- On June 7, 2016
Power of Appointment Support Trust (“POAST”) Planning
Accelerate Tax Basis Step-Up when Older Generations Pass
Kelleher & Buckley, LLC encounters many planning scenarios where a client has low basis assets (such as closely held stock, LLC units, marketable securities or real estate) that the client is hesitant to sell due to capital gains tax consequences. Now, with proper trust planning, some clients may be able to obtain an accelerated step-up in basis during the client’s life and thereafter sell the assets without incurring capital gains tax. Assume wealthier client (“Son”) has a creditor-free and elderly (or unhealthy) parent of low to moderate wealth (“Father”). Son can add Power of Appointment Support Trust (“POAST”) provisions to the Son’s trust planning documents to intentionally cause the Son’s trust assets to be included in Father’s taxable estate. So, if Father dies before Son and Father’s taxable estate (which includes Son’s trust assets due to the POAST provisions) is less than the lower of Father’s applicable state and federal estate tax exemptions (2016 federal exemption is $5.45M), no estate taxes will be payable at Father’s death and Son’s applicable trust assets will be stepped-up to their fair market value. Son’s trust can thereafter sell the stepped-up assets without incurring capital gains tax. A great result. If you think you may be a good candidate for POAST planning, please call Andrew J. Kelleher, David P. Buckley or one of K&B’s other attorneys at (847) 382-9130.