Swap powers will be useful (except in the case of a BDIT) should it become advantageous to move specific assets in or out of trust. Site trusts in a state with favorable decanting, income tax, rule against perpetuities laws such as Nevada or South Dakota. Utilize trust structures that provide ongoing access to transferred funds: For married couples, dual spousal access trusts (taking care to avoid reciprocal trusts). For a single client or married couples who desire greater control, beneficiary defective trust (BDIT). inheritor’s Consider the use of independent trustee(s) with absolute discretion regarding distributions, giving the client and ultimately beneficiaries removal/replacement powers (subject to Code §672(c)). Consider trust protectors or a new trust position to turn powers on and off. Utilize special powers-of-appointment. Until such time as new legislation repeals the gift tax, continue to make discounted gifts using annual exclusion gifts and remaining gift and GST exemptions. If the gift tax remains in effect, if repeal is for 10-years only then reverts to current law, or if no changes to current law, a win as it’s planning has always been. If the gift tax has been repealed along with estate and GST taxes, then presumably these gifted assets in trust would avoid Trump’s capital gains on gift or upon death (assuming that became law). If the Democrats ultimately i) reinstate current law, a win as it’s planning has always been; or ii) implement a new tax regime, the plan should be flexible enough to take advantage of new opportunities. If the new proposal includes carryover basis on lifetime transfers, the current gifts will have done no harm and, in fact, would have done much good considering all of the non-tax reasons for planning. Regardless the repeal outcome (ranging from no repeal to full repeal), consider the following strategies that, if properly valued, do not include gifts and will continue to make sense until some aspect of new legislation indicates otherwise:
Swap powers will be useful (except in the case of a BDIT) should it become advantageous to move specific assets in or out of trust. Site trusts in a state with favorable decanting, income tax, rule against perpetuities laws such as Nevada or South Dakota. Utilize trust structures that provide ongoing access to transferred funds: For married couples, dual spousal access trusts (taking care to avoid reciprocal trusts). For a single client or married couples who desire greater control, beneficiary defective inheritor’s trust (BDIT). Consider the use of independent trustee(s) with absolute discretion regarding distributions, giving the client and ultimately beneficiaries removal/replacement powers (subject to Code §672(c)). Consider trust protectors or a new trust position to turn powers on and off. Utilize special powers-of-appointment. Until such time as new legislation repeals the gift tax, continue to make discounted gifts using annual exclusion gifts and remaining gift and GST exemptions. If the gift tax remains in effect, if repeal is for 10-years only then reverts to current law, or if no changes to current law, it’s a win as planning has always been. If the gift tax has been repealed along with estate and GST taxes, then presumably these gifted assets in trust would avoid Trump’s capital gains on gift or upon death (assuming that became law). If the Democrats ultimately i) reinstate current law, it’s a win as planning has always been; or ii) implement a new tax regime, the plan should be flexible enough to take advantage of new opportunities. If the new proposal includes carryover basis on lifetime transfers, the current gifts will have done no harm and, in fact, would have done much good considering all of the non-tax reasons for planning. Regardless the repeal outcome (ranging from no repeal to full repeal), consider the following strategies that, if properly valued, do not include gifts and will continue to make sense until some aspect of new legislation indicates otherwise: