Estate Planning for High Net Worth Individuals in Illinois

Assisting high net worth clients with sophisticated estate planning strategies in St. Charles, IL, Kane County, DuPage County and throughout the Fox Valley.

The Fitzgerald Law Office, LLC has significant experience assisting affluent families pass their wealth and values to their loved ones in the most tax efficient way possible. We refer to this process as Advanced Estate Planning. Some of the planning strategies include:

Irrevocable Life Insurance Trust

Life insurance is a unique asset in that it serves numerous diverse functions in a tax-favored environment. Life insurance proceeds are received income tax free and, if properly owned by an Irrevocable Life Insurance Trust, life insurance proceeds can also be received free of estate tax.

An Irrevocable Life Insurance Trust (ILIT) is one of the most popular wealth planning devices. It is a trust designed to own a life insurance policy, usually on the lives of you and your spouse. You gift funds to the trust periodically and the trustee uses the funds to pay premiums on the life insurance policy. The trust is designed to produce benefits for your family.

Make current gifts to family members.
Accumulate assets outside the client’s taxable estate.
Protect assets from claims of creditors.
Avoid income tax on the accumulation of funds.
Avoid estate tax upon the distribution of funds to the family.
Create a source of liquidity to cover estate taxes or expenses.
Replace assets that may have been given to charity.

Grantor Retained Annuity Trust

The Grantor Retained Annuity Trust (‘GRAT’) is a type of trust specifically authorized by the regulations interpreting the Internal Revenue Code. This type of irrevocable trust permits you to make a lifetime gift of assets to an irrevocable trust in exchange for a fixed payment stream for a specified term of years.

At the end of the term of years, the balance of the trust property (the ‘remainder interest’) is transferred to the beneficiaries of your choice, typically children or grandchildren. The Grantor Retained Annuity Trust reduces estate taxes by removing assets from those that are counted in your estate for estate tax purposes.

The gift for federal gift tax purposes is based upon IRS published interest rates at the time of the transfer. This rate does not take into consideration any future appreciation in the value of the property and therefore you can reduce the value of the gift to as low as zero. The Grantor Retained Annuity Trust is particularly suited for assets that are expected to grow rapidly in value and property subject to discounts, such as interests in closely held businesses or limited liability companies.

During the term of years of the trust you must be paid a fixed amount annually or more frequently (for example, quarterly). The term of years and the amount of the payment are fixed at the time you create the trust (determined by you with the assistance of your legal and financial advisors).
During the term of years of the trust you can be the sole trustee or a cotrustee of the trust with complete control over all decisions of the trust and the assets in the trust.

Because the Grantor Retained Annuity Trust is a ‘grantor trust’ under the income tax laws, during the initial term of years you are treated as the owner of the property for income tax purposes. Therefore, all items of income, gain, loss and deduction with respect to the Grantor Retained Annuity Trust are treated on your personal income tax return.
If you die during the term of years the property in Grantor Retained Annuity Trust will be counted in your estate for estate tax purposes, but you will be no worse off than had you not created the trust.

Qualified Personal Residence Trust

A Qualified Personal Residence Trust (‘QPRT’) is a type of trust specifically authorized by the Internal Revenue Code. It permits you to transfer ownership of your residence to your family during your lifetime and retain the exclusive right to live in the residence, while reducing the size of your estate for estate tax purposes.

The residence is transferred to the Qualified Personal Residence Trust for a designated initial term of years. Provided you survive the initial term of years, ownership of the residence will be transferred to your family at a fraction of its fair market value. If you die during the initial term of years the property will be brought back into your estate, but you will be no worse off than had you not created the Qualified Personal Residence Trust. You may transfer up to two (2) personal residences into Qualified Personal Residence Trusts.

The Qualified Personal Residence Trust is a particularly noteworthy estate planning tool to reduce federal estate taxes because it permits you to transfer a residence out of your taxable estate while retaining the right to use it during your lifetime. The gift for federal gift tax purposes is based upon IRS published interest rates at the time of the transfer, and this rate does not take into consideration actual appreciation in the value of the property. Accordingly, these trusts are particularly useful to transfer residences in which significant future appreciation is anticipated. The Qualified Personal Residence Trust permits you to continue to enjoy your residence, knowing that the value at the date of death will not be included in your estate.

During the term of years of the trust you have the absolute right to remain in the residence rent free. After the initial term you can be granted the right to rent the residence for the balance of your lifetime for its fair rental value. During the term of years, you can be the sole trustee or a cotrustee of the trust with complete control over all decisions of the trust and the assets in the trust. You may also sell the residence and buy another residence during the trust term.

Because the Qualified Personal Residence Trust is a ‘grantor trust’ under the income tax laws, during the initial term of years you are treated as the owner of the property for income tax purposes. Therefore, all items of income, gain, loss and deduction with respect to the trust are treated on your personal income tax return. So for example, the deduction for real estate taxes remains available to you. In addition, favorable capital gains treatment, including capital gain rollover and the $250,000 exclusion of gain are still available to you.

