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Ed Morrow &The Optimal Basis Increase Trust – Basis Planning to Optimize the Step Up in Basis (and Avoid any Step Down in Basis) at the Surviving Spouse’s Death: Are You Wasting Your Clients’ $11+ Million Basis-Increasing Coupon?



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The increasing estate/gift/GST tax exemption, now doubling (for now!) to over $11 million with recent tax reform, has understandably taken the focus for the 99.9% away from estate tax planning. Increasingly, the focus is on reducing potential income taxes. A strategy known as The Optimal Basis Increase Trust can reduce income taxes on families by maximizing the increase in basis at the surviving spouse’s death. This combines the benefits of the typical A-B Trust with the ability to gain a basis step-up for trust assets upon the surviving spouse’s death and eliminate any step down in basis. 

Planners are increasingly “overusing” QTIP trusts to achieve a step up in basis at the second spouse’s death. But, there are often better ways to legitimately use this $11+ million basis increasing coupon without jeopardizing asset protection and prohibiting income tax shifting and modifications - as QTIP trusts unfortunately do. We’ll compare and contrast the risks and rewards to these various techniques with an extensive comparison chart.
 
In his exclusive LISI webinar, Ed Morrow will cover the following topics: 
  • What are the problems in relying on QTIP or General Power of Appointment marital trusts to get a second basis step up?
  • How can you use formula general testamentary powers of appointment to achieve a second step up for bypass trusts, while avoiding a “step down” in basis?
  • Why merely granting a trustee/trust protector the power to add this later could be a disaster!
  • How can you use limited testamentary powers of appointment to achieve the same result by triggering the Delaware Tax Trap?  How should we rework savings clauses to prevent inadvertent triggering but allow the much more common beneficial triggering?
  • How do you dovetail such powers to maximize the GST exclusion?
  • How should you cap powers of appointment to avoid additional federal or state estate tax (and why simple caps should be avoided)?
  • How can such powers be modified to prevent thwarting of the settlor’s estate plan, spousal elective share and/or exposure (depending on the state) to a beneficiary’s estate’s creditors?
  • How can you convert existing SLATs, Bypass Trusts and other Irrevocable Trusts to an “OBIT”?


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Edwin Morrow, J.D., LL.M., MBA, CFP®, CM&AA® is a Regional Wealth Strategist based in Cincinnati, Ohio for U.S. Bank Private Wealth Management, where he concentrates on thought leadership and planning ideas for high net worth clientele in tax, asset protection and estate planning areas.. Ed was previously a Director in Key Private Bank's Family Wealth Advisory Group and prior to that in private law practice working in taxation, probate, estate and business planning. Other experience includes research and writing of legal memoranda for the U.S. District Court of Portland, Oregon as a law clerk.

Ed is a Fellow of the American College of Trust and Estate Counsel (ACTEC) and a Board Certified Specialist (through the Ohio State Bar Assn) in Estate Planning, Trust and Probate Law. He is a Certified Financial Planner (CFP®) professional and a Certified Merger & Acquisition Advisor (CM&AA®). He is also a Non-Public Arbitrator for the Financial Industry Regulatory Authority (FINRA).

Ed is a frequent speaker at CLE/CPE courses on asset protection, tax and financial and estate planning topics, and recently co-authored, with Stephan Leimberg, Paul Hood, Martin Shenkman and Jay Katz, the 18th Edition of The Tools and Techniques of Estate Planning, a 997-page practice-based resource on estate planning.



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