Wills, Trusts & Estates Prof Blog

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

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Friday, July 25, 2014

Estate Tax Elimination Propels Its Way Through House


Backers of a bill that would eradicate the estate tax are pushing for a vote in September since they have achieved enough supporters to exceed a House majority.

The measure aims to end inheritance and generation-skipping transfer taxes as well as make permanent a 35% gift-tax rate with a $5 million lifetime exclusion. 

The groups pushing the bill are urging incoming House Majority Leader Kevin McCarthy, R-Calif., to put the measure on the House’s fall agenda.  “We feel really good for a September vote.”

Yet even if the Republican majority House approves the bill, it is not likely to be addressed by the Democratic led Senate before the end of the congressional term in December.  Bills that fail to get full congressional approval must be re-introduced in 2015.

Moving the bill through the House now is likely to position estate-tax reform for later debate on larger overhaul, “It shows that when tax reform gets going in earnest, this is an important issue to a lot of members.”

See Mark Schoeff Jr., Axing Estate Tax Gains Momentum in House, Investment News, July 22, 2014.

July 25, 2014 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0) | TrackBack (0)

Samsung Heirs Faced with a $6 Billion Inheritance Tax

Samsung heirs

As I have previously discussed, heirs of Samsung Electronics Group’s founder face a $6 billion inheritance tax bill.  Samsung Group chairman Lee Kun Hee, 72, is a legendary figure who turned Samsung Electronics into a powerful conglomerate.  Yet for the last three months, Lee has been in the hospital since suffering a serious heart attack. 

Under Korean inheritance law, an heir must pay fifty percent in tax when inheriting such wealth.  Tax attorney Kim Hyeon Jin says avoiding the bill may be possible if the money is placed in a foundation, however, that will cause the Lee family to lose control of some of their assets. 

Reports claim that in order to pay for the hefty bill, the Lees plan to open two additional Samsung businesses: Cheil Industries Inc. and Samsung SDS Co.

See Ren Benavidez, Samsung Heirs Could Pay a Massive US $6 Billion Inheritance Tax, China Topix, July 32, 2014.

July 25, 2014 in Estate Administration, Estate Planning - Generally, Estate Tax, Wills | Permalink | Comments (0) | TrackBack (0)

Thursday, July 24, 2014

How Matching the Right Beneficiary to the Right Asset Can Save Big

Money BagA married couple did not have an extravagant estate that they would leave behind. They would be under the exclusion amount, but they were not cash strapped either. They had a million dollars in IRA savings and used the $43,000 they were required to take out annually to fund a $800,000 life insurance policy. They named a charity as a revocable beneficiary of the insurance policy. Then they got some great advice. The advice was to swap the beneficiaries, and it was $300,000 worth of advice. By making their children the beneficiary of the life insurance policy, the children will save $100,000 in taxes paid on their inheritance and the charity gets $200,000 more from receiving the larger IRA and will not pay taxes due to their tax exempt status.

See Kelly Kearsley,  A Beneficiary Swap Saves $300K in Taxes, The Wall Street Journal, July 23, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

July 24, 2014 in Estate Planning - Generally, Estate Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 23, 2014

Article on the Israeli Estate Tax


Daphna Hacker (Buchman Faculty of Law, Tel Aviv University, Israel) recently published an article entitled, Intergenerational Wealth Transfer and the Need to Revive and Metamorphose the Israeli Estate Tax, Law & Ethics of Human Rights. Vol. 8 Issue 1, 59–101 (June 2014). Provided below is the article’s abstract:

This article suggests enacting an accession tax instead of the estate duty – which was repealed in Israel in 1981. This suggestion evolves from historical and normative explorations of the tension between perceptions of familial intergenerational property rights and justifications for the “death tax,” as termed by its opponents, i.e., estate and inheritance tax. First, the Article explores this tension as expressed in the history of the Israeli Estate Duty Law. This chronological survey reveals a move from the State’s taken-for-granted interest in revenue justifying the Law’s enactment in 1949; moving on to the “needy widow” and “poor orphan” in whose name the tax was attacked during the years 1959–1964, continuing to the abolition of the tax in 1981 in the name of efficiency and the right of the testator to transfer his wealth to his family, and finally cumulating with the targeting of tycoon dynasties that characterizes the recent calls for reintroducing the tax. Next, based on the rich literature on the subject, the Article maps the arguments for and against intergenerational wealth transfer taxation, placing the Israeli case in larger philosophical, political, and pragmatic contexts. Lastly, it associates the ideas of accession tax and “social inheritance” with inspirational sources for rethinking a realistic wealth transfer taxation to bridge the gap between notions of intergenerational familial rights and intergenerational social justice.

