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§ 8.6 ESTATE PLANNING PRINCIPLESSome examples of the statutory exceptions to the special valuation rules are:• Equity interests in business entities that provide for qualified payments 177with respect to the parents’ retained preferred equity interest• Transfers in trust for a family member in which the transferor retains aqualified annuity, unitrust, or remainder interest 178• Buy-sell agreements that meet the three-prong test of being recognized asa bona fide business arrangement under which transfers are not made forless than adequate consideration to a family member and the terms ofwhich are comparable to similar arrangements entered into by persons inarm’s length transactions 179• Restrictions that are imposed by federal or state law or that may be exercisedor removed only with the consent of a nonfamily member 180(c) DeferralAnother fundamental technique of estate planning is deferral of estate tax. Theprinciple concerning the time value of money posits that the deferred or delayedenjoyment of one dollar a year from now is worth less than a dollar today. Therefore,the same amount of money today is worth more than the same amount ofmoney in the future. The greater the deferral, the greater the present value ofmoney.Deferral of transfer taxes can be accomplished in a number of ways. Themost significant method is by transfers to a spouse. The marital deduction isunlimited. Except for the exclusion of certain unqualified terminable interests,taxes can be deferred through transfers to a spouse qualifying for the maritaldeduction.Another popular deferral device is use of one or more trusts. Assets placedin trust could provide for support of a spouse, with distribution on death to thechildren. Similarly, a trust could provide for support of children, with a distributionon death to grandchildren. In either event, taxation of the trust assets wouldbe deferred until after they were distributed to the children or grandchildren.The generation-skipping transfer tax must be carefully considered with respectto these types of transactions.(d) Generation-Skipping TransfersLike deferral, a traditional estate planning goal has been to pass assets down toas many lower generations as possible with little or no tax. Bypass trusts wereused for this purpose. A trust could be set up to provide for a transferor’s children,with the remainder to the grandchildren. The next lower generation wouldbe skipped over free of estate tax at that level.177 IRC § 2701(a)(3)(A).178 IRC § 2702(b).179 IRC § 2703(b).180 IRC § 2704(b)(3). 251