Give it NOW if you’ve got it, or pay Uncle Sam when you pass in the big way

That’s right. I am talking about estate taxes. Your heirs are in great luck if you die in 2010, with a zero estate tax rate, but if you die in 2011, and if changes in tax legislation remain unresolved, the portion of your estate which will avoids estate tax will drop back down to $1.0 million, as compared to $3.5 million in 2009. My guess is that for many of you that your net worth could exceed the $1.0 limit in 2011, especially if you own real estate. So while estate tax planning was once only for the “fat cats,” it’s not any more.
How to avoid estate taxes? One method is to gift the property outright now, while you’re still alive. Another method is to make the gift in a way that allows giver (grantor) to receive an economic benefit and to reduce the estate taxes payable. The later technique is particularly useful in this economy when
1.) property values are depressed,
2.) interest rates are low.The vehicle is called a Grantor Annuity Trust (GRAT).Trusts can be complicated, and you will want to discuss if a Grantor Annuity Trust is right for you with a financial planner, but, in a nutshell, here’s how it works: The grantor funds the trust with a reduced value property. The estate tax saving is the difference of the value of the property between now and the value in a better real estate market in the future, multiplied by the estate tax rate that begins at 55%. Basically you’ve stopped the clock on the estate tax growth of the asset and limited the tax on the future growth.
And here’s more good news — in exchange for giving away your property you will receive a flow of cash in the form of an annuity. You will have to pay taxes on the interest portion of the payments, but if you fund the GRAT now, today’s record low interest rates should keep your taxes low.Need some more reasons to take action now? Right now a GRAT can have a lifespan of as little as two years, which may change to a minimum of ten years. This is important because if the grantor dies before the end of the annuity, or the trust lifetime, the full value of the property goes back into the estate, defeating purpose of the GRAT.
Want to learn more? Several local estate planners are available to work with you to set up a trust and plan for any other estate planning needs. Be sure to coordinate your efforts with your financial planner who can quantify the impact of your choices on your cash flow, taxes and your future net worth.
CREW RECRUITMENT – Opportunities to talk with Celeste on a One-on-One Basis
• Call and speak to her at no charge in order to determine if she can be of service.
• Meet her in person for 30 minutes at no cost to confirm that your needs and her services are a match.

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