Personal Wealth Law News

A study by the Employee Benefit Research Institute concludes that many people will be at risk of running out of funds sufficient to pay living costs at some point after retirement. Not surprisingly, the results differ based upon the level of pre-retirement income. For people in the highest quartile of pre-retirement income, 5% are at risk of running out of funds within 10 years of retirement, and 13% within 20 years. But at the lowest income quartile, 41% could run out of funds within 10 years and 57% within 20 years. Yet another reason for doing whatever is possible to maximize retirement saving.

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The Florida Supreme Court has just issued an opinion denying asset protection for single member LLCs. We’ll write more about this later, but it points up the importance of thinking about protecting the wealth you have accumulated.

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The IRS has just announced that the applicable federal rate under Code Section 7520 will fall to 2.6% in August, down from 2.8% in July and 3.2% in June. These very low rates make certain planning and wealth transmission techniques far more effective. For example, the use of grantor retained annuity trusts (GRATs) is far more effective when interest rates are lower. This means that larger amounts can be transferred to succeeding generations= more efficient estate planning.

 In addition, low interest rates mean that intra-family loans are more effective. For example, under the August rates, you can lend to a child, for example, for a term of less than three years at annual rate of just .53% per year. The child can then invest the money and keep the difference in rates. This is a way of transferring wealth without using annual gift tax exclusions or lifetime exemptions.

 Combined with the continued low values in many assets, these low interest rates make this an ideal time for estate planning.

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