2020 Year-End Tax Guide

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SELL ASSETS TO AN INTENTIONALLY DEFECTIVE GRANTOR TRUST The taxpayer sells an asset to a grantor trust in exchange for a promissory note. (Real Estate owners often are great candidates for this strategy). By using a grantor trust, the sale of appreciated assets will not trigger any income tax. In addition, the grantor will continue to pay the income taxes on the trust income, thereby allowing the trust assets to grow tax-free. This strategy is ideal for assets with high potential for appreciation. Further, the income tax that the grantor pays on trust income does not constitute an additional gift. With market volatility and assets trading at depressed values, your Marcum advisor can help you implement a Grantor Retained Annuity Trust (GRAT), whereby you transfer assets to a grantor trust. You retain an annuity interest for a term of years and leave the remainder to your children. If the assets appreciate during the trust term, that appreciation passes to your children without using any of your lifetime exemption amount. GRATs can be structured so that no lifetime tax exemption is used on the gift to the trust. GRANTOR RETAINED ANNUITY TRUSTS (GRATS)

REFINANCING EXISTING PROMISSORY NOTES

Consider refinancing existing promissory notes, particularly intrafamily loans. Interest rates are at historic lows, and this is a simple strategy that can preserve additional principal of a trust, thereby allowing more trust assets to grow for future generations.

RECOMMENDATION Now is a good time to meet with your Marcum tax professional to discuss gift and estate tax planning recommendations. Current economic conditions present an opportune time to execute wealth transfer tax planning.