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Author: cbryan5150 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Private stock gifting. Date: 7/22/2002 3:15 PM
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I am a small member of a family business. Some stock is in my parents name as well as some in my own already. For estate planning purposes what are the possible strategies that can be used for transferring of this stock to the next generation (I have children of my own now)? I am aware of the exclusions that are increasing annually but I am looking at all alternatives as well.
Some sources have mentioned G.R.A.T.S but I am not too familiar with the concept. What are they referring too?

P.S. If you have internet links or websites that would be great as all information is appreciated.

Thank you,

-cb
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 61042 of 121095
Subject: Re: Private stock gifting. Date: 7/29/2002 10:16 PM
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<<I am a small member of a family business.>>

So...does that mean that you're small in stature, and the family business is regular size? Or that you have a small interest in the family business (i.e., minority shareholder). I'll assume the latter.

<<For estate planning purposes what are the possible strategies that can be used for transferring of this stock to the next generation (I have children of my own now)?>>

Which estate are you concerned about? Yours? Or your family? If it's yours, there are a few ways to get the stock out of your hands. But since I don't know the value of the business in total, and the value of your shares specifically, it's difficult to make any recommendations. No use going after a flea with an elephant gun, right?

So without those values, or some feel for them, it's difficlut to provide any specifics. And, not only that, the interest that you show should be guided by a qualified tax and/or estate planning pro. It's not a "do it yourself" thing...something that can be built into your entire estate plan. So make sure to keep that in mind.

<< I am aware of the exclusions that are increasing annually but I am looking at all alternatives as well. >>

Certainly gifting the shares would be easy and quick...and might help with the problem. Creating a family lmited partnership might also do the trick. But your interest (minority, I assume) can be suficiently discounted to assist you with sucession planning relative to the business. Again, without knowing the size of the breadbox, it's difficult to provide any specifics.

<<Some sources have mentioned G.R.A.T.S but I am not too familiar with the concept. What are they referring too?>>

Grantor Retained Annuity Trust. Generally a vehicle that you use when you want to give property to charity now, but retain an interest in the income that the property throws off. Likely wouldn't work well for stock in a closely held corporation, unless the corp would want to repurchase those shares (or another shareholder would make the purchase). And the biggest issue is that you'd bypass the kids all together.

<<P.S. If you have internet links or websites that would be great as all information is appreciated.>>

I haven't really found anything on the web that I'm thrilled about. But there are more than a few good books that might help you out. So check out Amazon.com and see what you think.

Hope this helps...
TMF Taxes
Roy


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