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Estate Planning Overview

Troutman Sanders’ estate planning and administration practice represents individuals, estates, and fiduciaries with assets ranging from about $5 million to over $1 billion, including both U.S. citizens and estates and non-citizens resident in the U.S. and overseas. We consider handling family matters as important as any corporate representation we undertake, and we offer services designated to optimize the preservation of a family’s accumulated wealth and reach philanthropic goals. We offer these services to individuals, fiduciaries of individuals’ estates, and banks and other fiduciaries that work with individuals. We also advise charitable organizations and litigate estate and gift-related issues.

At Troutman Sanders, our estate planning practice helps clients define their wealth transfer objectives in light of the relevant legal and tax rules and develop and implement an estate plan to accomplish their objectives. We are committed to informing clients of the options available to them, helping clients choose among these options and ensuring that clients understand their estate plans and the practical impact of those plans on their beneficiaries. As part of this process, we routinely work with clients to establish private foundations, or otherwise meet their charitable goals. In addition to estate planning, we regularly counsel and represent personal representatives and trustees in all phases of the administration of estates and trusts, including preparation of the estate tax return, consideration of disclaimers, and other post-mortem tax planning that may substantially reduce the tax burden on a family.

We also advise institutional clients, including bank clients and similar fiduciaries, regarding federal, state, and international tax issues, will construction (including issuance of legal opinions), and trust reformation for tax and non-tax purposes. In addition, we often work closely with others in the tax group to advise charitable organization clients—including large and small private foundations, supporting organizations, medical research organizations, and single-philanthropist schools—with respect to federal and state tax law, relevant corporate or trust law, and sophisticated endowment investments.

Areas of Focus

Charitable Lead Annuity Trusts

Charitable Remainder Trusts

Credit Shelter Trusts

Estate Administration

Estate Planning for Business Owners and Entrepreneurs

Estate Planning for Non-U.S. Citizens

Estate Tax Returns

Family Office Services

Generation-Skipping Transfer Tax/Dynasty Trusts

Gift Tax Returns

Gifts to Children

Grantor Retained Annuity Trusts

Life Insurance Trusts

Limited Liability Companies

 Living Wills

Planning for Same-Sex Couples and Domestic Partners

 Powers of Attorney

Private Foundations and Public Charities

 QTIP Trusts

Qualified Personal Residence Trust

 Revocable Trusts

Sale to Grantor Trusts

 Special Needs Trusts

 Trusts

 Wills

 

Estate Planning

Charitable Lead Annuity Trusts

A charitable lead annuity trust (CLAT) is a trust that provides an annual payment to charity, and then after a term of years the remainder of the assets pass to descendants or trusts for descendants. The remainder interest is a current gift, but is valued considering that the beneficiaries will not receive the assets until some point in the future.

Clients usually “zero out” these trusts so that the remainder interest is valued at zero, given U.S. Internal Revenue Service (IRS) assumptions. This is done by increasing the annual payment to charity. Then, if the assets appreciate to a greater extent than the IRS expected, the assets pass to children or trusts for the children gift tax-free.

Troutman Sanders frequently drafts wills with CLATs that drastically reduce or eliminate estate tax in cases where the client has a charitable intent and does not mind having his descendants wait several years before receiving certain assets.

Charitable Remainder Trusts

A charitable remainder trust (CRT) is a trust that provides the grantor and/or another person with annual payments for life or a term of years, with the remainder passing to charity. Clients receive an income tax charitable deduction for the remainder interest that passes to charity. Clients usually transfer appreciated property to these trusts, because the sale of the property within the trust is not subject to immediate capital gain.

Credit Shelter Trusts

Almost every married client whose estate value exceeds the amount that one can pass free of estate tax (“applicable exclusion amount”) benefits from the use of a credit shelter trust, also known as a by-pass or family trust. While a married couple could avoid estate tax completely at the death of the first spouse simply by transferring property to the surviving spouse and using the marital deduction to shield that transfer from tax, a credit shelter trust can provide similar benefits to the surviving spouse while attaining significant estate tax savings.

Clients use a credit shelter trust to ensure utilization of both spouses’ applicable exclusion amounts while still allocating the benefits of the trust property to the surviving spouse during her lifetime. Upon the death of the first spouse, that spouse would fund the credit shelter trust through his will (or revocable trust) to the extent of his remaining applicable exclusion amount available, with all other assets usually distributed to the surviving spouse. The surviving spouse usually is the primary beneficiary of the credit shelter trust, and can receive trust income or principal to maintain her standard of living (children can also be beneficiaries of the trust). The surviving spouse is also usually the trustee of the credit shelter trust. Still, because the first decedent bequests assets to the credit shelter trust rather than outright to the surviving spouse, the first spouses’ applicable exclusion amount applies to the trust. For this reason the funds in the trust can pass tax-free to the couple’s children upon the death of the surviving spouse—all without impacting the surviving spouse’s remaining applicable exclusion amount.

Estate Planning for Business Owners and Entrepreneurs

Many clients are owners of closely-held businesses who have special succession planning issues. Firm lawyers help these clients understand the potential impact of estate taxes on their businesses and devise plans to preserve the value of their business interests and provide for an orderly management transition. We work with our clients to develop appropriate stockholder and buy-sell agreements, life insurance, and other tax advantaged funding mechanisms, and advise clients about structuring and implementing executive compensation and key employee agreements.

Entrepreneurs often fail to consider wealth transfer taxes during the early stages of a new business, yet owners of emerging businesses who recognize the larger-term implications of those taxes for their families and businesses have opportunities to engage in especially effective estate planning. With combined federal and state wealth transfer tax rates as high as 50% or more, these transfer taxes may, someday, cost a business owner’s descendants millions of dollars in taxes that might have been avoided through careful, early planning – the earlier, the better. We also work with clients to help them organize their business holdings such that they may qualify for favorable deferral of estate taxes, pursuant to specific legislative relief that may be available to owners of illiquid small businesses.

Estate Planning for Non-U.S. Citizens

U.S. citizens and non-U.S. citizens who are U.S. residents are limited in what they can give to a non-citizen spouse free of estate tax. We have created qualified domestic trusts to preserve estate tax deferral when U.S. property passes to a non-citizen spouse, and we regularly provide advice on the effects of the various U.S. estate and gift tax treaties in effect with countries around the world and on the U.S. taxation of foreign citizens’ U.S. holdings and U.S. citizens’ holdings worldwide.

For non-U.S. citizen clients who are not U.S. residents, we design and implement offshore trust and corporate structures and work extensively with local counsel in several of the most prominent offshore jurisdictions. During a client’s lifetime, these structures can facilitate centralized management of and access to worldwide assets, reduce filing obligations that might otherwise accompany international holdings and in many cases provide significant savings in both income and gift taxes. At a client’s death, these structures can serve to preserve wealth for future generations on the terms specified by the client, through minimizing or eliminating death tax liabilities and avoiding forced heirship rules, and streamline the administration of the client’s estate by minimizing the burdensome filing obligations and uncertainty associated with multi-jurisdictional, international estate administration. Representative clients include international investors, business persons, and royal families with multi-jurisdictional assets in some cases exceeding several billion dollars.

We also help non-U.S. citizens as they may consider making gifts to family members who may reside in the U.S., working to ensure that the given assets remain forever outside the ambit of the U.S. estate and gift tax regime. And for individuals who are presently considered U.S. persons for income tax purposes, we help to navigate the complex Exit Tax rules applicable in the event that they cease to be treated as U.S. persons for income tax purposes, or are considering expatriation.

Family Office Services

Troutman Sanders offers a wide range of services individually tailored to assist clients in maintaining their independence and accomplishing their personal objectives. The firm’s attorneys are an important part of a client’s team of advisors. Our family office services principally provide active maintenance of a client’s estate and tax planning, working closely with trustees, accountants and financial advisors to ensure that ongoing reporting and filing obligations are met, that estate planning documents remains current, and that all relevant persons and advisors are working towards the same goals.

Generation-Skipping Transfer/Tax Dynasty Trusts

The Internal Revenue Code imposes a generation-skipping transfer (GST) tax – a tax in addition to the gift and estate tax – at the highest estate tax rate on the transfer of assets to persons more than a generation below the transferor. U.S. Congress provides each taxpayer with an exemption to the GST tax equal to the federal estate tax exemption amount, which is presently $2 million dollars.

If a client allocates his GST tax exemption to a trust (even a trust that benefits children with no grandchildren yet born), the assets (and their appreciation) may pass freely from generation to generation with no estate, gift, or GST tax effects, so long as the assets remain in a properly structured trust (a “GST trust”, also referred to as a “dynasty trust”). A GST trust typically benefits a client’s child as the primary beneficiary, with the child’s children as possible beneficiaries during the child’s lifetime. Upon the child’s death, the assets can pass to similar GST trusts to benefit the child’s descendants. Maryland, Virginia, and the District of Columbia, as well as many other jurisdictions, now allow taxpayers to waive the rule against perpetuities (a state law that limits the duration of a trust), meaning GST trust terms can provide that the assets remain in trust so long as a client has living descendants, and every generation level may access the assets transfer tax free – regardless of how much the trust assets have increased in value.

During a client’s lifetime, a client is somewhat limited to funding a GST trust because the federal gift tax exemption is limited to $1 million. However, there are a variety of techniques that can allow a client to leverage the gift tax exemption, resulting in significant post-gift appreciation passing to the GST trust and protected from GST and estate tax (and creditors) for generations.

Gift Tax Returns

We routinely file gift tax returns for clients who have made taxable gifts during the year, and often allocate generation skipping transfer tax exemption if the client has made gifts to dynasty trusts.

Gifts to Children

Clients usually wish to make gifts to younger generation family members as a key element of their estate plan. If the recipient of the gift is an adult, clients often make direct gifts to the recipient, outright and free of trust. Still, even for adult recipients, many clients prefer to make large gifts through the use of trusts.

If the recipient of the gift is a minor (under age 18), clients may use either of two available vehicles to make indirect gifts to the minor yet still qualify such indirect gifts for the annual exclusion: a custodianship under the Uniform Transfers to Minors Act or a trust drafted to qualify for the annual gift tax exclusion.

The main advantage of a custodianship is its simplicity – it requires no trust agreement. While simple, in many states (such as the District of Columbia) the custodianship generally will terminate on the child’s 18th birthday; other states allow custodianships until age 21 (such as Virginia). Most clients believe that outright ownership of property at the age of 18, or even at 21, could adversely impact both the child’s development and the property. In contrast to a custodianship, a trust specially drafted to qualify for the gift tax annual exclusion can ensure that a trustee manages the funds for the child until the child reaches a “target” age.

Section 529 plans provide an additional method of transferring assets to children for the purpose of that child’s education. Section 529 plans are tax favored vehicles administered by the states (although a taxpayer needn’t be a resident to utilize a particular state’s plan). Under the rules pertaining to Section 529 plans, the donor retains control over distributions from the account and removes the assets from his estate, yet the accumulation in the account avoids income taxation if the donor uses the money for qualified education expenses. No phase out provisions apply to Section 529 so donors of any income level may utilize Section 529 plans. If a donor uses his own state’s plan, he can usually receive some state income tax deduction for the contribution.

Grantor Retained Annuity Trusts

A grantor retained annuity trust (GRAT) can provide a favorable means of removing rapidly appreciating property from a client’s estate. Under a typical GRAT arrangement, the client would make a gift to a trust, which would provide the client an annuity interest for a term of years, with the balance payable thereafter to (or retained in further trust for) the client’s children. Since the gift tax value of what the client gives to the children gets reduced by the value of the retained annuity, the use of a GRAT “leverages” a client’s gift tax exemption.

