WHAT THE FAMILY COULD HAVE PLANNED

First, when the father started the business or at least when the boys started working there, he should have considered giving them portions of the business over the years. This would have created minority discounts in the business upon the deaths of the parents. As to the IRA, when Dad got sick, pop the IRA’s right away and don’t withhold any taxes. That way, you get an income tax deduction on the estate tax return. In essence trading a 39% tax for a 50% tax. Make sure Mom has assets in her name alone in case she were to die first. The family should have utilized revocable trusts and perhaps buy some life insurance owned by a Life Insurance Trust or an LLC owned by the sons. These are minimal steps which might have averted this confiscatory scenario. As you can see, for 2011, things can get real ugly and planning should be done.

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