Discounted sales to defective grantor trusts. Provided that the sold assets are valued properly, there is no gift. Parties may want to consider taking a more conservative valuation approach. Intra-family loans at favorable AFRs should continue to be utilized. Life insurance should be part of every current planning dialogue. It provides an income tax-free death benefit and strong wealth transfer characteristics in all repeal scenarios acting as a perfect hedge against the uncertainty. Evaluate economic benefit and loan regime split dollar funding designs. Again, employ strategies that provide the ability to adjust or unwind the transaction. The most challenging scenario is the one that is the least likely: repeal of all transfer taxes, retention of stepped-up basis upon death, and truly permanent repeal. In that case, has the planning been a waste? The clients and their families benefit from all of the non-tax reasons for planning, and have implemented a hedge against the more likely scenarios. For high net worth clients who live in decoupled states, there are substantial estate taxes to be saved as a result of lifetime transfers. With the repeal of the federal estate tax, the state estate taxes would no longer be deductible against the federal. With most states in need of tax revenues, it seems unlikely that these remaining states will repeal their estate tax and other states might enact new estate taxes. The Cost of Delay The cost of delaying planning can be substantial. Strategies such as gifts and/or sales to defective grantor trusts take time to move appreciation out of the estate. In addition, it is important to lock in favorable rates today since over time AFRs may increase, gift and GST exemptions may be reduced, and discounts may no longer be available or greatly reduced. Even if all planning factors remain the same, based on very conservative assumptions, the reduction in the amount wealth transferred is substantial. Delaying the purchase of life insurance can result in substantially greater costs or it may be unavailable:
Discounted sales to defective grantor trusts. Provided that the sold assets are valued properly, there is no gift. Parties may want to consider taking a more conservative valuation approach. Intra-family loans at favorable AFRs should continue to be utilized. Life insurance should be part of every current planning dialogue. It provides an income tax-free death benefit and strong wealth transfer characteristics in all repeal scenarios acting as a perfect hedge against the uncertainty. Evaluate economic benefit and loan regime split dollar funding designs. Again, employ strategies that provide the ability to adjust or unwind the transaction. The most challenging scenario is the one that is the least likely: repeal of all transfer taxes, retention of stepped-up basis upon death, and truly permanent repeal. In that case, has the planning been a waste? The clients and their families benefit from all of the non-tax reasons for planning, and have implemented a hedge against the more likely scenarios. For high net worth clients who live in decoupled states, there are substantial estate taxes to be saved as a result of lifetime transfers. With the repeal of the federal estate tax, the state estate taxes would no longer be deductible against the federal. With most states in need of tax revenues, it seems unlikely that these remaining states will repeal their estate tax and other states might enact new estate taxes. The Cost of Delay The cost of delaying planning can be substantial. Strategies such as gifts and/or sales to defective grantor trusts take time to move appreciation out of the estate. In addition, it is important to lock in favorable rates today since over time AFRs may increase, gift and GST exemptions may be reduced, and discounts may no longer be available or greatly reduced. Even if all planning factors remain the same, based on very conservative assumptions, the reduction in the amount wealth transferred is substantial. Delaying the purchase of life insurance can result in substantially greater costs or it may be unavailable: