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Today is Tuesday, I Don’t Have Time to Think About…..



April 25 , 2017 | Posted by David Cassady |

Today is Tuesday, I Don’t Have Time to Think About…..

ESTATE PLANNING.  I cannot begin to tell you how many times I hear this.  But then again, I also hear – “I need to save taxes, what can I do?”  Or, I also hear, “I do not have to do estate planning because President Trump is going to eliminate estate taxes”.

For our Emerging and Established Wealth clients, the “biggest bang for the buck” when it comes to planning is in the estate tax arena.  And, even if President Trump is successful in eliminating estate taxes, I would ask you the question – “Do you plan on living four more years?”  Remember, when you leave this world, there are only three alternatives for your wealth – Leave it to your kids; Leave it to charity; or Leave it to the IRS!

Estate planning is not something you do once in a lifetime.  Most attorneys we work with suggest that you revisit your estate plan at least every five years.  Personal circumstances change, children grow up, tax laws change, and the world changes.  A thorough review with your attorney and your Cassady Schiller CPA periodically makes a lot of sense, even if no changes are made to your plan.

For 2017, the estate and gift tax exemption is $5.49 million per individual, up from $5.45 million in 2016. Consequently, an individual can leave $5.49 million to heirs and pay no federal estate or gift tax. A married couple will be able to shield almost $11 million from federal estate and gift taxes. The annual gift exclusion remains at $14,000 per donee for 2017.  Essentially, every person can gift up to $14,000 in value to each donee annually without utilizing any of the aforementioned exemption.  Although these exemptions are significant and beneficial, planning is still needed.

There are several estate planning techniques utilized today to help reduce or eliminate estate taxes.  A few common strategies are GRATs, sales to IDGTs, CRUTs, CLATs, or IRA planning.  I realize these letters/acronyms mean next to nothing for most of you.  In this article, we will discuss three of them, GRATs, CRUTs, and IRA planning.


Grantor Retained Annuity Trusts (GRATs) are wealth transfer techniques that have several advantages, including:

  • GRATs are structured so that no taxable gift actually occurs as a result of the transfer. It is one of those situations where you “can have your cake and eat it too”.
  • Assets that are transferred into a GRAT are usually highly appreciated. Depending on circumstances and structure, often times valuation discounts can be utilized in order to gain additional leverage and tax advantage from the transaction.
  • If the valuation of assets transferred to a GRAT is successfully challenged by the Internal Revenue Service, an adjustment to the GRAT can usually prevent any adverse gift tax consequences.
  • Because the GRAT is a Grantor Trust, during its term, the transferor (Grantor) can swap assets with the GRAT without income or capital gains tax consequences.
  • Given today’s interest rate environment, the advantage of the GRAT technique is enhanced.


Charitable Remainder Unitrusts (CRUTs) are irrevocable trusts created in accordance with Section 664 of the Internal Revenue Code.  CRUTs have several advantages including:

  • The CRUT distributes a fixed percentage of the value of its assets (on an annual or more frequent basis) to a named beneficiary. This distribution provides periodic cash inflow to the creator of the Trust.  In many situations, these vehicles are established after someone retires.  This periodic (fixed) income is then a component of the retiree’s cash flow position.  Furthermore, often times, the IRS specified fixed income that must be paid to the creator is more than the yield from the original asset placed in the Trust, thereby enhancing the creator’s cash flow.
  • The creator of the Trust will receive a charitable income tax deduction in the year the CRUT is established. Because the creator will still enjoy the income from the Trust during their lifetime, the income tax deduction is discounted based on life expectancy.
  • At the expiration of a specified time (usually the death of the creator), the remaining balance of the CRUT’s assets are distributed to designated charities. This ultimate distribution to a charity provides the creator of the Trust with a lasting legacy that will be remembered forever. In addition, the assets in the CRUT are never subject to estate tax, thereby creating yet another advantage of this type of estate planning vehicle.


Most, if not all of our clients, have traditional pre-tax Individual Retirement Accounts (IRAs).  These accounts usually arise from direct contributions, or in most cases, from non-qualified plan rollovers from employment activities.  This type of asset is very tax burdensome – upon death, it is considered part of any taxable estate, and the payout of the IRA to designated beneficiaries is then income taxed.  Consequently, there are two layers of tax on this type of asset.  If someone is donative, and would like to leave assets to a designated charity upon their demise, a non-qualified plan asset, such as the IRA, is a great asset to use.  Why:

  • By leaving the IRA to a designated charitable beneficiary, the asset will not be considered as a part of the taxable estate, and therefore not subject to estate tax.
  • In addition, the value of the IRA, if left to a designated charity, will never be income taxed; thereby avoiding both levels of tax inherent in this type of asset.

As you can see, there are numerous estate planning techniques that can save your family and generations of your family significant tax dollars.  So, although I realize TODAY IS TUESDAY, ARE YOU REALLY TOO BUSY?