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I guess stepped up basis is considered a loophole
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Boone & Crockett
Posted 6/30/2020 19:05 (#8346013 - in reply to #8345913)
Subject: In reply to RealFarmers question on how to get ahead of this


I’ve given some thought to possible solutions, and here are a few scenarios, some more palatable than others. The first and likely most utilized strategy is the do nothing approach, and let the chips fall where they be. But for others, the cheap and easy way with little upfront cost could be the best solution for individuals or couples who have enough other income producing assets that they can utilize their lifetime unified credit exemption of 11 1/2 million for a single person, and 23 million per couple to transfer their assets subject to the loss of stepped up basis now, while they are alive, federal estate tax free. If you and your spouse were leaving these assets to the kids anyway, and can get by without the income, this is the best route to go. May have to split the house off and do a reverse mortgage on it to create enough income to get by though. And while you are at it, might as well secure the exemption for a couple generations and leave these assets to your grandkids per stirpes with your children being lifetime income beneficiaries per stirpes. This strategy will assure the taxaholics can’t get their grubby mitts on your hard earned assets for a good long time, and the assets won’t be cashed in for a good while if that’s a concern. The grandkids cannot sell their inherited asset while the income beneficiary is still living. And most likely, you’ve avoided paying for your long term care needs, as the bulk of your assets were given away. If going on title 19 doesn’t bother you, this is an added benefit. Another strategy that works wonders if you and or your spouse need the income from the asset is to create a Charitable remainder unit trust, and transfer the appreciated assets along with deprecated equipment and grain or livestock with unrealized gains into the trust, then have the trust sell them. Totally free of all estate or income taxes. And depending on how it’s set up, you can also enjoy a current income tax credit to be used against other income taxes that may be due. This CRUT will then provide income for twenty years, or life, for you and your spouse. The longer the potential income stream is created, the less the current income tax credit is available. This will cost from $1,500 to $4.000 in attorney fees to create, and there will also be an annual separate income tax filing required. I work with a couple of attorneys who specialize in these, and also prepare the annual tax filings. Most CPA’s just are not well versed enough to handle this. The downside is there won’t be much of an inheritance left for the kids using this strategy if that’s a concern. The value of the assets placed in the trust can be left to children though by using a life insurance wealth replacement trust, whereby life insurance in the amount of the assets placed in the CRUT is purchased to make the kids whole because the parents spent the majority of their inheritance. If you don’t care about your kids and what they will think of you spending their inheritance, by all means skip this step. Something just came up and I have to sign off for now, maybe more later. Boone

Edited by Boone & Crockett 6/30/2020 21:33
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