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How interest rates impact trust decisions

Trust planning professionals in New York and throughout the country should be aware that interest rates are likely to rise in the short-term. It is also likely that the past decade of low interest rates is set to gradually come to an end. Therefore, it is a good idea for those professionals to start adjusting the advice that they give to their clients.

Two trusts that may make sense in today's financial environment include a grantor retained annuity trust (GRAT) and a charitable lead annuity trust (CLAT). A GRAT can be advantageous because it allows an individual to receive income from the trust every year while also holding assets out of his or her estate. A CLAT gives money to charity each year and is best used to maximize tax deductions related to such charitable giving. When the CLAT term expires, any money left over will be given to beneficiaries.

As interest rates rise, it can be worthwhile to consider using qualified personal residence trusts (QPRTs). With a QPRT, a person's home is transferred into a trust with the current owner retaining the right to live there for a predetermined amount of time. However, the type of trust that a person chooses to make use of depends on their goals both now and in the future.

The use of trusts such as a CLAT or GRAT can make it possible to receive income today while reducing future tax liability. Those who would like to add a trust to their estate plan may benefit by having one created by an attorney. Individuals who already have a trust may want to have it reviewed by legal counsel as soon as possible. Doing so may increase the odds that it meets a person's estate planning needs and goals.

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