How the Clintons Use Trusts to Reduce Estate Taxes

ducksMy graduate tax students and those who have attended my professional seminars all know I like to say that there are as many types of Trusts as there are different automobiles, from race cars, to luxury sedans to monster trucks, etc., etc. In fact, asset protection, tax and estate planning attorneys choose from a huge menu of Trusts when equipping their clients, depending on many factors such as their personal and business goals, complexity tolerance, budget, who will use the Trust, what they want to put in it and the circumstances under which it will operate. Obviously, not every type of Trust is recommendable for every client every time. Here’s an article about how the Clintons used two types of Trusts to accomplish their objectives. The first is a Qualified Personal Residence Trust (Q.P.R.T. or “Q-Pert” as trust attorneys affectionately like to call them). A QPRT is definitely not for everyone, especially if they want to guarantee being able to live in their home the rest of their life. In some cases, however, it can provide huge tax benefits. The Clintons also have an I.L.I.T (pronounced “eye-lit”) or Irrevocable Life Insurance Trust. This Trust is actually a no brainer if you don’t mind limiting your ability to change the beneficiary of your life insurance policy in the future. But it must be carefully drafted and maintained so that it actually works, and there are additional hoops to jump through if the Trust is not properly set up until after the life insurance policy is purchased. Without an ILIT, having a $5 million life insurance policy, for example, means paying another 40% in estate taxes on that $5 million death benefit that you were hoping was going to help pay the taxes on your other assets. Look out for future posts regarding other kinds of Trusts and in the meantime, check out this great article from Bloomberg titled “Wealthy Clintons Use Trusts to Reduce Estate Taxes”


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