Читать книгу 2012 Estate Planning - Martin Inc. Shenkman - Страница 16

Favorable valuation discounts often provide the leverage that has imbued many estate planning techniques. Valuation discounts, in very simplistic terms, can be illustrated with an example. If a closely held business is worth $1 million, 30 percent of the business is worth less than $300,000 (30% x $1 million) because the owner of such a minority interest generally cannot control distributions to owners or make other important business decisions. Discounts have provided tremendous leverage to many tax-efficient wealth transfers.

There have been a host of proposals over recent years to restrict or eliminate valuation discounts on certain asset transfers among members of a family. If a gift is consummated before any such law changes, the favorable valuation discounts that are currently permitted should be locked in. Once the law changes, these favorable discounts may be lost on future transfers. Discounts can be more important than just adding leverage to a wealth transfer transaction (i.e., getting the biggest bang for the buck out of the donor’s available gift and GST exemptions). For instance, discounts may be critical to the transaction itself being viable in the first place. Discounts can be essential not only for certain estate plans, but for as-set protection as well. Asset protection planning as a separate motivation for 2012 transfers is discussed next.

EXAMPLE: A physician wishes to engage in asset protection planning. She owns interests in a number of real estate limited liability companies (LLCs) where her practice offices are based as well as in several surgical centers. The real estate alone is valued at $7 million. Relying on minority interest discounts on her ownership in the various LLCs, the physician can simply gift the LLC interests to a completed gift DAPT (explained later) without gift tax under the protection of the $5.12 million exemption and remove all future appreciation on this real estate from her estate. Perhaps, more important, the physician can also achieve meaningful asset protection planning. Without the discounts, the physician would have to gift one or more LLC interests to the DAPT and sell the remaining interests for a note in order to avoid gift tax. This would significantly increase the cost and complexity of the transaction and leave the note in her estate.

EXAMPLE: Entrepreneur A owns 50 percent of the interests in a real estate rental entity organized as an LLC. The business is valued at $40 million. Entrepreneur A wishes to gift $5 million worth of the LLC to a dynasty trust for his heirs to use his exemption. He also wishes to sell the balance of his interests in the LLC to the same trust. The goal is to shift all future appreciation in the value of the real estate business away from Entrepreneur A’s estate and to the dynastic trust while “freezing” the value of the business interests subject to the note sale.

Now is a perfect time to engage in this type of transaction because business valuations remain depressed due to the flailing economy, and the interest rate to be paid to Entrepreneur A on the note can be set at a historically low rate. While the LLC has always paid arm’s-length salaries, cash distributions to the members (owners) have been relatively modest compared to the revenues and earnings because most of the profits have historically been reinvested in the form of capital improvements to the real estate. Even with today’s historically low interest rate, the annual distributions that the real estate LLC could realistically make to the trust (as the new owner) would likely be insufficient to enable the trust to make current interest payments on the note. The attorney planning the transaction is of the opinion that interest on the note sale should be paid currently, not accrued, to bolster the likelihood of the IRS respecting the sale transaction. With an aggregate discount estimated by an appraiser at 40 percent, the value of the LLC membership interests sold (and given), the note sale portion of the transaction can be reduced to a level such that the annual distributions from the LLC may well be sufficient for the trust to make current interest payments on the note.

However, if the transaction is not completed in 2012, but in 2013 when these discounts may be restricted or eliminated, the annual distributions from the LLC would never suffice to make current interest payments. Thus, the discounts, apart from providing favorable leverage on the taxable value shifted out of the estate, may also be essential to the viability of the transaction itself.