HigH net wortH
he says, it would mark a historic
break from previous trust laws that
have allowed wealthy dynasties to
pass down assets, tax-free, to their
heirs in perpetuity.
Such a change would likely affect
the rules for such trusts going forward, but anything placed in trust
by the end of this year would almost
certainly remain protected, planners
and estate lawyers say.
In particular, this has consequences for clients who want to pass
on family-owned businesses to their
descendants. If those businesses
can’t be shielded from estate taxes
in a trust, they may need to be sold
upon the death of an owner or par-
The combined es Ta Te/gif T Tax
exemp Tion is se T To drop To
$1M
nexT year.
Under the lure of “simplicity,” he
and others say, both planners and clients may fail to understand some of
the critical benefits offered by placing assets in a dynasty trust. These
benefits include protections against
the loss of assets in a divorce or from
creditors, as well as protection from
estate taxes.
Oshins, an estate lawyer at the firm
(and Steve Oshins’ father). The firm
is well-positioned to do this work
because it’s based in Nevada, one of
several states with the most protective laws regarding dynasty trusts.
Trusts set up in Nevada, they
say, will protect assets for 365 years
following the death of a grantor’s
youngest living descendant at the
time a trust is created. (Shenkman,
for example, often asks the Oshins to
set up Nevada trusts for his clients.)
Other states with optimal dynasty
trust laws include Alaska, Delaware
and South Dakota, where trusts may
be set up that last in perpetuity, the
Oshins say.
‘In 30 years of doing this, I’ve never seen this many people of means
trying to plan in such a short time frame.’
ent. Often, say planners, such a sale
is the only way to satisfy tax bills
that can be half of the value of the
business.
HUNTING FOR APPRAISERS
To speed as many privately held businesses and other assets into dynasty
trusts as possible, planners and lawyers are scrambling to find appraisers
still able to asses the values of those
concerns in the remaining weeks of
the year. (See the sidebar on page 48,
Emergency Workarounds, for what
to do if you can’t get a dynasty trust
done this year.)
Even when passing along cash or
liquid assets to heirs, many wealthy
clients don’t understand the risks
entailed with not protecting it in a
trust. “The worst thing is when I hear
a client say, ‘I just want to make a
simple gift to my child,’” Shenkman
says.
“If someone makes a simple gift to
a child who then loses it in a divorce
or loses half of it to estate taxes, that
is a waste,” Shenkman says.
Right now, much of the workload is being caused by the rush
to place assets in protected trusts.
Overworked appraisers are being
stretched to their limits in trying
to value a whole host of difficult-to-appraise assets — from privately
held companies to real estate to
ownership stakes in non-traditional
holdings.
Despite a large staff, Oshins says
he could end up having to turn clients away. “We are getting to the
point where I can take new clients
only when I can do a simple asset
gift,” Oshins says.
Because dynasty trusts are an
Oshins specialty, the firm actually has customized trusts for most
of its regular clients, says Richard
PERSUAdING CLIENTS
Another challenge for planners:
Some clients simply took too long to
understand the urgency of making
changes this year.
In Virginia, many of Tim Lee’s clients are people with assets ranging
from $5 million to $50 million in the
value of companies they founded and
own, he said. If they fail to place those
companies into trusts, their heirs run
the risk of having to sell the companies
to satisfy the roughly 50% estate tax
bills to the IRS, Lee says.
“Most of the people I know who
are in that bucket have two views of
their wealth. One, I need to make my
future comfortable, and two, I need
to know my wealth will be passed
to future generations in a way that
reduces tax liability,” Lee says. “We’ve
had discussions with pretty much all
of our clients about it this year.”
Some of the most difficult clients
