The Wealth & Wisdom Blog

This was a great Thanksgiving, but who will host Thanksgiving next year?  Based on calls we receive from clients in the weeks following Thanksgiving, we know that home and cabin ownership planning is a common discussion topic during Thanksgiving.  In this month’s update, I provide a brief overview of a Qualified Personal Residence Trust (“QPRT), which is one of several legal strategies a family might consider to transfer ownership of a home or cabin to a child or children during lifetime.

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The IRS announced last month that it plans to increase audits of wealthy individuals and partnerships, with a special focus on the seventy-five largest partnerships.  According to the IRS announcement, the purpose of the audits will be to, “identify sophisticated schemes intended to avoid taxes.”  In response to this IRS announcement, in this month’s update I briefly summarize how a family partnership plan is generally implemented as well as the resulting legal and tax benefits of the planning.

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“Our kids are wealthier than we are!”  Some of my clients emphasize the wealth of their children as we customize their multi-generational estate plan.  “How can we help our grandchildren instead?”

As noted in a recent Wall Street Journal article, many wealthy families are implementing plans to lock in current federal exemption amounts to save estate and gift taxes at multiple generations.  One strategy is to implement a certain type of trust, known variously as a generation-skipping transfer trust, a dynasty trust, or a GST Trust. Contrary to what may be inferred by these monikers, a GST Trust can be a blessing in disguise to the very children who are ostensibly skipped by the GST Trust. In this month’s update, I summarize the benefits and costs of the GST Trust planning strategy.

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Each of my three middle-school children recently came to my wife and me with two “first-world” problems.  Ahead of various upcoming trips away from home this summer, each of them asked for more portable pillows and more portable electronic devises. These portability problems remind me of certain planning discussions about the portability of one’s estate tax exemptions.  In this month’s update, I summarize the portability of federal gift and estate tax exemptions, and what factors should be considered in implementing a plan relying solely on a portable federal exemption.

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“The correct lesson to learn from surprises is that the world is surprising.  Not that we should use past surprises as a guide to future boundaries; that we should use past surprises as an admission that we have no idea what might happen next.”[1]

Since life is indeed full of surprises, it is advantageous to be able to use an asset or account for a different purpose than originally anticipated.  By reason of the Secure Act 2.0 signed into law by President Biden on December 29, 2022, owners of college savings accounts (“529 Plans”) and traditional tax-deferred individual retirement accounts (“IRAs”) can now modify the purpose of a modest amount of account assets. In this month’s update, I highlight how the Secure Act 2.0 provides modest flexibility gains to 529 Plan and IRA owners.

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