Feature:
Benefits of Planning with Low Valuations & Low Interest Rates

What do you get when you mix low business, real estate and other asset values with historically low interest rates? Incredible opportunities!

While most of the country is frozen when it comes to any significant planning because of the economic turmoil which surrounds us today, this same economic turmoil creates great opportunities for proactive planners.

I mean higher end estate planning. Proper estate planning allows you to control the otherwise uncontrollable in the event of your incapacity or death. It allows you to protect yourself during your life and eventually pass assets to your loved ones while reducing costs and hassles, and the impact of Estate, Gift, and Generation Skipping Transfer (“GST”) taxes (the “wealth transfer taxes”). Estate planning can also allow you to protect your assets from your beneficiaries’ future problems, including creditors, divorcing spouses, and wealth transfer taxes on assets which eventually pass to the next generation. Good estate planning can also provide you with some level of protection from your own possible future creditors.

How can the current economic situation actually benefit those who are considering estate planning? First, understand that the sooner you begin, the more chance you have to maximize the value of your estate planning transfers. For example, the value of a $1 transfer at death is $1, but the value of a $1 gift during your life is equal to $1 plus all the income and appreciation on that dollar after the date of the gift. Next, understand that most advanced lifetime planning requires some type of transfer to take place.

When making an estate planning transfer, the goal is to transfer as much value as possible, while minimizing the tax and other costs of the transfer. Good estate planning can help reduce one transfer cost by allowing you to transfer assets but still keep effective access to and control over the assets, through using legal documents which contain maximum flexibility and built in release valves.

Once you realize that transferring assets will not have a significant negative effect on your life, but that such transfers can have significant benefits for you and your family, the next step is to see how much you can transfer, and how quickly, without negative tax consequences. This is where low asset values and historically low interest rates can really help.

Assume you have either: (1) a successful business, (2) a business with significant future potential, or (3) an opportunity for a new business. Depending on your situation, the estate tax value of your assets (i.e., net worth + face amount of life insurance), and the existing business value or amount of capital needed for a new business, you may be able to use one or more techniques to transfer the business value, as part of your business succession plan, or protect the business from wealth transfer taxes or future creditors. You may even be able to start a new business opportunity in a specialized trust, control the business, benefit from it, have it protected from outside creditor claims, and eventually have it pass to your family without wealth transfer taxes.

The type of estate planning which is right for you depends on your particular circumstances. However, you should consider both basic and more advanced techniques now, while current conditions may greatly increase their benefits. Contact an experienced attorney to discuss your situation and available options.

Richard M. Morgan is an attorney at the estate and tax planning law firm of Morgan & DiSalvo, PC, in Alpharetta, GA. Richard can be reached at 678-720-0750 rmm@morgandisalvo.com, or for more information visit: www.morgandisalvo.com.