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How to pass along appreciated stock out of Estate.

Park City, UT |

I have had the fortune of holding Berkshire Hathaway for the last 50 years. What started as a small investment has turned into a small fortune, around $11 Million. My wife and I have already used up our $10M exemption so aren't sure what to do with this set of shares. What is the best way to pass on the $11M in BRK? Would it be best to sell, pay taxes, then pass along cash that is then taxed? This all makes my head spin. I have heard about certain Charity trusts but I would like to pass along as much as possible to my family, BIG family. Thank you for your help!

Attorney Answers 4


  1. There are a few options would could discuss with you, including the option of charitable remainder trust planning. This option works quite well with highly appreciated assets, like the stock you describe. It would be important to assess your entire situation to adequately advise you on the best approach to take. We're located just off the I-80 freeway, so we're especially accessible for you where you're located in the Park City area. Please feel free to check out our profile and give us a call.


  2. Well it sound like you have done some planning as you have used up each of your unified credits. A couple of points worth mentioning. First selling this stock now does not make sense as you have a low basis. Beneficiaries who receive it at your death would take a step up in basis as of the date of your death. This would eliminate all capital gains.
    If you want these assets to go to your family then a charitable trust may not work for you.
    This is because whether you use a charitable remainder or charitable lead trust, the charity will take a significant share ultimately.
    You really need to get with an experienced estate planning attorney to explore all of your estate planning options spme of which may become evident and applicable once a full analysis is performed by the estates attorney. Doing it this way will stop your head from spinning and it will be done right.

    For more on estate planning and other issues, see Estate Planning Mistakes: 5 Not So Easy Pieces at http://www.sjfpc.com/estate_planning_drafting_wills_trusts.html. Please hit the like button at the end of the article if you found it helpful.

    Hope this helps.

    Please remember to designate a best answer to your question.

    Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336, his email address is sjfpc@comcast.net , for more tax, estate and business articles visit his website www.sjfpc.com. and blog

    LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.


  3. I would concur with my colleagues. You need to review the planning you have completed, discuss your goals, charitable intent, etc. There are no canned solutions to this issue.


  4. FIRST, have you used the indexed $10M exemption which is now $5.12M? If not, there's an additional $240,000 you and your wife can gift in 2012.
    SECOND, you can continue to make annual gift-tax exclusion gifts of $13,000 per donor per donee. If you have numerous children/grandchildren, that could help the situation you've described. You say it is a BIG family. Let's say you have 30 potential donees (perhaps siblings, children and their spouses), you could gift $780,000 per year using the annual gift-tax exclusion and the "real" value could be even more if you utilize valuation discounting (see THIRD below).
    THIRD, have you utilized valuation-discounting when you have made gifts? By discounting the value of what you gift, you can actually gift more. For marketable securities such as BRK, valuation discounting is best accomplished via a Family Limited Liability Company (FLLC).
    FOURTH, have you utilized "freezing" techniques to freeze the value of the BRK so its future appreciation doesn't cause your estate to grow even larger. (Nothing wrong with appreciation, but you want to try try to avoid having it occur in your estate).
    FIFTH, the CRT strategy could benefit our family as well as some worthy charitable causes -- don't think that it doesn't benefit your family because it does. The techniques are too complex to discuss on the internet.
    SUMMARY: These are some of the "mainstream" estate-tax management tools. The interplay with income tax (capital gains tax) would require more of a face-to-face discussion.
    I hope this was helpful to you. Randy Holmgren

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