Originally appeared in Estate Planning, a Thomson Reuters publication. Copyright 2021 Thomson Reuters/Tax & Accounting.
Some 7.4 million Americans own a second home. Planning for these assets is important to the estate planning process. The current environment of lower interest rates and property values, high temporary exemptions (which may or may not have changed by the time this article is published), and a growing concern amongst the wealthy that estate taxes will be made harsher to pay for the coronavirus bailouts, suggest that planning for this popular asset has become even more important. Wealthy clients can use vacation homes as gift assets to use some of their current high temporary exemptions and other family goals. This can be particularly advantageous as many clients are reluctant to gift away investment assets given market declines, as they may want to preserve those diminished assets to cover future living costs. Many wealthy families wishing to pass on vacation homes to future generations should take steps before the current high temporary exemptions decline.
Using exemption and passing on a vacation home, with a myriad of personal issues, require planning. That planning often is best served with a long-term dynastic trust.
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