NewsOK Q&A: Economic downturn can be boon for people planning their estates

From NewsOK / by Don Mecoy
Published: April 15, 2009
Click to see full story – Economic downturn can be boon for people planning their estates

Click to see Elizabeth K. Brown’s attorney profile

Elizabeth K. Brown’s practice is focused at a strategic level on serving her clients as outside counsel where she assists privately held companies in managing the many legal issues that arise in running a business.

Q: Can you explain how the current economic turmoil could be a good thing for some people who are planning their estates?

A: Depressed asset values coupled with historically low interest rates have created a window of opportunity to add significant value to family wealth transfer planning. From stock portfolios to real estate to family business interests, no asset has emerged unscathed. While no one jumps for joy over declining assets, there is a silver lining. I’m seeing a nice planning opportunity, especially for clients with family oil and gas businesses, for implementing certain estate planning techniques now, while the value of those assets is so depressed. The impact of rock-bottom IRS interest rates and lower asset values is that clients have the ability to transfer more of their assets to family members and minimize the taxes that can eat away at an estate’s value.

Q: Are there matters on the horizon that could make it important to act quickly?

A: Unfortunately, yes. In January, a bill was introduced to Congress that would eliminate the ability to take certain discounts from the value of family business interests that are transferred to children and other family members. Historically, these valuation discounts have been very important factors in planning to minimize the estate and gift tax consequences of these transfers. If the estate tax law changes as proposed, these important discounting techniques could be eliminated. While we can’t be certain that Congress ultimately will eliminate these discounts, Phillips Murrah is alerting clients to the possibility that this narrow window may soon close, and we are encouraging them to make these transfers immediately, before further action is taken by Congress.

Q: Do you have any other tips that might be valuable for someone who is considering how to distribute an estate?

A: Take the time to plan now for the event of your death or disability; that plan could be the greatest gift you ever make. And two very timely tips, involving specific estate planning techniques, have become my mantra these days: Consider transfers to Grantor Retained Income or Annuity Trusts (GRATs). Consider sales to Intentionally Defective Grantor Trusts (IDGTs). Both techniques require use of the historically low IRS interest rates, maximizing the value that can pass to family members, tax free.