Bear Market Provides Boost to a Little-Known Strategy; a Record Low Hurdle Rate

By Mike Spector

Because many clients remain shell-shocked from recent market losses, estate planners say they aren't executing a lot of these trusts right now. But because of current bear-market conditions, planners are increasingly advising clients to consider these trusts.

What makes them especially attractive now is an historically low special rate that the Internal Revenue Service uses to predict how much your assets will grow in the trust. Estate-planning lawyers call it the "hurdle" rate because investment gains beyond it can generally pass to heirs tax-free. The rate, which is adjusted monthly, remains locked in for the length of the trust.