Hopefully the following estate planning tidbits will make you the hit at the next campfire.
But now, most wealthy people’s estates are below the $5,430,000 (2015) estate tax exemption amount. Absent the IRS regulatory change the IRS could argue that the FLP/LLC interest must be discounted so that the assets in your estate will not receive the same quantum of basis step up.
With a regulation prohibiting discounts your estate might get a bigger basis step up (less capital gains to heirs) at no estate tax cost. ■ Administration: You have to meet regularly with all of your advisers after completing a complex/large transaction in order to properly administer that plan. A few of the myriad of vital steps folks so often get wrong include: missing note payments, missing GRAT or CRT annuity payments, paying fees from the wrong entities/trusts, monitoring defined value mechanisms, not issuing Crummey notices, not monitoring trust termination dates, and more.
Other states permit self-settled-like trusts (you can set up a marital trust for your spouse and on his or her demise the assets come flow into a credit shelter trust that you are a beneficiary of).
All told there is a significant number of states that permit self-settled trusts.
If you borrow $3 million using the highly appreciated stock as collateral, you can gift the $3M to a grantor trust.
You will grow the value of those assets outside your estate, you’ll pay the income tax on trust income reducing your estate, and your estate will be reduced by interest charges. What if the securities the trust invests in with the fund borrowed plummet in value?
Example: You have a highly appreciated stock portfolio worth M.
You might choose to retain those stocks in your estate so that on death the significant appreciate is eliminated by a basis step up.
That might mean that proper planning should work just fine.
Also, the number of states that permit self-settled trusts has grown over the years and is now 15.
For example, one technique is to give someone a general power of appointment over a trust.