Clients are also funding trusts using real estate, such as primary residences and second homes, said Amy Heller, a McDermott Will & Emery LLP New York partner.
They must pay rent or create a qualified personal residence trust to keep the right to live in the property. Otherwise the residence may be included in their estate at death, “undoing a lot of the planning you set out to do,” Heller said.
Gay Couples
Affluent gay couples are using the higher gift tax exemption, said Georgiana Slade, a Milbank Tweed Hadley & McCloy LLP partner. The federal Defense of Marriage Act keeps them from taking advantage of the unlimited marital deduction.
DOMA bars federal recognition of same-sex marriages even if a state recognizes them. That means transactions easy for married heterosexuals, like adding a spouse to the title of a home, can have gift-tax implications, she said.
The U.S. Supreme Court agreed last week to decide next year whether the federal marriage act is constitutional.
One of two cases the court will review involves an 83-year- old New York resident, Edie Windsor, who is fighting a $363,000 estate tax bill imposed after the 2009 death of her spouse, Thea Clara Spyer.
Windsor and Spyer were married in Canada in 2007, a marriage the U.S. Court of Appeals in Manhattan concluded would be recognized under New York law. Had they been a heterosexual couple, Windsor’s inheritance wouldn’t have been taxed.
Long Weeks
The “fiscal cliff” time pressure has prompted many lawyers who specialize in the area to work seven-day weeks. Fees for creating trusts can range from as low as $10,000 to more than $100,000, depending on the complexity of the trust and the time constraints.