Estate Tax Exemption Sunset 2026: Portability and IDGT Explained

Summary

The video script discusses the impending expiration of Trump-era tax cuts, particularly the halving of the gift and estate tax exemption from $13.61 million to an estimated $7 million after January 1, 2026. It emphasizes the importance of estate planning, with a focus on strategies like portability, community property laws, and the use of trusts to mitigate death taxes. The speaker, a legal expert, also touches on generation-skipping transfer tax and the benefits of an 'A team' approach involving a CPA, financial advisor, and attorney for effective wealth management.

Takeaways

• 📅 On January 1, 2026, the Trump-era tax cuts will expire, significantly impacting estate tax exemptions and rates.
• 💰 Currently, in 2024, the gift and estate tax exemption is $13.61 million, which is expected to be halved to around $7 million in 2026, adjusted for inflation.
• 🔝 The federal estate tax rate is set to increase from 40% to 45% after the expiration of the Trump-era tax cuts.
• ⏰ There is a sense of urgency as the expanded exemption amount is only available until December 31, 2025, prompting estate planning considerations.
• 👨‍💼 The speaker, a partner at Cunningham Legal with 30 years of experience, emphasizes the importance of a multidisciplinary team approach involving CPAs, financial advisors, and attorneys for effective estate planning.
• 💡 Basic estate hygiene, akin to washing hands before eating, is crucial for avoiding death taxes and involves strategies that take time to implement.
• 🔄 The concept of 'cake and frosting' is used to illustrate how gift taxes work with the current exemption levels, with the 'Obama cake' and 'Trump frosting' being distinct layers of exemption that will be affected differently post-2026.
• 🔄 Portability is a key strategy that allows a surviving spouse to inherit the unused estate and gift tax exemption of the deceased spouse, which can save millions in federal estate taxes.
• 🏡 Community property laws in states like California provide significant tax benefits, such as step-up in basis, which can be crucial for estate and tax planning.
• 🔗 The use of trusts, such as Community Property Trusts and Intentionally Defective Grantor Trusts, can be instrumental in managing tax liabilities and creating multigenerational wealth.

Q & A

What is the significance of January 1, 2026, in relation to the tax exemption amount?

January 1, 2026, is significant because it is when the Trump-era tax cuts expire, which means the current gift tax exemption amount of $13.61 million will be reduced, likely to around $7 million after adjustment for inflation.

How does the federal estate tax rate change after January 21, 2026?

After January 21, 2026, the federal estate tax rate, also known as the death tax rate, is expected to increase from 40% to 45%.

What is the role of a certified specialist in state planning trust and probate law?

A certified specialist in state planning trust and probate law, like the speaker, is an expert who advises on legal matters related to estate planning, trusts, and probate, helping clients navigate complex tax and legal issues.

What is the importance of 'basic estate hygiene' in the context of the script?

In the context of the script, 'basic estate hygiene' refers to fundamental estate planning practices that help avoid unnecessary tax burdens and legal complications, similar to the importance of washing hands before eating or delivering a baby.

What is meant by the 'A team' in estate planning?

The 'A team' in estate planning refers to a group of professionals including a CPA, financial adviser, and attorney who collaborate to develop and execute comprehensive estate planning strategies.

Why is it crucial to file for portability in estate planning?

Filing for portability allows a surviving spouse to inherit the unused portion of a deceased spouse's estate and gift tax exemption, which can significantly reduce the estate tax liability.

How does community property status affect estate and gift tax planning?

In community property states, assets included in a spouse's gross estate receive an adjusted cost basis upon the spouse's death, which can help avoid capital gains tax and foster the creation of intergenerational wealth.

What is the purpose of a Community Property Trust in non-community property states?

A Community Property Trust in non-community property states allows couples to utilize a trust structure that provides a full adjusted cost basis upon the death of one spouse, similar to community property rules, to potentially reduce capital gains tax.

