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New type of trust protects assets for Florida heirs

Even though the federal estate tax is affecting a smaller percentage of people every year, those with larger amounts of assets are more likely to suffer the ill effects of this particular fee. New federal estate tax rules protect individuals estates that are valued at $5.2 5 million or less, and couples' estates that are valued at less than $10.5 million. However, when estates passed those threshold, the estate tax rises to an overwhelming 40 percent. Now, a new type of legal protection has become available for those with large estates, allowing for additional shielding from the massive 40 percent tax.

This new estate administration tool is known as the grantor retained annuity trust. This particular type of trust is advantageous for people who are looking to pass down assets to heirs in the long-term. In essence, creators of this type of trust are making gifts themselves. Assets can be put into the trust for a minimum of two years, though the lifespan of the trust is up to the creator's discretion. At the end of that period of time, the trust can return the asset to the trust creator or the effort can be passed down to a beneficiary. If the asset increases in value while it is held in trust, gains can be passed down to beneficiaries without a tax penalty.

Assets that are eligible for this type of trust very widely in nature, but many people are using the grantor retained annuity trusts to pass along stocks and other holdings that are likely to increase in value in the future. There is no limit on the number of trusts that can be set up, nor do restrictions exist to limit the amount of money held in such trusts. As consequence, these trusts are becoming increasingly popular among the high-value estate set, who are using these tax planning tools to protect millions of dollars for the future heirs.

Even though it may not seem to your estate would be eligible for such protections related to tax planning, a grantor retained annuity trust may in fact be helpful for you. A qualified probate attorney in the state of Florida can help benefactors learn more about the benefits of certain types of trusts, many of which can provide tax relief and prevent formal probate administration from hindering the execution of the will and other estate planning documents.

Source: Market Watch, "How billionaires beat the estate tax" Matthew Heimer, Dec. 19, 2013

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