A Great Time to do Advanced Planning

With the current economic slowdown and the very real losses that have been incurred in people's retirement and other investment accounts, many people feel that this is not a great time to do estate planning. Most of the people that I have spoken with are waiting to see what the new congress and president do once they are sworn in, and they are happy and content to sit by and watch what happens.

Unfortunately for many of them they are missing a great time to do some advanced planning. I have not had an opportunity to blog on many advanced estate planning techniques yet, but there are several that depend on several key federal interest rates. Two important rates for many advanced planning techniques are the applicable federal rate and the 7520 rate. Future blog posts will investigate both of those rates and how they are used for various planning techniques, but for January of 2009, the long term applicable federal rate compounded annually is 3.57% and the January 2009 7520 rate is 2.4%. These rates are very low and are used for various planning techniques such as installment sales to defective grantor trusts, Grantor Retained Annuity Trusts, and other techniques.

In addition to the above, the fair market value of businesses, real estate, and investments in general are extremely low. These lower fair market values, coupled with the low rates described above, have made it a very good time to do advanced planning if you are a candidate for business succession, or are a high net worth individual who wants to transfer as much of your estate to your heirs in a tax efficient manner as possible. If you have additional questions about these issues, feel free to contact me to discuss and I will be expanding upon these issues in future posts.