For Tax Pros: A High-Impact Estate Planning Technique Using the Michael Saylor Playbook
Powerful results, but only with precise, defensible execution
I want to share a really elegant estate planning technique for ultra-wealthy clients.
It’s simple in concept, powerful in impact, and full of traps if you do it wrong.
When executed properly, this strategy can meaningfully reduce the size of a taxable estate — not by magic, but by moving future appreciation (and cash flow) out of the estate.
Let’s walk through it with an example.
Meet Michael Saylor
Assume Michael owns a Florida residence worth $10 million today.
Because of his fame, scarcity, and long-term appreciation, that same house could be worth $60 million by the time he dies.
Given his overall net worth, he’s almost certainly going to have a taxable estate.
That leads to the real question:
How do we keep that future $60 million value from being included in his gross estate?
The Core Strategy
Michael makes a gratuitous transfer of the residence to his nephew (he has no children).
No consideration.
No promissory note.
Just a straight gift.
This creates a $10 million taxable gift for gift tax purposes.
In practice, the unified credit under §2505 would likely cover it — but the gift still matters. It locks in today’s value and shifts all future appreciation out of Michael’s estate.
After the transfer, Michael continues to live in the house (maybe turn it into a BTC museum) — but not as an owner.
Instead, he 1) leases the property back from his nephew and 2) pays fair market rent.
If this is done correctly, IRC §2036 — the notorious gross estate pull-back provision — should not apply.
Why This Works (Only When Done Right)
§2036 pulls transferred property back into a decedent’s gross estate if the decedent retained possession, enjoyment, or income from the property.
Here, Michael retains none of that.
He no longer owns the home.
He has no special lifetime right to use it.
He pays rent just like any other tenant.
The Tax Court has respected this kind gift-leaseback structure when the facts align with the paperwork and there is no express or implied agreement allowing the transferor to retain lifetime enjoyment.
A classic example is Estate of Barlow v. Commissioner, where a real transfer followed by a genuine lease arrangement was respected because there was no retained life estate.
But that phrase “done correctly” matters a lot.
The Non-Negotiable Checklist
To make this work:
The nephew must actually hold title
The nephew must pay property taxes, insurance, and repairs like a real landlord
The lease must be bona fide
Rent must be fair market value
The lease must be renewed periodically (not locked in for Michael’s lifetime)
If those boxes are checked, §2036 is much harder for the IRS to invoke.
The Real Economic Result
If structured properly, the residence’s date-of-death value — potentially $60 million — is not included in Michael’s gross estate.
That does not mean the transfer disappears from the transfer tax system (e.g., Chapter 11 and 12). The original $10 million gift is still accounted for through adjusted taxable gifts.
The real tax savings come from two places:
All post-gift appreciation (approximately $50M) is removed from the estate
The rent Michael pays over time further reduces his estate while shifting wealth to his nephew.
For example, if Michael pays $250,000 per year in fair market rent, that’s additional value leaving his estate without being treated as a taxable gift.
The Cautionary Tale
If the lease is not respected…
If the lease is guaranteed for Michael’s lifetime…
If the arrangement looks like window dressing…
The IRS can argue the entire transaction is a sham.
When that happens, the residence gets pulled right back into the estate under §2036 — exactly what occurred in Estate of Maxwell v. Commissioner, where the court looked past the form and focused on the retained enjoyment.
Bottom line
Gift the residence outright.
Let the nephew truly own it.
Have the nephew pay all ownership expenses.
Create a real, fair-market lease that is not tied to lifetime use.
Do it cleanly, and millions of dollars of appreciation and cash flow can be shifted out of the taxable estate.
Do it sloppily, and the IRS will unwind the entire plan.
This is one of those strategies where the tax savings can be enormous — but only if the details are treated with respect.
This blog is dedicated to Professor Jon Vaught, Esq., LL.M. (Tax), who introduced me to the world of estate planning.
Tax Pros:
Have you utilized an estate planning technique like this?
If you have any interesting strategy to share, please do so! let’s compare notes and learn from each other.
Excellent breakdown of the gift-leasback structure. The tension between whats technically permissible and what survives IRS scruitny is huge here, section 2036 is basically the nuclear option if any element looks like retained enjoyment. Reminded me of similar issues with GRAT structures where valuation timing and bona fide transfer substance matter way more than people realize going in.