How does an 'Intentionally Defective Irrevocable Grantor Trust' (IDGIT) help in estate planning?

An IDGIT allows a person to transfer assets to a trust, avoiding capital gains tax, and pay the income tax liability during their lifetime, which can reduce the taxable estate's value and potentially create multigenerational wealth.

What is the impact of remarriage on portability in estate planning?

Remarriage by a surviving spouse can result in the loss of portability, as the unused estate and gift tax exemption of the deceased spouse may not be inherited by the new spouse.

Outlines

00:00

📉 Tax Exemptions and Estate Planning

The speaker discusses the impending expiration of Trump-era tax cuts, specifically the significant reduction in the gift tax exemption from $13.61 million to an estimated $7 million after January 2026. This change, along with the increase in the federal estate tax rate from 40% to 45%, underscores the urgency for estate planning. The speaker, a partner at Cunningham Legal with 30 years of experience, emphasizes the importance of 'basic estate hygiene' and the role of a coordinated team including a CPA, financial advisor, and attorney. The video also mentions the firm's YouTube channel, which offers over 200 videos on various legal topics in plain English.

05:01

💼 Estate Tax Strategies and Portability

This section delves into strategies to avoid death taxes, with a focus on the concept of 'portability.' Portability allows a surviving spouse to inherit the unused estate and gift tax exemption of the deceased spouse, which can be crucial in saving significant amounts in federal estate taxes. The speaker provides examples to illustrate how portability can be used effectively, especially when the exemption is expected to decrease. The discussion also touches on the importance of filing a timely Form 706 to elect portability and the impact of remarriage on portability. The speaker advises that, regardless of the future of estate tax exemptions, electing portability is a prudent strategy to mitigate potential tax liabilities.

10:02

🏡 Community Property and Estate Tax Benefits

The speaker explores the benefits of community property laws, particularly in California, which can be a powerful tool in estate planning. Upon the death of a spouse, community property receives an adjusted cost basis, potentially eliminating capital gains tax when the asset is sold. The speaker provides practical advice on notifying relevant parties, such as tax preparers and financial advisors, to ensure proper documentation of the changed basis. Additionally, the discussion extends to non-community property states, where strategies like the Community Property Trust can provide similar benefits. The speaker also introduces the concept of an 'intentionally defective irrevocable grantor trust,' which can be a powerful tool for wealth preservation across generations.

15:02

💼 Advanced Estate Planning with Grantor Trusts

In this part, the speaker discusses the use of 'intentionally defective irrevocable grantor trusts' (IDITs) for advanced estate planning. IDITs allow assets to be transferred out of an individual's estate for tax purposes while still being controlled by the grantor. The speaker explains the concept of 'tax burn,' where the grantor pays income tax on the trust's earnings, effectively reducing the estate's taxable value. The potential for asset swapping close to death to obtain an adjusted cost basis is also highlighted. The speaker emphasizes the importance of ongoing care and coordination among the advisory team when using IDITs. The video concludes with a call to action for viewers to subscribe to the firm's YouTube channel for more informative content.

Keywords

💡Estate Tax

Estate tax, also referred to as 'death tax' in the script, is a tax imposed on the transfer of a deceased person's estate to their heirs. The video discusses how the exemption amount for estate tax is set to decrease, which could significantly impact the tax burden on estates. For example, the script mentions that the exemption was $13.61 million in 2024 but is expected to be halved by 2026, potentially leading to higher taxes on larger estates.

💡Gift Tax

Gift tax is a tax on the transfer of property or money while the donor is living. The script explains that there is a gift tax exemption amount, which was significant in 2024, allowing individuals to give substantial amounts without immediate tax implications. However, the video also notes that failing to use the gift tax exemption could result in losing the opportunity to leverage the higher exemption amount before it decreases.

💡Generation-Skipping Transfer Tax

This is a federal tax on property that is given to grandchildren or more remote descendants while the estate is still alive. The video script touches on this tax, indicating that it's an area of concern for estate planning, especially when considering the use of trusts to manage and transfer wealth across generations.