Clients often “zero-out” a GRAT, meaning they retain an annuity that is high enough to cause the value of the remainder interest to equal zero, using the U.S. Internal Revenue Service (IRS) assumed interest rates. If the assets in the trust increase in value at a higher rate than the rate assumed by the IRS, the excess at the end of the term of years passes to the client’s beneficiaries tax free—and without using the client’s gift tax exemption. If the grantor fails to survive to the end of the annuity term, the full fair market value of the trust estate at the date of death is included in the grantor’s estate for federal estate tax purposes. However, the costs to establish this trust are very low compared to its possible benefit.

Life Insurance Trusts

Life insurance proceeds are taxable in the insured’s estate if the insured owns or controls the life insurance before his death. To avoid this inclusion, Troutman Sanders designs irrevocable life insurance trusts to be the owner and beneficiary of a client’s life insurance policies. If the trust either initially purchases the insurance or if the insured transfers an existing policy to the trust and survives this transfer by three years, the insurance death benefits will escape estate tax.

The transfer of a life insurance policy to a trust is a gift, valued at the policy’s current value (usually cash surrender value and unexpired premiums). Annual premium payments are also gifts to the trust. Nevertheless, a properly drafted irrevocable life insurance trust can qualify some or all of these gifts for the annual exclusion from gift tax. Thus, for little or no gift tax consequences, a client can avoid estate tax with respect to the life insurance proceeds.

Limited Liability Companies

For many clients, limited liability companies (LLCs) provide limited liability for risky investments and an attractive means of allowing family members to participate in family investments (including access to investment vehicles otherwise unavailable at lower asset levels). If an LLC meets a family’s other objectives, substantial tax savings can be a significant by-product of LLC planning. An LLC is in many ways similar to a partnership, but unlike a partnership no one has individual liability for LLC debts. All LLC income and deductions “flow through” to its members for income tax purposes.

In one common family LLC transaction for married clients, usually one spouse retains voting LLC interests and the other spouse acts as the LLC’s manager. The client sells or gifts non-voting LLC interests, typically to younger generation family members (or to trusts for them). Although the non-voting LLC members have ownership interests in the LLC, they enjoy no voting or management participation rights by virtue of this ownership. As a result, a significant portion of the value of the LLC assets resides with the younger generation while the older generation looks after the investments – an uncommon result in the context of the estate and gift taxes.

The tax advantage clients may realize through the use of family LLCs derives from the minority interest discount and the lack of marketability discount applicable to LLC interests. The minority interest discount adjusts the value of the transferred LLC interest to reflect factors such as the lack of control and voting power. The lack of marketability discount adjusts the value of the transferred LLC interest to reflect a narrower than usual range of prospective purchasers. For those discounts to be applicable for transfer tax purposes, the LLC must have a business purpose.

Properly drafted transfers of LLC interests to younger generation family members can qualify the gifts for the gift tax annual exclusion. A client may also make tax free transfers of LLC interest (in excess of the annual exclusion amount) by using all or part of his applicable exclusion amount, usually to trusts for the younger generation.

Living Wills

Troutman Sanders recommends that all of our clients have an advance medical directive. An advance medical directive constitutes a so-called “living will,” directing that the client be permitted to die without medical intervention if, in the opinion of two physicians, the client’s death is imminent or if the client is in a persistent vegetative state with no chance of recovery. An advance medical directive also serves as a health care power of attorney, appointing one or more persons, with one or more successors, to make health care decisions for a client if that client becomes unable to do so for himself.

Powers of Attorney

An important part of estate planning involves anticipating the possibility that a client could become incompetent to handle his financial and health care decision making. Troutman Sanders recommends that clients have a durable power of attorney, a legal document naming one or more persons, with one or more successors, to handle a client’s property on the client’s behalf if and, if a client wishes, not until the client becomes incompetent to handle this property himself. To establish incompetence, powers of attorney usually require the written opinion of one or two physicians.

