Lapsing 2012 Estate Planning Opportunities & large Estates Holding Businesses and Real Estate

The Obama Administration’s revenue proposals for fiscal year 2013 contain radical changes to the treatment of grantor trusts which would, in effect, impose an income tax on appreciated assets transferred in these leveraged estate planning transactions. Clients would be much less willing to engage in such transactions if they are subject to current income taxation – even if significant long term transfer tax savings may still be achieved. Whether or not you agree with the objectives of the proposed changes to the grantor trust rules, the current state of the law does provide some ability to mitigate transfer taxes imposed on succession planning for these business or real estate interests.

If the Administration’s grantor trust proposals are enacted, there will be a need for legislation that provides transfer tax relief for these illiquid business interests. Failure to enact such legislation would fuel any perception (and the reality) that the transfer tax system has a negative impact on job creation.

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