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A Balanced Solution

Meet your clients' needs for a comfortable retirement cushion through a sale to a beneficiary grantor trust; and reduce assets enough to avoid taxes

When we recommend ways for our clients to reduce their estates, we're mindful that clients generally want a comfortable cushion for retirement. But, providing this comfortable cushion is often inconsistent with reducing their estates enough to avoid estate tax. Consider solving this problem by using a beneficiary grantor trust (BT).

A BT is an irrevocable trust that a third party creates for your client. Your client is the beneficiary, can be a trustee and has the broadest possible non-general power of appointment. The settlor allocates generation-skipping transfer (GST) exemption to the trust to keep it outside of the estate tax system forever. The beneficiary is the deemed owner for income tax purposes but not for transfer tax purposes. The beneficiary later sells to the trust, for a note, non-voting S corporation stock or an interest in a limited liability company (LLC) taxed as a partnership.

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