• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Our Firm
    • About Our Firm
    • Advantages of Working With Our Firm
    • Attorney and Staff Profiles
    • Communities We Serve
      • Minnesota
        • Bemidji
        • Crookston
        • East Grand Forks
        • Fertile
        • Thief River Falls
      • North Dakota
        • Devils Lake
        • Dickinson
        • Grafton
        • Grand Forks
        • Minot
    • Job Opportunities
    • Speaker Connection
  • Estate Planning
    • Asset Protection
    • Business Planning
    • Elder Law & Medicaid Services
    • Estate And Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • Incapacity Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • Probate
    • SECURE Act
    • Special Needs Planning
    • Trust Administration
  • Elder Law
    • Are You A Caregiver
    • Conservatorship
    • Coping with Alzheimer’s
    • Hospice Care
    • Life Care Planning Services
    • Medicaid Benefits
    • Nursing Home Planning
    • Veterans Benefits
  • Seminars/Webinars
  • Resources
    • Client Resources
      • Estate Planning Resources for Farmers
      • Elder Law Resources
        • Bemidji
        • Grand Forks Elder Law
        • Minot Elder Law
        • Thief River Falls Elder Law
      • Estate Planning Checklist
      • Is Your Estate Plan Outdated?
      • Probate Checklist
      • Probate Resources
        • Bemidji Probate
        • Grand Forks Probate
        • Minot Probate
        • Thief River Falls Probate
      • Relocation Toolkit
      • Top 10 Estate Planning Techniques
    • DocuBank
    • Elder Law Reports
    • Free Medicaid/Long-Term Care Calculator
    • Frequently Asked Questions
      • Asset Protection
        • Business Planning
        • Business Succession Planning
      • Elder Law
        • Medicaid Planning
        • Veteran’s Benefits
        • Nursing Home Planning
      • Estate Planning
        • Estate Planning & Divorce
        • Estate Planning for Women
        • Job of an Executor
        • Families Without an Estate Plan
        • Gift, Estate, and Inheritance Taxes
        • Including Philanthropy in Your Estate Plan
        • Including Your Pet in Your Estate Plan
        • LGBTQ Estate Planning
        • Power of Attorney
        • Serving as Executor
      • Financial Planning
      • Incapacity Planning
        • Social Security Benefits
        • Understanding SSI and SSDI
      • Trust Administration & Probate
        • Probate
        • Small Estate Probate
        • Trusts
        • Wills
    • Newsletters
    • Probate & Estate Planning Savings Calculator
    • Professional Resources
    • Published Books
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Estate Planning for Niches
      • Trust Administration
  • Reviews
    • Our Reviews
    • Review us
  • Contact Us
  • Blog

GermanLawGroup

Estate Planning & Medicaid Attorneys in Grand Forks , North Dakota

Call us today(800) 774-7576

  • Facebook
  • Twitter
  • Linkdin
  • Instagram
  • Youtube
Attend A Free Seminar
Home » How Low Interest Rates Can Influence Your Estate Plan

How Low Interest Rates Can Influence Your Estate Plan

August 31, 2012

Compliments of Our Law Firm,
By: The American Academy of Estate Planning Attorneys

We all know that low interest rates can create excellent opportunities to buy or refinance real estate. But did you know that a low interest rate environment can have an impact on your estate planning options as well?

The four corners of a solid, basic estate plan remain the same no matter the economic climate. Interest rates do not determine the effectiveness of a Living Trust, Pourover Will, General Durable Power of Attorney, or a Healthcare Power of Attorney.

Interest rates can, however, influence the effectiveness of a number of advanced estate planning methods. Let’s take a look at just a few:

  • Grantor Retained Annuity Trust. A Grantor Retained Annuity Trust, or “GRAT,” is an estate planning tool with which you establish a Trust and retain a stream of income payments (the annuity) for yourself. When the term designated for the annuity expires, the children or other family members you’ve designated as beneficiaries receive whatever assets are left in the Trust. 

    The purpose of establishing a GRAT is to remove highly appreciated assets from your estate by passing them on to your chosen beneficiaries during your lifetime with the lowest possible gift tax bill. When you set up a GRAT, the IRS determines the value of the gift to your remainder beneficiaries by taking the value of the assets contributed to the Trust and subtracting from this the actuarial value of the scheduled annuity payments for the term of the Trust, using the “Section 7529” interest rate. The Section 7520 interest rate is a theoretical interest rate assigned to the Trust – it is equal to 120% of the applicable federal midterm interest rate for the month the Trust is established.

    When the Trust investments outperform the Section 7520 rate, the excess passes to your beneficiaries gift tax-free. This is easier to accomplish when the Section 7520 rate is low, making a GRAT a more effective estate planning trategy in a low interest rate environment.

 

  • Charitable Lead Annuity Trust. A Charitable Lead Annuity Trust, or “CLAT,” is similar to a GRAT except that, instead of receiving the initial stream of annuity payments yourself, you designate a charity to receive them. When the Trust ends, the remainder goes to your children or other designated beneficiaries. As with a GRAT, the IRS values a CLAT using the Section 7520 rate. If the CLAT’s investments out-earn that rate, the excess passes to your beneficiaries gift and estate tax-free. This is another instance in which very low interest rates can mean the opportunity to pass on large amounts to your loved ones while minimizing your tax bill.

 

  • Self–Cancelling Installment Note. A Self-Cancelling Installment Note, or “SCIN”, is another estate planning option for parents who want to move an asset out of their taxable estate while minimizing their gift tax liability. This strategy works well for parents whose actual life expectancy is less than the life expectancy that appears on actuarial tables.

