Financial Planning

Assemble an integrated set of tax, insurance, estate and financial planning disciplines so the client is prepared to manage change or uncertainty.

Situation Overview

A multi-generational family owns significant commercial real estate in Phoenix, Arizona, where market values are depressed. Family members have not used any of their lifetime exemptions for gifting and estate transfer, and the 2010 Tax Act recently increased exemptions from $1 million to $5 million through the 2012 calendar year. The family lacks an updated or comprehensive estate plan strategy.

Solution

Threshold works with family members to create an Intentionally Defective Grantor Trust (IDGT)  for real estate assets. This allows the grantor generation to maintain control of assets during their lifetimes, yet passes along assets to the younger generation without future appreciated values being subject to estate tax. Family members sell their shares of the real estate LLCs and use some of their lifetime estate tax exemption.  A comprehensive estate plan strategy is proposed for key family members.

Outcome

Individual family members reduce their estate tax exposure while creating a safe and sensible method for transferring wealth to their beneficiaries. This allows various family members to create gifting plans according to their own preferences and wealth needs, while taking advantage of the current estate tax exemption.  By selling illiquid, undervalued fixed assets to the IDGT, the family also preserves their liquid wealth as part of a long-term investment strategy.