Navigating Estate Planning Issues
By Christopher R. Paul, William V.A. Zorn, and Christina L. Krakoff
Published on 3/24/2020
Many of our clients have taken this pandemic as an opportunity to step back and give renewed thought to their estate plans. Our attorneys are completing ongoing estate planning projects and are ready to address new estate planning matters and implement changes to existing documents. With appropriate protections and procedures in place, document signing in New Hampshire can be done remotely or in person. Many such documents are valid without formality of witnesses or notaries. We are ready to guide you through these requirements.
Advanced Planning Opportunities in a Market Downturn
With the downturn in financial markets and historically low applicable federal interest rates, there is now an opportunity for advanced tax planning, such as:
- Gifting: Gifting assets low in value today can be advantageous if the assets recover and exceed their value in the future. With the current estate/gift/GST exemption at $11.58M per person, now may be a good time to use up some of the exemption before it is set to decrease on January 1, 2026 (or earlier, depending on federal elections).
- GRATs: For a Grantor Retained Annuity Trust, the grantor transfers assets to an irrevocable trust and receives an annuity payment each year for the term of the trust. The goal is to “zero out” the annuity, so that the entire investment and the imputed interest is paid out by the end of the term. Once the term ends, the balance is passed to the remainder beneficiaries free of gift tax. The lower the imputed interest rate, the less growth is needed to pass the “hurdle” of the initial investment, to be able to transfer a balance to the remainder beneficiaries. The IRS rate for April is 1.2%.
- CLATs: Charitable Lead Annuity Trusts are very similar to GRATs, except the annuity payment is made to a charity during the term of the trust. At the end of the term, the balance is transferred to non-charitable beneficiaries free of gift tax. This strategy also takes advantage of the lower IRS rate to determine the annuity value.
- Loans at low interest rates: With much lower applicable Federal Interest Rates, there is an opportunity to make low-interest loans to family members or trusts, or to refinance existing loans that have higher interest rates.
We hope that you and your family are healthy and safe during this difficult time. Although our offices are currently closed, most of our attorneys and staff are working remotely full time to continue to provide excellent legal services to you.