Asset Protection and Tax Issues

As of January 1, 2013, $5.25 million of an estate's value was exempt from federal taxes.

While renewing the federal exemption will be beneficial, advanced planning is the only sure way to protect assets from estate tax. Since state and federal tax codes can change, understanding how to reallocate assets, transfer property, or schedule the disbursement of trust funds in a way that is exempt from certain kinds of taxes is essential.

At the Law Offices of H. Michael Soroy, our attorneys work closely with financial advisors, tax experts, and accountants to create estate plans that help clients protect more of what they've earned. To learn more how we can help you, give us a call today.

Estate Planning Strategies and Asset Protection

  • Grantor Retained Annuity Trusts (GRAT) - Through a GRAT, you can transfer real estate, securities, or closely held stock to a trust for a minimum of 2 years. If you receive an annuity from the GRAT, the appreciation on it can be transferred to your family after the term of the GRAT expires. Once the transfer happens, the value of the annuity is not counted against your estate. In essence, the transferred annuity from a GRAT is treated as a gift and its asset value is reduced because of the retained annuity.
  • Granter Retained Unitrust (GRUT) - A GRUT is similar to a GRAT. However, instead of an annual payment as determined at the GRAT's creation, GRUT payments are a fixed percentage of the value of the trust. This means that if the trust earns more than it pays out, additional earnings are retained by the GRUT.
  • Personal-Residence Grantor Retained Income Trust (GRIT) - Also referred to as a Qualified Personal Residence Trust, a GRIT allows a homeowner to transfer ownership of a home while still alive in order to reduce the amount of estate tax heirs will have to pay.
  • Intentionally Defective Irrevocable Trust (IDIT) - An IDIT allows you to create a trust and seed it with assets or property as a taxable gift. Once you've created the IDIT, you can sell an asset to the trust for an installment note. Under current tax law, you don't have to recognize a gain or loss on the sale of an asset to an IDIT nor do you have to pay taxes on the interest payments of the note.
  • Irrevocable Life Insurance Trust (ILIT) - Money from life insurance is often subject to tax since it is treated as part of an estate. However, if you create an irrevocable life insurance trust as the owner of the policy, you can shelter its proceeds from certain kinds of estate tax.

Contact Our Estate Planning Attorneys Today

There are a number of legal and financial issues that must be considered when addressing estate tax issues. Our attorneys can evaluate your situation and discuss the options available to you for reducing your estate tax through various estate planning tools. To schedule an appointment for a free consultation to discuss your unique situation, give us a call at 310-694-5527. If you prefer, you may also fill out our electronic intake form.