Estate tax planning and the estate freeze

The repeal of Section 2036(c) and the enactment of Sections 2701-2704 has resulted in new estate freeze planning opportunities. An estate tax freeze is accomplished by using previously established valuation techniques to minimize the transfer tax value of family-owned assets. The estate tax freeze was a popular tax planning technique prior to the enactment of Internal Revenue Code Section 2036(c). The imposition of Section 2036(c) prevented normal business transactions and the legitimate transfer of business interests. Congress recognized the inadequacies of Section 2036(c) and repealed this code section in 1990. Chapter 14--Special Valuation Rules, which includes IRC Section 2701-2704, was enacted to replace Section 2036(c). The new tax law provides estate tax planners with the guidance and requirements necessary to create viable and beneficial estate tax plans.