10/04/2012 08:19:00 AM EST
Power to Substitute & End of Year Planning
By: David R. Schoenhaar, Esq.*
If you are currently planning for clients to use the
historically high gift tax exemption amount before the end of the year, you are
becoming acutely aware that time is running out. Whether it is the appraisal
companies refusing to take new business or the closing in on longer transfer
timeframes needed for more complex assets, the opportunity to transfer assets
is coming to a close.
For clients in this position, there may be a solution to "buy
some time." The power to substitute property of an equivalent value by the
Grantor pursuant to Section 675(4)(c) of the Code, that is so commonly included
in trusts to achieve grantor trust
status, can be used to achieve end of year planning. This provision can be
extremely helpful for those who have easily transferable assets (cash or
marketable securities) that can be used to fund a gifting trust now and later
substituted with more complex assets that are better suited for gifting purposes
but are not able to be transferred in 2012. Given this additional benefit,
planners who are drafting grantor trusts should consider including a power to
substitute to safeguard against a situation where assets can not be transferred
before the end of the year.
*David R. Schoenhaar, Esq., is a senior associate at
Ruskin Moscou Faltischek, P.C. and is a member of the firm's Trust and Estates
Planning and Litigation Department.
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