What is an irrevocable trust? How can it be flexible? How can the parents maintain a level of control? What makes an irrevocable trust a "grantor" trust and, therefore, disregarded for income tax purposes? What are the advantages of a grantor trust for asset protection planning and estate tax planning purposes? What are the disadvantages? How can you eliminate the disadvantages through the use of a "toggle" (or flip) switch? What are the tax return and EIN requirements for a grantor trust? What happens when the owner dies? When there is an outstanding installment note, does the owner's death trigger gain? Can a trust be treated as owned by someone other than the grantor? Do grantor trusts still make sense now that the estate tax rates are 40% and the income tax rates, in states like California, are even higher? Are grantor trusts here to stay?
In 1989 Alaska was the first state to allow a domestic asset protection trust. In that same year Nevada and Delaware also changed their laws to allow DAPTs (also called self-settled spendthrift trusts). The question was - for 30 years - if a person in California set up a DAPT in Nevada - could a judgment creditor in California take his judgment to Nevada and have the Nevada court enforce the judgment against the California debtor's asset protection trust. Some lawyers argued "yes," citing Art. IV, Section 1 of the U.S. Constitution, the "full faith and credit clause." Other lawyers argued "No, it would be against Nevada's public policy." Finally, in June, 2019, the South Dakota Supreme Court held that it would give "full faith and credit to the California family law court order. However, it would not give full faith and credit to the enforcement against a South Dakota trust. Will this case make it to the U.S. Supreme Court? What about the on-going divorce of Ed and Marie Borsarge? The Cameron case did not involve an asset protection trust. But certainly South Dakota, Nevada and the other states will rule the same way in a case involving an asset protection trust.
Investing Retirement Plan Assets: What Are The Limits?Bruce Givner
The Internal Revenue Code and the Title I of ERISA (administered by the U.S. Department of Labor) have restrictions on how retirement plan assets can be invested. For example, certain investments will cause UBTI (unrelated business taxable income) to what is otherwise a tax-exempt trust. Certain investments may cause prohibited transactions with the resulting excise tax under IRC Section 4975. There are also the general fiduciary rules governing trustees generally, e.g., the duty to diversify. This handout is designed to advise the trustee and the plan sponsor on how to avoid the pitfalls.
Family Limited Partnerships Update - Diagrams and Bullet Points - February 6,...Bruce Givner
Normal FLP structure for estate tax planning; modifying it to amplify the extent to which it can help add a hurdle between valuable assets and some future (not currently in existence) creditor if properly aged (4 - 7 years before there is a problem) and if it has a business purpose; important points in the event of an estate tax audit, e.g., separate counsel for the children's trust; problem of timing of the funding of the assets to the FLP versus timing of the gift of LP interests; problem of the change of California's LLC act effective 1/1/14; use of FLPs with captive insurance companies, pensions, life insurance and as an alternative to an ILIT.
15 06-18 Top 10 Tax Preparer And Other Tax Penalties - Not Going To Jail But ...Bruce Givner
What is the definition of a tax return preparer? What is the accuracy-related penalty? What are the primary other penalties? What is IRC Section 6694 (the preparer penalty)? How is it coordinated with the accuracy-related penalty? What are the easiest crimes to commit, e.g. obstruction of justice. What good can an opinion by a tax lawyer do for you?
Planning to Avoid the New Medicare Tax & Other 2013 Tax IncreasesBruce Givner
Information on all of the new tax increases for 2013, including the new Medicare tax, and how it will affect you!
For more information, please visit us at www.givnerkaye.com
20 07-23 building blocks to eliminate the estate taxBruce Givner
In 1977 Professor Cooper of Columbia Law School wrote an article that suggested the estate tax is voluntary. In 43 years, nothing has changed. Those who fail to plan, plan to fail. The elements of estate tax elimination include the discounts provided by a family limited partnership, such as lack of marketability and lack of control; thoughtful use of the lifetime estate and gift tax exclusion; private annuities, including how to meet the exhaustion test; generational split dollar; tiered entity discounts; GRATs (grantor retained annuity trusts); and SCIN-GRATs.
Crossing Borders: Primer On International Taxation For Individuals - June, 2013 Bruce Givner
Basic income and estate and gift tax rules for resident and non-resident aliens. Withholding. Returns to be filed. Pre-immigration planning. Residency for tax purposes. Expatriation - IRC Section 877A. How to hold real estate (inbound planning). Effectively connected income so as to be taxed at graduated rates. What does it mean to be engaged in a trade or business. Impact of treaties. Making the election to be taxed on a net income basis. Owning real estate through a foreign corporation, and handling the branch level taxes. IRS Forms 1120-F and 1040NR. FDAP: fixed,determinable and periodical income at 30%. Partnership might be required to withhold on foreign partner's share of gain on sale of real property under Section 1445 (USRPIs) and Section 1446 (partnerships). U.S. dividends paid to foreign subject to 30% under Sections 1441 and 1442. Treaties typically reduce the rate to 5% - 15%. Use W*-BEN. FIRPTA: the Foreign Investment in Real Property Tax Act treats gain from the sale of USRPI (United States real property interest) as if trade or business and gain as ECI (effectively connected income. Does not affect the character of the gain.
For more information, please visit us at www.givnerkaye.com
In 1989 Alaska was the first state to allow a domestic asset protection trust. In that same year Nevada and Delaware also changed their laws to allow DAPTs (also called self-settled spendthrift trusts). The question was - for 30 years - if a person in California set up a DAPT in Nevada - could a judgment creditor in California take his judgment to Nevada and have the Nevada court enforce the judgment against the California debtor's asset protection trust. Some lawyers argued "yes," citing Art. IV, Section 1 of the U.S. Constitution, the "full faith and credit clause." Other lawyers argued "No, it would be against Nevada's public policy." Finally, in June, 2019, the South Dakota Supreme Court held that it would give "full faith and credit to the California family law court order. However, it would not give full faith and credit to the enforcement against a South Dakota trust. Will this case make it to the U.S. Supreme Court? What about the on-going divorce of Ed and Marie Borsarge? The Cameron case did not involve an asset protection trust. But certainly South Dakota, Nevada and the other states will rule the same way in a case involving an asset protection trust.
