Jonathan Hurtarte, of Bloomberg Law’s Daily Tax Report, has published his article, Virus Chaos Creates Opening for Millionaires to Slash Tax Bills (Apr. 20, 2020). The article begins as follows:
•Transferring depressed assets can help people avoid future estate tax
•Planning opportunities may diminish in coming months
Market uncertainty caused by the coronavirus pandemic has created an opportunity for the very rich to pass more wealth to their children free, or virtually free, of tax.
Many people are in financial distress because the pandemic has forced businesses to temporarily shutter their operations, leading to furloughs and layoffs across the country. But those with enough wealth to shield themselves from any real hardship may find that it is an ideal time to deploy new tax-planning strategies.
Depressed asset values, combined with historically low interest rates, unprecedented estate and gift tax exemptions, and a favorable political climate, are making some tools more attractive than ever—especially those that allow parents to shift appreciable assets that have temporarily lost value to their children in a way that minimizes future estate and gift tax, according to estate tax attorneys.“
It creates, in many ways, a perfect storm for a transfer plan,” said Brett Berly, a shareholder in the trusts and estates section at Chamberlain, Hrdlicka, White, Williams & Aughtry.
The stock market took a big hit at the onset of the coronavirus pandemic. The S&P 500 Index, hit a three-year low on March 23. The index has rebounded some since, but closed Friday down about 11% from the beginning of the year.
Transferring depressed stocks, business interests, and real estate holdings to family members now could help individuals avoid estate and gift tax liabilities down the road, said Michael Rudegeair, tax director at Anchin, Block & Anchin LLP and incoming chair of an American Institute of Certified Public Accountants estate planning panel.
Tools to Consider
There are a variety of tools wealthy individuals can consider, planners said. One that may be especially attractive given the current mix of factors is the grantor retained annuity trust, or GRAT.
Under this type of plan an individual, typically a parent, transfers assets to a trust for a specified number of years. In a “zeroed-out” GRAT, the parent retains the right to get 100% of the initial value of the assets back over the trust’s life in annual fixed payments, plus a rate of return based on an IRS-prescribed interest rate. The rate, called the Section 7520 rate, is 1.2% for April and 0.80% for May.
To see full article, click: Virus Chaos Creates Opening for Millionaires to Slash Tax Bills
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.