💡Portability

Portability in the context of the video refers to a provision that allows a surviving spouse to use the deceased spouse's unused estate tax exemption. The script emphasizes the importance of filing for portability to maximize tax savings, as it enables the surviving spouse to inherit the deceased's unused exemption amount, thus avoiding higher estate taxes.

💡Community Property

Community property laws determine how property acquired during a marriage is owned and divided upon divorce or death. The video discusses the impact of community property laws on estate tax, especially in states like California, where all community property included in a spouse's estate receives an adjusted cost basis upon death, which can significantly reduce capital gains tax liabilities.

💡Intentionally Defective Irrevocable Grantor Trust (IDGIT)

An IDGIT is a trust where the grantor retains certain powers over the trust, causing it to be treated as a grantor trust for income tax purposes. The video script explains how this trust can be used to shift wealth and reduce estate tax liabilities by transferring assets to the trust, which grows tax-free, and then swapping out low-basis assets for cash before death to reset the cost basis and avoid capital gains tax.

💡Adjusted Cost Basis

The adjusted cost basis is the original value of an asset for tax purposes, adjusted for various factors such as depreciation and improvements. The video script mentions that upon the death of a spouse, the surviving spouse can inherit an adjusted cost basis for inherited assets, which can help to avoid capital gains tax when those assets are later sold.

💡Tax Burn

Tax burn refers to the process of paying income tax on trust earnings while the grantor is alive, which effectively reduces the value of the estate for estate tax purposes. The video script uses this term to illustrate how an IDGIT can be used strategically to minimize the overall tax burden on an estate.

💡Inheritance Tax

Inheritance tax is a tax levied on the act of passing on property, money, or other assets from one generation to another. The video script points out that some states have inheritance taxes, which are separate from estate taxes and must be considered when planning an estate to avoid unexpected tax liabilities.

💡Trust

A trust is a legal arrangement where one person, the trustee, holds title to property under the legal name for the benefit of another, the beneficiary. The video script discusses various types of trusts, such as disclaimer trusts and community property trusts, which are used in estate planning to manage assets, reduce tax liabilities, and provide for beneficiaries in a controlled manner.

Highlights

On January 1, 2026, the Trump-era tax cuts will expire, significantly impacting estate tax exemptions.

Currently, the gift tax exemption is at $13.61 million, a substantial increase from the $600,000 in the 90s.

Post-2026, the exemption is expected to be halved to around $7 million, adjusted for inflation.

The federal estate tax rate is also set to rise from 40% to 45%, adding urgency to estate planning.

Cunningham Legal, with 30 years of experience, offers expertise in estate planning, trust, and probate law.

Their YouTube channel provides over 200 videos explaining complex legal topics in plain English.

Estate planning is compared to 'basic estate hygiene', emphasizing the importance of proactive measures.

A team approach involving a CPA, financial advisor, and attorney is recommended for effective estate planning.

The concept of 'cake and frosting' is used to explain how gift taxes work with different tax exemptions.

Portability allows a surviving spouse to inherit the unused estate and gift tax exemption of the deceased.

Filing for portability is crucial to maximize tax savings and requires a timely filed form 706.

Community property laws in states like California provide significant benefits for married couples.

Non-community property states can utilize Community Property Trusts to achieve similar benefits.

Intentionally Defective Grantor Trusts are highlighted as a powerful tool for wealth transfer and tax planning.

The importance of communication among the A Team (attorney, financial advisor, CPA) for effective strategy implementation is emphasized.

Cunningham Legal's approach to explaining complex legal topics in layman's terms is praised for its clarity.

