The Flexibility of Using SLATS for Gift Tax Purposes in a Politically Uncertain Climate; What if the Federal Estate and Gift Tax Exemption Does Not Sunset?

The uncertain political climate brings the ultimate question: “To gift of not to gift”? The Tax Cuts and Jobs Act doubled the estate and gift tax exemption from $5,000,000 to $10,000,000 (index for inflation). That is the good news. The bad news is that these exemption amounts will be cut in half for gifts and deaths occurring on or after January 1, 2026 when these provisions sunset. If these provisions sunset, then gifting is critical to save $7,000,000 in wealth transfer taxes. Gifting on the other hand, provides the donee with a carryover basis meaning the gift comes with an eventual income tax bill.

In this program, we will analyze the benefits and burdens of gifting taking into account a carryover basis vs. step up in basis. Given the uncertainty, any gifting plan including the spousal lifetime access trusts (SLATS) must have the flexibility to allow the grantor to reacquire trust assets in order to obtain a step up in basis pursuant IRC § 675(4) (C). It is important that the gifting trusts be intentionally defective irrevocable grantor trust. These goals can be accomplished through disclaimer provisions but more often through the use of promissory notes in exchange for the assets that were reacquired. We also will discuss the current status of discounts since most cases will involve the gifting /transfer of non-voting corporate shares or non-voting LLC membership interests.

Registration Form: 2024 Fall CPE Registration Form