Unless you live under a rock, deep in a cave, you have heard about the new tax act that Congress is putting together. This is not a political commentary on that act. More importantly a few things to remember:
- With regards to estate tax very few people reading this need to worry about that element of the new tax act as it is set to bump the estate tax exemption from $5.45m to $10.9m. That is per person. So if you are a married couple with over $21.8m then your loved ones would still pay estate tax after your death. Also, it should be noted that the law sunsets so could go back to $5.45m per person or whatever else Congress feels like. However, for all practical concerns the estate tax is dead.
- However, there are still income tax concerns after death as relates to the step-up in basis.
There are a lot of great estate planning tools available to use. Clearly everybody should have a will, a financial “durable” power of attorney and a health care directive (or “living will”). However, there are other options. Two that I particular like are the Qualified Personal Residence Trust (QPRT) and the Irrevocable Life Insurance Trust (ILIT). Today I am going to talk about my favorite… the QPRT!
A QPRT is an irrevocable trust. That means that generally it can not be changed. However, we can build some flexibility into it.
The fact that it is irrevocable is what gives it the power. It’s what makes it superior to the basic living trust for the right clients. Let me stress that a QPRT is not right for everybody but when it’s right it’s really right!
One of the main