Investing Retirement Plan Assets: What Are The Limits?Bruce Givner
The Internal Revenue Code and the Title I of ERISA (administered by the U.S. Department of Labor) have restrictions on how retirement plan assets can be invested. For example, certain investments will cause UBTI (unrelated business taxable income) to what is otherwise a tax-exempt trust. Certain investments may cause prohibited transactions with the resulting excise tax under IRC Section 4975. There are also the general fiduciary rules governing trustees generally, e.g., the duty to diversify. This handout is designed to advise the trustee and the plan sponsor on how to avoid the pitfalls.
Family Limited Partnerships Update - Diagrams and Bullet Points - February 6,...Bruce Givner
Normal FLP structure for estate tax planning; modifying it to amplify the extent to which it can help add a hurdle between valuable assets and some future (not currently in existence) creditor if properly aged (4 - 7 years before there is a problem) and if it has a business purpose; important points in the event of an estate tax audit, e.g., separate counsel for the children's trust; problem of timing of the funding of the assets to the FLP versus timing of the gift of LP interests; problem of the change of California's LLC act effective 1/1/14; use of FLPs with captive insurance companies, pensions, life insurance and as an alternative to an ILIT.
15 06-18 Top 10 Tax Preparer And Other Tax Penalties - Not Going To Jail But ...Bruce Givner
What is the definition of a tax return preparer? What is the accuracy-related penalty? What are the primary other penalties? What is IRC Section 6694 (the preparer penalty)? How is it coordinated with the accuracy-related penalty? What are the easiest crimes to commit, e.g. obstruction of justice. What good can an opinion by a tax lawyer do for you?
Planning to Avoid the New Medicare Tax & Other 2013 Tax IncreasesBruce Givner
Information on all of the new tax increases for 2013, including the new Medicare tax, and how it will affect you!
For more information, please visit us at www.givnerkaye.com
20 07-23 building blocks to eliminate the estate taxBruce Givner
In 1977 Professor Cooper of Columbia Law School wrote an article that suggested the estate tax is voluntary. In 43 years, nothing has changed. Those who fail to plan, plan to fail. The elements of estate tax elimination include the discounts provided by a family limited partnership, such as lack of marketability and lack of control; thoughtful use of the lifetime estate and gift tax exclusion; private annuities, including how to meet the exhaustion test; generational split dollar; tiered entity discounts; GRATs (grantor retained annuity trusts); and SCIN-GRATs.
Crossing Borders: Primer On International Taxation For Individuals - June, 2013 Bruce Givner
Basic income and estate and gift tax rules for resident and non-resident aliens. Withholding. Returns to be filed. Pre-immigration planning. Residency for tax purposes. Expatriation - IRC Section 877A. How to hold real estate (inbound planning). Effectively connected income so as to be taxed at graduated rates. What does it mean to be engaged in a trade or business. Impact of treaties. Making the election to be taxed on a net income basis. Owning real estate through a foreign corporation, and handling the branch level taxes. IRS Forms 1120-F and 1040NR. FDAP: fixed,determinable and periodical income at 30%. Partnership might be required to withhold on foreign partner's share of gain on sale of real property under Section 1445 (USRPIs) and Section 1446 (partnerships). U.S. dividends paid to foreign subject to 30% under Sections 1441 and 1442. Treaties typically reduce the rate to 5% - 15%. Use W*-BEN. FIRPTA: the Foreign Investment in Real Property Tax Act treats gain from the sale of USRPI (United States real property interest) as if trade or business and gain as ECI (effectively connected income. Does not affect the character of the gain.
For more information, please visit us at www.givnerkaye.com
15 07-24 Puerto Rico Income Tax IncentivesBruce Givner
Instead of expatriating, it is better to consider retaining your U.S. citizenship and becoming a resident of Puerto Rico. You sign a 20 year contract with the government. As a result, as an individual, you can pay zero federal and state tax on local interest, dividends and capital gains. The incentives for business are also phenomenal: a 4% rate with profits paid to owners tax free. A business must have 3 employees of which husband and wife can count as two.
How Parents Keep Control Both During Their Lifetimes And After They Are DeadBruce Givner
Irrevocable trusts are required if you want to engage in estate tax planning, asset protection planning (creditor planning) and even in a great deal of income tax (including capital gains tax) planning. However, parents are not thrilled at the idea of having to give away assets to a trust that they cannot revoke!! Do you mean that they can't change it? What if they change their minds about their children? About the trustee? Happily, there are many ways to make the parents comfortable that even though the trust itself is unable to be revoked, it is flexible. The parents, of course, pick as the initial trustee the person they trust to do whatever he or she is told without question but simply out of loyalty. More importantly, the parents can - at any time, without a reason - remove the trustee and name a new one (as long as the new one is not "related or subordinate" as defined in IRC Section 672(c)). The parents can advise the trustee to drop the assets down into a single member LLC and appoint the parents as the non-managing members. The trust can have a protector who can be given the power to remove the trustee; to change the allocation among the children; to add grandchildren and spouses of heirs and charities as beneficiaries; to change the manner of distribution to the heirs. Under California law if all of the beneficiaries and the grantors agree, they can amend an irrevocable trust without having to go to court. There are also other ways to change an irrevocable trust, e.g., decanting to a new trust with better provisions. The trust can start off as a grantor (disregarded) trust for income tax purposes and it can "flip" or "toggle" to a complex trust and, perhaps, flip back again. So, the goal of this presentation is to make people aware that there are ways to make parents comfortable with irrevocable trusts, without which planning would be difficult, if not impossible.
14 07-09 orange county bar association - int'l estate planningBruce Givner
U.S. persons with real estate in multiple countries; U.S. persons with relatives in other countries; U.S. citizens abroad; non-U.S. persons with real estate in the U.S.; residency for income tax purposes; residency for transfer tax purposes; expatriation;
15 02-19 "C" Corporation Asset Sale - Martin Ice Cream and Bross: Personal Go...Bruce Givner
The Problem of Sale of "C" Corporation - it is usually a sale of the assets. What is Personal Goodwill? What are the benefits? What are the characteristics? What happened in Martin Ice Cream to make personal goodwill so attractive? It was affirmed in Norwalk, but the taxpayer lost in Solomon and Howard. The 2014 Bross Trucking case affirmed that there is a pro-taxpayer approach as did the estate tax case of Adell. How do you do the planning for this? First, you must do it years in advance of a sale. You need to value the personal goodwill and document it.
