Client: An individual with a high net worth.
Issue: Client desires to transfer financial assets to children and grandchildren in further trust but would like to direct the investment of the trust during his lifetime. Client has an appreciating asset and would like to make a gift for federal gift tax purposes and for federal generation-skipping transfer tax purposes.
Challenge: Devise a transfer that will maximize financial flexibility, minimize taxation, maximize use of federal estate tax exemption amounts and generation-skipping transfer tax exemption amounts and maintain more effective control than is possible under most typical estate planning documents.
Solution: We established a Delaware Trust that permits the Grantor, while living, to direct the investment of the assets, we transferred the appreciating assets to the trust and allocate generation-skipping transfer tax exemption to the transfer and drafted the trust in such a manner that the trust will be treated as a Grantor Trust under the Internal Revenue Code.
Result: In addition to the unique ability to segregate administrative functions under Delaware Law, we also achieved our client’s wealth planning and estate planning goals by transferring appreciating assets to a trust for the benefit of his children and grandchildren. Moreover, the Grantor will continue to be taxed for federal and state income tax purposes on income earned by the trust, notwithstanding the fact that such amounts will be set aside for his children and grandchildren. Such additional payments of tax will not be considered gifts for federal gift tax purposes.