Senior living
Case Study

Estate planning helps client achieve financial security for future generations and “pay it forward” through charitable giving

Senior living
Case Study

Estate planning helps client achieve financial security for future generations and “pay it forward” through charitable giving

Client background

Nearly 15 years after first purchasing his business, 50-year-old Sam* saw an opportunity to monetize his growth efforts through a possible sale.

He and his wife agreed to split their assets before he bought the business to avoid putting all their assets at risk. In addition to their basic wills, they had created a trust to benefit their four young children, but had not put anything of consequence into it. He knew the result of his business decisions could impact his family in significant ways, including creating not only an estate tax problem, but also, to use Sam’s terms, a potential disincentive for his children to develop as “productive citizens.”

The goal and challenge

Sam wanted to set up a mechanism that would allow his estate to benefit his children at “just the right level,” while also leaving part of his estate to charity rather than paying taxes. His questions included which vehicle(s) to use to set aside assets for his young children and how much to set aside. Given the long-term timeframe, the challenge was to provide meaningful benefits to his children at the right times, while continuing to grow and provide for them and their future generations. During this time, the estate exclusion was still climbing to the $3.5 million threshold and he was aware he would have significant estate tax issues.

In advance of the possible sale of his business, Sam engaged Baker Tilly for estate and charitable planning services to help him achieve his objectives.

Baker Tilly solution

Understanding Sam’s goals, Baker Tilly investigated entity structuring and/or restructuring of his business operations and locations, continuity of the business in case of his untimely death and estate planning that would provide for his wife, children and charity.

Entity restructuring for sale of a business

After separating the operations from the real estate, Baker Tilly formed a family limited liability company (LLC) with the business real estate. Sam’s operations in different states were then separated into individual S corporations, and an S corporation holding company was formed for the various operating S corporations.

Estate planning and charitable planning

To benefit Sam’s children and future generations, a new dynastic irrevocable grantor trust was created. The trust had multiple trigger points that would provide different benefits to the beneficiaries as well as flexibility for future generations to control the impact of their trust benefits.

  • The trust would stay as a single trust with multiple beneficiaries until the oldest child reaches age 40.
  • The main trust would then be divided into a trust for each child as the primary beneficiary and their future families.
  • From each separate trust, the trustee would distribute $500,000 to each primary beneficiary at ages 40, 45, 50 and 55.
  • As each child reaches age 55, their trust would change from a trust with discretionary income and principal provisions to a unitrust paying out between 3 and 5 percent a year designed as additional retirement benefits for that generation.
  • At age 55, the primary beneficiary child would be given a limited power to direct all or a part of the trust property to charity or to other trusts for the benefit of their issue. At the death of the primary beneficiary, one half of the trust will be directed in trust to the beneficiary’s issue as appointed by his or her will and the other half can be appointed to charity. If neither of these powers are exercised, the trust continues to that deceased beneficiary’s issue.

Sam funded the single dynastic trust with 99 percent of the family LLC units that held the real estate. He retained the business operations personally to avoid funding the trust with too much wealth initially. He still had the ability to fund it with more assets later.

In contemplation of the sale, Sam also created a lifetime marital trust for his wife to be funded with $7.5 million after the sale, which would benefit her for the rest of her life.

His estate disposition documents were redesigned to leave the rest of his estate to a private foundation, which was to be created during his lifetime and further funded at his death.


Sam sold the operations and the real estate for $60 million, the trust was funded with its designated share of this total and he and his wife kept the rest. Still relatively young, Sam had the ability to invest in additional business opportunities either personally or from inside the dynasty trust, and he could control the growth of the trust to manage its ultimate benefit to his children and their issue.

Sam had a significant charitable element to his planning with the residual funding of his estate going to charity. He also built charitable elements into the trust so his children can give to charities from the trust assets that otherwise are set aside to benefit multiple generations. The trust, and future trusts, will avoid estate taxes in each successive generation, saving the family and charity millions of future dollars. Given today’s estate tax environment, the plan will pay no estate tax.

Due to proper estate and charitable planning, Sam and his wife are financially secure, and he has confidence that his estate will provide for his children and future generations to come as well as contribute to charity.

*Name changed for confidentially

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

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