An overview of the entire state administrative process. Learn about when you can settle during the process, some great publications to read up on, how the audit wraps up, settlement, and what to do if you don't like the audit result.
For more information, please visit us at www.givnerkaye.com
Paul Vogel, CEO of Argos Family Office, shares how trusts are taxed in Missouri and other states and what every advisor should know when preparing a Trust Tax Return. He presents the different types of trusts for federal tax purposes, including grantor trusts, complex trusts and simple trusts and discusses how they are recognized at the state level and specifically what a Missouri Resident Trust entails and how Non-Resident Trusts are taxed.
Everything you ever wanted to know about trustees: What does it mean to be a trustee? What are your responsibilities and liabilities? What makes a good trustee?
For more information, please visit us at www.givnerkaye.com
Everything You Always Wanted To Know About Family Trusts But Were Afraid To AskBruce Givner
Family Trusts. Living Trusts. Inter Vivos Trusts. Revocable Trusts. Synonyms for trusts that are "Will substitutes." They help avoid probate and the need for a conservatorship. They help reduce the fees, including trustee and attorney fees, and delays of probate. Most of the documents are boilerplate, but why? What's wrong with using LegalZoom and other document preparation software? Must you file an IRS Form 1041 for a family trust? Must the living trust get its own EIN? What is a subtrust? What is an administrative trust? What is a grantor? A protector? A complex trust? How is competence determined? Are "no contest" clauses enforceable? Are illegitimate children "heirs"? Must a living trust be notarized? Must it be recorded? What is a "pourover" Will? What is a codicil? What is a holographic will? What is a personal property memorandum? What makes a power of attorney "durable"? What is a health care directive?
What is a "springing" power of attorney? What is a "pot" trust? What is a "specific" bequest? When should I use a corporate trustee? What's the difference between a fiduciary bond and fiduciary insurance? What is a trust certificate? What is a "blanket" assignment of assets? What is "per stirpes"? What is the rule against perpetuities?
A year on since the Living Longer Living Better reforms in residential care
This seminar will look at common issues for providers including:
- Additional services
- Third party RADs
- Controversy regarding guarantees and caveats
- 28 day rule
Bankruptcy basics: What every lawyer should knowMichael Sheridan
Michael Sheridan is a chapter 7 and chapter 13 Minnesota Bankruptcy Attorney. Michael outlines the basics of bankruptcy at a Continuing Legal Education seminar.
Embedded video of the presentation can be found at: https://wmitchell.adobeconnect.com/_a1011281558/p4rm0zjl0uw/?launcher=false&fcsContent=true&pbMode=normal
Bankruptcy basics: What every lawyer should knowMichael Sheridan
Michael is a chapter 7 and chapter 13 MN Bankruptcy lawyer. Michael outlines the bankruptcy basics the lawyers and other professionals at a Continuing Legal Education seminar. Embedded video of the presentation can be found at: https://wmitchell.adobeconnect.com/_a1011281558/p4rm0zjl0uw/?launcher=false&fcsContent=true&pbMode=normal
15 07-24 Puerto Rico Income Tax IncentivesBruce Givner
Instead of expatriating, it is better to consider retaining your U.S. citizenship and becoming a resident of Puerto Rico. You sign a 20 year contract with the government. As a result, as an individual, you can pay zero federal and state tax on local interest, dividends and capital gains. The incentives for business are also phenomenal: a 4% rate with profits paid to owners tax free. A business must have 3 employees of which husband and wife can count as two.
How Parents Keep Control Both During Their Lifetimes And After They Are DeadBruce Givner
Irrevocable trusts are required if you want to engage in estate tax planning, asset protection planning (creditor planning) and even in a great deal of income tax (including capital gains tax) planning. However, parents are not thrilled at the idea of having to give away assets to a trust that they cannot revoke!! Do you mean that they can't change it? What if they change their minds about their children? About the trustee? Happily, there are many ways to make the parents comfortable that even though the trust itself is unable to be revoked, it is flexible. The parents, of course, pick as the initial trustee the person they trust to do whatever he or she is told without question but simply out of loyalty. More importantly, the parents can - at any time, without a reason - remove the trustee and name a new one (as long as the new one is not "related or subordinate" as defined in IRC Section 672(c)). The parents can advise the trustee to drop the assets down into a single member LLC and appoint the parents as the non-managing members. The trust can have a protector who can be given the power to remove the trustee; to change the allocation among the children; to add grandchildren and spouses of heirs and charities as beneficiaries; to change the manner of distribution to the heirs. Under California law if all of the beneficiaries and the grantors agree, they can amend an irrevocable trust without having to go to court. There are also other ways to change an irrevocable trust, e.g., decanting to a new trust with better provisions. The trust can start off as a grantor (disregarded) trust for income tax purposes and it can "flip" or "toggle" to a complex trust and, perhaps, flip back again. So, the goal of this presentation is to make people aware that there are ways to make parents comfortable with irrevocable trusts, without which planning would be difficult, if not impossible.
14 07-09 orange county bar association - int'l estate planningBruce Givner
U.S. persons with real estate in multiple countries; U.S. persons with relatives in other countries; U.S. citizens abroad; non-U.S. persons with real estate in the U.S.; residency for income tax purposes; residency for transfer tax purposes; expatriation;
15 02-19 "C" Corporation Asset Sale - Martin Ice Cream and Bross: Personal Go...Bruce Givner
The Problem of Sale of "C" Corporation - it is usually a sale of the assets. What is Personal Goodwill? What are the benefits? What are the characteristics? What happened in Martin Ice Cream to make personal goodwill so attractive? It was affirmed in Norwalk, but the taxpayer lost in Solomon and Howard. The 2014 Bross Trucking case affirmed that there is a pro-taxpayer approach as did the estate tax case of Adell. How do you do the planning for this? First, you must do it years in advance of a sale. You need to value the personal goodwill and document it.
An overview of the entire state administrative process. Learn about when you can settle during the process, some great publications to read up on, how the audit wraps up, settlement, and what to do if you don't like the audit result.
