SilverLink - Winter 2008 - (Page 31)

Private client services Estate Planning Pushing Wealth to the Next Generation A Strategy to Avoid Gift Taxes By Jeff Sharp, JD, MBA, CFP®, CLU, ChFC You’ve made maximum gifts to family members and have used all of your Lifetime Federal Gift Tax exclusion ($1,000,000 per person in 2008). You’re also making the maximum annual gifts you can make without incurring gift taxes. You’d like to transfer more wealth to family members but hate the idea of paying gift taxes on additional gifts. Many successful families are facing the same situation. They’re more than willing to make gifts, but the idea that the government will receive a large amount of the gift, in the form of gift taxes, is an undesirable outcome. The strategy presented below, if structured properly, is one way to transfer wealth but avoid paying gift taxes. that it will remain inforce indefinitely after the loan is paid off, without further premium payments. Since the transaction is structured as a loan with interest due, there is no gift. Who are the ideal candidates? • Owner of S-Corporation stock that generates distributions of roughly 5% and has underlying appreciation in the value of the stock. When used in combination with a Grantor Retained Annuity Trust (GRAT), this strategy may produce a home run. Real Estate Developer/Manager who has income-producing real estate. He or she desires to pass the real estate to the next generation but needs to find a way to finance the estate tax with other assets so the family can retain the real estate. Owner of a concentrated position in a single stock (i.e., Berkshire Hathaway). The use of a combination of this strategy and a GRAT may result in significant wealth transfer with no gift tax. • Privately Financed Life Insurance and a GRAT The strategy is for Mom and/or Dad to loan money to a trust. The money is used to purchase a significant life insurance policy insuring mom, dad, or mom and dad jointly (last-to-die). The trust pays back the loan with interest at the earlier of death or the end of nine years. The life insurance is structured so • 5. GIFT 4. GRAT 1. GRANTORS 6. ANNUITY INCOME 7. REMAINDER To ILIT 3. LOAN PREMIUM 2. ILIT 8. LOAN REPAYMENT 31 silverlink — Winter 2008

Table of Contents Feed for the Digital Edition of SilverLink - Winter 2008

SilverLink - Winter 2008 Contents Risk Management: Where in the World is Human Resource Consulting? Workers’ Compensation Rate Declines Insurance Certificates Haute Retirement It All Began with a Cup of Coffee Playing Fair in the Housing Market Captives 101 Proceed with Caution Fore! (Or is it Pull? or Giddyup?) Don’t Be Fuelish Employee Benefits: Medical Trend Countdown to Compliance Private Client Services: Buy & Sell Agreements Flood Insurance Pushing Wealth to the Next Generation Client Spotlight: Travel and Transport Internal Happenings: SilverStone Group Giving Back Since 1945

SilverLink - Winter 2008

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