The Smartest Estate Plan Ever?!

“I don’t believe I’m exaggerating when I say that this could prove to be one of the smartest estate planning moves one will ever make.”

The economy is starting to show some life in a number of sectors, unfortunately, the housing market is not one of them. Their is good news however, when the poor housing market coupled with the tax laws that went into effect with last December it offered a unique opportunity.  For the right person this opportunity may very well rate amongst the smartest estate planning moves one will ever make, so says Forbes columnist Rob Clarfeld. Are you ready for the idea? Now might be the perfect time to give away the house.

The poor housing market remains perhaps the largest unhealed wound of the Great Recession. If you are trying to sell a home right now you are likely a bit frustrated. Homes are not moving quickly, and many sellers are forced to take a loss just to move their property. However, if you were considering giving your home to your loved ones, your timing could not be more perfect. Depressed prices mean that you won’t have to work to reduce your home’s taxable value and the gift you make will take a much smaller portion of your lifetime gift tax exemption. This is a serious boon to high net-worth individuals looking to give away property of considerable value.

Wait, there’s more. The tax compromise signed in with the budget deal last December also extends the lifetime gift allowance from $1 million to a generous $5 million. So, right now, there is an 18-month window of opportunity for you to make a tax-advantaged gift.

Previously, when one of my clients wanted to gift their real estate, the most popular strategy was the  Qualified Personal Residence Trust (QPRT) because it allowed for considerable discounts given certain risks through a gradual transfer. However, given this perfect storm of depressed real estate prices combined with a generous gift tax exemption and the outright gift in trust may make more sense. Further, if you want to retain post-gift use of the real estate, you may want to consider transferring the home to an Intentionally Defective Grantor Trust (IDGT), with a structured plan that allows you to remove the asset (in this case your home) from your estate for estate and gift tax purposes, but not for income tax purposes.  As with any out-of-box thinking, is is of the utmost importance to seek the advice of a knowledgeable estate planning attorney who will understand the need for a thoughtful crafting the trust provisions, including dispositive and potential generation skipping provisions.

Unfortunately, this window of opportunity could close at any time, so if this is an estate planning strategy you might want to consider, you are well-advised to discuss your situation with professional counsel sooner rather than later.

Reference: Forbes (June 22, 2011) “Your Smartest Estate Planning Move Ever: Give Away Your House—Now!”

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We've been putting together as many resources as possible so that we can continue to help:

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Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.