Planning Potpourri


GRATs and Grandkids:

Grantor Retained Annuity Trusts are a great technique to leverage gifts to children without gift tax. They're not used for grandchildren (skip persons) because you cannot allocate GST exemption to avoid the Generation Skipping Transfer tax on gifts to grandchildren until the GRAT is over and the properly presumably appreciated. If you've used up your $1 million lifetime gift exclusion, made no gifts to grandchildren, and don't contemplate future large gifts to grandchildren, you might use a GRAT to leverage gifts to grandkids even if the allocation of GST exemption at the end of the GRAT term is inefficient. Caution: estimate the growth in GRAT assets to avoid exceeding the $2 million GST exclusion at the end.


Avoid Estate Litigation:

Maintain consistency in your planning and documents. If you make equal gifts to your heirs while alive, then equal bequests to them in your will when you die, there really isn't likely to be much issue if an agent under your power of attorney makes equal gifts to the same people if you're disabled. However, if into that equal mix that you deed your home to your eldest daughter, the question is why. There may in fact be nothing untoward in that your daughter lived in the home with you and cared for you full time while your other children didn't. So you made one special provision for her. But how will other heirs know that was the case, rather than your daughter merely manipulating you during a week moment. Address inconsistencies in gifts, bequests and planning documents in a manner that makes it clear that those differences are intentional. Sign a gift letter explaining the rationale for the gift. File a gift tax return. This will also reconfirm the gift many months later when the return is due. At yet another date sign a new will that expressly acknowledges the prior gift and that you intend that your remaining assets should be bequeathed equally. If you include a favorite nephew in those who can receive gifts under your power of attorney, but not in your will, expressly state in the power the maximum gifts that can be made to him. Address differences explicitly and with detail to avoid fights and challenges later.


Beneficiary Designations:

Horror stories of lost forms abound. Make a copy for your files as well as send a copy to your CPA for his permanent file for you, and your estate planner. Better yet, have the professionals review the forms to be sure they accomplish your goals.

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