Estate Planning: Lessons Learned From Mitt Romney

Whether you agree with the politics of former Republican presidential candidate Mitt Romney or not, there are many lessons to be gleaned from his complex estate plan. A recent article in Fox Business discusses several of these lessons.

 

Romney, who is worth $250 million, has in place a variety of trust funds that will likely assist his heirs in avoiding the 35% tax rate on assets above the current tax exemption of $5.12 million. Although Romney’s level of wealth is not shared by the vast majority of Americans, the federal estate tax exemption fell from $5.12 million to $1 million on January 1, 2013. This change will put more people in a position where they will need to develop a plan not unlike Romney’s if they wish to avoid estate taxes as well.

Most middle class families find that their estate easily amounts to $1 million when they add up their home equity, life insurance policies, inheritance, retirement accounts, cash accounts, investments, cars, and other physical property and assets. For these people, the article offers several tips, inspired by Romney’s estate plan, to eliminate or reduce taxes.

These tips include:

  • Make tax-free gifts during life
  • Set up a Qualified Personal Residence Trust (QPRT), which holds your home for eventual distribution to heirs
  • Set up an Irrevocable Life Insurance Trust (ILIT), which removes your life insurance proceeds from your estate
  • Set up an Intentionally Defective Grantor Trust (IDGT), which holds shares of a privately held company that are assigned a low value
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