Paul Newman’s Will

Paul Newman’s will showed up on the internet over the weekend.  Here’s a link http://tinyurl.com/5at7eq.  The will has been filed in the probate court in his hometown of Westport, Connecticut.  The will contains all of the details of Cool Hand Luke’s estate including the fact that he left his Academy Awards from The Color of Money to his Newman’s Own Foundation and that the bulk of his estate including his production companies to his wife Joanne.  The will designates that some property be distributed to the Trustee of the Paul Newman Living Trust Number One.  I’m curious as to why the assets mentioned in the Will were not funded into the Living Trust.

The Silver Lining in Tough Economic Times

The economy is weaker than it was in the late 1990s. Interest rates have been rising. Food and energy prices have been skyrocketing. Home prices have been falling. It is getting to the point that we don’t even want to watch the news anymore.

However, there is a silver lining behind the dark economic outlook. As home prices fall and interest rates rise, one estate planning strategy for persons with taxable estates becomes particularly attractive. A Qualified Personal Residence Trust or “QPRT” is a great way to get the value of your home out of your estate for estate tax purposes at a discount. You transfer your home to an irrevocable trust you set up for that purpose. You retain all rights in the home for a period of years, which you select. After the expiration of the period, you can continue to live there by paying rent to the trust (which further helps diminish your taxable estate). The amount an individual can leave estate tax-free is $2 million, rising to $3.5 million in 2009, but then falling to only $1 million in 2011. If you have less than $1 million in assets, a QPRT may not be an appropriate estate planning strategy for you.

Let’s look at an example. In 2003, your home was worth $500,000. Today, it is worth $400,000. The interest rate used by the IRS was 3% in 2003. Let’s say that at the time of your transfer that interest rate has increased to 5%. Let’s further assume you are 70 years old and keep a retained interest for 8 years and then pay rent. The actuarial value of the remainder interest gifted to your kids in 2003 would have been approximately $292,000. If you did that same transaction in today’s environment with the home at $400,000 and the interest rate at 5%, the value of the gifted interest would be less than $200,000. That’s about a 31.5% reduction in the value of the gifted interest. Let’s say your home goes up in value to $800,000. You will have gotten the whole thing out of your estate for a value of less than $200,000! This preserves more of the amount that can pass estate tax-free to be used for your other assets.

As you can see, this is a great time to think about this strategy. The higher the interest rates and the lower the home values, the more powerful this strategy becomes. There may not be much to be thankful about in economic news nowadays. But, this can be a great time for certain estate planning strategies like this one. A qualified attorney who focuses his or her practice in estate planning can help you design and implement a strategy for these tough economic times that meets your unique needs.

Reasons To Have A Living Trust

This is a link to an article on Andrew Ewalt’s blog.  He’s an estate planning attorney in Connecticut.  In the article, he gives a very succinct list of all of the great reasons that a Living Trust is simply the best way to plan your estate.  It’s not the only way, and it’s not the right answer for every client, but in most cases, the Living Trust should be the preferred Estate Planning tool.

Andrew Ewalts Law Blog: Reasons To Have A Living Trust