How Gifting Strategies Can Reduce Your Taxable Estate
- By Oaktree Advisors
Peter and Lisa Roberts, both 68, had accumulated a large estate over their lifetime, primarily made up of real estate and other non-liquid assets. After spending a lifetime building their company, the couple did not want to see their children forced to sell properties to pay estate taxes.
Their goal was to minimize the amount paid in estate tax and to pass their real estate interests to their three children. In addition, they wanted the children involved in the estate planning process to protect family harmony and make sure the heirs would properly manage the assets once the Roberts were deceased.
What We Did
The financial team at Oaktree Advisors proposed establishing a family limited partnership owned by the children and gifting all minority partnership interests to the trust. Additionally, we recommended establishing a Qualified Personal Residence Trust (QRPT) and gifting the Roberts’ personal residence and vacation homes to the QPRT.
By focusing on the properties in which they had a minority stake, Oaktree was able to use significantly discounted property values and ultimately transfer one third of the Roberts’ assets out of their taxable estate. In addition to transferring the family residences into the trust, the Roberts gifted a portfolio of municipal bonds to generate income to pay for the upkeep and taxes due on the property.
The desired end result? Peter and Lisa retained a portfolio of properties generate enough income to maintain their lifestyle, while tax efficiently transferring property to a partnership owned by their children.