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Estate planning lessons from Hillary Clinton

When an individual decides to run for the office of the President of the United States of America, he or she is required to go through a process of disclosing his or her finances. Candidates are allowed to list their assets in categories and with very broad ranges, but the public in Tennessee and elsewhere are granted insight into how they have run their financial lives, which can be very revealing. In the case of Hillary Clinton, some of her estate planning measures show a remarkable sense of savvy.

Bill and Hillary Clinton have made use of residence trusts to reduce their taxable estate and pass one of their homes down to their chosen heir or heirs. A residence trust allows a homeowner to place a piece of property into the trust, which effectively removes it from their estate. The trust is designed to expire at a certain point in time, at which point the designated beneficiary will become the owner of the property.

While the property is held within the trust, it will continue to appreciate. However, the value assigned at the time of the trust's creation will be used for taxation purposes, not the true and current value of the home. Of course, in order for a residence trust to be effective, the proper length of time must be assigned. The trust should exist long enough to allow the home to achieve significant appreciation, but not so long as to outlive the homeowners. If that happens, then the property is placed back into the owner's taxable estate.

The Clintons also chose to create two separate trusts for the same piece of property, placing half of the value into each. That serves to further reduce the taxable value of the property, as neither half can be sold independently of the other. That move could lead to an additional 15 to 30 percent in savings. As this high-profile example shows, there are a number of lesser-known estate planning options available to people in Tennessee and across the nation.

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

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