Estate Liquidity and Tax Minimization Strategies

Very Hard Private Wealth Management Estate Planning

John and Maria, a married couple in their early 50s, have been financially savvy throughout their lives. They have accumulated a diversified investment portfolio worth $5 million and own two rental properties valued at $1 million. The couple has three children aged 18, 20, and 22. John has recently been diagnosed with a medical condition that may shorten his lifespan. During a discussion about estate planning, they express a desire to minimize estate taxes and ensure their children receive their inheritance relatively soon to assist with their own financial pursuits.

Considering John and Maria’s situation, they are contemplating different estate planning strategies. Which of the following strategies would most effectively address their objectives of minimizing estate taxes while also providing liquidity to their heirs without significant delays?

Establish a irrevocable life insurance trust (ILIT) to hold a life insurance policy and provide liquidity at John's death.

Create a family limited partnership (FLP) to transfer the rental properties and manage them, thereby retaining control while reducing estate taxes.

Utilize their annual gift tax exclusion to gift assets directly to their children each year, maximizing their lifetime gift tax exemption.

Hint

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