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GST Trust Administration Challenges: Post Mortem Strategies to Minimize Generation Skipping Transfer Tax

Changing Exemption Allocations, Severing GST Trusts, Investment Strategies in Exempt and Non-Exempt Trusts

Recording of a 90-minute CLE/CPE webinar with Q&A

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Conducted on Wednesday, August 22, 2018

Recorded event now available

or call 1-800-926-7926

This CLE/CPE course will provide estate planning counsel and fiduciaries with a practical guide to meeting the challenges of administering a generation-skipping transfer trust. The panel will discuss critical issues related to calculating the generation-skipping transfer tax inclusion ratio and those involving both GST exempt and non-exempt trusts where tax consequences may arise from disproportionate allocation provisions. The webinar will also address implications and potential solutions to mixed inclusion ratio trusts to rehabilitate flawed planning.

Description

Critical to successful multi-generational gift tax planning and compliance is a solid foundation in the complex GST tax regime of Section 2632 and following statutes. Beyond identifying skip-person transferees and gifts that will trigger GST tax, fiduciaries must have a detailed understanding of the rules to calculate the tax cost of GSTs.

Section 2642 provides the framework for determining the taxable portion of any GST. The inclusion ratio works with the “applicable fraction” to determine the tax rate of a GST. A trust with an inclusion ratio of 0 is exempt from GST tax, while a trust with a ratio of 1 is fully taxable; either of these ratios is considered optimally efficient, depending on drafting and planning goals. However, post-death events often create challenges to existing allocation provisions.

Trustees, or other parties such as trust protectors or directors with authority to effect distributions, may have the power to make non-pro rata or non-per stirpes allocations of GST exemption amounts, even in cases where the decedent has distributed property on a pro rata basis.

Additionally, the fiduciary may be able to sever a GST trust into separate instruments. Depending on the asset makeup, a fiduciary may also tailor investment decisions to minimize the GST tax impact of transfers, such as having the GST exempt trust invest in growth assets that produce minimal trust accounting income to distribute.

Listen as our experienced panel provides a practical guide to the tax-efficient administration of GST trusts.

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Outline

  1. IRC 2642 structure
    1. Inclusion ratio defined
    2. Applicable fraction defined
    3. Treatment of inclusion ratios in the severance of GST-impacted trust into two or more trusts
  2. Post-mortem events and transfers requiring recomputation of inclusion ratio and the appropriate fraction
  3. Making non-pro rata or non-per stirpes allocations of property disposed of on a pro rata or per stirpital basis by a testator
  4. Trust severance rules and opportunities
  5. Investment strategies to minimize GST impact on transfers
  6. Roles of various fiduciary and administrative persons

Benefits

The panel will review these and other relevant topics:

  • How to spot trusts with an inclusion ratio greater than 0
  • Proactively identifying valuation opportunities when calculating inclusion ratios
  • The interrelation between inclusion ratio and the applicable fraction under Section 2642 and its regulations
  • Special rules for CLATs and other types of trusts in the calculation of inclusion ratio and the imposition of GST tax
  • Regulatory guidance for calculating numerator and denominator of applicable fractions

Faculty

Jackson, Donna
Donna J. Jackson
Attorney
Donna J. Jackson & Associates

Ms. Jackson's practice focuses on estate planning, trusts and estates, wills, and probate law. She is a member of...  |  Read More

Dromsky-Reed, Susan
Susan K. Dromsky-Reed
Member
Brach Eichler

Ms. Dromsky-Reed concentrates her practice in estate planning and estate administration. She provides individuals and...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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