Wills, Trusts & Estates Prof Blog

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

Saturday, July 14, 2018

Podcast: 9100 Relief: Jumping Through the Hoops When You Learn You have an “Oops!

ACTEC_FoundationHere is the latest ACTEC Trust and Estate Tax podcast--the topic is 9100 Relief: Jumping Through the Hoops When You Learn You have an “Oops!”

9100 Relief for missed or mishandled tax elections is broader, more frequently needed, and thus a lot more useful than many estate planners might realize. ACTEC Fellows Ron Aucutt of Tysons Corner, Virginia and Beth Shapiro Kaufman of Washington, DC educate us on this podcast.

July 14, 2018 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Friday, July 13, 2018

CLE on Estate Planning 101

CLEThe National Business Institute is holding a conference entitled, Estate Planning 101, on Wednesday, August 15, 2018, at the Hilton Garden Inn Albuquerque/Journal Center in Albuquerque, New Mexico. Provided below is a description of the event:

Program Description

Provide Your Clients With the Full Spectrum of Wealth Planning Options

Estate planning practice is incredibly complex, varied and intricate. This primer breaks it down into key governing principles and fundamental planning approaches to give you everything you need to successfully deal with clients' asset planning. Understand what the tools are, when they're used, and how they affect clients' taxes and plans. Register today!

  • Understand the laws, key parties and basic plan elements involved in estate planning.
  • Explore the various types of wills and trusts and determine which is best to use in the client's specific circumstance.
  • Predict tax effects of each estate planning tool and coordinate them properly.
  • Help your clients make critical decisions regarding beneficiary designations and powers of attorney.
  • Examine life insurance and marital issues involved in estate planning.

Who Should Attend

This basic level estate planning primer is designed for:

  • Attorneys
  • Accountants and CPAs
  • Estate Planners
  • Trust Officers
  • Tax Advisers
  • Paralegals

Course Content

  1. What is Estate Planning?
  2. Key Parties in Estate Planning: Their Rights, Roles, and Responsibilities
  3. Basic Wills: Goals, Provisions and Execution
  4. Trusts: What They Are and How They're Used
  5. Tax Fundamentals
  6. Probate Basics
  7. Life Insurance in Estate Planning
  8. Beneficiary Designations, POAs and Other Estate Planning Documents
  9. Custody Arrangements, Pre-Nuptial Agreements and Other Family Issues in Estate Planning

Continuing Education Credit

Continuing Legal Education – CLE: 6.60

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 8.00 *

* denotes specialty credits

July 13, 2018 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Trusts, Wills | Permalink | Comments (0)

Wednesday, July 11, 2018

How Tax Reform Could Fuel Life Settlement Industry

Tax actThe life settlement industry may have already been growing at a steady pace, but the Trump Administration's passage of the Tax Cuts and Jobs Act gave it much appreciated momentum. Taxpayers could continue to shun life insurance policies due to the increase in the gift and estate tax exemption amount and opt to purchase life settlements instead.

But is the improved tax situation enough? "While the investing environment surrounding the life insurance market is looking ideal, it’s not yet clear if a better tax situation alone is sufficient to encourage long term growth in the life settlement industry." It is no longer a necessity for life insurance programs to be grouped together with a client's entire estate plans.

No market is entirely level for too long, and the truth of the matter is that Americans aren’t investing nearly enough in their retirement. A change of government in the near future could see new tax legislation introduced, altering or even removing the current master overhaul from President Trump.

See Gary Eastwood, How Tax Reform Could Fuel Life Settlement Industry, Accounting Web, June 13, 2018.

