King & Wood, P.A.

Is Charitable Giving Part of Your Estate Plan?

“When it comes to charitable giving, most donors think of cash—its liquidity and immediate benefits make it a go-to option.”

Legacy gifts and complex assets can be used in charitable giving to create a lasting impact for donors, heirs and the nonprofits they benefit, according to a recent article from Wealth Management, “Unlocking the Power of Complex Assets and Legacy Gifts in Philanthropy.”

Legacy donations, sometimes referred to as planned giving, involve gifting assets to a charity through trusts, wills, or beneficiary designations. These donations can be made during the donor’s lifetime, upon the donor’s passing, gifted all at once, or in a steady stream. Several trusts specifically allow for making donations, with Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs) among the most widely used.

An estate plan incorporating charitable giving should include educating family members about their own role in philanthropy. Creating a tradition of giving and service teaches the importance of compassion and social responsibility as part of the family’s legacy.

Legacy donations are often made through Donor-Advised Funds (DAFs). The estate planning attorney should discuss how donations are made to ensure that they align with the estate plan. Donations can be made annually, based on a percentage of the fund’s year-end balance, or structured according to the donor’s wishes.

Donating illiquid assets may yield greater benefits for a nonprofit than cash gifts. Nevertheless, some charities are reluctant to accept non-cash assets, since they may need to manage the assets and/or liquidate them. The DAF may provide a means of converting assets into cash for charitable giving.

A common gift to nonprofits is real estate property. The nonprofit may not have the money to maintain the property until it is sold, then sell the property. Instead of selling it and paying capital gains taxes (which will reduce the amount of money the charity receives), the donor can gift it to a DAF. The DAF facilitates the transfer, alleviating the nonprofit from the transactional work involved in real estate transactions.

Tax policy has recognized the social benefit of charitable giving for many years, acknowledging that donated assets aren’t income and shouldn’t be taxed. Legacy and complex asset gifts are not taxed as long as they are donated to charities recognized as 501(c)(3) organizations.

There have been some recent attempts to change the tax treatment of gifts, so an estate planning attorney should be consulted to ensure that all charitable giving falls within the current regulations and yields benefits for both donors and charity.

Reference: Wealth Management (Nov. 6, 2024) “Unlocking the Power of Complex Assets and Legacy Gifts in Philanthropy”

Can Estate Planning Reduce Inheritance Taxes?

“Contrary to common belief, estate planning benefits aren’t exclusive to the ultra-wealthy. The mid-affluent—individuals and married couples poised for significant asset growth—should also consider their future tax exposure.”

If not renewed, the expiration of changes in estate and gift taxes from the Tax Cuts and Jobs Act of 2017 (TCJA) on Dec. 31, 2025, will reduce federal estate tax exemptions to $7 million for individuals and $14 million for married couples. A recent article from CPA Practice Advisor, “A Crucial Window for Estate Planning: Preparing for 2026 Changes,” reminds us the IRS has said any benefits used under the current exemption are not subject to any “claw-backs.” In other words, use this tax advantage while you can.

It’s important to note the many benefits of estate planning are not just for wealthy people. The cohort referred to as “mid-affluent”—individuals and couples with or who will have significant assets and growth—should carefully plan for future tax exposure. Someone with $5 million in assets today could see their wealth grow to exceed the future exemption thresholds, making estate planning a vital means of protecting their wealth.

There are several techniques to minimize estate tax consequences, and your estate planning attorney will be able to identify the most appropriate for your unique situation.

Lifetime and Annual Gifting. Making gifts while living transfers wealth to the next generation while minimizing your estate’s tax exposure. Right now, you may gift $18,000 per person, or $36,000 per married couple, to as many people as you wish. Making these gifts annually allows you to reduce your taxable estate and enjoy seeing the recipients benefit from your gifts.

If you’d like to help someone with tuition or medical costs, you may pay any amount you wish without generating gift taxes as long as the payments are made directly to the educational institution or healthcare provider.

Spousal Lifetime Access Trust (SLAT). A SLAT is an irrevocable trust designed to benefit the spouse. Other family members can also be named as beneficiaries. The spouse has access to the income from the trust during their lifetime, and upon the spouse's death, the remainder can be distributed as per the grantor’s wishes.

Grantor Retained Annuity Trusts (GRATs). These trusts are best in a low-interest rate environment. Assets are transferred to the trust, with the right to receive annuity payments for a set period, usually two to ten years. When the grantor dies, assets pass to designated beneficiaries.