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2018 Copyright Fitzgerald Law Office, LLC
2580 Foxfield Road, Suite 200, St. Charles, IL 60174 | Phone: (630) 549-6961

Estate Planning for High Net Worth Individuals in Illinois

Assisting clients with estate planning in St. Charles, IL, Kane County, DuPage County and throughout the Fox Valley.

The Fitzgerald Law Office, LLC has significant experience assisting affluent families pass their wealth and values to their loved ones in the most tax efficient way possible. We refer to this process as Advanced Estate Planning. Some of the planning strategies include:

Irrevocable Life Insurance Trust

Life insurance is a unique asset in that it serves numerous diverse functions in a tax-favored environment. Life insurance proceeds are received income tax free and, if properly owned by an Irrevocable Life Insurance Trust, life insurance proceeds can also be received free of estate tax.

An Irrevocable Life Insurance Trust (ILIT) is one of the most popular wealth planning devices. It is a trust designed to own a life insurance policy, usually on the lives of you and your spouse. You gift funds to the trust periodically and the trustee uses the funds to pay premiums on the life insurance policy. The trust is designed to produce benefits for your family.

Make current gifts to family members.
Accumulate assets outside the client’s taxable estate.
Protect assets from claims of creditors.
Avoid income tax on the accumulation of funds.
Avoid estate tax upon the distribution of funds to the family.
Create a source of liquidity to cover estate taxes or expenses.
Replace assets that may have been given to charity.

Grantor Retained Annuity Trust

The Grantor Retained Annuity Trust (‘GRAT’) is a type of trust specifically authorized by the regulations interpreting the Internal Revenue Code. This type of irrevocable trust permits you to make a lifetime gift of assets to an irrevocable trust in exchange for a fixed payment stream for a specified term of years.

At the end of the term of years, the balance of the trust property (the ‘remainder interest’) is transferred to the beneficiaries of your choice, typically children or grandchildren. The Grantor Retained Annuity Trust reduces estate taxes by removing assets from those that are counted in your estate for estate tax purposes.

The gift for federal gift tax purposes is based upon IRS published interest rates at the time of the transfer. This rate does not take into consideration any future appreciation in the value of the property and therefore you can reduce the value of the gift to as low as zero. The Grantor Retained Annuity Trust is particularly suited for assets that are expected to grow rapidly in value and property subject to discounts, such as interests in closely held businesses or limited liability companies.

During the term of years of the trust you must be paid a fixed amount annually or more frequently (for example, quarterly). The term of years and the amount of the payment are fixed at the time you create the trust (determined by you with the assistance of your legal and financial advisors).
During the term of years of the trust you can be the sole trustee or a cotrustee of the trust with complete control over all decisions of the trust and the assets in the trust.

Because the Grantor Retained Annuity Trust is a ‘grantor trust’ under the income tax laws, during the initial term of years you are treated as the owner of the property for income tax purposes. Therefore, all items of income, gain, loss and deduction with respect to the Grantor Retained Annuity Trust are treated on your personal income tax return.
If you die during the term of years the property in Grantor Retained Annuity Trust will be counted in your estate for estate tax purposes, but you will be no worse off than had you not created the trust.

Qualified Personal Residence Trust

A Qualified Personal Residence Trust (‘QPRT’) is a type of trust specifically authorized by the Internal Revenue Code. It permits you to transfer ownership of your residence to your family during your lifetime and retain the exclusive right to live in the residence, while reducing the size of your estate for estate tax purposes.

The residence is transferred to the Qualified Personal Residence Trust for a designated initial term of years. Provided you survive the initial term of years, ownership of the residence will be transferred to your family at a fraction of its fair market value. If you die during the initial term of years the property will be brought back into your estate, but you will be no worse off than had you not created the Qualified Personal Residence Trust. You may transfer up to two (2) personal residences into Qualified Personal Residence Trusts.

The Qualified Personal Residence Trust is a particularly noteworthy estate planning tool to reduce federal estate taxes because it permits you to transfer a residence out of your taxable estate while retaining the right to use it during your lifetime. The gift for federal gift tax purposes is based upon IRS published interest rates at the time of the transfer, and this rate does not take into consideration actual appreciation in the value of the property. Accordingly, these trusts are particularly useful to transfer residences in which significant future appreciation is anticipated. The Qualified Personal Residence Trust permits you to continue to enjoy your residence, knowing that the value at the date of death will not be included in your estate.

During the term of years of the trust you have the absolute right to remain in the residence rent free. After the initial term you can be granted the right to rent the residence for the balance of your lifetime for its fair rental value. During the term of years, you can be the sole trustee or a cotrustee of the trust with complete control over all decisions of the trust and the assets in the trust. You may also sell the residence and buy another residence during the trust term.

Because the Qualified Personal Residence Trust is a ‘grantor trust’ under the income tax laws, during the initial term of years you are treated as the owner of the property for income tax purposes. Therefore, all items of income, gain, loss and deduction with respect to the trust are treated on your personal income tax return. So for example, the deduction for real estate taxes remains available to you. In addition, favorable capital gains treatment, including capital gain rollover and the $250,000 exclusion of gain are still available to you.

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Fitzgerald Law Office, LLC
2580 Foxfield Road, Suite 200, St. Charles, IL 60174 | Phone: (630) 549-6961