Act now to take advantage of wealth transfer strategies before proposed tax law changes are enacted

By Cathy Shoemaker, CPA, MBA, MST & Jeffrey Brogley, CPA, MT


October 18-24, 2021 is National Estate Planning Awareness Week, adopted in 2008 to help the public understand what estate planning is and why it is such a critical component of financial wellness. This article is the fourth in a series explaining the importance of exploring estate planning strategies in anticipation of expected tax changes that could be enacted under the Biden administration. Be sure to also read our first three articles in the series: Proposed estate tax changes: prepare now to preserve your assets, A good estate plan starts with thorough documentation and Smart estate planning moves for business owners.

Here we go with yet another round of changes to the Biden administration’s proposed tax laws that could be passed, enacted, and effective by the end of 2021. While the bill works its way through Congress, we should keep a close eye on the proposed tax treatment changes for grantor trusts.

Irrevocable trusts that are grantor-like for income tax purposes are effective, tried-and-true life planning tools that tax-efficiently transfer wealth to multiple future generations. Common trusts that fall into this category include:

• GRATs (grantor retained annuity trusts)
• IDITs (intentionally defective irrevocable trusts)
• SLATs (spousal lifetime access trusts)
• ILITs (irrevocable life insurance trusts)

A common planning strategy is for a grantor to sell a closely held business to an IDIT in exchange for an interest-only note that provides income to the grantor. The transaction does not trigger any capital gains taxes (since the grantor is effectively selling the business to himself), yet it removes the value of the trust and any future growth in value of trust assets from the grantor’s estate. However, the grantor pays the trust’s annual income tax, effectively keeping more value in the trust that will be passed on to beneficiaries.

The proposed changes would eliminate the estate and income tax benefits of this plan and many other wealth transfer strategies.

Time is of the essence – start planning today.

Generally, it’s a three- to four-month process to properly draft documents related to establishing and funding an IDIT. Now is the time to talk with your Rehmann advisor for expert guidance on the urgency of dynasty life planning, before legislative changes are enacted that could have significant estate tax implications.

You can learn more about planning opportunities by joining Rehmann’s Empowered Planning series of webinars, including a playback recording of the recent webinar, “Empowered Planning: Your Personal Financial Strategy.”

These complimentary webinars and Q&A sessions are taking place throughout this year and provide expert insight and real-time examples of organizations and individuals who are seeking to build and maintain a strong financial foundation during these changing economic times. Learn more about the series, which is focused on planning ideas to help you move forward confidently, at

Continue checking the Rehmann blog for upcoming articles in our estate planning series.

Published in Wealth Management

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