Intentionally Defective Grantor Trusts (IDGTs). No, they’re not broken. By creating an “intentionally defective” trust, the grantor splits the income tax responsibility from the estate and gift tax implications. The grantor pays the income taxes, allowing assets in the trust to grow tax-free.

There are more, including Qualified Personal Residence Trusts, Charitable Remainder Trusts, Charitable Lead Trusts, Dynasty Trusts and Irrevocable Life Insurance Trusts.

If you expect the value of your taxable estate to come close to or exceed the future estate tax threshold, now is the time to discuss the various options with your estate planning attorney.

Reference: CPA Practice Advisor (June 13, 2024) “A Crucial Window for Estate Planning: Preparing for 2026 Changes”

What are the Rules for Inheriting an IRA?

“Know what to expect if you inherit an IRA and how to establish a plan for taking distributions.”

Inherited Individual Retirement Accounts (IRAs) are created when the funds in an IRA or employer-sponsored retirement plans are inherited after the original owner dies. The beneficiary may not make any additional contributions to the account and must comply with a series of rules regarding the inherited account or face an expensive tax situation. A recent article from U.S. News & World Report, “What Is the Inherited IRA 10-Year Rule?” explains the basics beneficiaries need to know.

What is the Inherited 10-Year Rule? The rule applies to those who inherit an IRA on or after January 1, 2020. In most situations, all funds must be withdrawn within ten years of the previous owner’s death, but there are exceptions depending on your age and relationship with the deceased. Spouses who inherit an IRA have options, as do beneficiaries who meet certain criteria.

The inherited IRA 10-year rule was part of the SECURE Act. Before then, a non-spouse beneficiary could take required minimum distributions (RMDs) based on the heir’s life expectancy. Following the SECURE Act, funds from an inherited IRA must be withdrawn over ten years. This eliminated the ability of the beneficiary to keep the retirement account funded for the rest of their life and gain the advantages of the long-term tax-free growth of the IRA.

Does the 10-year rule apply to you? The exceptions to the 10-year rule are:

• The IRA owner’s surviving spouse
• The IRA owner’s minor child
• An individual who is not more than 10 years younger than the IRA owner
• A disabled or chronically ill person, as determined by IRS rules.

If a minor child inherits the IRA, the 10-year clock starts ticking once they reach the legal age of adulthood.

Heirs may take the entire amount from the IRA, but it will be taxable as regular income.

For spouses, there are decisions to make. The surviving spouse may open and transfer the assets into an inherited IRA and then withdraw funds during the 10-year timeframe. If the decedent was taking RMDs from a traditional IRA at the time of their passing, the spouse would need to take the RMD during the year of death if it wasn’t already taken. Otherwise, the spouse can wait until they reach the required age to take RMDs from the account.

If funds are taken from your own IRA before 59 ½, there is a 10% penalty plus taxes on the withdrawals. However, a surviving spouse under age 59 ½ could open an inherited IRA and start taking distributions.

There are strategies to optimize the 10-year rule. One strategy is for the owner to name a Charitable Remainder Trust as a beneficiary for your IRA. A CRT is an irrevocable trust that generates an income stream for the beneficiary with the remainder of the assets after the trust term. The trust term can be longer than the 10-year inherited IRA limit, allowing the beneficiary to stretch tax benefits longer.

An estate planning attorney can help you navigate the complex rules about inherited IRAs and determine how to use traditional and Roth IRAs to manage your tax liability.

Reference: U.S. News & World Report (Dec. 18, 2023) “What Is the Inherited IRA 10-Year Rule?”

How Do Qualified Charitable Distributions Work?

“For taxpayers who stress over annual Required Minimum Distributions and are also inclined to charitable giving, Qualified Charitable Distributions or QCDs have been a useful tool to accommodate both relief over federal income tax angst and the desire to donate.”

Qualified Charitable Distributions use the federal tax code to benefit older taxpayers and must take Required Minimum Distributions (RMDs). Recent changes in federal law under the SECURE Act 2.0 present even more opportunities to use QCDs, according to a recent article, “Planning Ahead: Expanding on year-end tax strategies for Qualified Charitable Distributions,” from The Mercury. How does it work?

Required Minimum Distributions for seniors can become a problem since taxpayers above a given age must withdraw specific amounts based on their age from traditional retirement accounts and pay taxes on the withdrawals, regardless of whether they need the money. The reason is obvious: if people weren’t required to take funds out of their accounts, the government would never have the opportunity to generate tax revenue. The QCD lessens the blow of the additional year-end taxes by providing some relief through donations to qualified charities.

