A Well-Crafted Estate Plan of Presidential Proportions

The presidential election of 2012 is sure to be the hot topic of conversation for the remainder of the year. It’s already the topic of conversation on almost every news channel and radio station. And while it would be fun to get on my soapbox and debate about the issues, that is not the point of this blog post. Rather, this post looks past any political views of the candidates and focuses on how one candidate in particular planned his estate.

A recent article by Jonathan Bergman on Wealthmanagement.com about Governor Mitt Romney’s estate planning is the impetus behind this post. I would encourage anyone to read the article, entitled Unlocking Mitt Romney’s Family Trust, because it does an excellent job of demonstrating just how important estate planning can be for any given estate. No matter the size of one’s estate, the legal principles behind the estate planning tools used to minimize taxes, protect beneficiaries, and ultimately distribute one’s estate are the same. In his article, Bergman demonstrates how these estate planning methods could realistically allow Governor Romney to pass over $100 million through his family trust without paying a penny of gift taxes. Here’s a brief summary of the estate planning methods described in the article:

A family limited partnership (FLP) is one method in which general partners give a partnership interest of partnership assets to limited partners. The benefit of doing that is that the gifted partnership interests can be discounted due to specific restrictions placed on those interests. This allows the general partners to actually transfer “more” than what is listed on paper. Over time, these discounts can amount to large gains, as demonstrated in the article.

A grantor retained annuity trust (GRAT) allows someone to take an asset that will appreciate greatly in the future and transfer that appreciation to a beneficiary, gift tax free. It functions just like any other annuity in which annual payments are paid back to the trustor (the person who created the trust), but at the end of the annuity term, the asset transfers to the beneficiary. The article does a wonderful job of highlighting how beneficial this type of trust can be to an estate plan.

A charitable lead annuity trust (CLAT) not only serves important functions for the person who creates it, but for a charity as well. This trust works similarly to the GRAT, only the annuity payments are given to a charity rather than a person. This allows the trustor to receive a tax deduction based on the amount that is paid to the charity and anything that is left in the trust at the end of the term passes to the trustor’s beneficiaries. This trust provides benefits to all the parties involved.

Finally, the article mentions other methods such as inter-family loans and intentionally defective grantor trusts that are most likely used as part of Governor Romney’s estate. The bottom line is that all these methods require careful planning and precise integration with the types of assets contained in any estate. At Morris Hall PLLC, we love to look for ways to meet the needs of our clients while providing for generations to come. If you would like to discuss any of these methods to see if any of them are right for your particular situation, please call us today and schedule a free consultation. We’d love to show you how you, too, can plan your estate like a presidential candidate.

Why Choose Morris Hall:

You have a number of options when it comes to estate planning, so why pick Morris Hall?  First off, estate planning and asset protection are a very complicated endeavor and you should only trust someone who focuses exclusively on those matters.  Also, MH is a proud member of The American Academy of Estate Planning Attorneys (AAEPA) which provides us additional support, advanced training, tools and information that is not available to others – which means that we can better protect your assets and your loved ones.  We are one of only two firms in Arizona that belong to the AAEPA and are the only firm in New Mexico that has been granted membership.  If you have assets and loved ones that you want to protect, you are in good hands with MH.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.