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St. Petersburg Wealth Preservation Lawyer

Wealth Planning Is Needed For Larger Or More Complex Estates


If you think that you might have a taxable estate, have assets with a low cost basis (and thus large unrealized capital gains), are concerned about asset protection, or know that your estate is just complex, your estate plan will need to include a comprehensive analysis where various planning theories, strategies and techniques will be analyzed to determine which strategies are best suited for your and your family.

Developing an effective plan that will work for a complex estate requires that your attorney, financial advisors and certified public accountant work collaboratively together to design a legacy strategy. This strategy needs to be developed before any preparation of the legal instruments required to carry out your strategic objectives.

Having advanced law degrees in estate planning, Legacy Protection Lawyers know how to use techniques that include tax-free gifts, irrevocable life insurance trusts, spousal lifetime access trusts, asset protection trusts, grantor retained annuity trusts, family limited partnerships or family limited liability companies, charitable remainder trusts or charitable lead trusts and other techniques to meet your specific needs.

Giving Tax-Free Gifts

Under federal law, you give up to $14,000 (during 2017) to as many people as you wish each year without reporting any gift to the IRS. With the effect of compounding, these types of gifts can add up significantly. The best approach is often to gift these amounts to a trust, especially if the beneficiaries are minors or if asset protection is a concern.

Gifting more than $15,000 per person in any given year can be made without paying any immediate gift tax but such gifts must be reported to the IRS and will reduce the available estate tax exemption. There are no limits on the amount of gifts to qualified charities or for tuition and medical expenses (provided that such payments are made directly to a qualified educational or medical institution).

Irrevocable Life Insurance Trust (ILIT)

The value of your life insurance can be removed from your estate by making an irrevocable life insurance trust or “ILIT” the owner of the life insurance policies. If you transfer an existing policy to an ILIT, live for at least three years after the transfer and have not retained any incidents of ownership, the insurance death benefits will not be included in your estate. Usually, the insurance death benefits will be paid to the irrevocable life insurance trust and the people who you want to receive those proceeds (i.e. spouse, children, grandchildren) are named as the beneficiaries of the trust.

Spousal Lifetime Access Trust (SLAT)

While many wealth strategies require you to give assets away with no strings attached (typically outright to your children, grandchildren or irrevocable trusts), it is possible for younger couples to take advantage of gifting strategies by using spousal lifetime access trusts to gift to each other, get assets out of the estate for estate tax purposes, and provide asset protection while at the same time having access to the gifted property in the event it is needed.

Grantor Retained Annuity Trust (GRAT)

A grantor retained annuity trust or GRAT allows a person to transfer a highly volatile asset (stock, business) or an income-producing asset (stock, real estate, business) to a trust for a set number of years, which thereby removes it from your estate if the value of the transferred assets appreciate in value (and at the same time, allows you to receive any income from the assets during the GRAT term). (If the income is a set amount, the trust is called a GRAT. If the income fluctuates, it’s called a GRUT.)

When the trust ends, the asset appreciation will go to the beneficiaries of the trust. Because the beneficiaries will not receive any value until the end of the GRAT term, the value of the gift is reduced, thus, maximizing the amount that can be gifted. If you die before the trust ends, some or all of the assets held in the GRAT may be included in your estate.

Limited Liability Company (LLC) and Family Limited Partnership (FLP)

LLCs and FLPs allow you to reduce estate taxes by transferring assets like a family business, farm, real estate or securites to your children now, and still keep some control. LLCs and FLPs can also provide protection for the assets from future lawsuits and creditors. Both of these ownership structures allow you to transfer the underlying assets to your children and grandchildren at a reduced value, without losing control.

You and/or your spouse can set up an LLC or FLP and transfer assets to it in exchange for ownership interests. You and/or your spouse will control the LLC (as manager) or FLP (as general partner). You can then gift certain ownership interests to your children or grandchildren, thereby removing the value from your taxable estate. The gifted interests cannot be sold or transferred without your approval, and because there is no market for these interests, their value is often discounted.

Charitable Lead Trust (CLT)

A Charitable Lead Trust allows you to transfer an asset to the trust, which reduces the size of your estate and saves estate taxes. But instead of paying the income to you, the trust pays it to a charity for a set number of years or until you die. After the trust ends, the trust assets will go to your spouse, children or other beneficiaries.

Charitable Remainder Trust (CRT)

A Charitable Remainder Trust lets you convert a highly appreciated asset (like stocks or investment real estate) into a lifetime income without paying capital gains tax when the asset is sold. It also reduces your income and estate taxes, and enables you benefit a special charity of your choosing at the end of the income interest term. With a CRT, you transfer the asset to an irrevocable trust, which removes the asset from your estate. This provides an immediate charitable income tax deduction.

The CRT can then sell the asset at market value without paying capital gains tax, and reinvests the proceeds in income-producing assets. For the rest of your life, the trust pays you income from the trust. Because the principal has not been reduced by capital gains tax, you will receive more income over your lifetime than if you had sold the asset yourself. Upon your death, the CRT assets go to the charity you have chosen.

Life Insurance as an Estate Planning Tool

Depending on your age and health, purchasing life insurance may be an inexpensive way to provide for liquidity, replace an asset given to charity and/or to pay any remaining estate taxes. If a life insurance policy is purchased by an ILIT (discussed above), the three-year look back rule does not apply to such new policies. However, you should not be the owner of the policy because that would cause inclusion in your estate. Upon your death, the death benefits can provide liquidity to the ILIT and its beneficiaries, and at the same time provide flexibility for the trustee to invest the proceeds.

Before we can make a recommendation regarding any of the strategies described above, we need to understand your hopes, dreams and fears, analyze your needs and assets, as well as learn about how you want your legacy to be distributed. Only then can we begin to structure a recommended legacy plan and begin to draft the necessary documents to implement your legacy plan.

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