Current Trends in Estate Planning: "Freezing" a Client's - - PowerPoint PPT Presentation
Current Trends in Estate Planning: "Freezing" a Client's $5.12 Million Gift/Estate Tax Exemption Presenter: Gal N. Kaufman, Esq. Offit Kurman, PA 4800 Montgomery Lane 9 th Floor Bethesda, MD 20814 gkaufman@offitkurman.com
Presenter:
Offit Kurman, PA 4800 Montgomery Lane 9th Floor Bethesda, MD 20814 gkaufman@offitkurman.com 240.507.1709 www.offitkurman.com September 26, 2012
2
3
4
5
6
7
8
– taxpayer created irrevocable trust (believed to be in Delaware) – trust designated corporate (Del.) trustee – trust permitted (but did not require) distributions to taxpayer, spouse and descendants, per trustee’s discretion – trust contained spendthrift provision – no part of the trust could be used to pay or satisfy taxpayer’s legal obligations – Trust did not give taxpayer a limited (or general) power of appointment over the trust assets – IRS ruled that the gift taxpayer made was a completed gift AND that the value
estate for estate tax purposes
assets that he has transferred during his lifetime but over which he has retained certain “strings”, such as the right to receive the income from the transferred assets.
transfers assets to a trust but the assets of the trust can be used to satisfy the taxpayer’s legal
9
– client must establish an irrevocable trust that contains a spendthrift clause – the trust must designate Delaware law as governing law of the trust – the trust must appoints at least one Delaware trustee (i.e., an individual who lives in Delaware (except the client) or a Delaware trust company that performs certain duties; the trust may have non-Delaware co-trustees and Delaware or non- Delaware advisers.
10
– consent to or direct investment changes – veto distributions; and/or – replace trustees or advisers.
more of the following: – ability to receive income or principal pursuant to broad discretion
– right to receive current income distributions (not advisable in context of “freezing” client’s exemption); – an interest in a CRT or a QPRT;
11
– up to a 5% interest in a total-return unitrust or a GRAT; – power, which the client may exercise by Will or another document, to appoint the principal in the trust at death to or for anyone except the client, the client’s estate, the client’s creditors,
– ability to be reimbursed for income taxes attributable to the trust
– power to provide for the payment of taxes, debts, and expenses payable at the client’s death.
12
– appoint the client trustee or co-trustee; – provide that the client will get trust assets back at a certain age
– contain any express or implied understanding that the trustee must or is required to make distributions to the client; – contain a limited (or general) power of appointment in the client
designed solely for asset protection purposes); – authorize the trustee, adviser, protector, or committee to terminate the trust; or – authorize the trustee to reimburse the client for gift taxes.
13
14
settlors in approximately the same economic position as they would have been had they created trusts naming themselves as life beneficiaries.”
15
16
17
exemption), combined (Federal and Maryland) estate tax would be approximately $4 million
18
gift/estate tax exemption) combined (Federal and Maryland) estate tax would be Ø
Maryland estate tax saved would be approximately $1 million
19