Grantor trusts can be an effective way to optimize lifetime exemptions, says …

By reducing taxable estate assets, families can protect and pass on more
to future generations

ATLANTA, Feb. 26, 2015 /PRNewswire/ – Transferring assets to a grantor trust
can be a powerful way to maximize an individual’s lifetime gift
exemption, according to Atlantic Trust, the U.S. private wealth management division of CIBC (NYSE: CM) (TSX:

These types of trusts, long relied on by estate planners, have been
receiving increased attention lately thanks in part to the income and
estate tax benefits they offer, but also because of how they can help
grantors use gift exemptions more efficiently.

“As the prospect of estate tax repeal grows less likely, individuals and
families want to optimize the exemptions that they already have,”
explains Linda S. Beerman, chief fiduciary officer for Atlantic Trust.
Since grantor trusts offer both income- and estate-tax benefits, they
can be a powerful tool for removing assets from a taxable estate.

Generally in these types of trusts, the person creating the trust (the
grantor) irrevocably transfers certain assets to a trustee to hold and
oversee so that the transfer is a completed gift for gift tax purposes.
The trust, however, is designed with certain specific rights and powers
that make the grantor – not the trust or any of its beneficiaries-
responsible for paying income tax on any trust income and gains.
Regardless of whether or not those powers are actually exercised—and
often they are not—putting them into the instrument makes it a grantor

While any tax paid by the grantor may reduce the value of the overall
estate, assets inside the trust can still appreciate without being
depleted by income taxes. “That prospect can translate into significant
sums,” says Judith A. Saxe, managing director and senior wealth
strategist for Atlantic Trust.

This strategy can be effective because it may help individuals maximize
their lifetime exemptions—the total value of assets that may be given
away before triggering a gift tax. Currently, the lifetime exemption
amount for individuals is $5.43 million ($10.86 million for married
couples) for 2015. Generally, once the exemption limit has been
reached, a gift tax of 40% applies.

Although grantor trusts can be powerful estate planning tools, they also
can pose an additional risk for grantors. If the trust assets greatly
appreciate, grantors must be prepared to pay the tax liability. For
example, if the trust owns a large position in low-basis stock that is
about to explode in value—because the company is being sold—the tax
liability could be higher than expected. Drafting a grantor trust to
allow for the ability to “turn off” grantor trust status if needed
provides additional flexibility with this type of planning.

Atlantic Trust offers a number of resources concerning estate planning
strategies that involve grantor trusts, as well as other types of
trusts. To learn more, visit the
Online Resource Center at

The tax information contained herein is general and for informational
purposes only. Atlantic Trust does not provide legal or tax advice, and
the information contained herein should only be used in
consultation with your legal, accounting and tax advisers.

About Atlantic Trust

Atlantic Trust is one of the nation’s leading private wealth management
firms, offering integrated wealth management for high net worth
individuals, families, foundations and endowments. The firm considers
clients’ financial, trust, estate planning and philanthropic needs in
developing customized asset allocation and investment management
strategies. Experienced professionals deliver a broad range of
solutions, including proprietary investment offerings and a robust open
architecture platform of traditional and alternative managers. Atlantic
Trust operates in 12 full-service locations throughout the U.S. with
$25.9 billion in assets under management (as of October 31, 2014). For
more information, visit

About CIBC

CIBC is a leading Canadian-based global financial institution. Through
our Retail and Business Banking, Wealth Management and Wholesale
Banking businesses, CIBC provides a full range of financial products to
individual, small business, commercial, corporate and institutional
clients in Canada and around the world. CIBC owns a 41 percent equity
interest in American Century Investments®, a major U.S. asset
management company, serving financial intermediaries, institutions and
individuals, and acquired Atlantic Trust, a premier U.S. private wealth
management firm, in January 2014. You can find other news releases and
information about CIBC in our Media Centre on our corporate website at

SOURCE Atlantic Trust Private Wealth Management

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Thursday, February 26th, 2015 EN

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