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Bottling Lightning: Utilizing the Intentionally Defective Grantor Trust to Turbocharge Estate Tax Planning and Protect Assets from Creditors

Bottling Lightning: Utilizing the Intentionally Defective Grantor Trust to Turbocharge Estate Tax Planning and Protect Assets from Creditors


SC Lawyer
(September 4, 2012)

Reprinted with permission from the South Carolina Bar. The article originally appeared in the September 2012 issue of South Carolina Lawyer magazine.

This year's unique federal estate and gift tax environment presents an important tax planning opportunity for the estate planning attorney. Specifically, because the current $5.12 million estate and gift tax exemption is scheduled to dramatically drop to $1 million on January 1, 2013, a substantial number of previously unaffected clients would be subject to estate taxation at death. Therefore, the estate planning practitioner should contemplate advising clients whose net worth exceeds $1 million and who are consequently subject to estate tax liability to consider gifting assets and take advantage of the millions of dollars of lifetime gift tax exemption scheduled to disappear. By employing a specific type of irrevocable trust to accomplish a gifting strategy, clients may additionally protect assets from potential creditors, a significant ancillary benefit for clients with debt or other liability exposure.

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Authors
G. P. Diminich
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