If an estate planning strategy sounds too good to be true and is offered by someone not an experienced estate planning attorney, stay away. The title of a recent article from Wealth Management says it all: “Don’t Be Tempted By Pop-Up Estate Planning Schemes.”
This is not the time to get engaged with improperly prepared trusts or someone’s brilliant but untested twist on a basic trust. While we don’t know who will win this fall’s Presidential election, it’s highly unlikely estate planning and gift exemption limits will be reduced. If you don’t take advantage of these historically high levels before they change, you and your heirs may miss a once-in-a-lifetime chance to get assets out of your estate tax-free.
An experienced estate planning attorney will create a plan offering flexibility. They’ll educate you and identify options, which may include charitable giving. However, creating and executing these plans takes time, so don’t wait until the last minute.
Spousal Lifetime Access Trusts (SLATs) are very popular right now for all the right reasons. The SLAT is funded by one spouse (the donor spouse), who transfers their assets into the trust and out of their estate. Their spouse has access to the assets. Assets can be gifted up to the current lifetime gift exemption—currently $13.61 million per taxpayer. As long as you stay married, the assets can support your lifestyle, while the principal and future growth have been removed from your taxable estate.
Be careful about “pop-up” estate planning schemes. A trust created in haste using untested strategies is asking for trouble. One example is a yacht brokerage website that says you can use ownership of a yacht or jet to get a tax write-off and then give the yacht or jet to charity. Promotional materials declare that this is “IRS-sanctioned,” and somehow magically eliminates the hobby-loss rules. Take a pass on this.
Another comes from a group selling mineral rights and claims you can earn a tax deduction worth eight times the original investment—a $400,000 income tax deduction for a $50,000 investment. The explanation is you’re buying minerals at the low cost of getting them out of the ground, then gifting them to a charity at a marked-up retail price. The attorney opinions posted on the website are from non-existent law firms. Do you need to know more? Pass.
As we approach the end of these exemptions, more of these shady schemes are likely to emerge. Steer clear and rely upon a realistic estate planning attorney who has the experience and knowledge to help you achieve your goals.
Reference: Wealth Management (Aug. 22, 2024) “Don’t Be Tempted By Pop-Up Estate Planning Schemes”