Transcripts

in January 1 2026 the uh Trump era tax

cuts expire so what that means

translated is uh right now in 2024

there's a gift in aate tax exemption

amount of $13.61 million which was is

way more than the $600,000 when I

started practicing in the 90s and on

January 21 2026 that number is basically

going to get cut in half and I'll

explain how that works and adjusted for

inflation uh we're kind of thinking that

the exemption will land somewhere around

7 thou or $7 million in

2026 also the death tax rate is going up

the Federal rate's going up to 45% from

40 so the clock is ticking and um

something to think about so I'm a

partner at Cunningham legal I've got 30

years experience we have offices

throughout uh California I'm certified

specialist in state planning trust and

probate law a real estate broker

Securities and insurance licensed and a

pilot we also have a YouTube channel so

you can check that out it's Cunningham

legal you just type in YouTube

Cunningham legal we have over 200 videos

and we cover a lot of these topics and

you know whether you're an attorney or

not an attorney maybe a professional

fiduciary we cover these topics in plain

English so it's a really good way to

understand them and also to um you know

just a different way to talk to your

clients about them

[Music]

so death taxes really uh fundamentally

they're they're optional right you can

or your clients can avoid death taxes

but it takes time it takes what What I

Call basic estate hygiene that's kind of

you know washing your hands before you

eat uh or you know deliver a baby that's

the old example from uh you know the

people who would go from working on

kabers to delivering babies when they

wash their hands they went wow infant

mortality went down 80% but this is good

habits this what we're talking about and

we're talking about an A team we're not

talking about the 80s a team we're

talking about the CPA financial adviser

and um and attorney so typically that's

going to be an experienced trust in a

state attorney one or more trust in

state attorneys as you'll see sometimes

it requires more than one attorney but

it really is a group effort this is not

done in isolation there are way too many

moving Parts when we get into these

complex strategies so what I'm going to

do is we're going to talk about income a

little bit of everything here income tax

capital gains tax death tax we're going

to talk about the federal estate tax I'm

when to use the term death tax I'm not

using it in a political sense it's

because some states have a death tax now

you you know if you're in California and

that's California here State death tax

not in California and State inheritance

tax none in California many states do

have uh estate taxes which is on the

estate level so is the decedent a

resident of a particular State there's

an extra tax did the decedent own

property located in a state that has an

estate tax and that may be subject to

tax also the person inheriting are there

inheritance taxes in Maryland and

Pennsylvania leap to my mind those are

states that have inheritance taxes so

it's something to be mindful of when

you're counseling a client um is there

an inheritance tax in the state in which

that child uh typically the child is

residing we're going to cover gift tax

generation skipping transfer tax we're

really not going to cover property tax

too much if you're in California very

important even if you're an attorney or

a fiduciary outside of California and

you're working on a on a on a matter

that has real property in California

best practice is check in with a lawyer

who is knowledgeable about California

property taxation because it is a

Minefield and it's a you know for the

uny and there A lot's been written on

California propert tax and um it's a

very Arcane cryptic uh system and you

just don't want to step in it so

December 31 2025 is the big date right

that is the the the last date that we

have this expanded exemption amount and

I like to think of the exemption amount

as a two-tiered cake so I am mentioning

presidents not because I am talking

about one party or another I'm just

giving you um a reference point other

than a date on what these things are so

in 2011 we got a $5 million

death tax exemption right state federal

estate tax exemption and that's a cake

that's the obam cake in 2017 we got

another layer of of benefit which is the

frosting so you've got the cake which is

five million and the frosting on top

which is another 5 million now adjusted

for inflation this is how we get to the

6 U 805 million and or the 13.1 million

when you add these two together now the

reason I talk about a cake and frosting

is when you make a gift you don't take

like a slice of the cake out and it's a

little bit of Obama and a little bit of

um uh Trump frosting the the gifts start

from the oldest exemption first meaning

if a client makes a gift of a million

dollars they are making it out of that

