Making Lemonade out of Lemons: Estate Planning Opportunities in a Low Interest Rate Environment

We have been thrust into an environment that is unpredictable and what many are referring to as "uncertain times." Due to the stress that has come with these "uncertain times" many people are not thinking about and are quite possibly even avoiding gifting programs. However, the current depressed financial markets and historically low interest rates have presented "a unique opportunity for families to pass a significant amount of wealth to younger generations with minimal transfer tax exposure."

There are multiple estate planning techniques that provide a great potential for upside "when implemented during a state of declining financial markets combined with the historically low interest rates. A few of these techniques are:

• Grantor Retained Annuity Trusts
• Sales to a Grantor Trust
• Intrafamily Loans
• Charitable Lead Trusts
• Generation-Skipping Transfer Tax Planning

Before you begin planning your gifting strategy, it is important to remember that each individual has a combined federal estate and gift tax exemption of $11.58 million. Which means, each married couple has $23.16 million. This exemption will remain in place in 2025, barring any unforeseen reduction due to the 2020 elections or other factors. 

Now is a perfect time to take advantage of the "rare opportunity to make some lemonade out of lemons."

See Anna Katherine Moody & Emily A. Plocki, Making Lemonade out of Lemons: Estate Planning Opportunities in a Low Interest Rate Environment, American Bar Association: Probate & Property, September/October 2020.