Used correctly, the QCD serves two purposes: saving on taxes and benefiting a favorite charity. Charities include any 501(c)(3) entities under the federal tax code. Before using a QCD, ensure the charity you choose is a qualified 501(c)(3). Otherwise, you’ll lose any tax benefits.

Your estate planning attorney can help you understand the process of making a QCD. You’ll need to coordinate with the custodian of the IRA. While some may provide step-by-step information, others require you to coordinate with your estate planning attorney and financial advisor. A reminder—the point of the QCD is that the distribution does not appear in your adjusted gross income and goes directly to the charity.

Usually, taking RMDs adds funds to your taxable income, which can, unfortunately, push you into a higher income tax bracket. It could also limit or eliminate some tax deductions, such as personal exemptions and itemized deductions. There may be increases in taxes on Social Security benefits as well. Whether you want or need to take the RMD, you must take it and include it as taxable income.

A QCD allows individuals required to take RMDs to donate up to $100,000 to one or more qualified charities directly from a taxable IRA without the funds being counted as income.

The RMD age has increased to 73, but the $100,000 will be indexed for inflation. Under SECURE Act 2.0, individuals will be allowed to make a one-time election of up to $50,000 inflation-indexed for QCDs to certain entities, including Charitable Remainder Annuity Trusts, Charitable Remainder Unitrusts and Charitable Gift Annuities.

QCDs cannot be made to donor-advised funds, private foundations and supporting organizations, even though these are often categorized as charities.

It must be noted that the rules concerning QCD are detailed and strict—you’ll want the help of an experienced estate planning attorney.

The QCD must be made by December 31 of the tax year in question.

Reference: The Mercury (Nov. 22, 2023) “Planning Ahead: Expanding on year-end tax strategies for Qualified Charitable Distributions”

Do I Have to Pay Taxes on Trusts?

“Trust distributions might be taxable, with the tax liability potentially varying based on factors, such as the type of trust, the kind of distributions and a beneficiary’s tax bracket.”

Dealing with trusts and the tax implications for those who create them, and their beneficiaries can seem confusing. Nevertheless, with the help of an experienced estate planning attorney, those issues can be managed, according to a recent article, “5 Taxes You Might Owe If You Have a Trust,” from Yahoo! Finance.

Trusts are legal entities used for various estate planning and financial purposes. There are three key roles: the grantor, or the person establishing the trust; the trustee, who manages the trust assets; and the beneficiary, the person or persons who receive assets from the trust.

Trusts work by transferring ownership of assets from the grantor to the trust. By separating the legal ownership, specific instructions in the trust documents can be created regarding using and distributing the assets. The trustee’s job is to manage and administer the trust according to the grantor’s wishes, as written in the trust document.

Trusts offer control, privacy, and tax benefits, so they are widely used in estate planning.

There are two primary types of trusts: revocable and irrevocable. Revocable trusts are adjustable trusts that allow the grantor to make changes or even cancel during their lifetime. They avoid the probate process, which can be time-consuming and expensive, especially if assets are owned in different states. However, the revocable trust doesn’t offer as many tax benefits as the irrevocable trust.

Think of irrevocable trusts as a “locked box.” Once assets are placed in the trust, the trust can’t be changed or ended without the beneficiary’s consent. In some states, irrevocable trusts can be “decanted” or moved into another irrevocable trust, requiring the help of an experienced estate planning attorney. However, irrevocable trusts are not treated as part of the grantor’s taxable estate, making them an ideal strategy for reducing tax liabilities and shielding assets from creditors.

Trust distributions are the assets or income passed from the trust to beneficiaries. They can be in the form of cash, stocks, real estate, or other assets. For instance, if a trust owns a rental property, the monthly rental property generated by the property could be distributed to the trust’s beneficiaries.

Do beneficiaries pay taxes on distributions from the principal of the trust? Not generally. If you receive a distribution from the trust principal, it is not usually considered taxable. However, the trust itself may owe taxes on any income it generates, including interest, dividends, or rental income. The trust typically pays these before distributions are made to beneficiaries.

It gets a little complicated when beneficiaries receive distributions of trust income. In many cases, the income is taxable to the beneficiaries at their own individual tax rates. This can create a sizable tax wallop if you are in your peak earnings years.

