Estate Planning and Interest Rates

  • Trusts
estate planning and interest rates |estate and probate legal group

We can’t escape hearing about the rise of inflation and interest rates. You may wonder why an estate planning office is talking finance with you. But you must remember your estate plan includes more than just a will. Your plan may consist of certain types of trusts to pay out your beneficiaries. And don’t forget, your estate plan needs to work with your future financial goals. There are links between estate planning and interest rates. We will describe a couple of them here.

Interest Rate-Related Trusts

It is best to establish some trusts when interest rates are high. Two are Charitable Remainder Trusts (CRTs) and Qualified Personal Residence Trusts (QPRTs).

  • A Charitable Remainder Trust is a tax-exempt irrevocable trust that generates income for the creator while reducing the taxable income of individuals and supporting charities. It can be set up as an annuity trust or unitrust. If you set up an annuity trust, it pays out a fixed dollar amount each year to the lead beneficiary. On the other hand, a unitrust pays out a fixed percentage of the trust each year to the lead beneficiary. This means that if the trust’s principle increases, the payout increases.
  • A Qualified Personal Residential Trust is a residential property held in an irrevocable trust for a specified number of years. The property is transferred to the trust beneficiaries. QPRTs provide asset protection because the grantor has the right to use the residence for a certain number of years. This makes the perceived value less than the actual value, making it undesirable to creditors. Plus, the lower gift tax value is reported to the IRS.

When establishing your estate plan, understanding which strategies work better in a higher interest-rate market will help increase the value of your overall plan. An attorney specializing in estate planning and trusts can help determine what is best for you.

Do You Need to Talk to An Oak Brook Attorney about Estate Planning and Interest Rates?

CRTs and QPRTs have many tax benefits, but these trusts are not suitable for everyone. An estate planning attorney experienced in various trusts can explain the pros and cons of each. Contact us at the Estate and Probate Legal Group today at 630-864-5835.

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