Using a Charitable Remainder Interest Annuity or Unitrust (CRATs/CRUTs) and Charitable Lead Trusts (CLTs) Charitable Remainder Interest Annuity and Unitrust as well as Charitable Lead Trusts are vehicles for the charitably inclined that can provide significant income and estate tax benefits. Both charitable remainder trusts and charitable lead trusts are split interest trust where an annuity interest and a remainder interest are split among the grantor of the trust or other non-charitable beneficiaries and a qualified charity. CRATs and CRUTs Charitable Remainder Interest Annuity Trusts (CRATs) and Charitable Remainder Interest Unitrust (CRUTs) are the two types of charitable remainder trusts. … Continue reading
Tag Archives: Estate Planning
Federal Gift and Estate Tax Planning- Part 5 of 7: Advanced Planning with IDGTs
Freezing and Reducing your Taxable Estate with Intentionally Defective Grantor Trusts (IDGTs) Likely the most effective and popular advanced planning techniques are the use of a Grantor Retained Annuity Trust (“GRAT”) or an Intentionally Defective Grantor Trust (“IDGT”). The general idea of both techniques is to transfer assets expected to appreciate in an amount that exceeds the current month’s Applicable Federal Rate or Section 7520 (120% of the AFR) rate and pass the excess growth to non-charitable beneficiaries, all while using little or none of the individual’s basic exclusion. In this part, I will discuss IDGTs. An Intentionally Defective Grantor … Continue reading
Federal Gift and Estate Tax Planning- Part 4 of 7: Advanced Planning with GRATs
Freezing and Reducing your Taxable Estate with Grantor Retained Annuity Trusts (GRATs) Likely the most effective and popular advanced planning techniques are the use of a Grantor Retained Annuity Trust (“GRAT”) or an Intentionally Defective Grantor Trust (“IDGT”). The general idea of both techniques is to transfer assets expected to appreciate in an amount that exceeds the current month’s Applicable Federal Rate or Section 7520 (120% of the AFR) rate and pass the excess growth to non-charitable beneficiaries, all while using little or none of the individual’s basic exclusion. In this part, I will discuss GRATs, which are likely the … Continue reading
Federal Gift and Estate Tax Planning- Part 3 of 7: Advanced Planning with ILITs
Creating and Irrevocable Life Insurance Trust aka ILIT The first advance planning technique I will discuss in this series of blogs and one of the simplest strategies is to have a life insurance policy held by an Irrevocable Life Insurance Trust aka an “ILIT.” While this strategy does not reduce the size of an individual’s taxable estate or estate taxes per se, it creates untaxed liquidity outside of their taxable estate to pay the taxes which may be due on the individual’s taxable estate. One question clients may have is why holding life insurance individually does not serve this same … Continue reading
Federal Gift and Estate Tax Planning- Part 2 of 7: Leveraging the Basic and Annual Exclusions
Maximizing Your Basic Exclusion The primary reason the vast majority of North Carolinians avoid estate tax is by simply using their basic gift and estate tax exclusion which is historically high. The 2024 amount is $13,610,000 per individual and $27,220,000 for a married couple who elects portability. Although some individuals may accomplish this without any planning, if an individual has a large estate, even if it is currently below the basic exclusion, there is simple planning which can leverage their basic exclusion. This leverage is due to the future growth of the gifted assets becoming removed from an individual’s taxable … Continue reading
Federal Gift and Estate Tax Planning- Part 1 of 7: The Unlimited Marital and Charitable Deductions
As discussed in prior blogs, North Carolina does not assess an estate or inheritance tax and the federal unified gift and estate tax exclusion as of 2024 is $13,610,000 per individual and $27,220,000 for a married couple who elects portability. Accordingly, the vast majority of North Carolinians do not have taxable estates. However, with the exclusion scheduled to sunset on January 1, 2026, and thereafter be greatly reduced to affect many more North Carolinians, I’d like to provide a summary of the most effective and popular strategies to reduce or eliminate gift and estate taxes. In part 1, I will … Continue reading