Nine Estate Planning Trends for 2022

Nine Estate Planning Trends for 2022

February 10, 2022

Tanko Law Montana

Estate planning is the preparation that serves to manage or dispose of an estate in the event of incapacitation or death. Planning for your estate is vital since it determines what happens to your asset after your death or incapacitation. The plan will guarantee ease in passing on your property to loved ones.


An estate plan is critical for anyone who owns an asset, irrespective of age. To create an estate plan, you require a few documents. The documents include a last will, living will, letter of instructions, and a life insurance policy. Also, you need a power of attorney to allow you to name someone to make decisions on your behalf.


Estate planning has been changing over the years. There are emerging trends in estate planning today. Keep reading to find out the nine estate planning trends for 2022.


Qualified Personal Residence Trust


A qualified personal residence trust is an irrevocable trust created to transfer the grantor’s residence outside of the grantor’s estate. The estate is transferred at a low gift tax. The grantor receives a retained income period allowing them to continue living in the house. At the end of the retained income period, the grantor pays rent to their beneficiary if they continue living in the home.


Qualified personal residence trust helps hedge against reduction tax exemptions. With the residence trust, you will not have to pay gift taxes if the value of your home is significant. Besides, it also hedges against appreciation.


Recapitalizing Using Non-Voting Common Stock 


Recapitalization involves changing a company’s capital structure. If you have a closely held company, you can recapitalize to help in estate planning. Recapitalization allows senior family members to transfer business interests to other family members. Recapitalization helps avoid estate taxes after death.

The grantor may not be ready to take up control of a company. One feasible solution is to issue non-voting common stock. Non-voting common stock does not give the beneficiary a say in the business until an appropriate time.


Grantor Retained Annuity Trust (GRAT)


A grantor retained annuity trust (GRANT) is an irrevocable trust that reduces taxes on large financial gifts to beneficiaries. The retained annuity trust is established for a specific number of years. The gift value is determined by the creator when creating trust.


After the assets are transferred into the trust, the creator begins to make annuity payments yearly. The property locked in the annuity trust earns an annual income. When the annuity trust expires, the beneficiary receives the assets free of tax. GRANT is suitable for wealthy individuals who want to minimize tax liabilities.


Family Limited Partnership


Family limited partnerships allow a grantor to give lifetime gifts without relinquishing control of the business. Family partnerships are created to allow the younger generation to participate in the administration of the family business. The beneficiaries benefit from any interest, profit, or dividends generated by the family limited partnership.


Giving lifetime gifts through family partnerships allows for a reduced gift tax. In addition, future returns are excluded from estate taxes. Individuals can also give interest-tax-free gifts to other individuals up to the annual gift tax exclusion.


Generation-Skipping Trust (GST)


Generation-skipping trust (GST) passes down the grantor’s estate to their grandchildren. GST skips the grantor’s children and passes over assets in the trust to the grantor’s grandchildren. GST is also used to pass over assets to individuals below 37.5 years. By this, it skips one generation to the next.


The owner’s children are not liable for taxes due from the estate. This is because they are skipped by the opportunity to own the assets. However, the grantor’s children can still benefit from the assets without taking the title of the assets. If the amount transferred in GST exceeds $ 11.7 million (in 20121), the trust becomes liable to taxes. This threshold amount is adjusted annually.


Buy/Sell Agreements


Buy/sell agreements should exist in the family business to regulate the transfer of interests. The agreements minimize uncertainties when funds are inadequate for passing business interests to beneficiaries. The agreement is in force during and after the life of the owner.


The agreement also gives mechanisms for purchasing a share of a deceased owner from other businesses. The agreement provides terms for reaching a fair price for the shares. This gives assurance to the owners that upon their death their beneficiaries will get their shares.


Dynasty Trust


Dynasty trusts are long-term trusts designed to pass wealth to many generations. Assets in the trust do not incur gift tax or estate tax. The distinctive characteristic of a dynasty trust is that it can last for a very long time.


The dynasty trust allows grantors to leave assets for future generations. Dynasty trust is irrevocable, and its terms cannot be changed once funded. Currently, an individual can pay up to $11.58 million into a dynasty trust.


Grandchildren’s Trusts


Grandchildren’s trusts are created by guarantors for the benefit of their grandchildren. Most grantors create grandchildren’s trust for specific purposes, such as education. The trust not only benefits the children, but also helps the grantor reduce estate tax. However, the generation-skipping tax is applied to grandchildren’s trust.


The generation-skipping tax and gift tax have annual exclusions. The annual exclusions amount is reviewed yearly. The maximum amount you can transfer GST tax-free is $ 1 million per lifetime.


Charitable Remainder Trust (CRT)


A charitable remainder trust is an irrevocable trust that gifts the beneficiary cash or property. The owner receives income for a term or life. Upon expiry of the term or death of the owner, the named charity receives a stream of income from the remaining assets.


The owner receives an income tax deduction if the trust is funded based on the face value of the assets. Besides, CRT liquidates appreciated stock with no capital gain tax. It is advisable to consult an estate planning attorney to help you choose a trust that provides your expected results.


Let Us Support You


Are you a resident in the state of Montana looking for an estate attorney? Look no further. Ensure you contact Tanko Law today to get legal advice on how to plan your estate. Tanko Law Firm has been providing the best probate services, estate planning, wills and trusts, and elder law since 1995.

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