Oregon Estate Planning Blog

The benefits of transferring wealth in hard economic times

If you're like me, you're starting to get a little bit nervous about the current financial crisis happening in the United States.  Personally, I worry about whether people will choose to invest money in estate planning when it seems trivial compared to the rising costs of food, gas, and basic necessities.  There are all sorts of rumors and fears going around about this being ten times worse than the Great Depression.  I may start stockpiling food soon.

The New York Law Journal had a somewhat comforting article for people who are worried about their investments:  It's a great time to transfer assets by taking full advantage of the deflated value of assets when it come to using your gift tax exemption: "It may seem counterintuitive to transfer wealth in 'hard times.' Yet, such gifts, especially of undervalued assets, can be highly desirable. If the value of assets is artificially depressed by the current market, utilizing annual exclusions and lifetime exemptions with these assets may make good estate planning sense. Assets are removed from the donor's estate at a deflated value, but the donee realizes the full value when the market recovers." 

Some of the effective estate planning methods are grantor retained annuity trusts (GRATs), sales to a grantor trust, self-canceling installment notes (SCINs) to a grantor trust, and forming family limited partnerships (FLPs).  Talk to your attorney if you think you might benefit from any of these methods.

As the author of the NYLJ article says:  "Given the present economic outlook and looming budget deficits, it will be difficult for Congress to find room in the budget to justify permanent repeal of the estate tax. While it might be difficult to part with wealth in these challenging and uncertain economic times, taking advantage of estate planning opportunities that are available in this type of economy may prove to be a very effective wealth transfer strategy."

Valuable collections

How should I plan my estate to preserve my valuable art collection?

You need to ask yourself what your purpose is with the collection.  Do you want it to stay in the family?  Do you want to share it with the world? 

You can actually do both if you transfer the collection to a trust.  A revocable living trust is best so that you can retain lifetime control over the collection.  I have one client who has a valuable art collection that he loans to a local museum for display.  This way, he can share the collection with the world, while still retaining ownership.  He has transferred the art into a revocable living trust.  He can control who will be the trustee after he dies and whether there will be any conditions to keep the collection in the museum.

There are other ways of going about preserving important collections.  If you want the collection to be income-producing, yet keep it in the family, consider a family limited partnership.  There are important tax-savings benefits to this strategy.

If preserving a valuable collection is something you wish to do, ask your attorney about revocable living trusts and family limited partnerships.