I’ve used PATs to assist a few clients in deferring their capital gains in the past. The key is to consult a knowledgeable attorney and possibly a CPA first. An example of a solution I provided a client (may not be suitable for you):
Client owned a commercial property with a low cost basis of which was now worth roughly $15,000,000.00.
Referred him to a trust attorney and created a PAT. Then transferred the property into the trust (non taxable event).
He then sold the property and we reinvested the entire sales proceeds into a tax-free bond portfolio, no capital gains taxes paid.
The client now receives a predetermined annuity payment. Payments are determined by the IRS life expectancy tables. He now only pays capital gains taxes on the principal annuity payments received (far less than the taxes he would have paid on the sale). Plus the tax-free income from the bonds which equates to a substantial amount.
It’s not a bad strategy as long as the IRS agrees to it. Consult a good trust attorney.
