Checklist for Common Client Tax Planning Issues

While there are many new and exciting tax planning techniques, it is sometimes the tried and true standards that are overlooked that can provide the best solutions to estate and income tax issues. Here is a helpful list of estate planning scenarios and possible solutions.

University planning

Financing the future education of a young child

1. Pure and simple gifts to the child;

2. Make gifts under the Uniform Minors Transfer Act for the benefit of the child;

3. Donations to trusts for the benefit of minors, including:

• Section 2503(c) Trusts;

• Section 2503(b) Trusts;

Crummey trusts; and

• Matching Grant Trust.

4. Participate in a qualified tuition plan, also known as a Section 529 plan;

5. Use an IRA for education; or

6. Hire the child part-time in a private company.

Help fund a college-age child

1. Create a charitable scholarship remainder trust;

2. Loan money to the child through an interest-free demand loan; or

3. Hire the child part-time in a private company.

Client wants to provide temporary access to funds

1. Create a long-term reversion trust; or

2. Use interest-free loans.


Allocate funds to care for a person with special needs

1. Use a third party special needs trust for a disabled family member, other than a spouse; or

2. Use a testamentary special needs trust for a surviving spouse,

Elderly parent needs lifelong support

1. Use a remaining charitable trust; or

2. Use a private annuity.

General inheritance issues

Avoid taxes on large capital gains

1. Place the assets in a Charitable Remainder Trust before they are sold;

2. Invest realized capital gains in a qualified opportunity zone fund; or

3. Place realized capital gains in a grantor-type charitable master trust.

The client wants to sell unbuilt land, but fears that later he will need

1. Use a trust from which the donor can receive discretionary distributions; or

2. Use a settlor’s income trust.

The client wants to transfer a residence but keep its use for life

1. Give up the property and take a sale-leaseback;

2. Offer ownership with use to tolerance;

3. Sell a residual interest in the property;

4. Use split buying; or

5. Use a qualified personal residence trust.

Client wants to donate large asset to avoid tax

1. Make gifts of partial interests in the property, or shares in an LLC, below the annual exclusion;

2. Make an installment donation;

3. Use an annuity trust retained by the settlor to provide future appreciation;

4. Use a Grantor Retained Income Trust for illiquid tangible assets and undeveloped real estate;

5. Use a Charitable Lead Trust with the rest for the kids; or

6. Use an intentionally defective sale to income trust and write it down.

Client wants to transfer ownership but maintain income

1. Use an annuity trust retained by the settlor;

2. Use a private annuity;

3. Use an installment sale;

4. Sell residual interest;

5. Use split buying;

6. Recapitalize a C company;

7. Recapitalize the limited partnership; or

8. Use a leftover charitable trust.

The client wants to donate shares of a growing business

1. Donate recapitalized preferred stock in a C corporation; or

2. Donate recapitalized limited partnership units.

Client is considering selling assets for the benefit of a family member but does not want to be taxed on the sale

1. Make an outright donation of a property before the sale; or

2. Use a Charitable Remainder Trust where the family member is the income beneficiary.

The client has illiquid assets

1. Donate illiquid assets;

2. Make a gift of life insurance in trust;

3. Make a gift, but the donee pays the gift tax;

4. Use an intra-family sale;

5. Selling a residual interest in illiquid assets (works of art, residence, etc.); or

6. Use a Charitable Lead Annuity Trust.

This list isn’t exhaustive, but it does get you started thinking about how to solve some of life’s most trying problems.

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