Now you guys know (because you read by Newsletters and Blog, right?) that all of us Estate Planning Attorneys are tax nerds at heart so it should be no surprise that I would comment on this story. Estate Planning and tax saving techniques really do go hand in hand with each other…

Last week, Bloomberg News reported that the Clintons (as in Hillary and Bill) are employing a series of financial planning strategies that will help reduce the tax burden on future recipients (probably Chelsea & family), which can be as high as 40%!!

The estate tax is arguably one of the most controversial elements of the U.S. tax system; reducing the amount of your assets that pass to your family members and other heirs after your death. Many lawmakers have sought to eliminate it, and many wealthy individuals use sophisticated tax-planning strategies to reduce or escape estate taxes – this is just business as usual folks!

One of those strategies is called the “QPRT” or qualified personal residence trust, and the disclosure that former President Bill Clinton and likely presidential candidate Hillary used the strategy to cut their potential estate tax has brought the QPRT into the news recently.

Shifting a property to a residence trust is a typical strategy used to avoid the estate tax. Instead of transferring a residential property upon death (which would trigger the estate tax), an individual can transfer that property to a trust, as a delayed gift. However, gifts don’t escape the estate tax by themselves; they are subject to the gift tax after you use up a certain lifetime exemption (which is equal in value to the estate tax exemption)… and I think I will stop there before most of you fall asleep! (If you are really interested shoot me an email and I will break it down for you with an example and actual numbers – [email protected])

Regardless, this is not something odd. This is just normal estate planning for wealthy people and the Clintons are wealthy people. Everyone should become consistently more sophisticated about how they plan their finances as they grow wealthier because if not you are doing the family you leave behind a huge disservice.

As my mentor used to say: Great Families Plan for Great Futures.  Have a great July 4th!