Patricia Quintana-
Perron

As you may have heard, legislative proposals affecting wealth transfer—along with depressed values and favorable interest rates—have made 2009 an ideal year for individuals to transfer assets in a tax-efficient manner. It also has become almost certain that the estate tax will not be eliminated any time in the near future. Several legislative proposals have been referred to committee in 2009, e.g., H.R. 436, H.R. 498, S. 722 and H.R. 2023. Some of these proposals could restrict the use of valuation discounts for transfers between family members or to trusts and place limitations on the use of grantor retained annuity trusts (GRATs) if enacted as law. 

H.R. 436 would eliminate valuation discounts on certain asset transfers between family members or to trusts made after date of enactment. Transfers of interests that generally yield valuation discounts are a common technique used in estate planning to help maximize wealth-transfer potential and minimize transfer tax. Many taxpayers may be considering making such transfers to family members or trusts as the year-end approaches. 

Also under attack are the minimum terms of GRATs. Generally, short-term (two- to three-year) GRATs have been commonly used to transfer assets to trust beneficiaries who benefit from the future appreciation of the underlying asset, thereby shifting wealth to future generations without transfer tax. Current proposed legislation would require that a GRAT entered into after date of enactment employ a term of at least 10 years. 

Taxpayers should evaluate the potential effects of these legislative changes on transfers made after 2009 and may want to consider making transfers before year-end.

Please consult your BKD advisor for further discussion on these matters.