Comments by Hillary Clinton that the Clintons were “dead broke” when they left the White House have brought some attention to an estate planning device called a residence trust that the Clintons are using as a tax-saving way of passing their home in Chappaqua, NY, to their daughter, Hillary. Tax attorney Rob Wood discusses the trust, described in a Washington Post article.
Wood explains that the purpose of the trust is to enable a taxpayer to pass a personal residence at a present value to a beneficiary and still maintain the home as a residence until the taxpayer dies. The assumption is that the value of the home will increase considerably before the taxpayer dies; passing it at the lower rate reduces the tax impact at a later date. Wood says that, if a taxpayer expects to have more than $5.34 million to pass to family members, a device like this might make sense. The $5.34 million number is the amount of estate that passes tax-free.
The Clinton home is probably worth about $2 million now, and it is almost certain to appreciate. Wood points out that all the gifts you make to a child count towards the value of an estate. The Washington Post article suggests that the Clintons will save about $640,000 in estate taxes. The residence trust is not an estate planning device that will be important to everyone. Wood opines that most taxpayers are not excited about doing estate planning, including all kinds of uncomfortable things that must be considered in deciding what to do and how to do it.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.