The prospect of paying the federal estate tax is not a very pleasant one. Right now the maximum rate of the tax is 35%, and this is a rather draconian imposition in the minds of many.
But apparently over a third of the taxable portion of your resources is not enough for the powers that be. At the end of this year the top rate of the federal death levy is going up to 55% as the laws currently stand.
Paying the estate tax once is a harrowing thought. But paying it generation in and generation out as money is passed down is even worse.
One way to mitigate your exposure would be to place resources into a generation-skipping trust. Most people would name their grandchildren as the beneficiaries, skipping their children’s generation. But in fact technically anyone who is at least 37.5 years younger than the grantor of the trust can be the beneficiary.
Though they will not own the assets directly, the children can in fact benefit from income derived from the trust in accordance with the trust agreement. So this generation is utilizing trust resources without being faced with the prospect of paying the estate tax.
The grandchildren assume ownership of the resources after the death of the children. This transfer will be subject to the generation-skipping transfer tax, but two generations benefited while just one instance of taxation was imposed.
These trusts can be a good wealth preservation solution for many families. Should you be interested in learning more about them, simply take a moment to arrange for a consultation with a seasoned, savvy Willoughby OH estate planning lawyer.