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

July 11, 2018 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Wills | Permalink | Comments (0)

Monday, July 9, 2018

Article on Basis Step-Up Planning: A Double-Edged Sword

PandpGriffin H. Bridgers recently published an Article entitled, Basis Step-Up Planning: A Double-Edged Sword, Probate and Property Magazine, Vol. 32 No. 4, July/August 2018. Provided below is an abstract of the Article:

Estate tax planning has, for decades, revolved primarily around maximization of the estate and gift tax applicable exclusion amount, with tax reform also focusing primarily on increases to that amount. With the recent enactment of the Tax Cuts and Jobs Act, P.L. 115-97, we have seen this exclusion increase from $675,000 per taxpayer in 2001 to $11.18 million per taxpayer in 2018. This has dramatically reduced the impact of the estate, gift, and generation-skipping transfer taxes. As a result, the focus of tax planning will likely continue to shift to income taxation. One of the biggest modern goals of tax planning now is maximizing the opportunity to obtain a step-up in income tax basis for family assets at least at the death of the client. The recent doubling of the estate tax applicable exclusion amount is certain to increase this type of planning.

While such transfer are driven by a desire to save income taxes, practitioners may neglect the state law implications of this type of planning, which we will refer to in the remainder of this article as "basis step-up planning." While the effects of such planning can differ from state to state, this article addresses some of the broad issues that should be considered before engaging in substantial basis step-up planning.

For purposes of this article, with respect to powers of appointment, reference is made primarily to the Uniform Powers of Appointment Act (UPAA), as published by the Uniform Law Commission in 2012. For purposes of analyzing powers of appointment, the following defined terms are derived from section 102 of the UPAA. The "donor" is the person creating a power of appointment, the "power holder" is the person in whom the power of appointment is created by a donor, "permissible appointee" means the person in whose favor the power of appointment may be exercised, and "appointive property" refers to the property over that the power of appointment may be exercised. A general power of appointment is generally defined in section 102 of the UPAA as being a power which can be exercised in favor of the power holder, the power holder's estate, a creditor of the power holder, or a creditor of the power holder's estate.

In addition, with respect to trusts, reference is made primarily to the Uniform Trade Code (UTC), as last amended by the Uniform Law Commission in 2010. Reference is also made to the Uniform Probate Code (UPC), as last amended by the Uniform Law Commission in 2010.

July 9, 2018 in Articles, Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation, Trusts | Permalink | Comments (0)

Saturday, July 7, 2018

Article on Constituencies and Control in Statutory Drafting: Interviews with Government Tax Counsels

TaxShu- Yi Oei and Leigh Osofsky recently published an Article entitled, Constituencies and Control in Statutory Drafting: Interviews with Government Tax Counsels, Tax Law: Tax Law & Policy eJournal (2018). Provided below is an abstract of the Article.

Tax statutes have long been derided as convoluted and unreadable. But there is little existing research about drafting practices that helps us contextualize such critiques. In this Article, we conduct the first in-depth empirical examination of how tax law drafting and formulation decisions are made. We report findings from interviews with government counsels who participated in the tax legislative process over the past four decades. Our interviews revealed that tax legislation drafting decisions are both targeted to and controlled by experts. Most counsels did not consider statutory formulation or readability important, as long as substantive meaning was accurate. Many held this view because their intended audience was tax experts, regulation writers, and software companies, not ordinary taxpayers. When revising law, drafters prioritize preserving existing formulations so as to not upset settled expectations, even at the cost of increasing convolution. While Members, Member staff, and committee staff participate in high-level policy decisions, statutory formulation decisions are largely left to a small number of tax law specialists.

Our findings carry important implications for statutory interpretation, affirming prior research, but also calling into deeper question arguments for textualism and the validity of certain interpretive canons. Our findings also have important implications for the design of our tax system, illuminating the distributive tradeoffs inherent in drafting practices. Finally, our findings reveal a contrast between public expectations about the legislative process and how the process actually works, underscoring underexplored questions about what makes this process legitimate.

July 7, 2018 in Articles, Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Friday, July 6, 2018

Businesses Require Proper Estate Planning

CashWhen the majority of people envision estate planning, they imagine retirement and a lengthy list of assets for individuals. The truth of the matter is that businesses, especially small business, can benefit from proper and efficient estate planning.