Obama cake now in 2025 or 2026 that

Trump frosting is going to get wiped off

the cake we're left with the Obama cake

so if you make a gift of a million

you're not gifting your Trump exemption

okay you're gifting your Obama exemption

so this is really important people say

oh I want you know use a couple million

of this Trump exemption you would have

to make a gift of 6.85 million and then

you're tapping into the Trump uh era tax

cut so this can be challenging for sort

of the middle Estates you know couples

with a $20 million estate that's

probably the most the hardest planning

in in many respects to uh to to do so

they expire and we think that the

exemption just based on this adjustment

for inflation so the Obama era 2011 a $5

million exemption will likely be 7even

and that's kind of what we're modeling

out for clients when we look at this and

again the death tax rate or the estate

federal estate tax rate is going from 40

to 45% and you can put State inheritance

taxes or state death taxes on top of

that so look let's look at some

strategies to avoid death taxes so what

are they well number one is file for

portability now if you're a lawyer you

probably know what this is uh and if

you're a fiduciary handling a deance

estate it's very important to pay

attention to this a portability allows a

surviving spouse to inherit the unused

portion of a deceased spouse's estate

and gift tax exemption and that's

13.61% surviving spouse could under

those circumstances uh inherit the

deceased spouse's unused exemption

amount because it's unused right so that

would be the full

13.61% representative who in this case

is able surviving spouse timely files

for portability and inherits Baker's

$13.61 million exemption so when Abel

dies in 2026 remember 2026 is when the

exemption drops to 7 million there's no

estate tax and this saves $ 5.85 million

in federal estate tax one reason that

number is so high is it's a 45% tax on

top on amounts over 7 million based on

our estimate so example two Abel and

Baker are married and have again have an

estate but in this instance uh Baker's

representative who's able files for

portability picks up the $13.61 million

exemption and therefore there is no tax

when able dies so this is very important

so if you have this case come into your

office and maybe these clients have a a

trust that leaves everything to the

surviving spouse or maybe it's a

disclaimer trust and and that's

something that we cover on our our

videos on our YouTube page if that is

alien to you it's very important to

think about portability and certainly if

you're in a position to advise these

clients I I will say as a default in our

firm we're recommending that surviving

spouses do file for portability and pick

up the unused exemption amount because

really if you don't we don't know what

this estate exemption is going to be it

could go back to 600,000 highly unlikely

it could go to a million it could go to

three million we don't know we don't

know what assets your client or they

could buy the next Nvidia and have their

assets go away up you just don't know

what's going to happen in in a client's

estate so I would say to to mitigate the

liability of the the practitioner uh

portability is a great uh a great way to

help avoid death taxes so how do you

elect portability it must be a timely

filed form 706 and you have um we cover

the the the time limits but you you have

to uh file this portability election and

then you have to itemize generally the

assets assets and as you will see should

be valued when somebody passes away

things that are included in the gross

estate of a decedent meaning the taxable

Federal taxable state of a cedant should

be valued and um even if the estate is

small really think about advising the

client to elect portability and file

that 706 and the deceased spouse's uh

representative has five years to pick up

the deceased spouse to unuse exemption

and if portability is elected this is

very important for the planning that

we'll be discussing so in this case if

Abel inherits Bakers the deceased

spouse's uh portability

exemption AEL does not inherit Baker's

generation skip transfer tax exemption

amount and that's a mouthful and we'll

get into that in a few slides but that

is loss so in order to preserve that you

would have to use typically a trust

mechanism of of one form or another

remember remarriage forfeits portability

so if you have a client who says yeah

you know Abel says Ah Baker passed away

and uh I'm I'm gonna remarry

Charlie if Abel marries Charlie you're

going to lose that portability so it's

very important that the client

understand that and again gifts are made

uh first H gifts are made remember we

talked about the Obama and Trump cake

but if Abel inherits Baker's dece spous

Dan's exemption when Abel makes a gift

Abel makes the gift out of the deceased

spouse's unused exemption first right

then the Obama exemption then the Trump

exemption so very important if you've