Private Foundations and Public Charities

Persons of substantial wealth sometimes choose to create—either during lifetime or at death—a private charitable foundation, often providing to their children, as managers of the foundation, a role in the philanthropic community. The Internal Revenue Code also provides income tax deductions for many charitable gifts—including those to a private foundation—subject to certain limitations. A public charity can create larger tax benefits for some clients, but it is more challenging for an organization to obtain public charity status than private foundation status.

We enjoy working with clients to create organizations that will make a difference in this world and carry out the client’s charitable goals and ideals.

QTIP Trusts

A taxpayer may make unlimited tax free gifts or death time transfers to a spouse if the transfer qualifies for the marital deduction.

If a transfer to a spouse is not outright (i.e., free of trust with no restrictions or strings attached), it will only qualify for the marital deduction if it is held in a QTIP (qualified terminable interest property) trust. Under the terms of a QTIP trust, the trustee must distribute all trust income to the spouse and the spouse must be the only beneficiary of trust principal (if principal can be used at all) during the spouse’s lifetime. At the surviving spouse’s death, the trustee distributes trust principal as the grantor spouse’s will directed. The decedent’s personal representative can elect for part or all of the QTIP trust to qualify for the marital deduction. The full value of the portion of the trust subject to the election is taxed as part of the estate of the surviving spouse at the time of the surviving spouse’s death.

Personal reasons, not tax reasons, drive the decision of whether to create a QTIP trust or pass assets outright to a spouse. A QTIP trust can benefit a client who wants to guarantee that assets remaining at the surviving spouse’s death pass to the client’s descendants. Also, in most states, a surviving spouse who remarries would not need a premarital agreement with respect to the QTIP assets because these assets cannot become marital property with respect to the new spouse.

Qualified Personal Residence Trust

Clients who own valuable residences, especially clients who own such residences in regions with appreciating real estate values, can benefit significantly from the use of a qualified personal residence trust (QPRT). Under this arrangement, a client transfers his home or vacation residence to the QPRT for a term of years. The client retains the right to live in the transferred house for the duration of the QPRT term and designates remainder beneficiaries to own the house upon expiration of the QPRT term. The client, the client’s spouse, or the client’s dependants must occupy the residence during the QPRT term. The Internal Revenue Code permits a taxpayer to claim up to two personal residences for the purpose of QPRT transactions.

QPRTs provide two estate or gift tax benefits to the client who survives the term. First, the client removes future appreciation of the residence from his estate, achieving an estate freeze with respect to the residence. Second, the remainder interest in the QPRT, which is a gift for gift tax purposes, is reduced from the value of the residence to reflect the fact that the remainder beneficiaries do not receive the residence immediately.

One drawback to a QPRT is that the remainder beneficiaries do not receive a step-up in basis of the residence upon the death of the former owner. For this reason, clients may only want to use a QPRT for a second home that is intended to remain in the family. Also, the client loses title to the residence as a result of the QPRT transaction, although the U.S. Internal Revenue Service (IRS) permits donors and remainder beneficiaries to enter into a rental agreement under which the remainder beneficiaries rent the residence to the client for a fair market value rent upon termination of the trust, thereby assuring the client the right to indefinitely continue living in the residence.

Revocable Trusts

Clients often use revocable trusts in their estate planning to avoid probate, provide privacy, and ease administration of their assets upon their incapacity or death. While a client lives, he has complete control over any assets titled in his revocable trust. During life, a revocable trust can provide a means for managing his property and planning for his possible incompetence. Upon a client’s death, a revocable trust has a similar effect as a will – it directs the holding and distribution of assets. However, any assets titled in a revocable trust avoid probate. Usually, a client with a revocable trust will also have a pour-over will, which is a simple will stating that any assets owned by the decedent outright (instead of in the name of his revocable trust) pour over to that trust at death.

