By by Martin M. Shenkman, CPA, MBA, JD
Dear Client Name: It was a pleasure to have assisted you with recent planning for 2012. As we discussed, the optimal means to plan for large gift transfers is an irrevocable (cannot be changed by you) trust organized in one of the states that has laws most favorable to trust planning (e.g., < ?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Alaska, Delaware, Nevada, and South Dakota). Ideally, a trust could take advantage of multi-generational planning (generation-skipping transfer tax planning, dynastic planning, and so forth). There are advantages to using grantor trusts (you, as the grantor establishing the trust, would continue to be taxed on the income of the trust). If a simple trust or an outright gift to an heir without the protections of a more appropriate trust is used, a number of less-than-optimal outcomes, as we discussed in our meetings, could occur. As but one example, the simple outright gift, like writing a check or transferring interests in a family business, could expose the assets to a claim by a son- or daughter-in-law of yours should a divorce occur. Waste, through a lavish lifestyle, by an imprudent recipient of the gift or estate tax on the next generation is another possibility. Should you wish to address future planning, or reconsider steps that might be taken to better protect the gifts you wish to make or have just made, please do not hesitate to call. I would be pleased to help. Until you next contact me, the file will remain closed. Bear in mind that if a major tax bill is enacted late this year or next year, as is anticipated, you should make an appointment so that we can review the impact of those changes on your planning. Sincerely yours, Attorney’s Name
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