Kaplin Stewart

Lessons to be learned from Hillary Clinton’s estate planning

Part of the process of running for the office of the President of the United States involves disclosing one’s personal financial information. Democratic presidential nominee Hillary Clinton recently submitted her accounting of her family’s assets. Her disclosure has led to important estate planning lessons for many in Pennsylvania and beyond.

Candidates are allowed to use wide value ranges to list their various assets, so the exact net worth of Bill and Hillary Clinton’s estate is not known. However, the public can see some of the couple’s estate planning measures, including how they have chosen to address one of their homes. The Clintons have placed the home into a residence trust in order to achieve tax savings when the property is eventually passed on to their chosen beneficiary.

By placing the home into a residence trust (the Clintons actually split the value of the home between two such trusts), the property’s value for tax purposes will be frozen at the value when the trust was funded. That means that the gift taxes due from that transfer will be based on that value, which will likely be far below the eventual value of the home. Once the trust period comes to an end, the Clintons’ named beneficiary will receive the property.

The catch in this estate planning approach is to choose the proper length for the residence trust. It should be long enough to allow for maximum appreciation, yet short enough to ensure that the owners do not pass away prior to the expiration of the trust. If that occurs, then the property will be placed back into the taxable estate, which eliminates the entire point of the residence trust. In the case of the Clintons, it can be assumed that steps were taken to select the proper time frame for their two residence trusts. Their approach would be a great example for many Pennsylvania residents to follow.

Source: Money, “Hillary Clinton Has Managed Her Estate the Way She Does Everything Else“, Kerri Anne Renzulli, July 25, 2016