Revocable trusts offer no tax advantage over wills; revocable trusts are completely ignored for income, estate, and gift tax purposes. Still, clients often benefit from using revocable trusts because a revocable trust can decrease the costs and delays of probate (which is more important in Virginia and Maryland than in the District of Columbia), minimize court supervision and hassle, and increase privacy for the client’s family.

Sale to Grantor Trusts

Clients with rapidly appreciating property can use a sale to grantor trust to remove the appreciation of that property from their estate. In this technique, a grantor sells property to a trust in exchange for a note. This allows the transfer of property with limited use of the client’s applicable exclusion amount, with all appreciation in excess of the note’s interest rate benefitting the trust. The property sold could be LLC interests.

Prior to the sale, a client will establish a trust (usually a dynasty trust) to benefit his children and other descendants. The client will then transfer at least ten percent of a total “target” amount to the trust. The client would apply his applicable exclusion amount (and usually GST exemption) to this transfer. The client would then sell assets that would comprise the remaining portion of the target amount for a note. The note would pay interest to the client, with a balloon payment of principal at some point in the future. Because the trust is a grantor trust, the client does not recognize gain on the sale, and the interest payments are not taxable to the client.

Under the terms of the note, the trust needn’t make any significant payments to the client until the balloon principal payment becomes due. This delay can provide a significant time period for asset appreciation. If the assets appreciate sufficiently, it is possible that the trust could repay the client for a portion of the note’s value with its gains. Last, so long as the trust is a “grantor” trust, the client remains taxable on all of the trust’s income, including tax on capital gains. Thus, the client in effect makes additional gifts to the trust beneficiaries, without such tax payments “counting” as a gift for gift tax purposes.

There is some debate over the income tax consequences if a client dies with the note outstanding. It is possible, although by no means certain that the sale could be recognized for capital gains purposes at death if the note has not been paid off.

Special Needs Trusts

When a client would like to benefit a disabled child or other family member, we often advise the client to create a special needs trust. Ordinarily, where a person receives disability benefits, any property given to that person could cause that person to lose those benefits. A special needs trust prevents property gifted or inherited from causing a disabled person to lose his governmental benefits. The trustee of the special needs trust can use the trust funds to provide anything to the beneficiary that is not being provided by any public agency, office or department of any state, or of the United States. For example, the trustee could make distributions to the beneficiary for vacations, spending money, small audio-visual equipment, and other entertainment. Because of restrictions in the trust, the property will not count as assets of the disabled person for the purpose of disability benefits.

Trusts

Trusts serve a wide variety of purposes in estate planning because they allow a person to benefit from property without having the responsibility of managing the property. A trust is a legal relationship created either by will (a testamentary trust) or by lifetime agreement (an inter-vivos trust). To create a trust, a grantor (the person giving money or property) creates a trust agreement (a legal document containing the terms of the trust and the parties involved). Under the terms of the trust agreement, the grantor gives money or property to a trustee. A trustee is a person who accepts legal title to the money or property furnished by the grantor but who also, in doing so, accepts a legal duty to invest or manage the trust property for the sole benefit of a beneficiary named by the grantor in the trust agreement. A trustee may charge a fee for this management service. The beneficiary is the person who benefits from the trust property. Under the terms of the trust agreement, the beneficiary may receive the income from the trust property, a portion of the principal (the trust property itself), or both. In some cases, a beneficiary may serve as a trustee or co-trustee.

State law generally provides grantors with great flexibility in creating trust agreements, setting trust terms, funding trusts, and taking active roles in the management of their trusts. However, some of these actions may have adverse tax consequences for the grantor or his estate. In contrast, certain trusts can provide clients with significant tax advantages.

Wills

All clients should have a will. A will is a document that directs the disposition of property owned by the testator (the person making a will) at the testator’s death. In order for a will to have legal effect, the testator must sign the will in the presence of at least two adult witnesses. A testator can revoke or amend his will at any time during his lifetime, unless he becomes incompetent.

