Presidential Estate Planning

Thursday, June 19, 2014

by Keith Eig

Earlier this week, on June 18, the Washington Post published an article on an estate planning technique used by Bill and Hillary Clinton. The article described the use of a Qualified Personal Residence Trust (QPRT), which is an "estate reduction and freeze" technique. Local estate planning attorney (and our friend) Alban Salaman was quoted in the article and helped explain this planning technique, which is used to reduce estate taxes.

In summary, this strategy allows the donors to give away the home at its current value, but they still get to live there for a fixed number of years. If the donors survive the fixed number of years, the home will pass free of estate and gift taxes to the beneficiaries of the trust. If the donors die during the term, the value of the residence the day of their death reverts back to the estate.

To minimize the tax consequences in the event of a reversion, it makes sense to purchase term life insurance within the QPRT on the donors as a hedging strategy. Should they die during the term, the QPRT would have assets to purchase the property from the estate and inject the estate with liquidity.

For questions about this technique, please contact us at GWE.