BDITs: Structuring Beneficiary Defective Inheritor's Trusts to Minimize Estate Tax and Retain Control Over Trust Assets

*** This program has been cancelled ***

A live 90-minute CLE/CPE webinar with interactive Q&A


Thursday, August 10, 2017
1:00pm-2:30pm EDT, 10:00am-11:30am PDT


This CLE/CPE webinar will provide a comprehensive and practical guide to structuring a beneficiary defective inheritor’s trust (BDIT). The panel will identify circumstances in which BDITs are an optimal strategy, properly drafting the BDIT to avoid GST consequences, structuring deferred payment sale/loans to BDITs, incorporating Crummey powers into the instrument, and integrating life insurance into BDIT planning. The panel will offer solutions to frequently asked questions about BDITs and when a BDIT can be a safer and more effective transaction than alternative estate planning strategies.

Description

Because many planning professionals are not familiar with the BDIT, it is an under-utilized vehicle for providing estate planning benefits and protection from creditor claims while allowing an individual to maintain control over trust assets and how the beneficiaries can enjoy trust assets.

The BDIT is an irrevocable trust that freezes the value of assets for gift and estate tax purposes when the assets are sold to the trust by a beneficiary. Since a beneficiary sold assets to the BDIT for equal value, the beneficiary is eligible to receive discretionary distributions from the trust.

BDITs are similar to a sale to an intentionally defective grantor trust (IDGT), but have key advantages over an IDGT. The BDIT is established by a third-party who is the nominal creator of the trust. This person, typically a parent of a beneficiary, contributes a small amount to the trust as a “seed” and retains no power over the trust. A key component of a BDIT is avoiding inclusion of the assets in the estate of either the trust creator or the beneficiary.

The trust language includes a Crummey withdrawal power for the beneficiary over the creator’s contribution to the trust, which the beneficiary declines to exercise. This allows the BDIT to be a grantor trust to the beneficiary for federal income tax purposes. After the Crummey withdrawal power lapses, the beneficiary sells an asset to the trust in exchange for a promissory note with a stated interest rate.

While a BDIT strategy provides transfer tax savings and asset protection, it is not without risks. Failure to structure the transaction according to well-established criteria can create a negative estate tax outcome.

Listen as our experienced panel provides a thorough and practical guide to structuring BDITs to maximize tax benefits and asset protection while preserving the client’s control over, and beneficial enjoyment of, the trust’s assets.

Outline

  1. Structuring BDITs as third-party created trusts
  2. Optimal property to place in a BDIT
  3. Valuation and pricing requirements
  4. Use of “seed money” and traps to avoid
  5. Ensuring valid Crummey powers in trust terms
  6. Income tax planning available if the trust is not a grantor trust to the beneficiary

Benefits

The panel will review these and other key issues:

  • When should a beneficiary of a trust created by another use that trust for the beneficiary’s own estate planning?
  • What types of client circumstances are best served by a BDIT?
  • What traps must planners avoid in structuring third-party trusts to qualify as a BDIT?
  • How to best handle “seed money” and other transaction details in structuring asset transfer into a BDIT
  • Avoiding indirect gifts in structuring asset transfers to BDITs

Learning Objectives

After completing this course, you will be able to:

  • List the specific characteristics and terms of BDITs
  • Distinguish the advantages of BDITs over IDGTs, particularly in the area of property sales to IDGTs
  • Identify client circumstances in which BDITs would be an optimal tax savings strategy
  • Recognize the economic substance rules to seed money and other transfers of property
  • Identify when a trust created by a third party should be a grantor trust or a complex trust with respect to the beneficiary

Faculty

Jerome M. Hesch, Adjunct Professor of Law
Miami

Mr. Hesch is a tax and estate planning consultant for lawyers throughout the country and is Special Tax Counsel with Oshins & Associates, Las Vegas Nevada and Meltzer, Lippe, Goldstein & Breitstone, Mineola, NY. He is also Director of Notre Dame Tax & Estate Planning Institute, Adjunct Professor of Law, Florida International University Law School, Graduate Program in Estate Planning, University of Miami, On-Line LL.M. Program, Boston University Law School and Vanderbilt University School of Law. He is an accomplished author, and has published numerous articles, several Tax Management Portfolios, and co-authored a law school casebook on Federal Income Taxation, now in its fourth edition.

Richard A. Oshins, Member
Oshins & Associates, Las Vegas

Mr. Oshins concentrates his practice in tax and estate planning with a substantial emphasis on multi-generational wealth planning particularly with regard to closely held businesses. He advises wealthy clients throughout the United States as well as serving as a consultant to many of the largest financial institutions nationwide. He was named one of the 24 “Elite Estate Planning Attorneys” in America by The Trust Advisor.


Live Webinar

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This webinar is eligible for at least 1.5 general CLE credits.

CLE credits are not available for PR.

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CPE on Live Event

Continuing Professional Education credit processing is available for an additional fee per person. You may register for CPE credit processing at any time before or after the program. To qualify for CPE you may not listen via the telephone.

This program is eligible for 1.5 CPE credits.

  • Field of Study: Taxes.
  • Level of Knowledge: Intermediate.
  • Advance Preparation: None.
  • Teaching Method: Seminar/Lecture.
  • Delivery Method: Group-Internet (via computer).
  • Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of verification codes announced throughout the presentation.
  • Prerequisite: Three years+ law or public firm experience at mid-level within the organization, structuring complex estate plans and trusts; supervisory authority over other estate planning work by other attorneys, preparers/accountants. Foundational knowledge and understanding of beneficiary defective inheritor's trusts, intentionally defective grantor trusts, goods and services tax, and Crummey powers.

NOTE: CPE credit processing for all attendees must be ordered by 2pm Eastern the day of the program to receive a Certificate of Attendance within 24 hours.


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Customer Reviews

The program was well organized and discussed the major issues.

Roxy Hammett

Wolff & Samson

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Anderson Hunter Law Firm

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I thought the information provided was great.

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Estate Planning Advisory Board

Brian M. Annino

Partner

Annino Law Firm

L. Paul Hood, Jr.

Consultant, Speaker and Author

The University of Toledo Foundation

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Member

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