Houston Investors May Realize Tax Savings With Frozen Assets

Money with watchEstate freezing, under the right circumstances, can become a vital component of an intelligent wealth preservation strategy.

A “frozen asset” can be viewed as an investment that refuses to move with the market. Fewer things are more annoying to a savvy investor! If an investment isn't growing, what is the point?

No, Gordon Gekko is not the only one to see it this way, either. Then again, if you are not investing in growth, but in your family and a powerful estate plan, there are some times when capping or transferring growth and, yes, even “freezing” assets is a definite boon.

The concept of asset freezing, at least as it pertains to estates and estate planning, was illuminated nicely in a recent Forbes article titled “Freeze Your Assets To Save On Taxes.

This concept of “freezing assets” is a useful but often complex concept to explain. The principal is fairly clear, however. You see, more often than not, you want to pass along valuable assets to the next generation, especially assets on the order of a small business. Unfortunately, the more valuable the asset the more tax liability it likely will trigger, especially if the estate tax threshold is surpassed after a period of unexpected growth.

On the other hand, if you transfer future growth from your own potential estate tax equation or even divert it to your heirs now, then you may avoid an estate tax catastrophe later.

How does one do that?

Well, first you must assess what your assets and investments are. A small business formed as a corporation may have to be treated differently than an LLC. Perhaps you only own investments in public companies rather than your own. In addition, the structure of your assets can be beneficial.

When it comes to estate planning strategies, a Grantor-Retained Annuity Trust (GRAT) or an Intentionally Defective Grantor Trust (IDGT) may be worth considering to freeze and transfer your assets. There are many processes to explore should your assets, their growth, and your estate plan all begin to bump into the estate tax ceiling.

There is no time like the present to evaluate your options and set a course to efficiently avoid the tax man and transfer more wealth to our loved ones.

For additional information on estate planning in Houston, please visit my website.

Reference: Forbes (March 5, 2014) “Freeze Your Assets To Save On Taxes


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