Case #8 · Grace O.
Tandem Trust
Passing a $4 million estate with zero estate tax.
The situation
Grace of Swartswood Lake, New Jersey, is a surviving spouse with four children and a $4 million estate: a $1.5 million IRA plus stocks and real estate.
The goals
- Pass principal to her heirs at death
- Provide income to her family for a period of time
- Save income tax on the IRA and avoid estate tax
The strategy: An IRA trust working in tandem with a family limited partnership and a charitable lead trust
- At her death, the $1.5 million IRA passes to an IRA trust for a ten-year term, creating a charitable deduction of $823,542.
- The IRA trust pays about $1 million of income to the family over ten years.
- About $2.5 million goes into a family limited partnership; at her death the units pass to a ten-year charitable lead trust.
- The lead trust pays $1,854,000 to charity, then distributes the remaining assets to the children.
The results
| Income to family | Over $1 million over ten years |
|---|---|
| Final distribution | Assets worth over $2.3 million to the children after ten years |
| Per child | About $2 million or more in total |
| Estate tax | Planned to be reduced to zero |
| To charity | $1,854,000 |
Figures are illustrative and based on the tax rules in effect when the case was prepared. Results vary.
Could a strategy like this work for you?
Every family is different. We will look at your situation and show you which ideas apply, at no cost.