Wills, Trusts & Estates Prof Blog

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

Tuesday, June 21, 2016

Portability and QTIP Election Do Not Produce Date-of-Death Basis on Death of Surviving Spouse

QTIP electionA recent private letter ruling concludes that portability and qualified terminable interest property (QTIP) election at the death of a first spouse would not produce a date-of-death basis for the death of the surviving spouse. An unnecessary QTIP election is void when an estate makes the election in trust for the benefit of a surviving spouse. This marital deduction is not allowed to reduce the estate tax liability at death because, as concluded, it was unnecessary. Ultimately, this will deny the date-of-death basis at the death of the surviving spouse. 

See Rodney L. Goodwin, IRS Rules No Date-of-Death Basis on Death of Surviving Spouse, Wealth Management, June 20, 2016.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

June 21, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax | Permalink | Comments (0)

Monday, June 20, 2016

The Unexpected Tax Bills from Your Art Collection

Art in estateYour expensive artwork could end up ruining your estate, leaving your heirs scrambling to pay bills. The IRS Art Advisory Panel is meticulously scrutinizing appraisals of artwork above $50,000 and insisting on value adjustments, creating unexpected, huge tax bills for heirs. So as a collector, you should have your estate get two artwork appraisals, and the heirs should prepare themselves for having to pay unexpected taxes. Another alternative would be to make lifetime donations, which would avoid estate taxes and allow for charitable deductions.

See Karen Hube, How Art Can Blow Apart Your Estate, Barron’s, June 18, 2016.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

June 20, 2016 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Friday, June 17, 2016

The Valuation Process of a Celebrity's Image

Publicity rightsWith so many recent celebrity deaths, there is an ongoing contention over the worth of intangibles, specifically publicity rights. The IRS intends to collect as much as possible from these estates, which forces heated tax claims over intangible evaluations. These evaluations are hard to get right because how can you put a price on a celebrity’s image?

There is no specific valuation process to follow but more of a “totality of the circumstances” approach is used. Some factors to consider in this process are the value of the net economic benefit, risk associated with future income, and historical income generation. Quantification problems in celebrity’s valuations, however, could mean the difference between millions of dollars 

See Ettinger Law Firm, What’s in a Name? Publicity Rights of Deceased Celebrities, New York Estate Planning Lawyer Blog, June 13, 2016.

June 17, 2016 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Thursday, June 16, 2016

Will a Significant Tax Bill Take Half of Prince's Estate?

Prince4The trustee for Prince’s estate has revealed that a sizeable tax bill could wind up taking half of his estimated $250 million estate, which could potentially force an early sale of his unreleased music. In order to meet a fee deadline for the tax bill, many of Prince’s non-cash assets will have to be sold. Representations for all parties are working to avoid an inevitable fire sale if the deadline is not met.

See Lindsay Kimble, Taxes Could Wipe Out Half of Prince’s $250 Million Estate and Force Early Sale of His Unreleased Songs, Trustee Says, People, June 8, 2016.

Special thanks to Jim Hartnett (The Hartnett Law Firm) for bringing this Article to my attention.

June 16, 2016 in Current Affairs, Estate Planning - Generally, Estate Tax, Intestate Succession, Music | Permalink | Comments (0)

NJ Court Rules Domestic Partnership Cannot Benefit from Estate Tax Break

Same-sex rulingSee Peter J. Reilly, NJ Domestic Partners Denied Estate Break of Married Couples, Forbes, June 9, 2016. Provided below is a summary of the Article:

A sad story is behind the recent New Jersey Tax Court decision—Rucksapol Jiwungkul, as Executor of the Estate of Maurice R. Connolly, Jr. v. Director, Division of Taxation.  The case also ends up being a something of a recap of the struggle over same-sex marriage and its tax implications.  At issue was $101,041 in estate tax that would be avoided if Mr. Connolly and Mr. Jiwungkul, who were registered domestic partners, were treated as spouses for purposes of the New Jersey estate tax.  The court ruled against the estate on a sort of “almost doesn’t count” theory.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this Article to my attention.

