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Transfer Planning with Interests in Private Equity and Hedge Funds

Transfer Planning with Interests in Private Equity and Hedge Funds

July 16, 2012

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

Much has been written about the potentially unique opportunities available to people to make gifts before year-end (for example, see our prior posts here and here). If Congress does not act, the increased $5,120,000 gift tax exemption will decrease dramatically. However, if you are the owner of an interest in a private equity or hedge fund, planning to gift part or all your interest in such fund requires particular care and attention.

Private equity funds are usually created as limited partnerships with two classes of owners. The limited partners are the investors in the fund, while the general partner is typically a business entity created as a limited liability company (“LLC”). A carried interest is normally held in and allocated to the LLC/general partner. A carried interest is the right to receive some of the profits of the fund. The initial value of a carried interest is

Estate Planning in 2012

Estate Planning in 2012

April 24, 2012

Authored by: Mary Ann Mancini

Generally, there are three basic goals of estate, generation skipping transfer, and gift tax planning: (1) the reduction of estate and gift taxes upon transfer; (2) the deferral of the estate, generation skipping transfer, and gift tax burden; and (3) ensuring for the necessary liquidity to pay the taxes when they come due.

We are in the midst of very volatile times which, at least for a foreseeable future, although no one knows for how long, can provide opportunities to achieve these goals in particularly beneficial and tax-efficient ways. This is the result of the present low interest rates and the drop in value of most types of assets, which allows clients to engage in some estate planning that may not be available when interest rates rise and values are driven higher.

Please see full Article for further information.

How to: Use Deceased Spousal Unused Exclusion Amount on the Surviving Spouse’s Gift Tax Return

On December 19, 2011, the Internal Revenue Service published the 2011 Form 709 and the accompanying Instructions for Form 709.  The 2011 Form 709 is substantially similar to that published for 2010.

Under the “What’s New” section of the Instructions for Form 709, there does not appear to be much new.  Set out in this section are the amounts in 2011 for the annual exclusion ($13,000) and for the annual exclusion for non-U.S. citizen spouses ($136,000), the due date in 2012 for the 2011 Form 709 (4/17/2012), the unified credit for 2011 ($1,730,800) and the top gift tax and GST rates for 2011 (35%), all of which is well-known.

However there is one section that is new in the Instructions to the Form 709 that is not mentioned in the “What’s New” section. 

IRS Issues Chief Counsel Advice 201208026

March 5, 2012


Late last month, the IRS released Chief Counsel Advice 201208026, which relates to gifts by the grantors of a crummey trust to the trust. The IRS held that the grantors had made completed gifts and that the withdrawal rights under the trust were unenforceable and illusory and, therefore, no annual exclusion was allowable with respect to the gifts.

The Silver Lining – Transferring Assets in a Down Economy

The current economy has created a great opportunity for individuals to transfer assets, and future appreciation of such assets, with little to no transfer tax. This opportunity is created by the depressed asset values and historic low applicable federal interest rates (“AFRs”), which are the minimum interest rates, set monthly, permitted by the IRS. (The current AFR for a loan with a term under three years is 0.19%, three to nine years is 1.17% and over nine years is 2.63%.)

The federal gift tax is imposed on all lifetime gifts that exceed the annual exclusion from gift tax (currently $13,000 per person), and the federal estate tax is imposed on the value of all assets and property that an individual owns at the time of death. Each individual, however, has an exemption of $5,120,000 against the gift and estate tax.

A gift during life of an appreciating asset can reap

Methods of Giving

Methods of Giving

November 16, 2011

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

As we approach Thanksgiving and the holiday season many of us turn our thoughts to gift giving to family and loved ones. The Federal gift tax system allows us some opportunities to do such “gifting” in a tax free manner. A few states impose independent state gift taxes, so an expert in your state should be consulted before considering any of these gifting transactions. Each individual has a total of $5,000,000 he can give away during his lifetime before owing any gift tax. However, there are several gifting opportunities which do not count as part of your $5,000,000 lifetime total. It is as if the Federal tax law has deemed them non gifts. Present interest gifts of $13,000 in 2011 and 2012 to any number of recipients are not subject to

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