There are ways to plan to minimize the tax consequences strategically. One approach is to structure trust distribution with a Charitable Remainder Trust, where income goes to a charity for a set number of years, and the remaining assets are then distributed to beneficiaries. An estate planning attorney will be a valuable resource, so grantors can achieve their goals and beneficiaries aren’t subject to overly burdensome taxes.

Reference: Yahoo! Finance (Sep. 27, 2023) “5 Taxes You Might Owe If You Have a Trust” 

Do I Have to Pay Taxes on Trusts?

“Trust distributions might be taxable, with the tax liability potentially varying based on factors, such as the type of trust, the kind of distributions and a beneficiary’s tax bracket.”

Dealing with trusts and the tax implications for those who create them, and their beneficiaries can seem confusing. Nevertheless, with the help of an experienced estate planning attorney, those issues can be managed, according to a recent article, “5 Taxes You Might Owe If You Have a Trust,” from Yahoo! Finance.

Trusts are legal entities used for various estate planning and financial purposes. There are three key roles: the grantor, or the person establishing the trust; the trustee, who manages the trust assets; and the beneficiary, the person or persons who receive assets from the trust.

Trusts work by transferring ownership of assets from the grantor to the trust. By separating the legal ownership, specific instructions in the trust documents can be created regarding using and distributing the assets. The trustee’s job is to manage and administer the trust according to the grantor’s wishes, as written in the trust document.

Trusts offer control, privacy, and tax benefits, so they are widely used in estate planning.

There are two primary types of trusts: revocable and irrevocable. Revocable trusts are adjustable trusts that allow the grantor to make changes or even cancel during their lifetime. They avoid the probate process, which can be time-consuming and expensive, especially if assets are owned in different states. However, the revocable trust doesn’t offer as many tax benefits as the irrevocable trust.

Think of irrevocable trusts as a “locked box.” Once assets are placed in the trust, the trust can’t be changed or ended without the beneficiary’s consent. In some states, irrevocable trusts can be “decanted” or moved into another irrevocable trust, requiring the help of an experienced estate planning attorney. However, irrevocable trusts are not treated as part of the grantor’s taxable estate, making them an ideal strategy for reducing tax liabilities and shielding assets from creditors.

Trust distributions are the assets or income passed from the trust to beneficiaries. They can be in the form of cash, stocks, real estate, or other assets. For instance, if a trust owns a rental property, the monthly rental property generated by the property could be distributed to the trust’s beneficiaries.

Do beneficiaries pay taxes on distributions from the principal of the trust? Not generally. If you receive a distribution from the trust principal, it is not usually considered taxable. However, the trust itself may owe taxes on any income it generates, including interest, dividends, or rental income. The trust typically pays these before distributions are made to beneficiaries.

It gets a little complicated when beneficiaries receive distributions of trust income. In many cases, the income is taxable to the beneficiaries at their own individual tax rates. This can create a sizable tax wallop if you are in your peak earnings years.

There are ways to plan to minimize the tax consequences strategically. One approach is to structure trust distribution with a Charitable Remainder Trust, where income goes to a charity for a set number of years, and the remaining assets are then distributed to beneficiaries. An estate planning attorney will be a valuable resource, so grantors can achieve their goals and beneficiaries aren’t subject to overly burdensome taxes.

Reference: Yahoo! Finance (Sep. 27, 2023) “5 Taxes You Might Owe If You Have a Trust”

Estate Planning and Tax Planning for Business Owners

“This article will explore key considerations and actionable insights for business owners to reduce their tax burden, protect their assets and facilitate a smooth wealth transition.”

Business owners who want long-term financial success must navigate an intricate web of taxes, estate planning and asset protection. Pre- and post-transactional tax strategies, combined with estate planning, can safeguard assets, optimize tax positions and help strategically pass wealth along to future generations or charitable organizations, as reported in a recent article from Forbes, “Strategic Tax and Estate Planning For Business Owners.”

Pre-transactional tax planning includes reviewing the business entity structure to align it with tax objectives. For example, converting to a Limited Liability Company (LLC) may be a better structure if it is currently a solo proprietorship.

Implementing qualified retirement plans, like 401(k)s and defined benefit plans, gives tax advantages for owners and is attractive to employees. Contributions are typically tax-deductible, offering immediate tax savings.

There are federal, state, and local tax credits and incentives to reduce tax liability, all requiring careful research to be sure they are legitimate tax planning strategies. Overly aggressive practices can lead to audits, penalties, and reputational damage.

