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Removing an income-producing asset

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1. The Grantor, age 70, is interested in removing an income-producing asset with significant appreciation potential from her estate. However, in addition to removing the asset from her estate for estate tax purposes, she wants to retain payments from this asset for a specific period of time and is concerned with inflation eroding her payments. Given these 2 objectives, which of the following estate planning strategies would best allow her to accomplish both objectives.

a. 10 year GRAT b. 10 year QPRT c. 10 year ILIT d. 10 year GRUT

2. Cameron owns all of the common stock of Diaz Industries valued at $2.5 million. Cameron is 60 and has two children, Lucy and Drew. Lucy is involved in the business, but Drew is not. Cameron wants to phase-out of the business and wants Lucy to take on more responsibility. Cameron needs some income to support her living expenses. Cameron has already used her unified credit and does not what to pay a gift tax. Which of the following is the most appropriate strategy to allow Cameron to transfer the business interest to Lucy.

a. An installment sale of Cameron’s stock to Lucy.

b. A bargain sale of the stock to Lucy.

c. A sale-leaseback of the company offices to the corporation.

d. A private annuity between Cameron and Drew.

Reference no: EM131333395

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