There’s much uncertainty in the world of estate planning for high net worth individuals and their families. With numerous legislative proposals that would drastically alter the current estate planning landscape, listen in as our Trust and Estate Services Practice team discusses: various proposals, including those in Congress and the Biden Administration’s Green Book, estate and gift planning strategies for the remainder of tax year 2021, and more.

1. September 23, 2021
High Net Worth Webinar Series
Growing Wealth & Preserving Your
Legacy
Estate Planning Strategies and Updates

2. Introduction 2
Patrick Daly
Partner and High Net Worth Practice Leader
pdaly@citrincooperman.com

3. OUR MODERATOR & PANELISTS
Principal
Citrin Cooperman
mdelman@citrincooperman.com
Mary Delman
Partner
Schiff Hardin LLP
kmatz@schiffhardin.com
Kevin Matz
Partner
Weinstock Manion
rstrauss@weinstocklaw.com
Robert Strauss

4. WELCOME
• A Few Keys to Getting Started…
o Depending on the length of this session, you will be eligible for up to 1 CPE credit for participation.
o You must reply to at least 3 polling questions to confirm your participation to receive the full
credit.
o You are in listening mode only and today’s session is being recorded.
o You will have the opportunity to submit questions to our presenter by typing your questions into
the Q&A pane from the control panel.
o You can also submit your questions by raising your virtual hand and we will open your
microphone.

5. Will you require CPE for today's webinar?
a. Yes
b. No
Polling Question #1
5

6. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21)
• On September 13, 2021, the House Ways and Means Committee released
proposed transfer tax legislation that, if enacted in its current form, would
drastically affect estate planning for high net worth individuals and families.
These proposals are contained in four sections of the proposed bill:
o Sec. 138207.Terminationof Temporary Increase in UnifiedCredit (effective after
December31, 2021)
o Sec. 138208.Increase in Limitationof Estate Tax Valuation Reduction for Certain Real
Property Used in Farming or Other Trades or Businesses (effective after December31,
2021)
o Sec. 138209.Certain Tax Rules Applicable to Grantor Trusts (effective as of dateof
enactmentwith an exceptionfor “grandfathered trusts”as to which no subsequent
“contribution” is made on or after the date of enactment)
o Sec. 138210.ValuationRules for Certain Transfers of Nonbusiness Assets (applies to
transfers after the date of enactment)
6

7. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o Sec. 138207.Terminationof Temporary Increase in UnifiedCredit
• This provision terminates after December 31, 2021 the temporary increase in the
unified credit againstestate and gift taxes, reverting the credit to its 2010 level of
$5,000,000per individual, indexed for inflation.
• This early sunset of the doubled estateand gift tax exemption – which is currently
$11,700,000 – moves up by 4 years the current law sunset date of December 31,
2025 and would apply to estates of decedents dying and gifts made after
December 31, 2021.
7

8. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o Sec. 138208.Increase in Limitationof Estate Tax Valuation Reduction for Certain Real
Property Used in Farming or Other Trades or Businesses
o This provisionamends section 2032A to increase the special valuationreduction
availablefor qualifiedreal property used in a family farm or family business.
o This reduction allowsdecedents who own real property used in a farm or business to
value the property for estate tax purposes based on its actual use rather than fair
market value.
o This provisionincreases the allowablereductionfrom $750,000 to $11,700,000.
8

9. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o Sec. 138209.Certain Tax Rules Applicable to Grantor Trusts
• This provision adds section2901, which pulls grantor trusts into a decedent’s
taxable estatewhen the decedent is the deemed owner of the trust.
• The provision also adds a new section1062, which treats sales between grantor
trusts and their deemed owner as equivalent to sales between the owner and a
third party.
9

10. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o Section 2901
• In the case of any portion of a trust with respect to which the grantor is the
deemed owner under the grantor trust rules (the “deemed owner”) –
o (1) the value of the gross estate of the deceased deemed owner of such portion shall
include all assets attributableto that portion at the time of the death of such owner
o (2) any distribution(other than to the deemed owner or the deemed owner’s spouse)
from such portion to one or more beneficiariesduring the life of the deemed owner of
such portion (other than in discharge of an obligationof the deemed owner) shall be
treated as a transfer by gift for gift tax purposes
10

11. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o Section 2901 (cont’d)
o (3) if at any time during the life of the deemed owner of such portion, such owner
ceases to be treated as the owner of such portion under the grantortrust rules, all
assets attributableto such portion at such time shall be treated as a transfer by gift
made by the deemed owner
o (4) “proper adjustment shall be made” with respect to amountsso includedin the
gross estate, or treated as transferred by gift, pursuant to paragraphs(1), (2) or (3), as
the case may be, to account for amounts treated previouslyas taxablegifts with
respect to previoustransfers to the trust by the deemed owner.
• Section 2901 does not apply to any trust that is includible in the gross estate of the
deemed owner without regard to these new rules
11

12. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o Section 1062
• In the case of any transfer of property between a trust and a person who is the
deemed owner of the trust (or portion thereof) under the grantor trust rules (the
“deemed owner”), such treatment of the person as the owner of the trust shall be
disregarded in determining whether the transfer is a sale or exchange.
o Section 1062 does not applyto any trust that is fully revocableby the deemed owner
o In addition,section 1062 cannot be appliedto produce a loss
12

13. Will the 9/13 legislation affect step up in basis at death?
a. Yes
b. No
Polling Question #2
13

14. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
oThe legislation assumes that a taxpayer has the choice whether
to make a trust a grantor trust or a non-grantor trust.
o In many cases, there is no such choice.
oThe special rules for grantor trusts contained in proposed section
2901 that produce estate tax inclusion, and deemed gifts upon
certain distributions, for grantor trusts would severely harm the
following:
a) Irrevocable life insurance trusts (ILITs)
b) Grantor charitable lead trusts
c) Spousal lifetime access trusts (SLATs)
d) Lifetime qualified terminable property trusts (QTIPs)
e) Grantor Retained Annuity Trusts (GRATs)
f) Qualified Personal Residence Trusts (QPRTs)
14

15. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o The grantor trust rules are highly nuanced and very easy to trigger.
• The “spousalunity rule” of section 672(e) automatically treats as a grantor trust
any trust that has a spouse as a beneficiary unless the trustee is an adverse party.
• The grantor trust provisions of section 674 are highly fact sensitive based upon the
identity of the various trustees who are in office from time to time, and can be
inadvertently triggered in the case of a non-grantor trust through the addition of a
nonadverse party trustee, or as a result of the resignation or death of an
independent trustee.
15

16. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o The effective date provisions contained in section 138209(c) of the bill
provide as follows:
• (c) EFFECTIVE DATE – The amendments made by this section shall apply ---
(1) to trusts created on or after the date of the enactment of this Act, and
(2) to any portion of a trust established before the date of the enactment of this Act
which is attributable to a contributionmade on or after such date.
16

17. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o According to the accompanying official summaryof provisions for section 138209,
“[t]he amendments made by this section apply only to future trusts and future
transfers.”
o The language of the actual bill, however, uses the word “contribution” instead of
“future transfers.”
oWhat is a “contribution” for purposes of this legislation?
• Is a sale in exchange for a promissory note bearing interest at the
applicable federal rate a “contribution”?
• Is a “swap” via the grantor’s exercise of the power to substitute
assets a “contribution”?
• Is a capital contribution to an entity that is owned in part by the
grantor trust a “contribution”?
17

18. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
o Sec. 138210.ValuationRules for Certain Transfers of Nonbusiness Assets
• This provision would amend section 2031 by clarifying that when a taxpayer
transfers nonbusiness assets, those assets should not be afforded a valuation
discount for transfer tax purposes.
• Nonbusiness assets are passive assets that are held for the production of income
and are not used in the active conduct of a trade or business.
• Exceptions are provided for assets used in hedging transactions or as working
capital of a business.
• A look-through rule provides that when a passive asset consists of a 10-percent (or
greater) interest in some other entity, the rule is applied by treating the holder as
holding its ratable share of the assets of that other entity directly.
• The amendments made by this section apply to transfers after the date of the
enactment of this Act, and apply for both estate and gift tax purposes.
18

19. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
• What’s Not Included?
o As important as the proposed changes are, there are a number of other changes the
estate planning communitywas expecting that have not been included in the proposed
legislation at this time.
• The maximum tax rate remains 40 percent.
• There are no proposed changes to the generation-skipping transfer tax, or to the
treatment of dynasty trusts.
• There has been some concern that the gift tax exemption would decrease to only
$1 million, but it remains unified with the estate tax exemption.
• No changes to the gift tax annual exclusion are being made.
• Perhaps most importantly, unlike the Biden Administration’s so-called “Green
Book” proposal, this legislation does not include any provisions triggering capital
gains tax when a gift is made or upon the death of a taxpayer, nor are there any
changes to the basis step-up rule.
19

20. into
HOUSE WAYS AND MEANS COMMITTEE
PROPOSAL (released on 9-13-21) (con’d)
• What’s the Import of It All?
o While the current proposal is certain to change through the legislative process, for the
first time we have specific legislation upon which to base our end of year planning.
o Some of the changes are significant, and would impact estate planning strategies that
have been used for decades.
o None of these transfer tax changes, however, would become effective until final
legislation is enacted.
o As a result, there is still time to review one’s specific circumstances and to take
whatever action best serves one’s overall planning goals.
o For additional information, please see the following article authored by Stephen Liss:
https://www.schiffhardin.com/insights/publications/2021/estate-tax-and-the-build-
back-better-act-threats-and-opportunities-before-year-end
20

21. Do you believe that you have enough information to advise your
clients about potential estate tax reform?
a. Yes
b. No
Polling Question #3
21

22. QUESTIONS & ANSWERS

23. DISCLAIMER
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