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Lawrence Scherer, Esq., CPA, LL.M. Taxation
Estate Planning Technique of the Month: The QPRT
(Qualified Personal Residence Trust)
Transferring a family home to children or grandchildren through an irrevocable trust can provide significant estate tax advantages, especially for high-value, rapidly appreciating properties (such as those in Sag Harbor, the Hamptons, Greenwich, or Montauk).
Here’s how the strategy works:
- Parents transfer the home into an irrevocable trust but retain the right to live in it for a set number of years.
- The property is appraised at the time of transfer, but its value is discounted because the beneficiaries (children or grandchildren) cannot take possession until the parents’ retained use ends.
- The longer the parents retain use, the greater the discount on the appraised value for estate tax purposes.
- When the retained use period ends, full ownership passes to the trust beneficiaries.
- If the parents outlive the trust term, the home’s appreciation occurs outside their estate, potentially reducing estate taxes.
- If the parents do not survive the trust term, the transaction is reversed and the tax benefits are lost.
- If the parents wish to stay in the home after the trust term ends, they must pay fair market rent, further reducing their taxable estate.
This approach “freezes” the home’s value for estate tax purposes at the discounted amount, while future appreciation benefits the next generation. It is important to consult with an estate attorney and obtain a professional appraisal to ensure the strategy is implemented correctly.
ON THE LOCAL FRONT:
Passport Assistance:
- Dates & Times: Saturday, May 3rd and Sunday, May 4th, from 9am to 3pm.
- Locations: Town Hall North (Oyster Bay) and Town Hall South (Massapequa).
- Services Provided: Assistance with organizing documents, obtaining passport photos, and submitting documents for approval for new passport applications.
- Eligibility:
- This event is for residents applying for a new passport.
- Adult renewals are NOT eligible unless the passport has been expired for more than 5 years.
If you need a new passport or your adult passport has been expired for over 5 years, you can attend this event for help with your application.
Residents are required to book appointments in advance. Town Clerk LaMarca has offices located at Town Hall North, 54 Audrey Avenue in Oyster Bay and Town Hall South, 977 Hicksville Road in Massapequa. Passport appointments are available Monday through Friday, from 9:30am to 3:30pm, and during this special Passport Weekend. For appointments in Oyster Bay, please call (516) 624-6324. For appointments in Massapequa, please call (516) 797-7962. For information on passport requirements and processing times, as well as instructions for passport renewals, visit www.travel.state.gov.
New York State Rebuffs the Deadline to End Congestion Pricing.
New York State Governor Kathy Hochul has decided to continue enforcing New York City’s congestion pricing program for drivers in Manhattan’s busiest areas, despite a federal directive to halt it by April 20, 2025.
A spokesperson for Governor Hochul stated, “The program is working. Traffic is down, business is up and the cameras are staying on.” In response, Transportation Secretary Sean Duffy has granted a 30-day reconsideration period and warned that New York State could lose federal funding and approvals for certain projects from the Federal Highway Administration if the program is not ended.
In summary:
- The congestion pricing program remains active in Manhattan.
- The federal government set an April 20, 2025 deadline to halt the program.
- New York risks losing federal highway funding if it does not comply.
- The state has 30 days to reconsider its position.
ON THE NATIONAL FRONT:
The waive after waive of Executive Orders by President Trump has caused a tremendous amount of litigation instituted to limit or negate the powers of the Presidency.
Harvard University Files Suit Against Executive Orders:
Harvard University filed a lawsuit against the Trump administration, alleging that the administration unlawfully froze nearly $2.2 billion in federal funding and threatened to suspend an additional $1 billion in grants. The university claims this action was part of a broader effort by the administration to pressure Harvard into changing its policies and leadership.
In addition to the funding freeze, the Trump administration suggested that the IRS should revoke Harvard’s 501(c)(3) tax-exempt status. Harvard’s lawsuit argues that these measures violated the university’s constitutional rights, specifically asserting that the withholding of funds was intended as a “pressure campaign to force Harvard to submit to the Government’s control over its academic programs.”
This case represents a significant conflict between a major academic institution and the federal government over issues of funding, autonomy, and academic freedom.
A Small Business Owner in Florida Files Suit Against Executive Orders.
Emily Ley, the owner of a Florida stationery business and influencer, has become the first to legally challenge Donald Trump’s new China tariffs. She filed a lawsuit against Trump and his administration, arguing that the 20% tariff on Chinese imports was imposed illegally and poses a threat to American small businesses.
The lawsuit claims:
- The Trump administration unlawfully bypassed required procedures and congressional oversight when implementing the tariffs.
- The President’s use of the International Emergency Economic Powers Act of 1977 (IEEPA) to justify the tariffs is inappropriate.
- The tariffs threaten the viability of small businesses that rely on imported goods.
Ley’s legal action highlights concerns about executive overreach and the impact of trade policy on small business owners.
In addition to being a co-founder of the LIAFPN, Larry Scherer has a strong background in Trust & Estates and Elder Law and serves as Managing Member of Scherer & Pudell, PLLC, a transactional law firm in Garden City, NY. He can be reached at (516) 747-7007.
Philip H. Kanyuk CPA/CFF/ABV, ASA
How Timing & Events Affect Valuation.
The timing of a business appraisal can greatly affect the outcome, especially when unexpected events like new tariffs are introduced. The recent tariffs on imports led to a sharp, immediate decline in global financial markets, with the S&P 500 dropping about 11.5% between April 2nd and April 8th, 2025. When the tariffs were paused, markets rebounded, but the initial downturn impacted both public and private company valuations.
For businesses heavily reliant on Chinese imports—such as a company undergoing acquisition due diligence on April 3rd, 2025, that sources 95% of its raw goods from China—the sudden tariff implementation would significantly reduce gross profit margins and company value. This could derail pending deals, as happened in a recent case where an acquisition was put on hold after the target company’s value dropped overnight due to the tariffs.
If no transactions occur during a downturn, there may be no lasting impact, but for deals in progress, timing is critical. A depressed company value can also present estate planning opportunities, allowing owners to transfer shares at a lower valuation and potentially reduce future estate taxes if values recover.
The key takeaway: business owners should consult with estate attorneys and business appraisers proactively, not just at retirement, to plan effectively and take advantage of market downturns for estate planning purposes.
In addition to being a co-founder of the LIAFPN, Larry Scherer has a strong background in Trust & Estates and Elder Law and serves as Managing Member of Scherer & Pudell, PLLC, a transactional law firm in Garden City, NY. He can be reached at (516) 747-7007. Connect on LinkedIn.
