Suitable trusts for higher interest rates

On Behalf of | Jul 2, 2018 | Trusts

An integral part of estate planning involves taking into account current interest rates: Certain types of trusts can be beneficial to the citizens of Nevada during times of low-interest rates, while other types of trusts are better suited for times of high interest rates. With that being said, the past few years, past decade actually, have been dominated by low interest rates, yet this is about to change. As a matter of fact, current interest rates are rising, and they are not showing any signs of slowing down.

As a result of this shifting terrain, it is necessary for estate planners to make use of current trusts that won’t be suitable a few years down the road. For instance, a grantor retained annuity trust (GRAT) can benefit from the relatively low interest rates of today in order maximize the grantor’s retained interest and reduce the taxable portion of the beneficiary’s gift. Similarly, a charitable lead annuity trust (CLAT) can be an ideal solution in a low-interest environment.

Additionally, estate planners would do well to advise their clients to use new types of trusts that may be more suited to the coming higher rates, such as qualified personal residence trusts (QPRTs), which can minimize the amount of interest passed on to the trust’s beneficiaries. Also, charitable remainder annuity trusts (CRATs) can prove to be an alluring option for those who want to help both themselves and a charity of their choosing.

Naturally, different people will have different needs, necessitating the use of different types of trusts. Nevertheless, estate planners need to keep up with the times and to be willing to change their advice depending on what is suitable at the moment. Therefore, anybody planning to establish a trust may benefit from hiring an experienced attorney who is aware of the current landscape and knows how to best maneuver within it.