got a client whose one spouse is near

death it's these are very important

considerations generation skipping

transfer tax concerns so again

portability can be very valuable

community property my understanding is

there are a lot of people from

California on here and um so you're

probably if you're an attorney I hope

you're familiar with this community

property very powerful tool there are

nine community property states in the

United States each with their own

separate Laws Texas has different

community property rules in California

uh which is was a shocker to me when I

attended a continuing education course I

kind of thought everyone did it the

California way but uh we've got nine

states that are community property

States and that leaves 41 that are not

plus the District of columia so as you

know if you're a California attorney all

property that is included in a spouse's

gross estate uh all community property

that's included in a spouse's gross

estate receives an adjusted cost basis

meaning that's a step up or a step down

if you paid a million bucks for stock

and it's down to 100,000 that basis gets

stepped down if you bought stock for

100,000 it's worth a million it gets

stepped up and uh it is best to document

the change of basis with valuation so

here's a little bit of a practice tip

it's really important for the client and

typically it's going to be the lawyer

nudging the client or the lawyer

reaching out to the client's team in

this case The A Team uh it's really

important to notify the tax preparer the

financial advisor and managers of

partnership interest that a um a

community spouse has passed away and the

reason is on a partnership return the

manager when they file the return can

make what is called a 754 election and

in order to get an adjusted cost basis

on a for a surviving spouse on a

partnership interest that election has

to be made on the partnership 1065

return so it's very important to

communicate with these people that

somebody's passed away uh and the tax

preparer obviously if you got rental

property and you get an adjusted cost

basis you're going to start red

depreciating the property and then the

financial adviser these are kind of

common mistakes we see the tax preparer

doesn't put in the new basis information

the uh manage the manager of the

partnership doesn't make your 754

election and then certainly the

financial adviser isn't putting in the

apprpriate basis information when that

those stocks get a new cost basis when a

spouse passes away so that's a really

good way of avoiding capital gains tax

um which technically isn't a death tax

but it's something important to pay

attention to because it it tends to to

Foster the creation of of

intergenerational wealth so example one

Abel and Baker are married Baker Buys in

baker's name alone $100,000 of Nvidia

stock I think we all wish we would have

bought $100,000 of Nvidia stock a while

ago with earnings from employment so uh

community property rule in California is

even though Baker's even though that

stock account is in baker's name it is

still community property because it is

uh because the source of funds was was

community and then Baker dies when the

Nvidia stock is worth a million bucks

Abel sells the Nvidia stock and pay zero

in capital gains tax Abel and Baker are

married example two and they buy a

million-dollar apartment building in

Santa Barbara at Baker's death it's

worth 10 million Abel keeps the

apartment building and resets the

depreciation clock

right at the $10 million value which and

this is a huge income tax benefit for a

surviving spouse so the surviving spouse

ultimately will be a single filer taxes

typically go up but what we find with

many of our clients who own real estate

they get that adjusted cost basis and

their income tax bill oftentimes drops

so question um question was does the

amount of portability remain what was

claimed on the 706 after the January 1st

2026 date

yes that's that's the that's the power

of that of the portability yes it

remains so what about non-c commmunity

property States what if you uh are in

one of those states that doesn't have

community property are you totally out

of luck well the answer is no because

there is this uh a pretty recent um

structure called the Community Property

Trust so some states allow residents of

states that are not community property

states there 41 states in the District

of Columbia to utilize a trust structure

so that when one spouse passes away the

assets of that particular trust get a

full adjusted cost basis now these

states are Alaska Florida Kentucky South

Dakota and Tennessee they offer their

own version of a community property

trust if you talk to a lawyer from

Florida they'll say Florida is the best

talk to a lawyer from Alaska they say

Alaska is the best these are heavily

marketed in um in these in these

separate property jurisdictions and U so

the example here is Charlie and Delta

