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Questions asked during Estate Planning Webinar

As part of Anchin, Block, & Anchin’s webinar program, we recently presented “The Perfect Storm for Estate Planning.”  Participants were able to learn about some of the critical aspects of effective estate planning.  Anchin partners Richard Baum and Bernie Rappaport discussed their perspectives on numerous estate planning techniques in light of the current economic environment and recent and upcoming changes in relevant legislation. 

During the webinar, participants were able to ask the presenters questions.  Below are their answers.

1. With a Qualified Personal Residence Trust (QPRT), what happens if the residence is sold during the term of the trust?

Richard Baum: The residence can be sold, and if the home was a principal residence, then the grantor can take advantage of the capital gain exclusion.  A replacement residence can be purchased by the trust utilizing the proceeds of sale of the first home.  If additional funds are needed (to purchase a more expensive home) a gift to the trust can be made.  If a less expensive residence is purchased, or if no replacement property is acquired, then the cash in the trust is annuitized and paid out to the grantor over the remaining term of the trust.

2. On a sale to a grantor trust, what is the preferred term of the note?

Bernie Rappaport: The term of the note (and this is true for any intra-family sale) should not be longer than the life expectancy of the seller.  What you can do is make the amortization of the principal longer than the term.  So you can have a 10-year note using 30-year amortization if that is what you need with regard to cash flow.

3.  With regard to a Grantor Retained Annuity Trust (GRAT), how often does the annuity have to be paid? What happens if there’s not enough cash to pay the annuity?

Berne Rappaport: The annuity can be paid monthly, quarterly, or annually.  In fact, the IRS gives you 105 days after the anniversary date of the creation of the trust to make the first annuity payment.  With regard to insufficient cash, the annuity will have to be paid out in kind, which means the assets will have to be valued in order to make the annuity payment. 

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"The Perfect Storm for Estate Planning" Copyright © 2009 Anchin Block & Anchin LLP  "The Perfect Storm for Estate Planning" was produced by Anchin, Block & Anchin LLP, Accountants & Advisors. A service for clients, business associates and staff, the webinar contains material that is general in nature and based on sources which are believed to be authoritative. Specific applications would require consideration of all facts and circumstances by qualified professionals. The firm will be pleased to provide additional details upon request. No part of this presentation may be reproduced or utilized in any form or by any means without written permission from Anchin, Block & Anchin LLP.

U.S. Treasury Circular 230 Disclosure: If any tax advice is contained in this communication or attachments, it is not intended or written to be used, and cannot be used, for the purpose of avoiding tax related penalties under federal, state, or local law.

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