Archives for September 2013

You Have Options

Since the Qualified Personal Residence Trust (QPRT) is also an Intentionally Defective Grantor Trust, it is an excellent asset protection tool. To begin today’s posting, I need to provide full disclosure. The QPRT involves both trust and tax planning: so the underlying mechanisms are complex. I want to advise you not to attempt this strategy on your own. But instead, consult your CPA and attorney before transferring your home into a trust.

A QPRT is an irrevocable trust funded by the transfer of a personal residence, a vacation home, or both, to the trust. The homeowner still retains a right to reside in the home for a term of years. The term selected is typically between five and 20 years, although the IRS imposes no minimum or maximum term: the longer the term, the greater the benefits that are available. At the end of the term the homeowner no longer has the right to live in the residence. However, if they desire to continue to live in the home then they may then lease the property from the trust or its beneficiaries, which is typically involves their children.

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Home Sweet Home

Once again the ‘Good ol’ US of A’ has weathered another storm. The recession is behind us and the economy is again moving forward. The employment numbers are rising, the stock market is doing well and home prices are recovering.

Regarding home price recovery, I have just finished reviewing Household Wealth in the U.S.: 2000 to 2011. I do enjoy statistics, and this brochure by the Census Bureau is chock full of fun factoids. An item of note, for the majority of U.S. households, home equity continues to remain their single largest asset

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Estate Planning with Intentionally Defective Grantor Trusts

As you may have noticed, both of last week’s blogs discussed Intentionally Defective Grantor Trusts (IDGTs). This began our month of focusing on IDGTs. Each month I will have a theme and focus the majority of the blogs on that topic. In addition, beginning this month, I will conclude each month’s theme with a one-hour CE/CPE event. I will host this month’s CE/CPE Webcast: Diamonds in the Rough – Estate Planning with Intentionally Defective Grantor Trusts (IDGTs) on Friday September 27, 2013 at 1:30PM EST.

Daily, I receive questions from advisors on topics ranging from Asset Protection to Life Insurance and my response always begins with the question: Is there an Intentionally Defective Grantor Trust (IDGT) for us to use in the estate plan?

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Revocable Living Trusts – “All is fair in love and war”

The quote used in the title of this blog entry is often incorrectly attributed to William Shakespeare.  However, it is John Lyly, an English dramatist and writer who first coined the phrase. It means that in matters of war and love, there are ‘no holds barred,’ and that an individual should not be blamed for acting in their own interest. Their actions, no matter how deceitful or morally wrong, are justified as a means to an end.

“All is fair in love and war” is how I begin my conversations with clients regarding their estate planning. Family members, once amenable to one another become hostile antagonists. The system of probate court, established to protect the creditors and the heirs of an estate, becomes a party to an industry which preys upon individuals at their weakest moments.

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The Use of Intentionally Defective Grantor Trusts Post ATRA

by Susan Tillery

In view of the changes brought about by the American Taxpayer Relief Act of 2012, estate planning has taken on a new complexion. With the portability rules and the applicable estate tax exclusion of $5,250,000 (indexed for inflation) being made permanent, ATRA has not taken away the need for estate planning; rather, it has changed what CPAs now need to plan for. Most CPAs working in the area of estate planning are shifting focus to asset protection, enhanced generational transfers and portability.

AICPA President and CEO Barry Melancon, CPA, CGMA, stated this video to AICPA members that the primary purpose of estate planning is to financially protect and provide for loved ones. This same sentiment was echoed by Jean-Luc Bourdon in a previous blog post, Tax Planning Complexity Can Provide Growth for Your Firm. The message is clear: CPAs need to shift from estate tax planning to estate planning.

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