After a transaction, shielding assets becomes even more critical. Establishing a limited liability entity, like a Family Limited Partnership (FLP), may be helpful to protect assets.

Remember to keep personal and business assets separate to avoid putting asset protection efforts at risk. Review and update asset protection strategies when there are changes in your personal or business life or new laws that may provide new opportunities.

Developing a succession plan is critical to ensure that the transition of a family business from one to the next. Be honest about family dynamics and individual capabilities. Start early and work with an experienced estate planning attorney to align the succession and tax plan with your overall estate plan.

Philanthropy positively impacts, establishes, or builds on an existing legacy and creates tax advantages. Donating appreciated assets, using charitable trusts, or creating a private foundation can all achieve personal goals while attaining tax benefits.

Estate taxes can erode the value of wealth when transferring it to the next generation. Gifting, trusts, or life insurance are all means of minimizing estate taxes and preserving wealth. Your estate planning attorney will know about estate tax exemption limits and changes coming soon. They will advise you about gifting assets during your lifetime, using annual gift exclusions, and determine if lifetime gifts should be used to generate estate tax benefits.

Reference: Forbes (Sep. 28, 2023) “Strategic Tax and Estate Planning For Business Owners”

Estate Planning and Tax Planning for Business Owners

“This article will explore key considerations and actionable insights for business owners to reduce their tax burden, protect their assets and facilitate a smooth wealth transition.”

Business owners who want long-term financial success must navigate an intricate web of taxes, estate planning and asset protection. Pre- and post-transactional tax strategies, combined with estate planning, can safeguard assets, optimize tax positions and help strategically pass wealth along to future generations or charitable organizations, as reported in a recent article from Forbes, “Strategic Tax and Estate Planning For Business Owners.”

Pre-transactional tax planning includes reviewing the business entity structure to align it with tax objectives. For example, converting to a Limited Liability Company (LLC) may be a better structure if it is currently a solo proprietorship.

Implementing qualified retirement plans, like 401(k)s and defined benefit plans, gives tax advantages for owners and is attractive to employees. Contributions are typically tax-deductible, offering immediate tax savings.

There are federal, state, and local tax credits and incentives to reduce tax liability, all requiring careful research to be sure they are legitimate tax planning strategies. Overly aggressive practices can lead to audits, penalties, and reputational damage.

After a transaction, shielding assets becomes even more critical. Establishing a limited liability entity, like a Family Limited Partnership (FLP), may be helpful to protect assets.

Remember to keep personal and business assets separate to avoid putting asset protection efforts at risk. Review and update asset protection strategies when there are changes in your personal or business life or new laws that may provide new opportunities.

Developing a succession plan is critical to ensure that the transition of a family business from one to the next. Be honest about family dynamics and individual capabilities. Start early and work with an experienced estate planning attorney to align the succession and tax plan with your overall estate plan.

Philanthropy positively impacts, establishes, or builds on an existing legacy and creates tax advantages. Donating appreciated assets, using charitable trusts, or creating a private foundation can all achieve personal goals while attaining tax benefits.

Estate taxes can erode the value of wealth when transferring it to the next generation. Gifting, trusts, or life insurance are all means of minimizing estate taxes and preserving wealth. Your estate planning attorney will know about estate tax exemption limits and changes coming soon. They will advise you about gifting assets during your lifetime, using annual gift exclusions, and determine if lifetime gifts should be used to generate estate tax benefits.

Reference: Forbes (Sep. 28, 2023) “Strategic Tax and Estate Planning For Business Owners”

How Wealthy People Save on Taxes—Can Regular People Do the Same?

“The wealthiest taxpayers have many tools at their disposal to pay less to Uncle Sam. Some tactics, like donating to charity via trusts, might seem far-fetched but are perfectly legal.”

As a direct result of tax cuts made in recent years, Americans can give nearly $13 million in assets without paying any federal estate taxes. Only 0.2% of all tax payers worry about federal estate taxes these days, explains the article “Here are six ways the rich save big on taxes, from putting houses in trusts to guaranteeing inheritance for future generations” from Business Insider. Could some of their tactics work for “regular” people too?