For more information, please visit us at www.givnerkaye.com
Paul Vogel, CEO of Argos Family Office, shares how trusts are taxed in Missouri and other states and what every advisor should know when preparing a Trust Tax Return. He presents the different types of trusts for federal tax purposes, including grantor trusts, complex trusts and simple trusts and discusses how they are recognized at the state level and specifically what a Missouri Resident Trust entails and how Non-Resident Trusts are taxed.
Everything you ever wanted to know about trustees: What does it mean to be a trustee? What are your responsibilities and liabilities? What makes a good trustee?
For more information, please visit us at www.givnerkaye.com
Everything You Always Wanted To Know About Family Trusts But Were Afraid To AskBruce Givner
Family Trusts. Living Trusts. Inter Vivos Trusts. Revocable Trusts. Synonyms for trusts that are "Will substitutes." They help avoid probate and the need for a conservatorship. They help reduce the fees, including trustee and attorney fees, and delays of probate. Most of the documents are boilerplate, but why? What's wrong with using LegalZoom and other document preparation software? Must you file an IRS Form 1041 for a family trust? Must the living trust get its own EIN? What is a subtrust? What is an administrative trust? What is a grantor? A protector? A complex trust? How is competence determined? Are "no contest" clauses enforceable? Are illegitimate children "heirs"? Must a living trust be notarized? Must it be recorded? What is a "pourover" Will? What is a codicil? What is a holographic will? What is a personal property memorandum? What makes a power of attorney "durable"? What is a health care directive?
What is a "springing" power of attorney? What is a "pot" trust? What is a "specific" bequest? When should I use a corporate trustee? What's the difference between a fiduciary bond and fiduciary insurance? What is a trust certificate? What is a "blanket" assignment of assets? What is "per stirpes"? What is the rule against perpetuities?
A year on since the Living Longer Living Better reforms in residential care
This seminar will look at common issues for providers including:
- Additional services
- Third party RADs
- Controversy regarding guarantees and caveats
- 28 day rule
Bankruptcy basics: What every lawyer should knowMichael Sheridan
Michael Sheridan is a chapter 7 and chapter 13 Minnesota Bankruptcy Attorney. Michael outlines the basics of bankruptcy at a Continuing Legal Education seminar.
Embedded video of the presentation can be found at: https://wmitchell.adobeconnect.com/_a1011281558/p4rm0zjl0uw/?launcher=false&fcsContent=true&pbMode=normal
Bankruptcy basics: What every lawyer should knowMichael Sheridan
Michael is a chapter 7 and chapter 13 MN Bankruptcy lawyer. Michael outlines the bankruptcy basics the lawyers and other professionals at a Continuing Legal Education seminar. Embedded video of the presentation can be found at: https://wmitchell.adobeconnect.com/_a1011281558/p4rm0zjl0uw/?launcher=false&fcsContent=true&pbMode=normal
Principles of Trust: Classification and CreationPreeti Sikder
Learning Outcome:
Students will :
-be informed about the major divisions among the concept of trust
-learn about the basic legal conditions a trust has to fulfill under Trusts Act, 1882
"Recovering a Lost Deduction"
Authors: Barry Sacks, Nicholas S. Maningas, Sr., Stephen Sacks and Francis Vitagliano
Journal of Taxation
April 2016 Copyright 2016
14 12-18 Everything You Always Wanted To Know About Public Charities But Were...Bruce Givner
Tax deductible vs. tax exempt; charities vs. other tax-exempt entities such as trade associations; UBTI - unrelated business taxable income; Forms 990 and 990-T; self-dealing rules; Section 4940 and the 2% excise tax on investment income, 4941 and the taxes on self-dealing, 4942, 4943, 4944 and 4945; intermediate penalties and Section 4958; private foundations vs. public charities; private operating foundations; medical research organizations; types of public charities;
What information would your trustee or executor need and/or want to know if you died suddenly? Where is the information about your assets, debts, estate planning documents, relatives, retirement benefits, insurance policies? This checklist is designed to get you to put all of that information in one place, and to update it regularly.
14 09-04 Everything You Always Wanted To Know About Post-Mortem PlanningBruce Givner
Portability vs. disclaimer to a bypass trust; getting rid of an unwanted bypass trust; notice of proposed action vs. a 17200 petition; valuable information for the successor trustee; Heggstad assignment of assets; modified financial statement for the successor trustee; funding the subtrusts; first spouse post-mortem checklist; Prop. 13 problems; 16061.7 notice;
California and federal forms; does it make sense to use non-California entities?; asset protection benefits; 3 different types of asset protection; problems with LLCs; gross receipts tax; best states for LLCs; the best structure; the rollout LLC; FLPs using LLCs; limited partnerships instead of LLCs; LLCs for tax-exempt entities;
14 06-19 U.S. Treaties - How To Understand And Plan With ThemBruce Givner
IRS publications and forms; list of countries with which the U.S. has income and estate and gift tax treaties; reasons for both types of treaties; situs vs. status transfer tax treaties; German estate tax treaty as an example; treaties vs. the Internal Revenue Code; review of the basic provisions of income tax treaties, including tie-breakers, independent workers, directors, artists and athletes, students and teachers, interest, dividends, royalties, real property income and gains, Publication 901 table examples, double Irish structure.
14 05-17 the most common flaws in estate planningBruce Givner
The most common flaws in estate planning including the failure to get started, the failure to maintain fresh documents, the failures in many documents, failures in asset transfers, failure to consider family issues, and failures through overplanning and underplanning.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Acetabularia Information For Class 9 .docxvaibhavrinwa19
Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
Normal Labour/ Stages of Labour/ Mechanism of LabourWasim Ak
Normal labor is also termed spontaneous labor, defined as the natural physiological process through which the fetus, placenta, and membranes are expelled from the uterus through the birth canal at term (37 to 42 weeks
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
Everything You Always Wanted To Know About Grantor (And Other Irrevocable) Trusts But Were Afraid To Ask
1. LAW OFFICES
BRUCE GIVNER
(bruce@GivnerKaye.com)
OWEN D. KAYE
( o we n @ G i v n e r K a y e . c o m )
KATHLEEN GIVNER
(kathy@GivnerKaye.com)
NEDA BARKHORDAR
(neda@GivnerKaye.com)
GIVNER & KAYE
A PROFESSIONAL CORPORATION
SUITE 445
12100 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90025
www.GivnerKaye.com
www.MajorTaxProblems.com
PHON E
(3 10) 207 -8 008
(8 18) 785 -7 579
F AX
(3 10) 207 -8 708
(8 18) 785 -3 027
October 17, 2013
EVERYTHING YOU WANTED TO KNOW ABOUT GRANTOR
AND OTHER IRREVOCABLE TRUSTS
BUT WERE AFRAID TO ASK
1.
