New York Wealth
Transfer Attorneys
Providing Customized
Estate Planning to
Optimize Results in
Passing More Assets
Down The
Generations:
People with
significant wealth
face potential
estate tax rates in
excess of 50% when
attempting to pass
wealth to their
children and
potentially 100%
when passing assets
grandchildren. The
attorneys of Maurice
Kassimir &
Associates, P.C. are
adept at
transferring wealth
with the least
possible estate tax
consequences.
Some of the tools
Maurice Kassimir &
Associates, P.C.'s
lawyer use to
maximize wealth
transfer include
grantor retained
annuity trusts (GRAT’s)
and intentionally
defective grantor
trusts (IDGT’s).
With a GRAT, an
individual (the
grantor) contributes
property to a trust
and retains an
annuity for a term
of years. After
the retained term
ends, the property
in the GRAT passes
to the children,
free of gift and
estate tax. The
grantor may leverage
the gift by
retaining
responsibility for
reporting and paying
income tax on any
income generated by
the GRAT assets.
An IDGT is an
irrevocable trust
usually created for
the benefit of the
grantor’s spouse,
and/or children and
grandchildren. The
trust is structured
so that the trust
assets will not be
included in the
grantor’s estate.
This is typically
accomplished by
transferring assets
to the IDGT via a
gift, loan or sale.
Similar to the GRAT,
the IDGT is drafted
so that the grantor
is still treated as
the owner of the
trust for income tax
purposes. Hence it
is “defective” for
income tax
purposes. Because
the grantor is
paying the income
taxes on any income
generated by the
trust, the trust
assets can grow at
an accelerated pace,
leaving
substantially more
assets in the trust
to pass on to the
grantor’s heirs. The
income tax paid by
the grantor with
other assets is not
an additional gift
for gift tax
purposes.
A IDGT can achieve
excellent wealth
preservation
results. Here is
an example of one
such Maurice
Kassimir &
Associates, P.C.
success story:
The client owned
a very
successful
family business
in which three
of his children
were involved.
Maurice
Kassimir &
Associates, P.C.
arranged a
recapitalization
of the business
so that the
voting stock
represented one
percent of the
company’s equity
and the
non-voting stock
represented 99
percent of the
equity. The 99
percent interest
was then sold to
an IDGT set up
for the benefit
of the children.
The full value
of the company
was $12 million,
but under law
the non voting
stock could be
valued at $8
million because
of discounts for
the lack of
control and
minority
interest.
Because the
client received
an $8 million
note in exchange
for the sale of
the stock, the
value of the
business was
then capped at
$8 million. All
income and
appreciation of
the business
after the date
of sale is not
part of the
parent’s estate.
Only the $8
million note
would
potentially be
included in the
taxable estate.
The note would
be paid down
from profits of
the business.
Similarly, had
the non-voting
stock been
gifted to a GRAT
in which the
grantor retained
the right to
receive an
annuity of
approximately $1
million per year
for a ten(10)
year period, all
the non-voting
stock would be
removed from the
estate at zero
tax cost. The
annuity would be
paid from
profits of the
business.
Up to Date With
Changes in the Laws
Affecting Estate
Planning. . .
Family limited
partnerships (FLPs)
have been useful for
estate planning
purposes, but are
vulnerable to IRS
scrutiny if not
constructed for a
legitimate business
purpose. The
attorneys at Maurice
Kassimir &
Associates, P.C. are
always current on
the latest legal
developments and tax
rulings affecting
estate-planning
devices, and can
advise you to
navigate through
changing conditions.
The attorneys at
Maurice Kassimir &
Associates, P.C. are
adept at figuring
out creative ways
within the
structure of the tax
laws to help
preserve wealth for
your family
members.
Contact them for
sophisticated state
of the art planning
to preserve your
wealth.
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