Analyzing Generational Trusts for Basis Increase Opportunities

Learning Objectives

• To identify what types of trusts and trust powers may be subject to estate tax.
• To review how the estate tax, gift tax, and step-up basis interact.
• To identify what planning methods are available to achieve tax flexibility for irrevocable trusts.
• To discuss risks inherent in tax planning for trusts.
• To analyze how are irrevocable trusts treated for estate tax purposes at the death of a grantor.
• To inspect when a step-up in basis applies.

Course Description

This course is valid up to December 31, 2023, for CFP Professionals. It is advisable to complete this course before that to process the credit on time.

The uncertainty of the gift and estate tax laws over the last decade has led to a proliferation of irrevocable, completed gift trusts. Similarly, low estate tax exclusion amounts in the 1980s, 1990s, and 2000s generated a significant number of credit shelter trusts. These types of trusts often have significantly appreciated assets, often with a low basis.

However, the higher estate tax exclusion amount currently available ($12,060,000 in 2022) may create opportunities to seek a step-up in the basis for these types of trust holdings.

A generation-skipping trust is a type of legally binding trust agreement in which the contributed assets are passed down to the grantor's grandchildren, thus "skipping" the next generation, the grantor's children. By passing over the grantor's children, the assets avoid the estate taxes—taxes on an individual's property upon his or her death—that would apply if the children directly inherited them. These are effective wealth-preservation tools for individuals with significant assets and savings.

In this CE/CPE webinar, the speaker joining Griffin Bridgers will answer the following major questions:

• How are irrevocable trusts treated for estate tax purposes at the death of a grantor, or beneficiary?
• When does a step-up in basis apply?
• What types of trust powers and rights may create opportunities for a step-up in basis?
• For irrevocable trusts that do not currently qualify for a step-up in basis, what powers may be available to a trustee or beneficiary to seek this income tax benefit?
• What are the exposure risks to estate tax, generation-skipping transfer tax, and state death or inheritance taxes?

Overview

• Transfer tax and basis

  6 mins
• Gift transfers and basis

  10 mins
• Estate tax and basis

  19 mins
• Getting property out of a trust

  31 mins
• Creation of general powers of appointment

  43 mins
• Amendment of trust by independent party

  54 mins