Among these tax avoidance techniques include putting homes and vacation homes in trusts lasting decades and any appreciation in the property’s value doesn’t count towards their taxable estate. Qualified Personal Residence Trusts, or QPRTs, basically freeze the value of real estate properties for tax purposes. The home is placed in the trust, which retains ownership for however many years desired. When the trust ends, the property is transferred out of the taxable estate. The estate only pays the gift tax on the property’s value when the trust was formed—regardless of the appreciation of the home.

Dynasty trusts allow taxpayers to pass wealth to generations who haven’t been born yet and are only subject to the 40% generation-skipping tax once. Florida and Wyoming allow these trusts to last up to 1,000 years, which spans about 40 generations. Heirs don’t own the trust assets but have lifetime rights to the trust’s income and real estate.

Charitable Remainder Trusts (CRTs) can be funded with various assets, from yachts to closely held businesses. Taxpayers put assets in the trust, collect annual payments for as long as they live and get a partial tax break. Only 10% of what remains in the CRT must be donated to a charity to qualify with the IRS.

Taking loans to pay estate taxes is scrutinized by the IRS and has many hoops to jump through. Asset-rich people use this method but are cash-poor and facing a big estate tax bill. The estate can make an upfront deduction on the interest of “Graegin” loans, named after a 1988 Tax Court case. Suppose illiquid assets comprise at least 35% of the estate’s value. In that case, families can defer estate tax for as long as 14 years, paying in installments with interest and effectively taking a loan from the government. However, Graegin loans are prime targets for IRS auditors and can lead to legal battles.

Private-placement life insurance, or PPLI, can pass on assets without incurring any estate tax. A trust is created to own the life insurance policy, which has been created offshore. This strategy is only for the very wealthy, as it usually requires $5 million in upfront premiums and a small army of professionals to set up and administer.

A down market has one silver lining for high-net-worth individuals: it’s an excellent time to create new trusts, as people can transfer depressed assets at a lower tax basis. The Grantor-Retained Annuity Trust (GRAT) pays a fixed annuity during the trust term; any appreciation of the asset’s value is not subject to estate tax.

An experienced estate planning attorney will know which of these strategies might work for your family, along with many others used by “regular” people.

Reference: Business Insider (June 12, 2023) “Here are six ways the rich save big on taxes, from putting houses in trusts to guaranteeing inheritance for future generations”

Tax Scams Involving Charitable Remainder Annuity Trusts

“Part of the agency’s latest annual ‘Dirty Dozen’ scams, these potentially ‘abusive arrangements’ involve charitable remainder annuity trusts and monetized installment sales.”

The IRS has issued a warning about promoters aiming specifically at wealthy taxpayers, advises a recent article, “IRS Warns Of Tax Scams That Target Wealthy,” from Financial Advisor. Charitable Remainder Annuity Trusts (CRATs) are irrevocable trusts that allow individuals to donate assets to charity and draw annual income for life or for a fixed period. A CRAT pays a dollar amount each year, and the IRS examines these trusts to ensure they correctly report trust income and distributions to beneficiaries. Of course, tax documents must also be filed properly.

Some sophisticated scammers boast of the benefits of using CRATs to eliminate ordinary income or capital gain on the sale of the property. However, property with a fair market value over its basis is transferred to the CRAT, the IRS explains, and taxpayers may wrongly claim the transfer of the property to the CRAT, resulting in an increase in basis to fair market value, as if the property had been sold to the trust.

The CRAT then sells the property but needs to recognize the gain due to the claimed step-up in basis.  The CRAT then purchases a single premium immediate annuity with the proceeds from the property sale. This is a misapplication of tax rules. The taxpayer or beneficiary may not treat the remaining portion as an excluding portion representing a return of investment for which no tax is due.

In another scam, abusive monetized installment sales, thieves find taxpayers seeking to defer the recognition of gain at the sale of appreciated property. They facilitate a purported monetized installment sale for the taxpayer for a fee. These sales occur when an intermediary purchase appreciated property from a seller in exchange for an installment note, which typically provides interest payments only, with the principal paid at the end of the term.

The seller gets the larger share of the proceeds but improperly delays recognition of gain on the appreciated property until the final payment on the installment note, often years later.

Anyone who pressures an investor to invest quickly, guarantees high returns or tax-free income, or says they can eliminate taxes using installment sales, trusts, or other means, should be dismissed immediately. Your estate planning attorney is well-versed in how CRATs, LLCs, S Corps, trusts, or charitable donations are used and will steer you and your assets into legal, proper investment strategies.

Reference: Financial Advisor (April 24, 203) “IRS Warns Of Tax Scams That Target Wealthy”