What is an “Irrevocable” trust?
2.
How many types of irrevocable trusts are there?
See the end of this handout.
3.
Can you amend an irrevocable trust?
3.1.
3.2.
California Probate Code.1
3.3.
4.
Rev. Rul. 95-58. §672(c) limit.
Protector.
Can you control an irrevocable trust?
4.1.
4.2.
New trust buys assets from old trust.
4.3.
You manage the single member LLC which has all the trust’s assets.
4.4.
1
You pick the trustee.
You stop paying premiums to an ILIT.
§15403. Modification or Termination of Irrevocable Trust by All Beneficiaries. (a) Except as provided in
(b), if all beneficiaries of an irrevocable trust consent, they may compel modification or termination of the trust
upon petition to the court. (b) If the trust’s continuance is necessary to carry out a material trust purpose, it
cannot be modified or terminated unless the court, in its discretion, determines that the reason for doing so
under the circumstances outweighs the interest in accomplishing the material purpose. The court does not have
discretion to permit termination of a trust that is subject to a valid restraint on transfer of the beneficiary's interest
as provided in Chapter 2 (beginning with §15300).
15404. Modification or termination by settlor and all beneficiaries. (a) If the settlor and all beneficiaries of a
trust consent, they may compel the modification or termination of the trust. (b) If any beneficiary does not
consent to the modification or termination of the trust, upon petition to the court, the other beneficiaries, with the
consent of the settlor, may compel a modification or a partial termination of the trust if the interests of the
beneficiaries who do not consent are not substantially impaired. (c) If the trust provides for the disposition of
principal to a class of persons described only as "heirs" or "next of kin" of the settlor, or using other words that
describe the class of all persons who would take under the rules of intestacy, the court may limit the class of
beneficiaries whose consent is needed to compel the modification or termination of the trust to the beneficiaries
who are reasonably likely to take under the circumstances.
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4.5.
The trust includes a Protector.
4.6.
Tax reimbursement clause. Rev. Rul. 2004-64.2
4.7.
Danger: In re Schwarzkopf, 626 F. 3d 1032 (9th Cir. 2010).
5.
“Own” For Income Tax ≠ “Own” For Estate Tax.
6.
What is a “grantor”3 trust?
6.1.
6.2.
Goal: Owned for income tax, not owned for estate tax.
6.3.
2
A revocable “family” trust is a “grantor trust.
Rev. Rul. 85-13.4
“In Situation 3, the governing instrument provides the trustee with the discretion to reimburse A from
Trust's assets for the amount of income tax A pays that is attributable to Trust's income. As is the case in
Situation 1 and Situation 2, A's payment of the $2.5x income tax liability does not constitute a gift by A
because A is liable for the income tax. Further, the $2.5x paid to A from Trust as reimbursement for A's income
tax payment was distributed pursuant to the exercise of the trustee's discretionary authority granted under the
terms of the trust instrument. Accordingly, this payment is not a gift by the trust beneficiaries to A. Also,
assuming there is no understanding, express or implied, between A and the trustee regarding the trustee's
exercise of discretion, the trustee's discretion to satisfy A's obligation would not alone cause the inclusion of
the trust in A's gross estate for federal estate tax purposes. This is the case regardless of whether or not the
trustee actually reimburses A from Trust assets for the amount of income tax A pays that is attributable to
Trust's income. The result would be the same if the trustee's discretion to reimburse A for this income tax is
granted under applicable state law rather than under the governing instrument. However, such discretion
combined with other facts (including but not limited to: an understanding or pre-existing arrangement
between A and the trustee regarding the trustee's exercise of this discretion; a power retained by A to remove
the trustee and name A as successor trustee; or applicable local law subjecting the trust assets to the claims of
A's creditors) may cause inclusion of Trust's assets in A's gross estate for federal estate tax purposes.”
3
“Grantor” has the meaning given to it under Reg. §1.671-2(e): “For purposes of part I of subchapter J, chapter
1 of the Internal Revenue Code, a grantor includes any person to the extent such person either creates a trust,
or directly or indirectly makes a gratuitous transfer (within the meaning of ¶(e)(2)…) of property to a trust. For
purposes of this section, the term property includes cash. If a person creates or funds a trust on behalf of
another person, both persons are treated as grantors of the trust. (See §6048 for reporting requirements that
apply to grantors of foreign trusts.) However, a person who creates a trust but makes no gratuitous transfers to
the trust is not treated as an owner of any portion of the trust under §§671 through 677 or 679. Also, a person
who funds a trust with an amount that is directly reimbursed to such person within a reasonable period of time
and who makes no other transfers to the trust that constitute gratuitous transfers is not treated as an owner of
any portion of the trust under §§671 through 677 or 679. See also §1.672(f)-5(a).”
4
Madorin, 84 T.C. 667 (1985) (a grantor should be treated as the owner of the partnership interests the grantor
transferred to his grantor trust. Cf. Rothstein v. U.S., 735 F. 2d 704 (2nd Cir. 1984) (contrary position – trust
owned by a grantor must be regarded as a separate taxpayer capable of engaging in sales transaction with the
grantor). In Rev. Rul. 85-13, the IRS announced it would not follow Rothstein. Headnote of Rev. Rul. 84-13. “A
grantor who acquires the corpus of a trust in exchange for the grantor's unsecured promissory note will be
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6.4.
IRC §675(4)(C).5
Usefulness of near-death swaps: (i) step up in basis; (ii) preserve loss (put the
loss asset into trust; (iii) elude 3 year rule of §2035 (swap the policy into trust for
other assets); and (iv) get assets back from a GRAT about to expire.
6.5.
IRC §677(a)(3).6
6.6.
Power to add a charitable beneficiary held by a nonadverse party.
6.
Why is it called a “defective” trust?
