Estate tools in a low-interest climate: Use 'em or lose 'em

Different trusts benefit from puny rates, tax adviser says; 'lock those in now'

Nov 9, 2012 @ 1:18 pm

By Liz Skinner

Financial professionals should be helping clients take more advantage of the nation's very low interest rates and help get growth outside of clients' estates, according to financial planner and tax adviser Robert Keebler.

“We are not doing enough to take advantage of today's low interest rates,” the partner at Keebler & Associates LLP told the annual conference of the National Association of Estate Planners & Councils in Orlando, Fla., on Friday. “If we can lock in those now, that's really going to benefit clients in the long run.”

One tool that works best with low interest rates is the grantor-retained annuity trust because appreciation in the trust beyond current government rates is pushed outside of the trust and not taxed, Mr. Keebler said.

The charitable-lead trust, which reduces taxes on an estate left by the deceased, and the intentionally defective grantor trust both benefit from low interest rates, he said. The defective trust is the type of generation-skipping vehicle that former Republican presidential candidate Mitt Romney came under fire for using to avoid estate and gift tax.

Mr. Keebler doesn't think Congress will hammer out a deal before Jan. 1 on the estate and gift tax rates, which are set to increase, or the exemptions that are set to fall to $1 million, from $5 million. And the re-election of President Barack Obama guarantees that the estate tax is not going away, as Republicans had pledged to see to.

“We're not going to see the estate tax totally disappear,” he said.

Mr. Keebler also warned that Mr. Obama has expressed interest in changing the rules for GRATs and other estate-planning tools that help wealthy individuals pass on their wealth free of taxes.

“One day, we're going to go to our estate-planning toolbox and it's going to be empty,” he said. “Some will develop new tools, but we're going to lose the tools we have.”

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