Topics: Inheritance, Tax, Asset Pages: 6 (2042 words) Published: June 4, 2012
FIN 4132: Estate Planning |
Beneficiary Defective Inheritor’s Trust|
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Estate-planning iconoclast Richard Oshins, key founder of the Inheritor's TrustTM concept, has created a “super-charged multi-tasking” trust that utilizes readily available techniques and transforms them into a perfectly innovative and effective arrangement. This ground-breaking approach that has taken estate planning to a whole new level is called a Beneficiary Defective Inheritor’s Trust (BDIT). The BDIT is specially arranged so that you can 1) "freeze" estate asset values for estate tax purposes, 2) "squeeze" value for transfer tax purposes by exchanging minority or non-controlling interests in businesses that are subject to valuation discounts, and 3) "burn" off the trust's income tax strategically all while still maintaining control and access of the trust property. Richard Oshins has undoubtedly created a “triple threat” that is uniquely suited for these difficult economic times and which has numerous advantages over all other available alternatives. What makes the BDIT work is the arrangement of five essential planning opportunities of: 1) Chapter 13- GSTT rules, 2) IRC 678 – beneficiary income tax status, 3) Revenue Ruling 2004-64 – no additional gift on payment of income tax, 4) Revenue Ruling 85-13 – non-recognition of sales to IDIT’s, and 5) Revenue Ruling 93-12 – no family attribution rules for purposes of discounting. Inheritors Trust overview

The chassis for this vehicle (BDIT) is the Inheritor's TrustTM, which Richard Oshins launched in a series of articles in 2003. The Inheritor's TrustTM added an extra dimension to dynasty trusts by moving the starting point for planning to the previous generation, i.e., to assets that have not yet been inherited. There are impressive advantages available when intercepting a gift or an inheritance and directing it into a separate trust before the assets can be received by the client's estate.

Unlike traditional downstream trusts, the Inheritor's Trust looks upstream to take better advantage of assets that the client has not yet inherited. In essence the funds are directed in anticipation of what the client would have done. The client exercises great influence over the funds under the terms of the trust. Yet the assets, having never belonged outright to the client, avoid exposure to debts and liabilities. The other benefits include: ● Even if the inherited assets are relatively small, they can have a major role if they remain in a separate trust that can continue for the trust assets to grow income-tax free for many years and all while remaining out of the reach of “predators” including: creditors, business partners, IRS, a divorcing spouse, and certain family members. ● Having a separate pool of assets to use as "seed money". Wealth-earning opportunities can be shifted to the trust at their inception so that future earnings are kept out of the client's estate. When “seeding” the trust it must come from the donor’s funds and have economic validity i.e. debt-equity ratio or rule of thumb (10% or 9:1). ● Life insurance can provide a source of liquid assets to pay estate taxes or can be an instant asset that is not included in the decedent's taxable estate because it was purchased and owned by a separate irrevocable trust. The Inheritor's Trust is positioned in the same way and can purchase life insurance on the client's life without the proceeds being included in the client's gross estate. However it is important that the BDIT should avoid making the settlor the owner of life insurance or settlor's spouse but can buy it on the client.

●The Inheritor's TrustTM can become the 1% general partner of an...
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