7.
What are the advantages of a “grantor” trust?
7.1.
In A Sale.
Mom and Dad own apartment building worth $5,000,000 with a basis of
$1,000,000.
Mom and Dad establish irrevocable grantor trust for the benefit of children.
Mom and Dad believe the building will appreciate significantly between the date
of transfer and the date of the survivor’s death.
Mom and Dad make a gift of $500,000 to the children’s trust.
Mom and Dad sell the building to the children’s trust for $5,000,000, receiving
back $500,000 as a downpayment and a $4,500,000 30 year interest only
installment note a 3.5% interest. (The 30 year term does not exceed the
survivor life expectancy of Mom and Dad.)
considered to have indirectly borrowed the trust corpus. As a result, the grantor will be treated as the owner of
the trust and the grantor's acquisition of the trust corpus will not be viewed as a sale for federal income tax
purposes. The Service will not follow the Rothstein decision.”
5
The grantor shall be treated as the owner of any portion of a trust in respect of which—(4) General powers of
administration. A power of administration is exercisable in a nonfiduciary capacity by any person without the
approval or consent of any person in a fiduciary capacity. For purposes of this paragraph, the term “power of
administration” means any one or more of the following powers: … (C) a power to reacquire the trust corpus by
substituting other property of an equivalent value.
6
(a) General rule. The grantor shall be treated as the owner of any portion of a trust, whether or not he is
treated as such owner under §674, whose income without the approval or consent of any adverse party is, or, in
the discretion of the grantor or a nonadverse party, or both, may be—…(3) applied to the payment of premiums
on policies of insurance on the life of the grantor or the grantor's spouse (except policies of insurance
irrevocably payable for a purpose specified in §170(c) (relating to definition of charitable contributions)).
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Advantage: Mom and Dad incur no capital gain tax on the sale, even if the
principal of the note is paid off. Mom and Dad incur no tax on the receipt of
interest on the note.
Disadvantage: building is not included in their estate so it does not get a stepup in basis.
Cure for the disadvantage: when one of the parents seems ill, have the
parents buy the building from the children’s trust for a note. That way the
building will be owned by the parents on the first spouse’s death, gaining a
step-up in basis.
7.2.
In An ILIT.
The ILIT can buy a policy from parents for full fair market value to avoid the 3
year rule of IRC §2035 and yet avoid the §101 transfer for value rule.
Is §675(4)(C) a problem?7
7.3.
In A QPRT.
Mom and Dad can continue to deduct the interest on the mortgage.
Mom and Dad can continue to deduct the property taxes.
Mom and Dad can take advantage of §121 $250,000 capital gain exclusion.
7.4.
8.
S Corporation.8
What Are The Tax Return Requirements.9
Separate one is not needed.10
7
Should not since Jordahl, 65 T.C. 92 (1975), acq. 1977-1 C.B.1, involved a trust with life insurance policies and
the Tax Court, in a reviewed opinion, held against inclusion.
8
IRC §1361(c)(2)(A)(i).
9
Taback and Bowman, “Frequently Asked Questions On Grantor Trust Tax Reporting,” 39 Estate Planning #8
(August 2012), page 34.
10
Reg. §1.671-4(a). The Traditional Method. “Portion of trust treated as owned by the grantor or another
person. Except as otherwise provided in paragraph (b) of this section and §1.671-5, items of income, deduction,
and credit attributable to any portion of a trust that, under the provisions of subpart E (section 671 and
following), part I, subchapter J, chapter 1 of the Internal Revenue Code, is treated as owned by the grantor or
another person, are not reported by the trust on Form 1041, ``U.S. Income Tax Return for Estates and Trusts,''
but are shown on a separate statement to be attached to that form. …”
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Reg. §1.671-4(b)(1). Two Alternative Methods. “In general. In the case of a trust all of which is treated as
owned by one or more grantors or other persons, and which is not described in ¶(b)(6) or (7)…, the trustee may,
but is not required to, report by one of the methods described in this ¶(b) rather than by the method described in
¶(a) of this section. A trustee may not report, however, pursuant to ¶(b)(2)(i)(A) of this section unless the
grantor or other person treated as the owner of the trust provides to the trustee a complete Form W-9 or
acceptable substitute Form W-9 signed under penalties of perjury. See §3406 and the regulations thereunder
for the information to include on, and the manner of executing, the Form W-9, depending upon the type of
reportable payments made.”
Reg §1.671-4(b)(2). “A trust all of which is treated as owned by one grantor or by one other person.
(i)
In general. In the case of a trust all of which is treated as owned by one grantor or one other person, the
trustee reporting under this paragraph (b) must either—
(A)
Furnish the name and taxpayer identification number (TIN) of the grantor or other person
treated as the owner of the trust, and the address of the trust, to all payors during the taxable year, and comply
with the additional requirements described in paragraph (b)(2)(ii) of this section; or
(B)
Furnish the name, TIN, and address of the trust to all payors during the taxable year, and
comply with the additional requirements described in paragraph (b)(2)(iii) of this section.
(ii)
Additional obligations of the trustee when name and TIN of the grantor or other person treated as the
owner of the trust and the address of the trust are furnished to payors.
(A)
Unless the grantor or other person treated as the owner of the trust is the trustee or a co-trustee
of the trust, the trustee must furnish the grantor or other person treated as the owner of the trust with a
statement that—
(1)
Shows all items of income, deduction, and credit of the trust for the taxable year;
(2)
Identifies the payor of each item of income;
(3)
Provides the grantor or other person treated as the owner with the information
necessary to take the items into account in computing the grantor's or other person's taxable income; and
(4)
Informs the grantor or other person treated as the owner that the items of income,
deduction and credit and other information shown on the statement must be included in computing the taxable
income and credits of the grantor or other person on the income tax return of the grantor or other person.
(B)
The trustee is not required to file any type of return with the Internal Revenue Service.
(iii)
Additional obligations of the trustee when name, TIN, and address of the trust are furnished to payors.
(A)
Obligation to file forms 1099. The trustee must file with the IRS the appropriate Forms 1099,
reporting the income or gross proceeds paid to the trust during the taxable year, and showing the trust as the
payor and the grantor or other person treated as the owner of the trust as the payee. The trustee has the same
obligations for filing the appropriate Forms 1099 as would a payor making reportable payments, except that the
trustee must report each type of income in the aggregate, and each item of gross proceeds separately. See
¶(b)(5) of this section regarding the amounts required to be included on any Forms 1099 filed by the trustee.
