Lots of action is expected at the federal level on estate and gift taxes over the next few weeks. While few expect full reform, a compromise bill that gives us predictability may be possible. However, the compromise may include the end of certain awesome planning techniques. One of the strategies in danger is the Tax-Free Forever Trust that I told our firm’s Client Care members about earlier this year.
Until Congress acts, you can put money into a trust that will never ever be subject to estate tax and that can last forever – just like the Rockefellers and Kennedys did before Congress imposed the Generation-Skipping-Transfer Tax.
It works because you can put a limited amount of assets into a trust that is exempt from Generation-Skipping-Transfer Tax. And as long as you invest it in the right trust (not your revocable living trust) before Congress changes the law, that money will always be exempt. Forever. Within 3 generations, no matter what rate of return you assume the money gets, your family will have six times more money than if you had not protected it from tax.
The Congressional proposal will impose a limit on how long the trust can be exempt from Generation-Skipping-Transfer, Estate and Gift taxes, limiting this technique only to those who took advantage of the strategy before Congress acted.
If you’ve been thinking about using the legal and effective technique for your grandchildren and great-grandchildren, now is the time to learn more. If your parents are regularly gifting money to you or your kids, talk to them about this strategy soon.
To learn more, call our office for a memo on the technique.