Want to benefit from stock market volatility? Start a Trust.
Subscribe to enjoy similar stories.In the sleepy world of trust planning, the topsy-turvy stock market is creating big tax-savings opportunities.While irrevocable trusts are permanent structures, the assets within them are flexible and can be swapped at any time with different similarly valued assets—a strategy worth considering during times of extreme swings in market values.“Asset swapping often falls between the cracks,” says Ed Renn, of counsel on the private client and tax team at Withers. “Some people are knocking around with trust structures from years back and may not be proactive when it comes to managing assets in the trusts.”Swapping assets is often part of estate planning for wealthy taxpayers aiming to minimize exposure to the 50% estate tax rate.
But the strategy can also have significant benefits for people who aren’t worried about the estate tax now that the estate tax exemption is at $15 million per person or $30 million for couples.To swap assets, a trust must be an irrevocable grantor trust. These are generally the most popular kinds of trusts in which the person setting it up is responsible for paying the trust’s taxes.For a swap to be valid, any assets you take out of the trust must be replaced with assets of the same value.“You can swap one security for another, or cash for private equity or real estate,” Renn says.
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