Pending Tax Changes – Move Fast, Plan Now

Pending Tax Changes – Move Fast, Plan Now

By: Martin M. Shenkman, CPA, MBA, JD

Taxpayers Keep Fiddling While Tax Bennies are Burning


Money Matters Radio – Estate Planning Checklist

By: Martin M. Shenkman, Esq.



Introduction/Overview: Folks, we have budget issues. They’re pretty bad. One of the obvious ways to address budget issues is to raise taxes. The famous bank robber, Willie Sutton, was asked by a reporter why he robbed banks. He quipped, “’Cause that’s where the money is.” Well, who do you think the government is going to tax more to raise revenues? Getting the picture?


Consider the following items?


Crummey: Crummey powers make it possible to make annual gifts to trusts that qualify for the annual exclusion. There has been talk of restricting them. If you’re going to set up a trust, do it now, perhaps it will be grandfathered. Maximize gifts to trusts containing these withdrawal rights while you can.


GRATs: GRATs (Grantor Retained Annuity Trusts) are on the block for restriction or worse. Do GRATs now if they make sense for your estate planning.

Dynasty Trusts: Really rich folk like to transfer assets to perpetual trusts in Delaware, Nevada, South Dakota or Alaska, among other states. These trusts can grow forever outside the estate, gift and GST tax regimes. They may also facilitate minimizing state income tax. Assets can remain out of the reach of creditors. A university profession wrote an article in the July 12, 2010 New York Times lambasting these trusts as contributing unreasonably to the concentration of wealth in our country. Well, if you have big buckaroos and have done a dynasty trust (or two….) move now.

Discounts: These have been the tax planning Holy Grail for years. No surprise they are on the blocks for significant restriction. Discounts are the concept that a 25% of a business is worth a lot less than 25% of the underlying business value because of the lack of control and marketability. Discounts have been the grease that has made the numbers fit on myriads of tax planning transactions. Grease your tax wheel now before its too late. Make gifts to heirs, trusts, and more, while the leveraging benefits of discounts can be realized.

Higher Tax Rates: No surprise what is coming around the corner on this issue. Plan for higher rates now. Give gifts of business and rental real estate to heirs who are likely to be in lower tax brackets. Revise partnership and operating agreements to reflect the requirements to legitimately shift income to lower bracket heirs.

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