August 24, 2015

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Potential Limitations on Gift Tax Strategies Coming Soon

Authors:

Mark H. Boscoe
mboscoe@rcalaw.com
303.813.6744

Phil J. Jang
pjang@rcalaw.com
602.440.4861

Valuation discounts have been a significant component of estate planning for many years.  By contributing assets to a family entity and gifting or selling an interest in the entity to family members, you can effectively remove high-value assets from your estate at lower valuations and shield them from the federal gift and estate taxes.  There must be valid business reasons to set up family entities, but valuation discounts can be an important factor in using family entities in your estate plan.

The IRS has challenged, with limited success (on properly created and operated family entities), this powerful tax planning tool for years.  The IRS has recently indicated that it will propose regulations to impose substantial restrictions on the use of valuation discounts within family entities.

If you have previously set up a family entity or may have considered doing so, we recommend you consult with one of our estate planning attorneys in the near future about your particular situation.  It is possible that substantial restrictions limiting the use of valuation discounts within family entities may be in place, in the form of proposed regulations, as early as this Fall.

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