Proactive Estate Planning


A client purchased a second property in a popular summer vacation area.  They planned on doing a large renovation and wanted this property to stay in the family for generations to come. 

The Challenge:

  • How to keep the property in the family for generations?
  • How to ensure future generations will be able to afford the property?
  • How to minimize future estate taxes on the property?

The Solution:

  • Place the property and a lump sum of cash into an LLC.
  • Gift the ownership interest in the LLC to an Irrevocable Trust.
  • Family signs an annual lease with the LLC to rent the property back to them.

The Benefits:

  • Gifting the LLC interest to the Irrevocable Trust was done prior to construction being completed thus significantly reducing its value. In addition, a valuation firm was hired to justify a further valuation discount due to lack of marketability and liquidity. This meant that a much lower portion of the client’s Lifetime Gift Tax Exemption had to be used thus preserving some exemption for future strategies.
  • Removing the property from their estate means that the principal and future growth in the value of the property is exempt from estate taxes, saving the family a significant amount of money.
  • Having the property in an LLC and owned by the Irrevocable Trust provides excellent liability protection for the family’s other assets.
  • Seeding the LLC with a lump sum of cash means it can be invested and the growth used to cover the carrying costs for generations.
  • Leasing the property back to the owners provides another means of removing more money from their estate and thus saving on estate tax.

It’s important to note that the client did not approach APW with the above stated challenges.  Rather it was the APW team that identified this timely opportunity and proactively presented it to the client for their consideration.  The old saying is true that you don’t know, what you don’t know.  Having the deep and close relationships with our clients allows us to identify these types of opportunities. 

These case studies do not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted regarding your specific situation.

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