| With the interest rates at a really low rate, and with | | | | and you provide the buyer with a note payable to you |
| the economic fallout from the present economy, even | | | | which stipulates that the unpaid balance will be |
| people with money do not feel flush now and may | | | | cancelled when you die. |
| decide that they do not want to make gifts to the next | | | | Another technique, the GRAT, is called a grantor |
| generation. Even though the economy has been in | | | | retained annuity trust, allows you to transfer future |
| recession many times before and has come out of it | | | | appreciation on assets that you think may appreciate |
| to prosperity, sometimes it is hard to look beyond the | | | | in the future to your children or other heirs. Assuming |
| present time to see that prosperity. | | | | that you live longer than the term of the trust, which |
| However, this is really a good time to consider making | | | | may be two or three years, the balance in the trust will |
| gifts. In a low interest rate environment, there are | | | | go to your heirs tax free of either gift or estate tax. |
| many tools allowed by the Internal Revenue Code, | | | | However, you if fail to survive the term of the trust, |
| which allow a person to give more than they would in | | | | the amount reverts to your estate and may be |
| a higher interest rate environment. These tools are | | | | taxable upon your death. |
| given various names by estate planners such as | | | | There is another technique referred to as a CLAT, a |
| SCINs, GRATs, CLAT's and IDGT's. Since the value of | | | | charitable lead annuity trust, which is a longer term |
| the gift is based upon interest rate tables shown by | | | | strategy than a GRAT. While a GRAT will revert to |
| the IRS referred to as the" applicable federal rates" | | | | your estate if you fail to survive its term, a CLAT will |
| and those rates are low, the low interest rates enable | | | | not. In a CLAT, property is placed in trust for a period |
| you to transfer more of your wealth tax free. | | | | of years during which a fixed amount is paid to a |
| If you think that your children will need to borrow | | | | charity each year, with the remainder of the trust at |
| money (and they are a good credit risk), consider | | | | the end of the term passing to non-charitable |
| acting as their banker. While you must have a note | | | | beneficiaries. Using the CLAT, you may receive a large |
| and proper collateral, just like the bank, using the IRS | | | | charitable deduction in the first year the trust is set up |
| tables published in October, you can make a nine year | | | | for the gift portion to the charity, but in that event, you |
| fixed rate loan to your child for a rate as low as | | | | are taxable from an income tax standpoint on the |
| 2.63%, which your child will not be able to match in the | | | | income that is being paid to the charity. |
| open market. Then you can collect the interest on the | | | | A technique that moves the assets out of your estate |
| note for at least one year and forgive up to $13,000 | | | | immediately and is not dependent upon your survival is |
| ($26,000 if your child is married) of your child's | | | | a sale to an IDGT, an intentionally defective grantor |
| obligation each year, without incurring current gift taxes | | | | trust. This trust is perfectly legal and is not actually |
| and also decreasing your potential future estate tax | | | | defective. Using this estate freeze technique fixes the |
| liability. | | | | value of the asset that will be includible in your estate. |
| There are other more complex techniques where the | | | | As you may be able to tell from this article, there are a |
| low interest rates also help to minimize your future | | | | number of perfectly legal techniques in which you are |
| federal estate taxes and are most helpful to those | | | | able to give more to your heirs due to the low interest |
| persons with a higher amount of wealth. One concept | | | | rate. Since these are more complex techniques, it is |
| mentioned above is a SCIN, which is a self-cancelling | | | | wise to use a trust attorney who specializes in this |
| note. Using this technique, you sell an asset to a family | | | | area to assist you in making these types of gifts. |
| member. You, as the seller, agree to finance the sale | | | | |