2010 Tax Laws: Estate Taxes, GRAT, Life Insurance, Trusts
Obama’s Two-Year Tax Law Bonanza: Part 2
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Many clients who have learned that the Tax Act will only last two years will wait until the end of 2012 to plan. This is not a good idea. Time and economic fluctuations concern the estate-tax laws and have an effect on the ability to meet estate planning objectives. Family loans, GRATs (Grantor Retained Annuity Trusts) and charitable lead annuity trusts (CLATS) are affected by interest rates. Since December the interest rates have risen dramatically and long-term interest rates were 3.53%. For the same types of transactions in January, the interest rates were already at 3.88%. Additional spikes over time will erode the advantages that planning strategies could obtain. When estate planning, time is of the critical. It is suggested that planners urge clients to act as soon as possible to avoid the implications of higher interest rates in the future.
How the new 2010 Obama Tax Laws Affects Estate Planning Strategies
Clients are questioning how this new tax law will change my estate planning steps. There are a few things that planners should tell their clients in this regard:
GRATs (Grantor Retained Annuity Trusts)
For many years, planners have recommended the use of bypass and marital deduction trusts when planning. Many clients should have wills that will include these types of trusts. Planners need to take the time to explain to the client why the new provisions of the law are actually traps for unwary taxpayers. They should not be relied upon and traditional bypass trust
planning remains important.
The 2010 Tax Act has changed estate planning completely, but these changes will only last for two years. Some clients who take advantage of this situation could benefit in many ways. Advisors should help all clients understand the changes that have been made and the opportunities that are now available as a result.