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Another common basis maximizing technique is to borrow money on appreciated assets and gift the borrowed funds away.
This is particular useful to avoid tax in a decoupled state that has no gift tax (e.g., New Jersey).
One common restriction on decanting is not adding new beneficiaries, as confirmed in a recent case. Practical steps such as consolidating assets, organizing and computerizing records, involving children or others who will serve in fiduciary capacities so that they are aware of their roles, and more, is essential.
But now, most wealthy people’s estates are below the ,430,000 (2015) estate tax exemption amount. Absent the IRS regulatory change the IRS could argue that the FLP/LLC interest must be discounted so that the assets in your estate will not receive the same quantum of basis step up.
With a regulation prohibiting discounts your estate might get a bigger basis step up (less capital gains to heirs) at no estate tax cost. ■ Administration: You have to meet regularly with all of your advisers after completing a complex/large transaction in order to properly administer that plan. A few of the myriad of vital steps folks so often get wrong include: missing note payments, missing GRAT or CRT annuity payments, paying fees from the wrong entities/trusts, monitoring defined value mechanisms, not issuing Crummey notices, not monitoring trust termination dates, and more.
Domestic asset protection trusts (“DAPTs”) are trusts that you set up (you’re the settlor) but you are a beneficiary of, called “self-settled” trusts.
Although there have been a number of court cases suggesting that self-settled trusts might not work, the facts on all of those cases have been pretty ugly.