If a contract is in place to buy a family owned business upon death from siblings, is it removed from the Trust?

Currently a family owned bank is listed in the trust and to be divided 4 ways among the siblings upon the death of both parents. Now, 2 of the siblings, would like to buy the bank from the other 2 siblings. The buyers have been advised, that if a contract is in place to buy the bank, it will not longer be included in the Trust and not subject to

inheritance tax. The desire to remove it from the Trust is due to the large amount of additional assets that cause the total amount of assets to exceed 11 million dollars.

Asked on September 15, 2017 under Estate Planning, Nebraska

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

A contract does not by itself remove items from a trust or any other ownership; after all, the contract may never come to fruition (the buyers could breach the contract, could be unable to pay the purchase price, could pass away before the contract should be carried through; the asset [the bank] could end up being "lost" in someway [e.g. become insolvent or go out of business] prior to the sale; etc.). It is only when the ownership is actually transferred that property is removed from the trust. So to take it out of the trust, you have to actually do the sale or other transfer.
As for how to avoid, or at least minimize, federal estate tax, consult with a tax attorney: for an asset worth $16mm and total estate worth $20mm, why would not be consulting in detail with a specialist in this area?


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