In just a few weeks, we will elect a new president. Recent polls have Hillary in the lead. Regardless of whether you agree with Bill and Hillary’s politics, we can learn a few things from them about smart estate planning strategies. A recent Time.com article reveals that Bill and Hillary have set up a variety of trusts.
First, the Clintons have a “qualified personal residence trust” for their home in Chappaqua, New York. The purpose of the “qualified personal residence trust” is lock-in a low value for a piece of real estate before it appreciates. In most cases, the result is that while the value of property transferred to the trust is subject to estate tax, any appreciation on the property is not. With the estate tax at 40%, the resulting savings can be huge.
Second, the Clintons set up Irrevocable Life Insurance Trusts (ILIT). It is reported that Bill and Hillary have 5 different life insurance policies, 3 of which are in ILITs. The benefit of the Irrevocable Life Insurance Trusts is that you can minimize or completely avoid tax. By using ILITS, Bill and Hillary will likely allow the death benefits of their large life insurance policies to pass to their daughter, Chelsea, outside of their estate, which means it will not count towards their estate tax exemption ($5.45 million per person in 2016).
If Bill and Hillary Clinton take advantage of the tax laws, so should you! ILITs are a common estate planning tool we use for high net worth individuals including small business owners and farmers. It’s only fair that you have the opportunity to use the same estate planning tools that the Clintons are using.