June 16, 2016 in Estate Tax, New Cases | Permalink | Comments (0)

Wednesday, June 15, 2016

Elective Sharing of Transfer Tax Exemption Between Spouses

Estate and gift taxKerry A. Ryan recently published an Article entitled, Marital Sharing of Transfer Tax Exemptions, 57 Boston College L. Rev. (2016). Provided below is an abstract of the Article:

This Article analyzes portability and its antecedents in order to distill a positive account of marital sharing of transfer tax exemption amounts. Prior to 2010, the estate and gift tax exemption equivalent was a nontransferable, separate tax attribute of each spouse. A spouse could only access his or her spouse’s effective exemption by shifting property into the other spouse’s tax base. With the enactment of portability, Congress decoupled tax-free availability of a spouse’s unified credit from the necessity of a prior intra-spousal transfer. All that is required is an election by the decedent spouse, via the executor, to share the decedent’s unused exemption equivalent with the surviving spouse. This Article argues that a logical extension of this progression in the law, presaged by several early proposals by the American Law Institute and the U.S. Treasury, would be a regime that authorized elective sharing of estate and gift tax exemption amounts between spouses, in any proportion, during life or at death.

June 15, 2016 in Articles, Estate Tax, Gift Tax | Permalink | Comments (0)

Sunday, June 12, 2016

Life Insurance for Couples

Couples life insuranceWhen two people begin to build a life together, it is important to plan for the future and safeguard their assets as early as possible. Looking at the each partner’s goals can help advisors present appropriate options to meet their specific needs. If the couple is relying on both incomes, it is beneficial for each to retain a life insurance policy to rectify any loss. Additionally, couples with blended families need to create life insurance policies to cover all intended beneficiaries. Another useful strategy is an irrevocable life insurance trust, which are mainly used for wealthy couples that want to avoid taxes.

See Couples Insurance, Wealth Management, June 10, 2016.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

June 12, 2016 in Estate Planning - Generally, Estate Tax, Non-Probate Assets, Trusts | Permalink | Comments (0)

Monday, June 6, 2016

Whitney Houston Estate Fights $11 Million Tax Bill

Whitney houstonThe heirs of Whitney Houston’s estate are now in tax court over claims on the amount owed in estate taxes. The IRS claims $11 million is owed in taxes due to $22.6 million being underreported. The heirs claim that part of the problem is the IRS’s error in increasing the value of Houston’s publicity rights. One thing is clear, the IRS intends to seek money from the name and image of dead stars.

See Eriq Gardner, Whitney Houston Estate Challenges $11 Million Tax Bill, Hollywood Reporter, May 27, 2016.

Special thanks to Jim Hartnett (Hartnett Law Firm) for bringing this Article to my attention.  

June 6, 2016 in Current Events, Estate Tax | Permalink | Comments (0)

Thursday, June 2, 2016

Article on Estate Tax Reformation

Estate taxWendy C. Gerzog recently published an Article entitled, Toward a Reality-Based Estate Tax, 57 Boston College L. Rev. (2016). Provided below is an abstract of the Article:

Currently, the estate tax does not accurately value the property and transactions that it is meant to cover. Additionally, the marital and charitable deductions do not reflect actual associated transfers, instead skewing their benefits away from their purported beneficiaries. This Article proposes reforming the estate tax by eliminating these sources of unreality and distortion, and to make the current estate tax a reality-based tax. Through six specific proposals, the Article identifies solutions to the problems associated with testamentary transfers, puts forth alternative methods of valuation to prevent gaming of transfer taxes, and offers significant modifications to two deduction provisions.

June 2, 2016 in Articles, Estate Tax | Permalink | Comments (0)

Tuesday, May 31, 2016

Planning for Estate Taxes

Estate taxesEstate tax is the tax on your property transferred at death. Tax laws are constantly changing, so there has been much disputed controversy over the years. Most Americans do not need to worry about federal estate tax because of the $5.45 million exemption. There are, however, 14 states and the District of Columbia that maintain estate taxes, and they often impose taxes on smaller estates. Using a variety of estate planning techniques can allow you to reduce or eliminate state estate tax liability. It is important to know what the estate tax laws are in your state and any state you are considering for retirement.

See Dan Caplinger, Does My State Have an Estate Tax?, Motley Fool, May 20, 2016.

May 31, 2016 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)