In the field of advanced planning, there are ways to shrink your estate (to reduce your estate tax liability), and there are ways to get future appreciation out of your estate (to keep your estate tax liability from ballooning over time). In some cases, there are ways to do both at the same time. Finding a method to accomplish both that has low risk and doesn’t entirely disrupt your financial life is truly wonderful.
Such vehicles do exist, but their effectiveness can vary based on factors under no one’s control. For example, a Qualified Personal Residence Trust (QPRT) can shrink your estate and get the future appreciation of your residence out of your taxable estate, at very little risk of loss. But the technique becomes more effective as interest rates rise. In today’s ultra-low interest rate environment, few estate planning attorneys are recommending QPRTs. But if the past four months of rising interest rates continues, paired with rising home prices, then QPRTs could become very popular again.
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