Difficult though it may be at present to focus on long-term wealth planning, there are good reasons to do so. Lower asset values and record low interest rates may present potentially significant tax savings.

Families with sufficient assets and liquidity to weather this crisis have a unique opportunity to accelerate their wealth transfer plans. Let’s look at five strategies, keeping in mind that every family’s circumstances are unique, and any decisions should be made in consultation with trusted advisors and in the context of a comprehensive wealth plan.
Gifts of stock with now higher potential for appreciation allow families to efficiently transfer assets, as growth in the asset’s value occurs outside the estate. Individuals can use their annual exclusion amount of $15,000 ($30,000 for a married couple) or make more significant gifts, tapping some or all of the current $11.58 million lifetime exemption ($23.16 million for a married couple). If asset levels warrant such a large gift, this is a great time to consider making it, as the relatively large exemption amounts are scheduled to sunset after 2025 and revert to about half the current level.
Those married clients hesitant or unwilling to make irrevocable gifts (again, especially understandable at present), should consider a Spousal Lifetime Access Trust, or SLAT. This structure removes assets and their future growth from the estate but allows for a spouse to be the beneficiary.
Intra-family Loans can be made, based on IRS rules at below market interest rates. The IRS rates change monthly; for April, that means just 0.91% for loans of three years or less, 0.99% for mid-term loans, and 1.44% for loans of 10 years or more. It’s important to note that the loan documents should be properly drafted, as they may otherwise be viewed by tax authorities as a gift. The interest on the loan will be taxable to the lender as ordinary income. This may be helpful in assisting a family member who was in the process of purchasing a home and requires additional funds for a down payment. This is also an opportune time to consider refinancing existing loans to family members.
Grantor Retained Annuity Trusts, or GRATs, can be extremely attractive wealth transfer mechanisms in this environment. Funding, for example, a two-year GRAT with assets highly likely to appreciate in that period, should generate an annuity over that period equal to the entire value of the funding amount plus the IRC Section 7520 rate, which as of April 2020 is 1.2%. Assuming the grantor survives the term of the trust, any appreciation beyond the annuity amount passes to heirs with no gift tax or reduction in the lifetime exemption. This strategy is particularly attractive after a significant market decline; if the market rebounds strongly, it will easily exceed the 1.2% hurdle rate.
GRATs can be especially effective for individuals who hold a long-term appreciated asset – such as a public stock holding – transferring to GRATs at interim low points allows for wealth transfer to occur with both gift tax and income tax efficiency. The annuity payments can be made in-kind.
Once the term of the trust is over, or as annuity payments are made in kind, the equities can be rolled over into a new GRAT.
Existing GRATs that have declined significantly may allow for a swap in the equity position for fixed income or perhaps even a promissory note, and restarting the GRAT from a lower funding value.
Sales to Intentionally Defective Grantor Trusts, or IDGTs, enable individuals to freeze the value of the assets transferred to the trust while the grantor continues to pay the taxes on the income generated. The payment of income tax is not considered a further gift, and the trust benefits additionally by being able to grow without paying any taxes itself. This strategy works well when stocks are low, by selling stocks or private assets at relatively low values to an IDGT in exchange for a promissory note at the now low interest rate. This would have to be an arm’s-length transaction, so the interest rate needs to be sufficient (see Intra-family Loans) and the valuation needs to be substantiated. Because this is an IDGT, the seller of the asset, who is also the grantor responsible for the income tax of the trust, will not have to declare the interest payment as income. This strategy is also more effective for transfers to grandchildren and other skip persons (as opposed to the GRAT, which should only be for the immediate next generation).
There must be sufficient assets in the trust (usually 10% to 20% of the value of the loan) prior to the sale. This amount is usually funded by a gift from the grantor to the trust.
Charitable Lead Annuity Trusts, or CLATs, are split-interest trusts that benefit a charity during their terms and at the termination of the trust, any remaining assets pass to the remainder beneficiary, the heirs. As with a GRAT the amount of the remainder will depend on whether or not the trust’s investments outperformed the IRC Section 7520 rate.
In the current historically low interest rate environment and after a market dislocation, CLATs can be an effective means of wealth transfer to the immediate next generation. The interim beneficiary of the charitable lead interest can be a donor-advised fund, a private foundation or a public charity. If structured as a grantor trust, the grantor may have an immediate tax deduction as well. Decisions between grantor and non-grantor CLATs are based on personal circumstances and should be made with professional consultation.
This may be a lot to think about in a difficult environment. And it is important to ensure that individuals and couples look after themselves first, before making substantial commitments to family members and charities. But for those who are considering wealth transfer strategies in the context of an overall plan, now may be a very opportune time to act.
Helena Jonassen is a Partner and Wealth & Fiduciary Advisor at Evercore Wealth Management. She can be contacted at

To Roth or Not: Roth IRA Conversions vs. Traditional IRAs

By Jen Tse
Reduced IRA values in the wake of the market drawdown make Roth IRA conversions potentially attractive. In exchange for paying current income tax on the assets, all future growth and distributions will be tax-free. Additionally, the original owner of the Roth IRA does not have to take a required minimum distribution, or RMD.1
But does a conversion make sense for you? Here are a few considerations; please contact your Wealth & Fiduciary Advisor to discuss your individual circumstances.

  • Is the intent to donate the IRA to charity? Traditional IRAs are still the best assets to use for this purpose, as the charity can be made the beneficiary of all or part of the assets.
  • Are you likely to be in a higher income tax bracket in the future? Assuming you have sufficient non-retirement assets to pay the income tax due, a Roth conversion makes the most sense, as future growth and distributions are tax-free.
  • Will you have time to benefit from the conversion? There is an opportunity cost in converting to a Roth IRA, and the break-even point can take years or even decades to reach, depending on the rate of return on the assets.2
  • What are your estate tax considerations? Traditional and Roth IRA assets are both subject to estate taxes. However, distributions from a Roth IRA are income tax-free for beneficiaries but taxable to the traditional IRA beneficiary.3

A few important points to remember:

  • You can no longer undo a Roth conversion if the value of the IRA drops after conversion.
  • Partial conversion of a traditional IRA to Roth IRA can limit your income tax obligations.
  • After a Roth conversion, you must wait five years to begin tax-free withdrawals.

Jen Tse is a Vice President and Wealth & Fiduciary Advisor at Evercore Wealth Management. She can be contacted at


1,2 The Secure Act, which came into effect in 2020, eliminates the stretch IRA and requires any non–spouse beneficiary of an IRA to distribute the assets within 10 years, with some limited exceptions.
3 The traditional IRA beneficiaries receive a credit to offset some of the ordinary tax owed on distribution for estate taxes paid on these assets, but the distributions are not fully tax-free to the beneficiary.

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