A remainder interest is the interests, rights, assets, etc. left at the end of a preceding interest (sorry, bear with us!). An example can illustrate. Your father establishes a grantor retained annuity trust (“GRAT”) to shift the value of significant family wealth to you at a substantial discount. During the term of the GRAT (called…
A “step-transaction” is a transaction in which various components or steps in the process or matter are consolidated or condensed to arrive at a different single integrated transaction. The theory underlying this doctrine is that a taxpayer, for example, should not be able to arbitrarily break a single transaction into separate parts and achieve a…
To understand a “rolling” GRAT you have to understand what a GRAT is. See that definition, but here’s a quickie. A GRAT is the acronym for Grantor Retained Annuity Trust, a sophisticated estate planning technique used to shift value to the next generation (generally children only, not to further generations such as grandchildren). A GRAT…
First let’s define a grantor trust. This is a trust that is taxed to the grantor (settlor, trustor) who is the person that established the trust. Thus, for example, if you set up a trust that is taxed as a grantor trust, and it earned $5,000 of income, you would report that $5,000 of income…
Section 7520 of the Internal Revenue Code provides for specified interest rates which the Internal Revenue Service publishes monthly. A host of different tax planning techniques and results are required to be calculated using the mandated interest rates under Code Section 7520. These include the periodic annuity payment to be made to the grantor of…
Basis refers to the amount generally used for tax purposes to calculate gain or loss on a sale of an asset. In simple terms it is the price paid for the asset, plus the cost of post acquisition improvements, less depreciation allowed or allowable (if you didn’t claim depreciation you were entitled to, it is…
See also “revocable living trust”. Most trusts that are revocable (can be changed, modified or rescinded), are created during the grantor (the person who establishes the trust, also called trustor or settlor) lifetime (in legal jargon, inter-vivos). These are also referred to as “living trusts” and “loving trusts”. Too often these trusts are boilerplate sold…
An ultra vires act is an act by a corporation that is not permitted. An ultra vires act is an act beyond the power and authority of the corporation as granted under its certificate of incorporation (charter) and the laws of the state of incorporation. An action is ultra vires if the corporation has no…
Laches is an equitable legal doctrine that provides if you don’t exercise your legal rights with reasonable diligence (you sit on your rights) that they will be forfeited. If you have a claim or other legal right, you have to carefully evaluate how long you defer pursuing it to avoid loosing it. Courts at some…
An “agent” is someone who acts on behalf of or represents another person called the “principal”. The principal appoints or designates another to act as his or her agent. That designation can be accomplished in a number of different legal documents and for a myriad of purposes. The relationship can be created verbally, although there…