Ignoramus11754 wrote:
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Chris Fasano wrote:
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Chris, speaking of basis, one more straightforward tax-reduction
technique to keep in mind relates to the step-up rules. There's not only
step-up, there's also "step-down" - basis is reset to the basis on date
of death (or alt valuation date), even if it means a stock you bought at
$40/share is now at $10/share. That means unrealized losses are lost
after death. So for some people it pays to realize those losses before
death, leaving the gain assets in the portfolio. Enough to knock out the
gains for the year and get the $3k/year offset to ordinary income, anyway.

Of course this is a year to year thing and it's unclear what the basis
step-up rules, or estate tax, will be in the year of death - it's
probably all going back on the table sometime in the next couple of years.

-Tad

On Tue, 30 May 2006 08:16:12 -0500, Ignoramus11754
<ignoramus11754[at]NOSPAM.11754.invalid> wrote:

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Yes it's this sort of play I had in mind. For IRS valuation purposes
there's a longer life expectancy then will almost certainly (and
unfortunately) be realized. There must be a way to leverage this for
the family's financial advantage. Perhaps the comment about throwing
a huge party wasn't far off the mark either: I'm thinking about
non-recourse liabilty extinguished at death coupled with a basis
step-up.

What if children gifted low basis property to dad (which dad assumes);
dad dies, and passes the property back to children along (and basis
gets stepped up)? I recall there's a rule about the step-up not
applying where this type of transfer was made "in contemplation of
death," but if death takes place several years after the transfer I
can't see how the IRS would prevail on this one.

I think it's getting a bit too weird and unrealistic now; thank you
all for your replies anyway.

..
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hey, just because the OP gave little info is no reason we
can't all post contradictory replies, argue a bunch, and
call each other names. This is the internet, ya know!

And I think the number has risen to $11k per year, per givee, per giver,
per year.

Actually, for 2006 it's 12K/person.

Since the OP gave very little information in the way of how many heirs,
friends, etc, there's little chance of a specific reply, just guesses.
JOE

"Ignoramus11754" <ignoramus11754[at]NOSPAM.11754.invalid> wrote
in message news:%zXeg.5668$h12.1600[at]fe13.usenetserver.com...
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while this may be true for life insurance, I do not believe
it is true for IRS rules which use the life expectancy (per
standardized tables) for certain valuation purposes (like
the valuation of future interests). Ask a tax/estate
planning pro - the rules have changed since I knew much
about this stuff.

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he could give such gifts to anyone, not just heirs
(heirs-to-be, since he is still living). And he cannot give
$40k to each child, he and his wife must give half to the
child's spouse. And I think the number has risen to $11k
per year, per givee, per giver, per year.

he could also give away an amount up to the unified credit,
without having to pay gift taxes.

And, what is the threshold for death taxes these days? I
don't recall. But under current law, if he could manage to
die in the right year (2010?), there will be no death taxes,
I believe. timing is everything.

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definately. When the greedy bastards say the death tax
affects so few people, because so few people pay any death
taxes, they fail to mention the MILLIONS and MILLIONS of
people who have paid BILLIONS and BILLIONS to set up estate
planning programs, (with millions and millions of extra bank
accounts, brokerage accounts, and annual state and federal
tax returns) thus avoiding the death taxes. These people
are certainly affected by the existance of the death tax.


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On Tue, 30 May 2006 04:02:07 -0500, Chris Fasano <aquariustutor[at]verizon.net> wrote:
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As far as arbitraging his life expectancy, there is not much to
arbitrage. He cannot make some sort of a gamble, such as buying life
insurance, without disclosing pertinent information about his
health. (or else his heirs would not collect). In other forms of
gambling, such as horse racing, one can make a gamble using superior
information, but not so with life insurance. Usually, insurance
contracts do not cover death from illness that existed when contract
was made. (even if it is claimed to be not known)

He could give tax free gifts to his heirs every year. That could
amount to quite a bit if they are married, your client is married, or
there are many people who he would like to get money to without paying
taxes.

Example, say he is married and has three children, all married, and
five grandchildren. Then he can give 40,000 per year to each child,
and 20,000 to each grandchild, tax free. Every year, that would amount
to 120,000 to children and 100,000 to grandchildren, or 220,000 per
year. In five years of gift giving, he could give away $1,100,000, all
tax free, a considerable portion of his wealth.

He could also give them cash in excess of that, on which they could
pay gift tax if they feel like being honest. I think that a good case
is made here to look for a estate planning attorney who is known to
care about his clients (and not just about collecting hourly fees). He
may know a few tricks, the amount in question is not huge and possibly
a lot of games (partnerships, related transactions etc) can be played.

i

On Tue, 30 May 2006 04:02:07 -0500, Chris Fasano
<aquariustutor[at]verizon.net> wrote:

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Personally, I'd begin by throwing a party in my honor somewhere in the
Cayman Islands. Then ask and pay for 25 of my closest friends to
attend.

I say "personally" since we don't know jack about your client. So all
we have to go on is what we would do, which probably has zip to do
with your client. Now, if you were to tell us something about
him/her, for example family situation, personal goals, employment,
charitable interests, etc.... perhaps you'd get something appropriate
to him/her.


-HW "Skip" Weldon
Columbia, SC

Chris Fasano <aquariustutor[at]verizon.net> writes:

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Well, he could always try to spend all the money before he dies. ;-)
Then he won't have any estate to plan for. ;-)

Seriously, I've wondered about, er, "exit strategies" myself. Last
year I went through a serious illness and for a while I thought there
was a good chance I might end up cashing in my chips somewhat early.
(I'm in my mid 40's). Healthwise, things are under control for now,
but the issues were things like, do I continue to plan for the normal
situation that I'm still some years away from retirement and might
still live a long time after that, or for the possibility that I might
need to spend a lot of my assets on medical/hospice care in the
not-too-distant future? About the only thing I concluded was that it
was best not to make any changes at all, but rather to keep working
and socking money away while I'm still able to do so. The only tweak
I made to my asset allocation is that last year I put a little more
money in my taxable account and a little less in my tax-sheltered
retirement accounts.

Anyway, isn't life insurance the traditional bet on an early death?

-Sandra

I have a client whose actuarial life expectancy is about 16 years but
who medically is given five years to live.

He's has about $5 million of liquid assets (stocks, bonds, mutual
funds) with a basis of just about that same amount (invested
"moderate-conservative"). I'm trying to think of some estate and gift
tax planning mechanism to use in his situation that will save death
taxes, and thinking there's some leveraging opportunities here because
of his actual life expectancy versus the tables. But I can't think of
any. Any help on this one?