Someday your estate could be taxed at a rate as high as 40%. Your heirs would lose much of what you’ve built up.
If concern about estate tax leads you to visit an estate planner, you probably will hear about:
- Lifetime credit amount ($5.45 million, as of 2016)
- Annual gift tax exemptions ($14,000 per recipient per year)
- Crummey trusts (another way to use annual exemptions)
- Unlimited marital exemption (for gifts to your U.S. spouse)
- Unlimited marital deduction (for bequests to your U.S. spouse)
- QTIP trusts (to capture the marital deduction for money left in a trust)
- Life insurance trusts (to avoid estate tax on life insurance proceeds).
- Grantor Retained Annuity Trusts (GRATs, to efficiently remove an unlimited amount of wealth from your taxable estate).
These are the standard tools of estate planning, the techniques designed to reduce the eventual tax bill on your estate. You readily can apply any or all of them with an international trust. But an international trust lets you do even more.
Your trust makes estate planning easier. With an international trust, you can remove assets from your taxable estate and still keep them available for your own support , in case you need them later. This frees you to do a thorough, energetic job of estate planning without fear of planning yourself into the poorhouse by letting go of too much too soon.
A thorough estate plan may call for transactions between you and other family members. You can simplify those transactions by wrapping them in your international trust. Because of the grantor trust rule, transactions between you and your trust have no income tax effect. Thus the trust lets you pursue powerful transactions for estate planning without entangling yourself in unwanted income tax complications.
And an international trust is the grand slam of estate planning : it eventually eliminates the need for estate planning. Because the trust is discretionary, it won’t be included in the estate of anyone in a later generation. In other words, your trust leaves the estate tax system forever .
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