Does one pay taxes on an inheritance from overseas?

Estate Law and Wills: How does one transfer assets to others without there being inheritance taxes?

• If an LLC owns assets in excess of $5 million (the limit before inheritance taxes kick in), can the the LLC owner (assume there is only one) sell/gift all the LLC stock to another (child, friend) and bypass inheritance taxes? What is the best way to transfer assets without having to pay inheritance taxes?

• Answer:

  There are a variety of tools in the planning toolbox to mitigate or eliminate the estate tax (the inheritance tax). This answer is meant to be a general response and not legal advice. The method to use in planning depends on the asset and the objective. Here are just two examples that would be used in the case of your LLC: 1. Life Insurance - client purchases life insurance to be held in a special irrevocable trust. The life insurance proceeds pay the estate tax. 2. Fractionalization - client gifts some portion of the LLC to a family member (perhaps to an irrevocable trust for the children) and retains the other portion.  Let's say the LLC is worth $10million, and 20% is gifted. The IRS allows the value of the gifted interest to be reduced by applying discounts for lack of marketability and lack of control. The gifted interest (20% times $10 million) is not $2 million after the applicable discounts; it may be more like $1.5 million. The gift uses up some of the exemption (one exemption for estate and gift tax), but uses less exemption than it would have without discounting. Client makes further gifts in later years using the same strategy.  On client's death, the value of the retained interest in the LLC is also eligible to be discounted in value. Overall the client was able to depress the value of the LLC via fractionalization.