Over the last several months, everyone was waiting with anticipation as to what Congress and the President would do about the expiring estate tax exemption. We know now that they made the enhanced estate tax exemption of $5.21 million permanent and attached to it an inflation rider for inflation adjustments.
This is great news for IPUG™ planners. IPUG™ (irrevocable pure grantor trusts) (IPUG™) trusts are a strategic asset protection trust that allows individuals to protect their assets without having to give up control and allows them to maintain many benefits from them. An IPUG™ trust is an irrevocable trust where the grantor remains trustee with the power of appointment.
An irrevocable pure grantor trust allows the grantor to remain in control and change the beneficiaries or the investments in any manner he deems appropriate during his lifetime. These trusts have become extensively popular for middle-aged and elder Americans who want to protect their assets from the government, lawsuits, and nursing homes. The new expanded estate tax exemption just over $5 million ensures that these trusts can be utilized by 99.5 percent of Americans. Only one-half of 1 percent of Americans have an estate over $5 million.
Further, couples with up to $10 million can utilize these trusts. Since the grantor maintains sufficient powers, no separate tax returns are required and it's included in their taxable estate but since inclusion in their estate provides for a step-up in tax base, this actually provides an extended benefit to users. The permanent extension now expands the application of these strategic trusts to essentially the entire estate planning marketplace.
For more information on IPUG™ trust planning, you can read my law review article on irrevocable pure grantor trusts at Syracuse University College of Law.
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