Unfortunately, there’s no one size fits all estate plan. This couldn’t be truer during a year when a large number of uncertainties exist about the future. The Covid-19 pandemic has changed our lives in countless ways, which includes an increased concern about end of life issues. As a result, as we begin 2021, there are some helpful estate planning strategies that you might consider implementing.
# 1 – Grantor Retained Annuity Trusts
Grantor retained annuity trusts are financial instruments that are used as part of the estate planning process to both reduce taxes on large financial gifts to loved ones. In accordance with these trusts, a person transfers property to an irrevocable trust for a certain time in exchange for annual annuity payments. At the end of the trust term, a beneficiary receives the remaining assets. Because interest rates are currently low, there is an increased likelihood that the amount passing to the beneficiary will surpass the calculated amount of the gifts, which allows assets to pass to family members without being subject to gift taxes.
# 2 – Intra-Family Loans
Another wealthy technique that is utilized successfully by many people are intra-family loans, which are loans that are most frequently made between parents to children or grandchildren. Typically, these loans rely on the Applicable Federal Rate, which is the lowest interest rate that can be charged on a loan for it to not be classified as a gift. These loans provide a method for families to transfer growth on their wealth without making outright gifts. These trusts can be particularly beneficial when the recipient of a loan is beginning a business because the repayment terms have great discretion.
# 3 – Changes to Tax Law
Substantial changes to both federal estate and gift taxes occurred in 2018. More recently, Congress passed legislation to significantly change income tax deferral opportunities regarding inherited retirement accounts. Due to both government stimulus spending as well as the change of political administrations that will occur in January 2021, it is likely that additional changes regarding tax laws are approaching and that these changes are not “friendly” to many taxpayers. For people who create estate plans without considering current or future legislation, new regulations could result in undesirable consequences.
Why Estate Planning is Critical
It’s easy to end up delaying estate plans. After all, it’s certainly an unpleasant thought that one day we will no longer exist. Remember, adequate estate planning can help to make sure that the time leading up to when you pass away is less challenging and stressful for your loved ones. Adequate estate planning also helps to make sure that your estate can be settled efficiently and cost-effectively. Estate planning also helps to make sure that your beneficiaries are protected against later lawsuits as well as divorce.
Speak with an Experienced Estate Planning Attorney
It can be challenging to decide what estate planning strategies work best for you, but a knowledgeable estate planning attorney can discuss your various options as well as discuss the strengths and disadvantages of each. If you or a loved one needs the assistance of an experienced accident attorney, you should not hesitate to contact Ettinger Law Firm today.