The clock may be running out for two of the most widely-used advanced estate planning strategies: FLPs and GRATs. The Obama Administration recently announced its FY 2011 budget. As we know, this is important because it signals the direction the Administration intends to head with regulations or legislation. FLPs and GRATs are both under fire in the new budget proposal.
Specifically, FLPs would be subject to new valuation rules to be promulgated under code section 2704. It appears these valuation rules might be applicable to transfers made after October 8, 1990, the effective date of that statute. GRATs would be subject to a ten-year minimum term, among other restrictions. These changes would be applicable to GRATs formed after the date of enactment. Of course, the assumption underlying both of these changes is that there will continue to be an estate tax.
Stay tuned for upcoming developments!