Internal Revenue Rulings

Changes to Trust to Create Charitable Remainder Annuity Trust is Not Qualified Reformation and Therefore Does Not Qualify for Estate Tax Charitable Deduction.

Decedent created an irrevocable trust that provided for himself and his legally incapacitated daughter. Upon his death, the payments were to continue for the daughter up to a maximum amount and then an additional amount to go to her children for their lives. Upon the death of the grandchildren and the daughter, all remaining assets are to be distributed to charity. Based upon the values of the initial funding, the amounts to be paid to the descendants was less than five percent of the initial value of the trust. Nonetheless, it was not a qualifying split interest trust, and therefore did not qualify for a charitable deduction in the grantor's estate, so the trustees agreed to seek a court reformation to create a charitable remainder annuity trust that provided for the payments to the descendants.

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IRS Issues Proposed Regulations Revising Alternate Valuation Date Provisions.

The Service has issued Proposed Regulations to revise requirements for electing alternate valuation. Under these proposed rules, an estate could elect an alternate valuation date on an estate tax return, whether filed timely or late, so long as the return is filed within one year from the due date of the return, including extensions.

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Service Rules That OID Rules Do Not Apply To Private Annuity.

Taxpayer intends to transfer his interest in a partnership to a trust in exchange for a private annuity. The trust beneficiaries are the taxpayer's grandchildren, and the assets consist of publicly traded stock and real estate. Taxpayer intends to irrevocably transfer the partnership interest in exchange for the annuity that is computed under applicable IRS tables.

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From Holland & Knight Private Wealth Services Publications

Employee Stock Ownership Plans: An Innovative Succession Planning Strategy For Business Owners

The recent rebound in the stock market has brought about renewed interest in Employee Stock Ownership Plans (ESOPs). While much of the focus is on large, publicly traded companies, ESOPs can provide owners of small and mid-sized corporations with a strategy to sell their stock for “top dollar” in a tax-advantaged manner without having to relinquish control of the corporation.

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Self-Canceling Installment Notes: A Useful Tool in Transferring the Family Business to the Next Generation

A Self-Canceling Installment Note (SCIN) is a technique used to sell an asset, usually shares or partnership interests in a closely held family business, in exchange for an interest-bearing promissory note. An appropriately structured SCIN will remove the future appreciation in the family business from the seller's estate. In addition, if the seller dies prior to the maturity of the promissory note, the then-outstanding principal amount of the note may be excluded from the seller's gross estate.

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Planning for Retirement Accounts: There Is More to Consider than Asset Allocation

Given the benefits of pre-tax contributions and tax-deferred growth, retirement accounts have become the largest repository of liquid assets for many Americans. This fact alone would make planning for the disposition of retirement accounts a key part of most estate plans. When you consider that retirement accounts may be subject to combined federal estate and income taxes of approximately 70 percent at the time of the death of the plan participant, the motivation for proper planning is truly compelling.

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