high probability of outpacing that borrowing rate over the 7+ years.

During our professional careers, we have never seen leverage possible at such attractive rates.

Life insurance was already, for those that qualify, a most efficient way to pay the estate tax, however it just became more attractive with the possibility of premium financed policies.

3.      Historically low asset valuations

Most assets are worth less than just a few months ago (some exceptions such as Amazon or ZOOM stock..) and this could be temporary.  The equity markets have had a substantial rebound already, however economic data in the coming months will be very challenging.

It is very likely that business and real property valuations will be extremely attractive due to the pandemic.  This coupled with typical discounting strategies creates great estate planning valuations.

How this TRIPLE CROWN can help you in your estate planning will undoubtedly vary, however it behooves you to act now to explore options.  We try to live our lives with a “no regrets” philosophy and affluent families that do not update their estate plans with competent legal now may well regret their inaction at a future date.

Please contact us to schedule a no cost review and discuss how this Estate Planning TRIPLE CROWN can help you accomplish your objectives.