Boilerplate provisions are not created equally. Though typically disregarded by your clients as insignificant, these provisions are a key to having excellent documents. Focus is on the most important standard provisions, those that will elevate your documents to the A+ category. Also identified, are out of the ordinary recommendations regarding standard problems, and references to solutions echoed by the Uniform Trust Code.
In past articles we have discussed the continued viability of Grantor Retained Annuity Trust ("GRAT") and partnership planning in today’s estate tax reduction environment. [Insert cites from prior JPTEs.] There is noise that the GRAT as we know it could be legislated away, and yet there are no pending bills to achieve that.
The partnership cases over the last 5 years (since what has become known as Strangi II, T.C. Memo.2003-145) have provided the tax planner with a reasonable roadmap as to how to structure sustainable partnerships for estate tax planning purposes. The cases established that the Tax Court is more than willing to apply a broad reading and liberal application of Code section 2036, meaning that it will apply 2036 to partnership cases to ignore the partnership for purposes of valuing partnership assets.
One of the more complicated decisions is how to pay estate taxes, post mortem, when illiquidity exists because of family held businesses, including family limited partnerships. In those cases, outside of the family business entities, there are not sufficient assets to pay the estate taxes.
One of the more complicated decisions is how to pay estate taxes, post mortem, when a family limited partnership has been set up with a substantial portion of the decedent's assets. In many cases, outside of the family limited partnership, there are not sufficient assets to pay the estate taxes.
An individual that incurs these fees will deduct these as a miscellaneous itemized deduction (MIDs) -- deductible only to the extent that they exceed 2% of a trust’s adjusted gross income (AGI), often referred to as the “2%-of-AGI floor.” The issue involves whether an entity that incurs these fees -- in this case trusts-- changes the nature of the expense from an MID to an above the line business deduction.
Much discussion has been had since Estate of Strangi ("Strangi II"), on that mysterious section, 2036 (a) (2) of the Code, and its implications. But estate planners have been dealing with 2036 (a) (2) and trusteeship issues for a long time.