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New laws and their effect on trusts

On Behalf of | Jun 11, 2020 | trusts

Missouri residents may have missed the news that the Internal Revenue Service has pronounced a new tax rate for certain gifts, specifically those under s.7520. For May of 2020, the rate is 0.8%—this amounts to a full 73% decrease from February of the same year. This can have a huge effect not only on gifts but also on trusts. Loans given to family members can also be impacted by this interest rate. What many do not realize is that this rate is at an all-time low right now. This gives people a chance to transfer their assets while the value is down, and lock in the value right now.

An estate planning tool known as a grantor retained annuity trust or GRAT can be a great estate planning tool for Missouri residents. Assets are transferred to an irrevocable trust by the donor trustee and the trust pays back an annual annuity payment. This lowered rate is used to calculate the value that has to go back to the donor. Opportunities with charitable trusts are also created with the new interest rate.

Great timing for updates

Given reduced values, low valuation opportunities and the potential for earlier tax law changes being implemented now seems like a great time to begin one’s estate plan. Trusts are just one tool in the estate planning tool belt that can protect beneficiaries in the future. Given one’s individual situation, different tools can be utilized.

Estate planning decisions are often complex and involve lengthy discussions that many do not wish to have. However, putting off the inevitable only complicates matters for family members in the future, as they try to guess what their deceased loved ones would have wanted with regards to asset distribution. Consulting an experienced attorney to discuss one’s options might be one way for those interested to proceed.