By taking appropriate estate planning measures a business owner can help keep a business from absorbing the heavy burden of estate taxes. Two IRS tax breaks, Section 303 and Section 6166 can help alleviate the burden for small businesses. Section 303 allows an estate to redeem stock in a business with very little tax consequence while Section 6166 offers outright estate tax deferral for small businesses. To be eligible for Section 6166 however, at least 35% of a person's adjusted gross estate must come directly from their small business interests.

Sole proprietorships are the most common types of businesses that require estate planning as the business is not separate from an individual's personal assets, and in a sense, your business is you.

See Inna Fershteyn, Businesses Require Proper Estate Planning, Brooklyn Trust and Will, June 25, 2018.

Special thanks to Ronald Osherov for bringing this article to my attention.

July 6, 2018 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Thursday, July 5, 2018

How the Tax Cuts and Jobs Act of 2017 Affects Estate Taxes

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-07-05/6c5e3ae8-969c-49bf-89ce-a132c538c1fb.pngThe federal estate and gift tax exemption allows individuals a specified value of lifetime gifts and assets to pass to their beneficiaries -- estate tax-free. As of 2017, the federal exemption was $5,490,000. Under the new changes, the federal estate tax exemption has been temporarily doubled. As of January 1, 2018, the exemption is now $11,180,000. The increase only lasts until 2026 at which time the amount reverts back to 2017 amounts.

Beware though: just because the federal exemption has been increased it does not mean that you will not owe the estate taxes owed to the state that you reside in. There other options to help with state estate tax responsibilities in the shape of certain trusts.

A credit shelter trust can be a viable option for married couples with children who wish to ultimately pass assets to their beneficiaries (children) and also keep those funds available for their surviving spouse for their lifetime. The disclaimer offers flexibility to a surviving spouse under embedded provisions, which are usually contained in a will.

See David Frisch, How the Tax Cuts and Jobs Act of 2017 Affects Estate Taxes, Forbes, June 27, 2018.

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

 

July 5, 2018 in Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)

Tuesday, July 3, 2018

Five Shrewd Family Money Moves

ChessPresident Trump's new tax law appears to temporarily alleviate the majority of client's estate tax worries, but income tax and capital gains tax remain legitimate issues. Here are five tips to maximize assets passed on in a family while reducing or limiting the tax burden:

  • Give Stock to the Children
    • By “gifting” highly-appreciated stock assets to a younger, less well-off member of the family, the recipient can sell the asset while avoiding some or all of the capital gains taxes on the sale.
  • Fund the Children's Retirement
    • 66% of Americans 21-23 have no invested into a retirement plan yet, so another more well-to-do family member can assist by depositing money into a pre-tax retirement account just as an IRA or 401(k).
  • Convert Grandparent's IRA to a Roth IRA
    • It may benefit the younger generation for the older IRA owners to convert some or all of their IRAs to Roth IRAs while alive.
  • Leave the Right Money to the Right People
    • Depending on the income brackets of the beneficiaries, certain assets should go to different people to get the most out of tax-deferred accounts and IRAs as well as highly appreciated assets.
  • Keep the Life Insurance Going
    • "If the life insurance owner believes the insured will pass away sooner than the product of that equation, it’s probably a good idea to keep paying the premiums and keep the insurance in force."

See Kevin McKinley, Five Shrewd Family Money Moves, Wealth Management, July 2, 2018.

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

July 3, 2018 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Legislation | Permalink | Comments (0)

Sunday, July 1, 2018

CLE on Trusts: The Ultimate Guide

CLEThe National Business Institute is holding a conference entitled, Trusts: The Ultimate Guide, on Monday, July 30, 2018 - Tuesday, July 31, 2018 at the Holiday Inn & Suites Oakland Airport in Oakland, California. Provided below is a description of the event.

Program Description

Make the Best Use of Today's Top Trusts

We've expanded on our top "Trusts 101" course to give you even more unique trusts structures, sample provisions language, and reasoning for which planning tools better suit specific client situations. Understand the key structures and uses of today's top trusts and anticipate administration challenges and tax consequences. Register today!

