Personal Wealth Services: Representative Cases
Molosky & Co. counsels on an installment-sale-to-irrevocable-trust freezing technique in multinational real estate investment and estate planning transaction
Our client, an ultra-high-net worth individual, engages in a variety of wealth transfer tax reduction techniques. Most recently, Molosky & Co. took the lead on a complex arrangement involving multiple globally renowned law and accounting firms in a cross-border transaction involving an investment in foreign real estate. The technique involved:
formation of a domestic holding company to hold special purpose vehicles (“SPVs”),
formation of several domestic SPVs for each property,
installment sales evidenced with interest-only promissory notes, each featuring a nine-year term, bearing interest compounded semiannually at the mid-term applicable federal rate, and guaranteed by a third-party beneficiary, and
coordination with a team of accountants and foreign attorneys.
Any return produced by the investment exceeding the amount of interest owed will escape wealth transfer taxation. If the investment produces a total year-over-year return of just 5% over the next 30 years, the client will have transferred nearly $20 million in wealth without any wealth transfer tax consequences.
Molosky & Co. counsels on a freeze using an intentionally defective grantor trust
Molosky & Co. counseled a professional sports executive on the mechanics, benefits, and use of freezing techniques and intentionally defective grantor trusts (“IDGTs”) in his estate planning to reduce total tax burden and eliminate wealth transfer taxes. If implemented, the technique could transfer around $2 million of wealth to beneficiaries with zero wealth transfer tax consequences, while simultaneously accomplishing a freeze that could accomplish a wealth transfer tax savings amount to tens of millions of dollars.
Molosky & Co. counsels on a squeeze involving commercial real property investments
Molosky & Co. counseled an ultra-high-net worth individual on the formation of a limited liability company and the structuring of its operating agreement to perform an estate squeezing technique involving commercial real property investments. The squeezing technique provides a discount on the valuation of the property for wealth transfer tax purposes, providing a wealth transfer tax savings of nearly $10 million.
Molosky & Co. counsels on a marital deduction gift followed by a spousal lifetime access trust
Molosky & Co. represents a family in which one spouse has substantial wealth and the second has more modest means. We made several recommendations related to estate planning including the use of a marital deduction gift followed by a spousal lifetime access trust (“SLAT”). The technique would allow the wealthy spouse to make a marital deduction gift of $10-15 million to the second spouse. The second spouse would then create a trust for the benefit of the wealthy spouse during the wealthy spouse’s lifetime, and then her descendants. The gift to the trust would ensure the second spouse’s unified credit is “locked in” at the 2022 amount of $12.06 million. This technique is a hedge against the risk that the credit is reduced to around $6 million or less at the start of 2026. It also doubles as a freeze for the wealthy spouse. If the $12 million in the SLAT is invested in a portfolio of publicly-traded securities and appreciates at an average annual rate of 7% over the next 35 years, our client will have a wealth transfer tax savings of more than $50 million.