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Jun 1, 2011 12:00 PM
When There's a QPRT and GRAT
Consider other issues when the decedent dies during the term of a qualified personal residence trust and a grantor retained annuity trust
At our firm, we're facing an unusual situation concerning a client who died in 2010 during the term of a qualified personal residence trust (QPRT) and a grantor retained annuity trust (GRAT). For about two decades, the decedent lived abroad and during that time, didn't keep comprehensive records of his finances. We and the estate are concerned that the decedent may have made unreported gifts, although no one has any knowledge of such gifts. So, both to avoid estate tax and minimize any gift tax issues, it's likely that the estate will decide to accept carryover basis rather than opt in to the estate tax regime.
Regarding the QPRT, the decedent has no surviving spouse and the residence passes, per the terms of the QPRT, into trusts for his children. Because of the opt out, there will be no estate tax on the residence, but neither will there be a step-up in basis. Most likely, the residence will be sold and the children will face capital gains taxes — but the decision to sell is within their control and is similar to the decisions faced by heirs of other decedents who died in 2010. There's no Kentucky inheritance tax on transfers to children, so state inheritance tax isn't an issue.
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| GSTs | Family Offices |
| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
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