Trusts that Help Reduce Estate Taxes

  As I have previously discussed, recently Congress passed the American Tax Relief Act of 2012, or “ATRA”. The Act affects only already existing provisions, but has many new tax implications. Some of the provisions included in the act will positively affect estate planning. One of the areas affected by the Act is the maximum estate, gift and GST tax rate. The rate is now permanently set at 40%, which occurs on taxable estate worth more than $5,250,000. Additionally, “portability” is now a permanent addition to the estate tax. 

Two types of trust can transfer funds to reduce the amount of the decedent’s taxable estate. One is the grantor retained annuity trust, or GRAT often used for shielding future stock growth. The other trust is a qualified personal residence trust, or QPRT that will protect current and future growth on your home. Both are set up for previously determined amount of time. Additionally, both trust creators have to live past the term of years or the assets are accounted for in the estate. 

See Judy Martel Shielding Your Assets From Estates Taxes, Fox Business Jul. 29, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.