Structuring Installment Sales to Intentionally Defective Trusts: Using Private Annuities and Promissory Notes
Transferring Appreciated Property Through Asset Sales and Installment Payments
Recording of a 90-minute CLE/CPE webinar with Q&A
This CLE/CPE webinar will provide estate planning counsel and advisers with a comprehensive, deep and practical guide to structuring asset sales to defective trusts. The panel will discuss the use of both promissory notes and private annuities in estate planning, and will identify ideal scenarios for determining which payment vehicle to use. The event will also provide concrete drafting suggestions to avoid tax traps in structuring intra-family wealth transfers to defective trusts.
- Structure of standard sale to IDIT transaction using promissory note
- IRC Secs. 2036(a)(i) and 2702 and Fidelity-Philadelphia Trust Co.
- Sale for a private annuity
- 50% probability of survivorship test
- The exhaustion test
- Another individual as measuring life
- Convert a note into an annuity based upon life
- Use of a self-canceling installment note (SCIN) – The Davidson case
- Terms of SCIN
- The Davidson case
The panel will review these and other important questions:
- How to avoid IRC 2036 issues in structuring a sale of equity in appreciated assets in exchange for a private annuity
- How do private annuities operate differently from SCINs, specifically the importance of the “50% likelihood of one year survival test” in light of the IRS position stated in CCA 2103-033?
- What must estate planning counsel be aware of to ensure that the annuity term can be pegged to the actuarial tables?
- What key drafting language should a private annuity contain to avoid gift tax or unanticipated gain recognition issues?
Julius H. Giarmarco
Chair of Trusts and Estates Practice Group
Giarmarco Mullins & Horton
Mr. Giarmarco's primary practice areas include estate planning, business succession planning, wealth transfer... | Read More
Mr. Giarmarco's primary practice areas include estate planning, business succession planning, wealth transfer planning, and life insurance applications. He lectures frequently on a national basis. He published a number of articles on estate planning appearing in professional journals and is also the author of the chapters on succession planning in Advising Closely Held Businesses in Michigan and The Michigan Business Formbook published by the Institute of Continuing Legal Education (ICLE).Close
Michael D. Mulligan
Mr. Mulligan is a principal originator of the estate planning strategy of sale to defective trust for an... | Read More
Mr. Mulligan is a principal originator of the estate planning strategy of sale to defective trust for an installment note, now widely used by estate planners nationally. He has been elected to the Estate Planning Hall of Fame® and has been awarded the Accredited Estate Planner® (Distinguished) designation by the National Association of Estate Planners & Councils. He is currently a member of the Editorial Boards of Estate Planning Magazine and The Journal of Taxation, having written numerous articles for both publications as well as the Journal of the Missouri Bar. He is a frequent lecturer on tax and estate planning subjects, and he has spoken at tax institutes and seminars across the country.Close