Grantor trusts

Supreme Court – Beneficiary Residency Alone Is Insufficient Basis for State Trust Taxation.

Topics: Estate planning, Grantor trusts, Trusts

The WRMarketplace is created exclusively for AALU members by experts at Baker Hostetler LLP and the AALU staff, led by Jonathan M. Forster, Partner, Rebecca S. Manicone, Partner, and Carmela T. Montesano, Partner. WR Marketplace #19-13 was written by Jonathan A. Schwartz, Associate, and Jennifer M. Smith, Counsel, Baker & Hostetler LLP. The AALU…

Warning Will Robinson: Tax Reimbursement Clauses May Cause Problems.

Topics: Grantor trusts

As creators (“grantors”) of irrevocable grantor trusts must pay the trusts’ annual income taxes without receiving any trust benefits, advisors typically suggest incorporating a tax reimbursement power that gives the trust flexibility to reimburse the grantor for the tax payment. Despite their prevalence, however, tax reimbursement powers must be crafted and used with care, not…

Flipping the Script: Nongrantor Trusts with Grantor Trust Benefits – Can It Be Done?

Topics: Estate planning, Grantor trusts, Non-grantor trusts, Trusts

Grantor trusts, which tax the trust’s income to the trust creator (“donor”), have long been a planning mainstay, as they can enhance growth in the trust and offer significant flexibility in transactional planning with the donor. As discussed in WRMarketplace No. 18-03, however, new limits on tax deductions, including for state and local taxes, may…

Decoding Tax Reform: Grantor vs. Nongrantor Trusts – Which Way Do I Go?

Topics: Estate planning, Grantor trusts, Trusts

H.R. 1 (“Tax Act”) has dramatically altered the tax consequences and economics of many common irrevocable trust plans given the combination of higher exemptions for gift, estate, and generation skipping transfer taxes (collectively “transfer taxes”) and changes to the taxation of individuals and trusts. Grantor trusts, which tax the trust’s income to the trust grantor,…

It’s Déjà Vu- Planning (Again) in the Face of Uncertainty – Estate Freeze Series- Installment Sales to Grantor Trusts.

Topics: Estate planning, Grantor trusts, Trusts

The ISGT transfers appreciating assets to the next generation without capital gains taxes and allows the assets to grow in a grantor trust without reduction for income taxes. As a trade-off, the grantor must relinquish control over the assets sold to the trust while retaining liability for the payment of the trust’s income tax obligations.

It’s Déjà Vu- Planning (Again) in the Face of Uncertainty – Estate Freeze Series- Zeroed-Out GRATs.

Topics: Estate planning, Grantor trusts, Trusts

The zeroed-out GRAT can transfer asset appreciation without gift or estate tax, but only if the grantor survives the term of the GRAT and the assets transferred outperform a federally-set investment hurdle rate known as the “7520 rate.” The approach is particularly suited to today’s planning, since the GRAT’s unique features, including options to backload…

What’s Trending- What Experts from the 2017 Heckerling Institute Had to Say.

Topics: Estate planning, Estate tax, Grantor trusts, Split-dollar, Trusts

The 2017 Heckerling Institute on Estate Planning identified several critical trends for legacy and life insurance planning in this uncertain environment, including (1) the need for flexibility, (2) the appealof estate freezes, like GRATs, installment sales, and preferred partnerships for current planning, (3) the tax considerations for life insurance planning regardless of any estate tax…

Survey Says- Tax Reform & Client Planning – What Advisors Are Seeing & Saying.

Topics: Estate planning, Grantor trusts, Irrevocable trusts, Trusts

While President Trump and the Republican-controlled Congress have promised major tax reform, uncertainty remains as to the final outcome. Despite this, the advisors surveyed indicate that many clients are still moving forward if the planning approaches satisfy their practical needs and provide flexibility.

Case Study Series- Grantor Trusts vs. Non-Grantor Trusts – Which and When

Topics: Estate planning, Grantor trusts, Non-grantor trusts, Trusts

Irrevocable trusts are frequently used to transfer family wealth to younger generations. Such trusts can be structured as either grantor or non-grantor trusts, where either the grantor pays the tax on trust income or the trust or its beneficiaries pay the tax. For clients able to bear the income tax burden, grantor trust status offers…

New Case Study Series- The Power of Substitution Powers in Grantor Trusts – Flexibility in Transfer & Income Tax Planning.

Topics: Estate planning, Grantor trusts, Trusts

A non-fiduciary substitution power allows a grantor to re-acquire irrevocable trust assets by substituting other assets of equivalent value. While this power results in grantor trust treatment for federal income tax purposes, it will not cause inclusion of the trust assets in the grantor’s estate.