 

  • When you use a SCIN, you sell an asset to your child in return for a stream of payments. At your death, the payments end – your child’s debt is cancelled with no further obligation. Since the asset has been transferred to your child, its value is not included in your taxable estate; instead, only the loan payments made to you count toward your estate tax bill. If the promissory note governing the transaction is properly structured, the IRS does not view the asset transfer as a gift; therefore, you also avoid gift tax liability. When interest rates are low, a SCIN can be an effective estate planning strategy because it keeps your child’s payments to you low, allowing you to transfer more wealth to your child.

 

  • Qualified Personal Residence Trust. The Qualified Personal Residence Trust, or “QPRT,” is an example of an estate planning strategy that does not work as well in a low interest rate environment. Under this arrangement, you transfer your home into a Trust, retaining the right to live in your home for a specified number of years. After this term of years has expired, your home is transferred to your children or other beneficiaries selected by you. The goal of a QPRT is to remove your home from your taxable estate and transfer it to your children (or other beneficiaries) with the smallest possible gift tax bill. Your gift tax bill is determined by the value of your beneficiaries’ remainder interest in the home, and this is discounted more heavily with a higher interest rate.

When interest rates are low, certain advanced estate planning strategies become very appealing, while the effectiveness of others is diminished. Your estate planning attorney can help you determine which tools and techniques are best suited to meet your family’s needs.

Primary Sidebar

TESTIMONIALS

Client Review
August 24, 2020
    

Needed to come in to get specific advice for our needs. The attorney spoke to us in terms we could understand, coming to our level and did not make up feel uncomfortable. They were very considerate and caring. We didn’t feel rushed. We felt like they cared and knew what they were doing.

C.P., Minnesota
Client Review
August 24, 2020
    

We were wonderfully satisfied. Wayne did an outstanding job of explaining, diagramming and answering questions and concerns.

JW & CD, North Dakota
Client Review
August 24, 2020
    

They were courteous, efficient, knowledgeable, and trustworthy.

D.T., Minnesota
Client Review
August 24, 2020
    

Very helpful. Our children and us are are confident in your group.

-Anonymous, Fargo, North Dakota
Client Review
August 24, 2020
    

"Very professional, covered all, expertise, friendly, peace of mind now."

- Anonymous, North Dakota
Client Review
August 24, 2020
    

So much of a client's high or low opinion of an organization depends on their welcomed feeling. I felt that every time I visited the office, every person I talked with listened and took action on my concern or questions! They were also very friendly.

~J.R., Grand Forks, ND
Client Review
August 24, 2020
    

From phone calls to signing the final documents I was treated with respect, kindness, and understanding by Wayne & Jenn. Every business that wants their business represented well should have someone like Jenn & Wayne. They both made me feel relaxed and assured I was at the right place at the right time at this time in my life. 

~ Deborah Rucinksi, North Dakota 
Client Review
August 24, 2020
    

All of the paperwork was completed in a timely matter. Wayne was very good in explaining the trust to us. 

~Anonymous
Client Review
August 24, 2020
    

Thank you for taking care of my finances after I am gone. I worried about probate once; hopefully this has been solved. Everyone was very polite and helpful. Thank you Katie for answering my questions, and also Jenn.

- Anonymous
Client Review
August 24, 2020
    

This Avvo rating is killer and so deserved! You are the best brother! The only thing is I think the 10 rating is too low, in my book you go to 11! Congratulations on the award, you should be very very proud. See you at your Holiday party, thx for the invite.

Anthony G., Los Angeles, CA
Client Review
August 24, 2020
    

Everyone at German Law was helpful and pleasant. I felt good about my decision, I thought I was doing the right thing for myself & my family. Wayne took his time and didn't rush, which is good because a lot of this can be over people's heads.

A.W., Red Lake Falls, MN
Client Review
April 15, 2021
    

Excellent

Very interesting, informative and valuable information and ideas.

Valuable information.

RP
Client Review
April 15, 2021
    

5 STARS! Thanks for allowing this to be on a webinar! Very interested in this topic.

Great Estate Planning Guide

SD
November 25, 2022
    

John provided very short turn-around time that we needed. He built an amortization schedule that really met our needs. He was responsive and very easy to work with! Quick and easy!

 

Cammy was also very helpful and professional!

November 25, 2022
    

Really Liked it.
Assisted by John Oelke

November 25, 2022
    

Excellent!

<
>

FREE ESTATE PLANNING WORKSHEET

  • This field is for validation purposes and should be left unchanged.

Where We Are

German Law
2650 32nd Avenue South, Suite O
Grand Forks, ND 58201
Phone: (701) 738-0060
Fax: (701) 738-0064

See Larger Map Get Directions

Office Hours

Monday8:00 AM - 12:00 PM and 1:00 PM - 5:00 PM
Tuesday8:00 AM - 12:00 PM and 1:00 PM - 5:00 PM
Wednesday8:00 PM - 12:00 PM and 1:00 PM - 5:00 PM
Thursday8:00 AM - 12:00 PM and 1:00 PM - 5:00 PM
Friday8:00 AM - 12:00 PM

Map

Footer

  • Speaker Connection
  • Advantages of Working With Our Firm
  • About The American Academy
  • Sitemap
  • Contact Us

Connect to Us

  • Facebook
  • Twitter
  • Linkdin
  • Instagram
  • Youtube
footer-logo

© 2023 German Law
All Right Reseved.

Attorney Advertisement