  • Get an update on the current laws and tax regs governing the trusts practice.
  • Analyze all key factors in selecting the best trust option for each unique situation.
  • Define powers and duties of all trust parties to smooth implementation and prevent disputes.
  • Save drafting time with sample trust language.
  • Clarify who your client is to avoid conflicts of interest and other ethical violations.
  • Minimize your client's tax burdens with effective use of defective trusts.
  • Get practical guidance for drafting unique, single purpose trusts for pets.

Who Should Attend

This basic level seminar is designed for professionals involved in drafting and administering trusts:

  • Attorneys
  • Accountants and CPAs
  • Trust Officers
  • Tax Managers
  • Wealth Managers
  • Financial Planners
  • Nursing Home Administrators
  • Paralegals

Course Content

  1. Key Parties, Terms, Legal Concepts
  2. Revocable vs. Irrevocable and Revocable to Irrevocable
  3. Living vs. Testamentary Trusts
  4. Marital/Disclaimer Trusts Post-ATRA
  5. Medicaid-Planning Trusts
  6. Special Needs Trusts
  7. Grantor Trusts
  8. Asset Protection Trusts: Domestic and Offshore
  9. Legal Ethics
  10. Trust Decanting, Modification, Dissolution, and Constructive Trusts
  11. Tax Deduction with Trusts
  12. Other Trust Structures and Issues

Continuing Education Credit

Continuing Legal Education – CLE: 12.00 *

Financial Planners – Financial Planners: 14.00

International Association for Continuing Education Training – IACET: 1.20

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 14.00 *

Professional Achievement in Continuing Education – PACE: 14.00

* denotes specialty credits

July 1, 2018 in Conferences & CLE, Current Affairs, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Non-Probate Assets, Trusts | Permalink | Comments (0)

Monday, June 25, 2018

Gifting Wealth and the Estate Tax Law Under Trump

GavelIt is by now well known that President Trump's Tax Cuts and Jobs Act doubled the gift and estate tax exemptions to about $11.2 million for 2018, and $22.4 million for each married couple, with some basic portability techniques. However, this is just temporary: the amounts will revert to pre-passage amounts after adjusting for inflation.

To take advantage of the temporary increase for gifting, wealthy citizens and business owners have quite a few options.

  1. "Make gifts of public or private stock each year to your children and grandchildren without limiting your corporate powers. Use an entity such as an LLC to own assets and give “member interests” of ownership to your loved ones but maintain control with your LLC operating agreement.
  2. If you are with a company that is quickly appreciating in stock value, you may set up trusts to own the stock on behalf of children and grandchildren.
  3. Fully funding accounts and trusts for disabled children with special needs.
  4. Since you can transfer large amounts of assets under the new law, the use of trust documents can be wonderful in that they can protect children and grandchildren for a lifetime. Example: You can elect to have a trust give 1/3rd to a child at 30 years old, another 1/3rd at 50 and another 1/3rd at 60 years old while also allowing for education, health and welfare payments to be made to loved ones by trust officers.
  5. Trusts are only good if they are funded. Thus, the new law allows for a lot of money to fund trusts for spouses, children, and extended families. But, the law could change one day in the future.
  6. Of course, you can strategically fund 529 educational plans for many children and grandchildren without gift tax implications.
  7. You could also fund various types of insurance trusts for both yourself and your loved ones or even a dynasty trust.
  8. A wealthy person could help buy homes for their children.
  9. An owner can diversify by gifting their holdings in land, small business stock, or mineral rights.
  10. As for retirement, a wealthy donor could fund retirement products or loved ones such as an annuity or single premium variable life product. Funding a permanent insurance product for a child would actually protect the child and their children."

See George Mentz, Gifting Wealth and the Estate Tax Law Under Trump, News Max Finance, June 20, 2018.

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

June 25, 2018 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)