(B)
Obligation to furnish statement.
(1)
Unless the grantor or other person treated as the owner of the trust is the trustee or a
co-trustee of the trust, the trustee must also furnish to the grantor or other person treated as the owner of the
trust a statement that—
(i)
Shows all items of income, deduction, and credit of the trust for the taxable
year;
(ii)
Provides the grantor or other person treated as the owner of the trust with the
information necessary to take the items into account in computing the grantor's or other person's taxable
income; and
(iii)
Informs the grantor or other person treated as the owner of the trust that the
items of income, deduction and credit and other information shown on the statement must be included in
computing the taxable income and credits of the grantor or other person on the income tax return of the grantor
or other person.
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Needed if gross income of $600 or more, regardless of taxable income.11
Needed if it has an NRA beneficiary.12
EIN needed if traditional or second alternative reporting method used.13
Even when EINs not needed due to lack of gross or taxable income, many
practitioners obtain them as a vestige or prior regulations and it proves useful on
grantor’s death by providing continuity, e.g., ILITs.
Traditional method not available to all grantor trusts.14
May change from traditional to alternative by filing final 1041 and including “Pursuant
to Treas. Reg. §1.671-4(g), this is the final Form 1041 for this grantor trust.”
Non-U.S. trust files a 1040NR.15
Assets may trigger additional returns: 8621 (PFICs); 926 (transfers of property to
foreign corporations); 5471 (interests in certain non-U.S. corporations); and 8865
(certain non-U.S. partnerships).
What happens when the owner dies?
New EIN if it continues.
Traditional Method: (i) due date is same as for decedent’s final return (April 15);
and (ii) Form 1041 must indicate it is the final return.
First Alternative Method: must provide a new W-9 with new EIN to all payors.
Second Alternative Method: Form 1096 for year ending with owner’s death and
(2)
By furnishing the statement, the trustee satisfies the obligation to furnish statements to
recipients with respect to the Forms 1099 filed by the trustee.”
11
IRC §6012(a)(4).
12
IRC §6012(a)(5).
13
If a single owner of a trust dies, the trustee must get a new EIN if the trust will continue to exist even if the
trust previously had its own EIN.
14
(i) trusts with non-U.S. assets or situs; (ii) QSSTs; (iii) trusts with single owner with a fiscal year, in which case
the trust must be on that fiscal year; (iv) where owner is not a U.S. person; and (v) multiple owners and one is
an NRA.
15
Be alert to the need for an FBAR (TD F 90-22.1); Form 8938; Form 3520 (if U.S. beneficiary receives a
distribution of more than $100,000); Form 3520 (if a U.S. trust is funded by or receives more than $100,000 from
an NRA); Form 3520-A (if the trust is a non-U.S. trust with a U.S. owner).
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indicate it is the final return.
What happens when one spouse dies in a community property grantor trust?
9.
What are the disadvantages of a “grantor” trust?
10.
Does The Grantor’s Death With An Outstanding Note Trigger Gain?16
11.
What Is A Reverse Grantor Trust?17
12.
What is a “flip” trust?18
Is toggling a listed transaction?19
13.
What is the problem with using “protectors”?
14.
Are Grantor Trusts Here To Stay?
15.
Do Grantor Trusts Still Make Sense?
In the past the federal estate tax rate at 55% could be almost 15 points higher than the
federal and state income tax rates (35% and a deductible 9.3%).
Now the federal estate tax rate at 40% - combined with a $10,500,000 married couple
exclusion which is COLA’d – is about the same as the state and federal capital gains
tax rate (20 + 3.8 = 13.3 = 37.1%) and lower than the top ordinary income tax rate
(39.6% + 13.3% (whether or not deductible)).
Reduction in the estate tax rate may also affect the use of §6166 deferral and Graegin
16
Cantrell, “Gain Is Realized At Death,” Trusts & Estates, February 2010, page 20; Gans & Blattmachr, “No
Gain At Death,” Trusts & Estates, February 2010, Page 34: “…first, that gain is not recognized at the time of the
grantor’s death; and second, that the income in respect of a decedent (IRS) regime, largely contained in Internal
Revenue Code Section 691, cannot apply.””
17
Stevens, “The Reverse Defective Grantor Trust,” 33 Trusts & Estates (October, 2012).
18
February 21, 2013, Steve Leimberg’s Estate Planning Email Newsletter Archive Message #2068 by Alan
Gassman & Christopher Denicolo: Defective Grantor Trusts Are Not Black Holes. “We do not believe that
toggling off grantor trust status constitutes an income recognition event. We have never heard of this tax on
‘toggling off’ and have found no authority to indicate how or why it would be imposed. Do not sell your clients
short by not offering to allow them to engage in defective grantor trust planning.”
19
The only transactions which experts and the IRS have identified as having the potential for tax avoidance or
evasion and are considered “transactions of interest” occur when a reversionary interest is sold at fair market
value so that there is no gain recognized, and the grantor trust status ends. See IRS Notice 2007-73,
Transaction of Interest – Toggling Grantor Trust.
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notes. May be better to deduct the corresponding interest payments on the annual
fiduciary income tax returns for the estate instead of on the 706.
Difficult if the beneficiaries responsible for the estate tax ≠ beneficiaries responsible for
the fiduciary income tax.
But deduction on 706 is permitted no matter when paid. But estates are on cash basis
method of accounting.
EXHIBIT A.
Acronym
Meaning
Why It’s A Grantor Trust
ILIT.
_________________
_______________________
GRAT.
_________________
_______________________
GRUT.
_________________
_______________________
CLAT.
_________________
_______________________
Grantor CLAT.
(illustration is Exhibit B.)
_________________
_______________________
Non-grantor CLAT.
_________________
_______________________
T-CLAT.
