Estates & Trusts

In light of changes to the federal estate tax laws, we worked with a couple to update their estate planning documents to allow the tax plan created under the last wills or revocable trusts to adapt to ever-changing estate tax laws. Under the new plan, upon the death of the first spouse, all of the deceased spouse’s assets will be transferred to a marital trust (e.g., a QTIP Trust). Elections will be made on an estate tax return to (1) qualify the marital trust for the estate tax marital deduction and (2) allow the deceased spousal unused exclusion amount to be transferred to the surviving spouse. The deceased spouse’s generation skipping transfer (GST) tax exemption will be allocated to the marital trust. Upon the death of the surviving spouse, the assets of the marital trust will receive a step-up in tax basis and the surviving spouse’s applicable estate tax exclusion (the basic exclusion plus the deceased spousal unused exclusion amount) will minimize or eliminate estate taxes. Because GST tax exemption was allocated to the marital trust, the assets of the marital trust can be held in dynasty trusts for the couple’s descendants without triggering a GST tax.

To minimize the value of a gift a client wanted to make to his children, we established a grantor retained annuity trust (GRAT). We structured the term of years of and annuity payments from the GRAT so that the value of the remainder interest of the GRAT was near zero. The appreciation of the assets inside the GRAT have significantly exceeded the 7520 rate in effect at the time the GRAT was established. We anticipate that after the GRAT terms end, the children will receive approximately $250,000 each, effectively allowing the client to make a significant gift to his children without making a taxable gift.