The coronavirus-inspired rise in estate planning continues as people who fear for their health take necessary measures and others stop procrastinating and start estate plans or complete a process they began but then set aside.
Media coverage of the phenomenon focuses on basics—the necessity of having a will, and the importance for parents of trust and guardianship issues.
Tools and benefits of comprehensive estate planning extend much further for those with more substantial assets and financial portfolios, such as corporate and finance executives, as well as owners of small and medium sized businesses.
For these individuals, inaction can be costly.
Turning a Negative into a Positive
Below we highlight some of the strategies and benefits of sophisticated estate planning. Cramer & Anderson’s highly-experienced Estate Planning attorneys make these tools easy to understand and implement. (Direct contact information for our team is at the end of this post.)
Let’s begin with estate taxes. The federal estate tax exemption is currently $11.58 million for an individual and $22.16 million for a couple. A maximum marginal tax rate of 40% applies to estates above the federal exemption level. Most importantly, this exemption level reverts to $5.5 million for an individual and $11.2 million for a couple as of Dec. 31, 2025.
By contrast, the Connecticut estate tax exemption is increasing from $5.1 million this year to $7.1 million in 2021, $9.1 million in 2022. It aligns with the federal exemption in 2023. The minimum marginal tax rate of 7.2% applies to estates with assets up to $1 million above the exemption level, and the maximum marginal tax rate of 12% applies to estates of $7.5 million or more above the exemption level.
How Depressed Assets Can be Leveraged for Massive Estate Tax Savings
Due to the current economic climate, many people are facing depressed asset and depressed business valuations. These depressed values do not have to be a negative, as they present an opportunity to transfer wealth at substantial discounts to the next or future generations in one’s family. This allows clients to take advantage of favorable taxation terms and remove large depressed assets from their estate at a discount and use a much smaller amount of their exemption, as described above, than they would have before the coronavirus hit.
Ultimately high net worth families are able to move a large portion of wealth tax free or at a reduced taxable cost. Once the asset recovers its value, it will all be outside the client’s taxable estate and transferred to the next or future generation in trust.
Effective Estate Tax Strategies in Conditions Created by the Coronavirus Include:
- Simple outright gifts. Gifting assets with depressed values to family utilizes the lower valuations as a tool to transfer assets that will appreciate again without tax implications.
- GRATs, or Grantor Retained Annuity Trust, allow you to transfer a depressed asset to a trust, for the benefit of family, for a certain number of years while still collecting income and getting back all the principal plus interest. However, all the future appreciation once the markets recover will be removed from your estate, gift and estate tax free.
- Sale to an IDGT, or Intentionally Defective Grantor Trust, allows you to sell an asset such as a family business or stock usually at a discount and take back a note, so that the principal value of the asset is returned to the client, but again the future appreciation once the markets or business recover will be removed from the clients estate gift and estate tax free, and already be in trust for future family generations.
- QPRT, or Qualified Personal Residence Trusts allows a client to transfer their primary or secondary home to a trust usually at a discounted value, and once the trust term ends the entire value of the home will be removed from the client’s estate.
The tools highlighted above outline just some of the estate and tax strategies available to business owners and high net worth individuals and their families.
Now is the time for high net worth individuals to take advantage of the current economic downturn and turn it to their tax saving favor, which could advantage their families for multiple generations due to the artificially depressed markets caused by the coronavirus through current wealth transfer tax savings opportunities.
Cramer & Anderson’s Estate Planning, Probate, and Trust Administration team focuses on client’s goals in helping to handle and preserve wealth and assets before and after death, protecting your business and legacy for your spouse.
Our Estate Planning services also involve the administration of trusts and estates after the implementation of an estate plan, and our attorneys work with families to protect assets from Medicaid—as well as assisting families in all aspects of the probate process, including disputes.
View the profile pages of our Estate Planning team to learn more:
Partner Josh Weinshank, Resident Partner of Cramer & Anderson’s office in Ridgefield and the Fairfield County Trust and Estate Planning and Administration Group Leader for the firm, may be reached by email at firstname.lastname@example.org.
Our attorneys and staff are working remotely amid the COVID-19 coronavirus crisis but are accessible by phone or email, and connecting with clients using technology such as Zoom. For more information, see the firm’s website or call the flagship office in New Milford at (860) 355-2631.