Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

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Tuesday, October 11, 2005

Katrina and Estate Planning Opportunities

Congress enacted the Katrina Emergency Tax Relief Act of 2005 to provide tax relief to the victims of Hurricane Katrina.

Some of these provisions provide unique estate planning opportunities.   For example:

  • An exception to the 10% early withdrawal tax in the case of a qualified Hurricane Katrina distribution from a qualified retirement plan, a 403(b) annuity, or an IRA.
     
  • A distribution received from a 401(k) plan, 403(b) annuity, or IRA in order to purchase a home in the Hurricane Katrina disaster area may be recontributed to such a plan, annuity, or IRA in certain circumstances.
     
  • Special rules in the case of a loan from a qualified employer plan to a qualified individual made after the date of enactment and before January 1, 2007.
     
  • Enhanced ability to make gifts which qualify for the charitable deduction.  In the case of an individual, the deduction for qualified contributions is allowed up to the amount by which the taxpayer’s contribution base exceeds the deduction for other charitable contributions. Contributions in excess of this amount are carried over to succeeding taxable years.
There is no requirement that the charitable gifts be for the benefit of Katrina victims.
 
To qualify for the special treatment, the gift must be (1) in cash, (2) completed between August 28, 2005 and January 1, 2006, and (3) to a public charity (but not donor-advised funds or private foundations

To explore the details of the Act, see Joint Committee on Taxation, Technical Explanation of H.R. 3768, the “Katrina Emergency Tax Relief Act of 2005," as Passed by the House and the Senate on September 21, 2005, (JCX-69-05), September 22, 2005.

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