When an entity interest is transferred to a trust for estate tax planning, asset protection, control or income tax planning (e.g. the NIIT tax) formalities must be addressed.
First confirm that the entity is validly existing and key assets are in fact owned by the entity (e.g. for a real estate entity, is the deed in the name of the entity).
Obtain a certificate of good standing.
Be certain that the entity has all relevant governing documents prior to transfer (e.g. a shareholders' agreement).
Have proper documentation to address the transfer to a trust such as an assignment, gift letter, etc.
Confirm whether there are any prerequisites to transfer (e.g. a shareholder approval, lender consent, etc.).
Post-transfer governing documents must be signed (e.g. an amended and restated operating agreement).
If there is a defined value mechanism, all documents, tax returns, stock certificates, etc. should conform with that uncertainty.
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