are residents of Colorado which is not a

community property State and the create

a joint trust naming a Tennessee trustee

and the trust these are the the the

rules that you have in these Tennessee

in a Tennessee trust provides for a 5050

division of assets at divorce you can

have an alternate provision in there uh

but just for Simplicity sake let's say

it provides for a 50-50 division of

assets half the assets are subject to

each spouse's creditors and either

Charlie or Delta can remove the assets

at any time and if so such removed

assets cease to be Community uh property

and this actually may be a good asset

protection

planning strategy for a California

resident potentially because California

residents are 100% liable for the debts

of the community so it's a way of

effectively severing the community

property just kind of an interesting

side note uh intentionally defective

irrevocable grantor trust so for those

of you whove done um public benefits

planning medical planning Medicaid

planning you might have heard of this uh

this is used in a slightly different way

uh when you're doing Advanced uh

planning for uh federal estate tax ation

so I would say this is probably one of

the single most effective tools for the

creation of multigenerational wealth

that we use and that practitioners use a

human a human with a heartbeat so a

person can create an intentionally

defective irrevocable Grant or trust

transfer assets to the trust by gift or

by sale not realizing a capital gain and

this trust this grant or trust is

ignored for income tax purposes the IRS

does not it's it's a grant our trust

totally ignored for income tax purposes

and the key here is is not ignored for

uh death tax purposes or federal estate

tax purposes so this is very very

important um the grantor pays the tax

liability during the grantor's lifetime

therefore creating an additional gift

it's called tax burn so um Robert keer

has a really good uh program on this and

he talks about this concept of tax burn

the other thing is you can swap assets

out of a grantor trust without a tax

consequence if you have a swap power in

the trust that does affect who can be

trustee and powers of trustee I'm not

getting into the Weeds on this just to

give you an idea of the power of these

grantour trust so if you've got someone

who knows they're going to die I mean we

all know we're going to die but if

they're close to death they can swap a

low basis asset out for cash right

because cash a dollar has a basis of a

dollar those low basis assets come into

the estate uh the decedent dies and then

um then you have a full adjusted cost

basis so very very um and there's some

rules connected with that but can be a

very effective strategy so uh I I ran

some numbers getting ready for this to

show you the benefit so AEL creates an

irrevocable trust for the benefit of

Charlie so this is an intentionally

defective grantor trust transfers a

million dollars to the trust and invests

in in a portfolio of Securities the

Securities returns 4% uh capital

appreciation per year 4% growth plus 3%

income and the assets are held for 20

years and then the grantor dies a

non-grantor trust lead leaves the

beneficiaries right the people who

inherit $2.7 million the grantor trust

results in $3.62 million which is almost

a million dollars different that's a lot

of money and add a zero to that it's

going to be a lot more money right it's

going to be a $10 million difference

right so what's happening as the As Time

Goes By is the grantor is paying the

income tax which means that trust that

that grantor trust is not paying tax

it's not that it's tax-free because the

grantor is paying it but the grantor has

a taxable estate right and if the grant

if the if the non-grantor trust is

paying the tax they're paying at the

higher rates but the gr Tor has high

rates anyway right so if you're going to

pay the same tax you might as well pay

it from the gr toor's estate which

further depletes the taxable value of

the estate and then if you swap the

assets Out close to death you know

there's a rule on that but if you swap

those assets out then you can also get U

an adjusted cost basis on the asset so

you swap the asset out in exchange for

cash and uh this is very important to

understand this is not a set it and

forget it strategy it requires a pretty

extensive Caren feeding and

collaboration Among The A Team so this

again the attorney financial adviser

CPA U and other professionals as well

our firm we have offices in northern and

southern California and on Zoom

everywhere and if you're watching this

on YouTube subscribe to our YouTube

channel or check it out there's a lot of

good content on there and the feedback I

get from lawyers is it's a way of

explaining things in layman's terms and

I love listening to other lawyers by the

way talk about stuff I'm like oh wow

that's a great analogy that's a great

way to explain that horrifically complex

topic

[Music]

[Music]

[Music]