_________________
_______________________
Super CLAT.20
_________________
_______________________
20
BNA Portfolio 866-2nd Charitable Lead Trusts, VI.D.1, second paragraph: “The charitable lead “super trust” is
a grantor charitable lead trust that attempts to retain for the grantor the advantage of both the grantor and
nongrantor trusts by preserving the income tax charitable deduction and also removing the trust corpus from the
grantor's estate. The foundation for this type of trust arises from the lack of parity between income tax and
estate tax principles. Merely because the retention of a certain power by the grantor results in the income being
taxed to him or her under the income tax law does not necessarily mean that this same power is sufficient to
cause inclusion of the corpus in the grantor's estate under the estate tax rules. The charitable lead super trust
involves a retention by the grantor of a power over the corpus sufficient to cause the grantor to be taxed on the
income of the trust under the grantor trust rules but not of such a nature as to cause the corpus to be included
in the grantor's estate. The concept of the super trust or, as more frequently referred to outside of the charitable
lead trust context and in general estate planning discussions, an “intentional” grantor trust (or intentionally
defective grantor trust or IDGT), has gained in popularity and use over time. And although there is a growing
body of authority regarding the methods that permit a trust to be treated as an intentional grantor trust for
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CLUT.
_________________
_______________________
CRAT.
_________________
_______________________
CRUT.
_________________
_______________________
SLAT.
_________________
_______________________
SLUT.
_________________
_______________________
QPRT.
_________________
_______________________
IDIT.
_________________
_______________________
Dynasty trust.
_________________
_______________________
Reciprocal trusts.
_________________
_______________________
GST trust.
_________________
_______________________
DAPT.
_________________
_______________________
NAPT.
_________________
_______________________
CGAPT.21
_________________
_______________________
BDIT.
_________________
_______________________
income tax purposes but not be subject to adverse rules for estate (or gift) tax purposes, drafters of super
charitable lead trusts should nevertheless exercise caution in navigating the labyrinth of the grantor trust rules
under §§671-679 while making sure that some other power may not exist within the trust that could cause the
assets to be includible for estate tax purposes. The primary retained powers that may achieve this result for use
in charitable lead trusts include: (1) permitting the income of the trust to be used to pay the premiums of life
insurance policies on the life of the grantor or the grantor's spouse; (2) giving a non-adverse trustee the power
to distribute principal among noncharitable beneficiaries; and (3) giving the grantor, in a nonfiduciary capacity,
the power to reacquire the corpus by substituting property of equal value. These powers, when retained by the
grantor or the grantor's spouse, will cause the income of the trust to be taxed to the grantor under the grantor
trust rules.” [footnotes omitted]
21
If the trust is formed in a Alaska or Nevada, the grantor can be a discretionary beneficiary or able to be added
by a protector and the trust can still be excluded from the grantor’s estate. See PLR 200944002. Givner &
Singer, “The Completed Gift Asset Protection Trust,” Journal of Financial Service Professionals, page 60
(September, 2011).
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DING.22
_________________
_______________________
NING.
_________________
_______________________
Bypass trust.23
_________________
_______________________
Marital24 Trusts.
_________________
_______________________
QTIP Trust.
_________________
_______________________
QDOT Trust.
_________________
_______________________
Survivor’s Trust.25
_________________
_______________________
§678 Trust.26
_________________
_______________________
22
“Several Private Letter Rulings confirm that under Delaware law a grantor can create a non-grantor asset
protection trust for income tax purposes under Subpart E of Subchapter J of the Internal Revenue Code (the
“Code”), fund the trust with contributions that are not considered taxable gifts for federal gift tax purposes and
still retain the right to receive discretionary distributions of trust income and principal from the trust. In Delaware
such trusts are commonly known as “DING” trusts. The acronym stands for “Delaware Incomplete Gift NonGrantor Trust.” [PLRs 200612002; 200502014; 200247013; 200148028.] Delaware does not impose state
income tax on income and capital gains accumulated in trust for ultimate distribution to out of state
beneficiaries.4 If the grantor and beneficiaries of a DING reside in a state that does not tax trusts based on the
residence of the grantor or beneficiaries, it is possible to eliminate state income taxes. This presents a planning
opportunity for an individual that owns a low basis asset and contemplates the sale of such asset in the future.
For instance, a New York City resident who is the owner of a closely held S-corporation could create a DING
and transfer his S-corporation stock to the DING. When the DING sells the assets, the gain will escape New
York State and City income tax. Many individuals residing in states such as New York, New Jersey, Kentucky,
Massachusetts, Michigan and Missouri have established DINGs not only for the asset protection feature, but
also to minimize or avoid state income tax.” Gordon, “Use of Delaware Incomplete Gift Non-Grantor Trusts In
Light of IR-2007-127,” 2011.
23
Synonyms include “decedent’s trust,” “B Trust,” “exclusion trust,” and “exemption trust.” Big problem for
Bypass Trusts is that they normally are not grantor trusts and, therefore, you do not want the residence
transferred to it on the first spouse’s death for fear of losing the §121 $250,000 exclusion. So, if you provide
that the survivor has a withdrawal power over all taxable income, which includes taxable capital gains income,
from a separate bypass trust set up only to hold the residence, the survivor becomes the owner for income tax
purposes under the plan language of §678.
24
Most commonly mis-spelled word in all of estate planning!!
25
Synonym: “A” Trust.
26
Under §678, a person other than the grantor may be treated as the owner of the whole or any portion of the
trust if (a) the person has the power, exercisable solely by himself or herself, to vest the corpus or income in
himself or herself or (b) if he or she has partially released or modified such a power so that if the power were
retained by the grantor, the grantor would be treated as the owner of the trust under the principles of §§671-677
of the Code. A third person will not be treated as the owner of the trust income if the grantor of the trust is
otherwise treated as the owner of that income under the other grantor rules of §§673-677 or 679. §678 should
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EXHIBIT B
The Vanguard Explorer Fund Investment reported taxable income to its investors of
0.12% as ordinary income and 2.92% as capital gains for the period beginning 10/31/2011
and ending 10/31/2012. The fund’s increase in value during the period was 16.28%. A trust
investing in this fund for this year would report a 2.92% capital gain and 0.12% as ordinary
income despite the 16.28% rate of return. A portion of the excess growth would be
recognized as capital gains when the mutual fund is sold in the 15 year to satisfy the payment
which must be made to the charity.
not apply if the power is subject to a HEMS standard. Are Crummey powers a problem? Perhaps not. See
PLR 200606006.