Macomb County Advanced Estate Planning Attorney

Offering Advanced Estate Planning Services Throughout Macomb & Wayne County 

You've worked hard your whole life to provide for your family and make your loved ones more secure.  Without advanced estate planning strategies, much of the significant assets you have accumulated may end up with the IRS and state taxing authorities.

Our firm regularly assists affluent families with such sophisticated planning strategies as Family Limited Partnerships or Limited Liability Companies, Personal Residence Trusts, Irrevocable Life Insurance Trusts and a wide range of charitable gifting techniques to reduce Federal Estate Taxes, Gift Taxes and Generation Skipping Transfer Taxes. 

Family Limited Partnerships

A Family Limited Partnership (FLP) is a form of a limited partnership among members of a family. The main advantages of forming and funding an FLP involve estate and gift tax savings and asset protection. An FLP also allows you to retain control over the transferred assets while enjoying these advantages.

Once the FLP is established and your assets are transferred to it, you can make gifts of limited partnership interests to your children or other beneficiaries. This accomplishes several different estate planning objectives simultaneously.

Making gifts of limited partnership interests accomplishes several estate planning objectives at once:

• Reduces your taxable estate. The value of each interest you give away lowers your taxable estate — and the tax your heirs would owe — while the annual gift tax exclusion lets you make these transfers gift-tax-free.
• Discounted valuations let you transfer more wealth. Because limited partners can't direct day-to-day operations, a minority discount applies; because the partnership isn't publicly traded, a marketability discount applies too. Together these let you leverage the FLP to transfer more wealth to your beneficiaries while retaining control of the underlying assets.
• Potential creditor protection. A properly structured FLP can offer creditor protection characteristics, since general partners aren't obligated to distribute the partnership's earnings.

Qualified Personal Residence Trusts

Our homes are often our most valuable assets and hence one of the largest components of our taxable estate. A Qualified Personal Residence Trust, or QPRT (pronounced "cue-pert"), allows you to give away your house or vacation home at a great discount, freeze its value for estate tax purposes, and still continue to live in it. Here is how it works:

• You transfer the title to your house to the QPRT — usually for the benefit of your family members — reserving the right to live in the house for a specified number of years.

• If you live to the end of that period, the house (and any appreciation in value since the transfer) passes to your children or other beneficiaries free of any additional estate or gift taxes.

• After the period ends, you may continue living in the home, but you must pay rent to your family or designated beneficiary to avoid the residence being included in your estate. This rent can further reduce your taxable estate, though it does carry income tax consequences for your family.

• If you die before the period ends, the full value of the house is included in your estate for estate tax purposes — though in most cases you are no worse off than if you'd never established the QPRT.

A QPRT also serves as an excellent asset/creditor protection vehicle, since you no longer technically own the property once it has been transferred to the trust.

Irrevocable Life Insurance Trusts

There is a common misconception that life insurance proceeds are not subject to Federal Estate Taxes.  While the proceeds are received by your loved ones free of any income taxes, they are countable as part of your taxable estate and therefore your loved ones can lose about half of its value to estate taxes. 

An Irrevocable Life Insurance Trust is created specifically for the purpose of owning your life insurance policy. A properly established and administered trust holds the policy outside of your estate and keeps the proceeds from being taxable to your estate. The proceeds from the insurance policy can then be used to provide your estate with the liquidity to pay estate taxes, pay off debts, pay final expenses and provide income to a surviving spouse or children.  The ILIT will be the policy owner and beneficiary.  Once your trust is established, you use your annual gift tax exclusion to make cash gifts to your trust. Your beneficiaries forgo the present gift (in lieu of the future proceeds) and the trustee uses the remaining gift to pay the premium on the life insurance policy.

There are many options available when setting up an ILIT.  For example, ILITs can be structured to provide income to a surviving spouse with the remainder going to your children from a previous marriage.  You can also provide for distribution of a limited amount of the insurance proceeds over a period of time to a financially irresponsible child.

Advanced Estate Planning Lawyer Serving Macomb, Oakland & Wayne County

Our firm is dedicated to helping clients make educated, informed decisions about their assets and will work with you and your team of financial advisors and CPAs to implement a highly sophisticated estate plan.

Keating Law serves advanced estate planning clients throughout the greater Detroit area, including Macomb County, Wayne County, Grosse Pointe, St. Clair Shores, and Sterling Heights.

FAQs

What is advanced estate planning?

Advanced estate planning uses more sophisticated strategies to help protect significant assets, reduce potential estate and gift tax exposure, and plan for wealth transfers to family members or beneficiaries. This may include tools such as Family Limited Partnerships, Qualified Personal Residence Trusts, Irrevocable Life Insurance Trusts, and charitable gifting strategies.

How can a Family Limited Partnership help with estate planning?

A Family Limited Partnership can help reduce the value of a taxable estate, allow gifts of limited partnership interests to children or other beneficiaries, and provide possible asset protection benefits when properly structured. It may also allow the person creating the FLP to retain control over the transferred assets.

What is the purpose of an Irrevocable Life Insurance Trust?

An Irrevocable Life Insurance Trust is designed to own a life insurance policy outside of the taxable estate. When properly established and administered, the trust can help keep life insurance proceeds from being taxable to the estate while still providing funds for estate taxes, debts, final expenses, or support for a spouse or children.