Archive for the ‘Presentations’ category

Now is the Time for All Good Estate Planners to Come to the Aid of Their Clients!: Estate Planning Opportunities in 2012

February 7, 2012

 By Ashley Alderman

On January 25, 2012, Scot Kirkpatrick and I spoke about how clients can utilize the current gift, estate, and generation-skipping transfer tax laws and $5.12 million exclusion amount in 2012 to their advantage, particularly given the increasing likelihood that as of January 1, 2013, we will again be back to a $1 million gift and estate tax exemption with a 55% tax rate and a 5% surcharge on estates in excess of $10 million.  After reviewing the current state of the law, we also discussed the lingering questions surrounding the estate tax law, primarily dealing with the concept of portability of the unused spousal exclusion amount and the potential for “claw back” if an individual makes gifts in 2012 utilizing the current $5.12 million exclusion amount, but then the individual dies in a year when the exclusion amount is less than the amount the individual already gave away.  There is the potential that when the individual dies, his estate will owe estate taxes on those prior gifts.  Despite the uncertainty and this claw back risk, maximizing use of the $5.12 million exclusion amount in 2012 is still a very attractive option for some clients.  One reason is that many practitioners believe that some form of administrative or legislative relief would be provided.  Although there is not unanimity among all commentators, another reason is that even if the claw back applies, the total amount of taxes paid by the client and his estate would be lower if the gifted assets appreciate in value because the assets, along with any appreciation on such assets, are removed from the gross estate.

Following the explanation of the current law, and the uncertainties in the current law, we discussed multiple estate planning opportunities for clients in 2012, in particular those to utilize their $5.12 million exclusion amounts.  Some of the strategies discussed include:

  1. Outright gifts;
  2. Decanting assets in existing trusts into new trusts;
  3. Grantor Retained Annuity Trusts;
  4. Business Restructuring, including the formation of Family Limited Partnerships and “Estate Freezes,” including gifts and sales to intentionally defective grantor trusts;
  5. Captive Insurance Companies;
  6. Forgiveness or refinancing of outstanding promissory notes or loans;
  7. Additional gifts to Irrevocable Life Insurance Trusts to facilitate the purchase of additional life insurance policies or increased death benefit on existing policies;
  8. Qualified Personal Residence Trusts; and
  9. Charitable Lead Annuity Trusts.

As we repeatedly emphasized to those in attendance, this is the year to “use it or lose it!”   Many of these strategies need to be implemented in the beginning of the year in order to be completed by the end of 2012.  If you or a client may benefit from some of these estate planning opportunities, we will be glad to discuss them in more detail with you.

Jingle Bells or Ringing Out the Year Gone By – Time Is Short to Complete Annual Planning

November 14, 2011

 by Jeff Waddell

Each year at this time our section of the office begins to get really busy.  Clients we have reached out to all year but who have not responded suddenly begin appearing.  Yes, its year end annual gifting time.  Pay heed to the sounds of the approaching holiday season, for in all the merriment those sounds signal the last days to take advantage of annual exclusion gifting or the last opportunity to capture a loss to offset a gain in the same tax year.

Take the opportunity to be proactive.  Review what you have done and what can, or should, be done before year-end.  Be aware that the annual gifting exclusion for each individual is currently $13,000.  Consider consulting your accountant (now is a relatively quiet period for them) to determine whether you are likely to experience an unpleasant April surprise on your tax bill and if so what might help offset that unwanted occurrence.  Then give your estate planning attorney a call to discuss what needs to occur before year end.

Just as with holiday giving, estate planning gifts come in all shapes and sizes.  Annual gifting is something, as the name implies, to consider every year.  This year and next, unless and until the law changes, larger opportunities exist than ever before in the gifting arena (with lifetime $5 million dollar gifting exemptions) so, if your current financial situation allows, consider making it a truly memorable holiday season for yourself and your loved ones.

New Era of Estate Planning in GA

September 2, 2011

Recently, Rose Drupiewski and Ashley Alderman were part of the New Era of Estate Planning in GA forum where they discussed the various facets and benefits of certain estate planning procedures. Attendees received the full rundown of information provided by Rose and Ashley, but below are a few key items we wish to share with you.

Rose discussed the benefits of giving away interests in a family business, such as a limited partnership or LLC, versus other types of assets that are more commonly given away, such as cash or marketable securities.  A few of these benefits include:

  • Greater asset protection for the gift recipients because of the limited liability provided by the entity under state law.
  • Greater control over how the assets are used following the gift, if the donor decides to retain control over the business.
  • Potential valuation discounts for gift and estate tax purposes, because interests in closely held businesses are generally traded at values.
  • The ability to slowly transition ownership of the business to younger generations.

Ashley talked about Sales to Defective Grantor Trusts.  These are especially effective in today’s economic environment of low fair market values and low interest rates.

She first described the characteristics of a Defective Grantor Trust, which include:

  • The Trust is treated as owned by the Grantor (in whole or in part) for INCOME tax purposes;
  • The Trust holds trust assets whose transfer was structured so as to constitute a “completed taxable gift” for GIFT tax purposes; and
  • The Trust contains trust assets that are NOT includible in the grantor’s estate for ESTATE tax purposes.

Ashley then reviewed how it is defective for income tax purposes because it is not considered a separate taxpaying entity from the Grantor, but it is effective for purposes of the gift tax and estate tax.

She also examined the basic structure of a Sale to a Defective Grantor Trust and the benefits of using this type of sale over a simple gift transaction. These include:

  • Because the Trust is defective for income tax purposes, the Grantor incurs no capital gains on the sale of the property to the Trust.
  • Because the Trust is not a separate taxpayer from the Grantor, the Grantor is responsible payment of the income tax liability generated by the Trust.
  • Payment of the income tax liability is not considered a gift to the beneficiaries of the Trust.