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STRATEGIES

Results may occur from taking action. Desired results require implementation of sound strategies.

Family limited partnerships save transfer taxes

Family limited partnerships (FLP) can significantly reduce gift, estate, and generation-skipping transfer (GST)
taxes on generational wealth transfer through valuation techniques employing minority interest and liquidity
discounts.  
 

Tax-advantaged philanthropy

Charitable remainder annuity trusts (CRAT) & unitrusts (CRUT) can be employed to retain lifetime
income with assets passing to charity at death.

Private Foundations create a lasting family legacy, while eliminating income tax on gifts of appreciated property.

Planned giving to public charities can include life insurance and retirement plan assets.

Eliminate non-resident state income tax


Professional corporations can be employed to eliminate non-resident state income tax for Florida
& Texas attorneys.  Candidates for this strategy are partners of large, multi-state law firms admitting
corporate partners.     

Tax Planning with Grantor Trusts

Gifts of property to family members  SHOULD  ALWAYS  BE  TRANSFERS  IN  TRUST.
Grantor retention of certain fiduciary powers will vest ownership of trust assets with grantor for 
federal & state income tax purposes.  Trust income and gains are reported on donor's personal
income tax return.  Donor's payment of tax on trust income and gains is not a taxable gift to 
the trust.  This permits income tax-free growth for trust property.  
 

Estate Planning with Grantor Trusts

Simplify testamentary planning  by transferring property in trust and retain benefits of ownership. 
Generally, a decedent's Will is subject to legal proceeding in probate court.  There
will be legal costs and it may take months, or in some cases, years to finalize legal action. 
If real property is owned in states / commonwealths, other than where decedent is domiciled at time
of death, ancillary probate proceedings are likely required to pass clear title to heirs.  
Creating family trusts, where grantors retain revocation powers, will eliminate any need for 
state probate proceedings.  The family trust agreement is a superior substitute for a Will, allows
substantial flexibility for addressing the needs of heirs, and permits the transfer of assets on a 
completely confidential basis.  Generally, family Trusts are drafted so Grantors may revise them
as circumstances change.  Proper drafting can insure each spouse's testamentary wishes are protected 
upon their death.  For income tax purposes, on the death of surviving spouse, generally Trust assets
will receive a basis step-up under IRC Section 1014.
 

  

Why is Fiduciary Accounting important?

Trustees & Executors are generally required to account for principal and income under terms of the
governing instrument (Trust Agreement or Decedent's Will).  Most states have adopted the Uniform
Principal & Income Act (UPIA), or a modified version, to guide Trustees and Executors when the 
governing instrument is silent.  Fiduciaries have responsibilities to both current income beneficiaries
and to remainder beneficiaries.  So, records must be maintained to determine what $$ are currently 
distributable as income and what $$ are to be retained for the remainder interests. 

Income tax accounting for Trusts and Estates is not the same.  Many inexperienced advisers confuse
the two.  It is true however, that calculation of current income tax for a Trust or Estate, will depend upon
computation of fiduciary accounting income.    

Most state laws require annual fiduciary accountings by Trustees & Executors and timely reporting to 
beneficiaries.  Beneficiaries generally have rights to enforce annual reporting, which may involve 
legal action, when Trustees & Executors fail to comply.  
  

2025 Sunset Provisions - 2017 TCJA

On December 31, 2025, numerous provisions of the 2017 Tax Cuts & Jobs Act will sunset, unless tax legislation
is passed by Congress to extend them.  Income, gift, and estate taxes are all affected.   
 
More detail to come shortly.