2010 has brought the suspension of the federal estate tax and the federal generation-skipping transfer tax and the introduction of the carryover basis system. It is possible that these rules will endure for the duration of 2010, and be replaced by the laws effective for 2011, which will result in the restoration of the federal estate tax and the generation-skipping transfer tax and the elimination of the carryover basis system. It is also possible that changes will be made in 2010 that will be prospective only – or that will be made retroactive to January 1, 2010. If made retroactive, it is not certain if the courts will sustain a retroactive application of whatever rules are enacted. It is also possible that some of the 2010 rules expected to expire in 2011 will be continued.

*RELATED CLE COURSES, "Critical Estate Planning Decisions: 2010, 2011 And Beyond" by Steven G. Siegel.  Go to www.nlfonline.com for the online course available 24/7 and to www.nlfcle.com for the course on Audio CD or DVD. On both web sites, for CLE credits, please click on your state (or any state if you don't care about getting CLE credits) and then, under "Estate Planning", and scroll down to this title. (This course is not available for New York CLE Credits.)

This Form is a Dynasty Trust, intended to be created for the benefit of the children and more remote descendants of the Grantor, and designed to be a perpetual trust. Ideally, this trust is created in a State that has repealed the rule against perpetuities, thus allowing for the perpetual duration of the trust.

Intentionally Defective Grantor Trust

This a form of an Intentionally Defective Grantor Trust. The grantor retains an administrative power over the Trust (here, the power of substitution) (See Article 11) that leaves the grantor taxable on the trust income. This administrative power is not; however, a sufficient retained interest to require the trust property to be included in the grantor’s estate. The intent here is to enable the grantor to pay all of the income tax liability arising from the trust while allowing the actual trust income to be accumulated for or paid to the trust beneficiaries without income or gift tax consequences to them. (See Rev. Rul. 2004-64).

Installment Sale To Trust

This is a Form of installment sale agreement between the grantor of an intentionally defective grantor trust (Form A) as the seller, and the defective trust as the purchaser. The concept of this transaction is to enable the grantor to sell an appreciating asset to the trust in exchange for a Promissory Note (Form C), which sale will have the effect of freezing the value of the property being sold at its current fair market value, represented by the principal amount of the Note.

Promissory Note For Sale To Defective Grantor Trust

This is a form of Promissory Note that may be used in conjunction with an installment sale (Form B) to an intentionally defective grantor trust (Form A). The interest rate selected should be the appropriate rate based on the duration of the Note published by the IRS for the month of the sale

*RELATED CLE COURSE, "Defective Grantor Trusts: How To Make Them Work For Your Clients" by Steven G. Siegel.  Go to www.nlfonline.com for the online course available 24/7 and to www.nlfcle.com for the course on Audio CD or DVD. On both web sites, for CLE credits, please click on your state (or any state if you don't care about getting CLE credits) and then, under "Estate Planning", and scroll down to this title. (This course is not available for New York CLE Credits.)