©2019 by Jonathan G. Blattmachr & Daniel J. Scott. All Rights Reserved.
For decades, the primary focus of estate planning lectures and publications was about preserving the maximum value of an estate, primarily through estate tax planning. The emphasis was paying less tax in order to transfer more wealth to future generations using techniques such as irrevocable life insurance trusts, corporate and partnership “freezes,” grantor retained income trusts (GRITs), qualified personal residence trusts (QPRTs), grantor retained annuity trusts (GRATs), installment sales to grantor trusts, (family) limited partnerships (FLPs) and making lifetime gifts under the protection of the gift tax annual exclusion or to avoid transfer tax on gift tax paid. This seemed to make sense for many Americans when the estate and gift tax exemptions hovered around $600,000 or $1,000,000. In some states, the combined state and federal estate tax could exceed 50%. As a result, an individual dying with $1 million in assets could end up leaving her heirs less than $500,000. Virtually all of these arrangements involved changing the nature of what was owned by the time of transfer, whether during lifetime (by sale or gift) or at death. For example, the value of a limited partnership received in exchange of other assets, such as market securities, likely was lower than the value of the assets transferred to the partnership. The adage was: lower the value and thereby lower the tax.