A will can only direct the disposition of property actually owned by the testator and held in his sole name at the time of his death. Property titled in joint names with rights of survivorship (such as a typical joint bank or securtities account and real estate held by spouses) passes automatically to the surviving co-owner, without regard to the provisions of the will of the first co-owner to die. Similarly, designation of beneficiary forms signed during the decedent’s lifetime generally determine the recipient of insurance proceeds and IRA, pension, and profit sharing benefits, again without regard to the provisions of the decedent’s will.

A typical will directs specific bequests of cash or other property to named persons and directs a disposition of the residuary estate (all of the property remaining in the estate after payment of the specific bequests, debts, expenses, and taxes). Many wills provide that a trust for the benefit of children or other beneficiaries hold some or all of the residuary estate.

The will names an executor or personal representative, who has a duty to meet the various legal requirements for paying creditors, federal or state death taxes and expenses of administration, and for collecting and distributing the property as directed by the will. If the will distributes any property to a testamentary trust, the will also names a trustee. The will may also name a guardian for any minor children. The guardian provides a home for minor children and in some cases has authority to handle a minor’s property on the minor’s behalf.

If a client has a revocable trust, the client will likely have a “pour-over” will that simply names an executor and directs any assets passing through probate to “pour-over” to the revocable trust.


Estate Administration

Courts, Creditors and Distributions

We routinely assist clients in administering estates in the District of Columbia metropolitan area (including Virginia, Maryland, and the District of Columbia), New York, Georgia, and Florida. We have worked to administer estates in a variety of other jurisdictions as well, including ancillary jurisdictions where clients may own real property.

We will typically petition the relevant court or courts to probate the decedent’s will, prepare required inventories and accounting, address issues that arise regarding a decedent’s will and any applicable trusts, respond to creditor’s claims, and advise on titling and estate or trust distributions. However, our involvement in estate administration varies widely among clients. Some clients prefer us to handle everything involved in the process. Other clients prefer to handle most duties on their own, and only seek our assistance in very limited aspects of the administration process. Most often, the client and we will strike a balance and allocate the various responsibilities based on the efficiency, the client’s ability to handle administration obligations on his or her own, and the client’s budget.

Estate Tax Returns

We prepare a decedent’s estate tax return, due nine months after death. This return determines the decedent’s taxable estate and can allocate the decedent’s remaining unified credit and generation skipping transfer tax exemptions where possible. A state estate tax return would also generally be due at that time. The due dates can be extended for six months.

Working with the client on the preparation of the Estate, Gift and Generation Skipping Transfer Tax Return, including tax planning regarding asset valuations, making various tax elections to maximize the efficient use of all exemptions available, planning for the exercising of certain rights that various persons may have in the estate (including powers of appointment and disclaimers), planning to minimize eventual estate and generation skipping tax at the death of any surviving spouse, and income tax planning involving the funding of estate shares and trusts, is typically the most involved – and often the most valuable – aspect of our work in administering estates. We also work with the family’s accountant to ensure that the decedent’s final income tax return and income tax returns relating to the estate and certain trusts are properly prepared, where we work to maximize the efficiency of deductions, optimize the income tax basis of assets, and plan for timing of income items.

We represent clients before the IRS in estate and gift tax audits and, when necessary, represent clients in Tax Court and other federal courts on matters of significant tax disputes.


Litigating Estate and Trust Issues

Troutman Sanders helps trustees, executors and beneficiaries resolve a broad range of estate and trust issues and disputes, many of which involve complex and sophisticated legal and tax issues. Clients turn to us for representation in trust construction suits, petitions for executor or trustee instructions, substitution of fiduciaries, trust reformation and termination proceedings, breach of fiduciary duty litigation, and will and trust contests. Troutman Sanders has a long history of representing both individual and corporate fiduciaries in such matters, including advising fiduciaries during the course of administering an estate or trust so as to prevent unnecessary litigation and avoid future claims.

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