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IRS Section 7520 Rate: Bad Economy May Be Good for Wealth Transfer

By Amy Campbell

Following the dramatic changes in the economy, the Internal Revenue Code section 7520 rate required for valuation of retained interests plummeted from 5.0% in December, 2007, to 3.4% in December, 2008, and has dropped to the dramatic low of 2.4% for January, 2009, a rate never before seen since the enactment of section 7520 in 1989. This according to trusts and estate planning lawyer, Jan Myskowksi.

In an article titled, 7250 Rate Drop to Historic Low Creates Rare Opportunities for Lifetime Wealth Transfer Planning, Myskowski states, acutely low interest rates have created "rare opportunities arise to shift wealth at reduced transfer tax burdens, but a larger than usual gap opens in the comparative utility of various planning techniques, placing greater emphasis on the importance of analyzing the appropriate technique for any given client."

He explains further that estate planning vehicles such as Grantor Retained Annuity Trusts (GRATs) become particularly attractive, while others, such as Qualified Personal Residence Trusts (QPRTs) lose some of their appeal. For more information on estate planning in light of recent economic events, read the entire article by clicking on: Wealth transfer planning.

Full post as published by Law Links | Health Links on January 19, 2009 (boomark / email).