July 23, 2014 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0) | TrackBack (0)

Lessons Learned From James Gandolfini’s Will

James GandolfiniJames Gandolfini’s  will made headlines for the tax implications that his estate planning decisions created. The Soprano’s star left gifts to his sister and daughter totaling 80% of his estate, which was then taxed at 55% in “death taxes.” Here are six lessons learned from Gandolfini’s will:

  1. Without the public nature of probate, the media craze could not have happened.
  2. A revocable trust would have been an inexpensive way to keep the process private
  3. It is not the end of the world if Gandolfini did pay the reportedly high amount of taxes, if his estate went to who he wanted it to.
  4. There are ways to limit the tax bill, including how Gandolfini left his son $7 million through a life insurance trust.
  5. It is important to adjust provisions for the age that children will recieve inherited funds based on how responsible and mature they are over time.
  6. It is important to remember that foreign property may be subject to foreign laws, such as Gandolfini’s Italian property.

See Robert Wood, 6 Estate Planning Lessons from James Gandolfini’s Will, Forbes, July 20, 2014.

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

July 23, 2014 in Estate Planning - Generally, Estate Tax, Non-Probate Assets, Television, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Friday, July 18, 2014

Political Commentary on the Estate Tax With a Dash of Humor

John OliverJohn Oliver addressed the politically hot topic of income inequality through his combination of news, commentary, and comedy on ‘Last Week Tonight’ on Sunday. At about minute seven of the segment he directly addressed the estate tax.

See Patrick Kevin Day, John Oliver Tackles Income Inequality on ‘Last Week Tonight’, Los Angeles Times, July 14, 2014.

Special thanks to Michael Booth (Chicago Estate Planning Attorney) for bringing this article to my attention.

July 18, 2014 in Current Affairs, Estate Tax, Television | Permalink | Comments (0) | TrackBack (0)

When a Personal Representative Refuses to File Estate Tax Return

Question3The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, allows unused estate tax exclusion amounts to be transferred to the surviving spouse. The transferred exclusion is then added to the estate tax exclusion amount when that spouse dies. The transfer requires an election by the personal representative of the estate. A potential problem arises if the personal representative refuses to make the election. One possible solution is to negotiate with the personal representative of the estate, as the reason for not making the election may be based on the high cost of filing an estate tax return. Another possible remedy would be to ask the probate court for help.

See Jeffrey Skatoff, Personal Representative Required to File Estate Tax Return to Claim Portability?, Clark Skatoff, July 16, 2014.

July 18, 2014 in Estate Administration, Estate Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, July 17, 2014

Using an LLC as an Estate Planning Tool

Couple doing paperwork

The Limited Liability Company (LLC) is a hybrid legal entity that is beneficial not just for small-business owners, but is also a powerful tool for estate planning.  If you want to transfer assets to your family members, but are worried about gift and estate taxes, an LLC can protect assets during your lifetime and reduce taxes owed by you or your family members.

Creating a family LLC with your children allows you to reduce not only the estate taxes your children would be required to pay on their inheritance, but it also enables you to distribute inheritance to your children during your lifetime, without being bludgeoned by gift taxes.  This is made possible while also providing the ability to maintain control over your assets. 

In a family LLC, the parents maintain management of the LLC, with children or grandchildren holding shares in the LLC’s assets, however, they do not have any management or voting rights.  This allows parents to buy, sell, trade or distribute the LLC’s assets.  Thus, parents can maintain control over the assets and protect them from financial decisions made by younger members. 

Upon establishing your family LLC, you can begin transferring assets pursuant to your state’s legal process.  You subsequently decide on how to translate the market value of those assets into LLC units of value, similar to stock in a corporation.  It then becomes possible to transfer ownership of your LLC units to your children or grandchildren. 

See Michelle Ullman, Using an LLC for Estate Planning, Investopedia, July 15, 2014.

July 17, 2014 in Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

New York Estate Tax Changes Fall Short of Goal

TaxAs I have previously discussed, New York enacted new estate tax laws that increased the state estate tax exemption. The state was motivated by a desire to prevent wealthy residents from moving to other states with lower estate tax. However the increased exemptions, which will reach an estimated $6 million by 2019, do not benefit estates that are worth more than 105% of the exemption amount, as the exemption will no longer apply to those wealthier estates.

There is more bad news for wealthy estates in New York. The new estate tax does not adopt the concept of portability, and gifts made within three years before death that are more than the $14,000 annual exclusion will be taxed under a newly created state estate tax.

See Robert W. Cockren et al., New York State Reduces its Estate Tax for Some, Increases it for Others, Mondaq, July 14, 2014.

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

July 17, 2014 in Estate Planning - Generally, Estate Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Monday, July 14, 2014

New Edition of Federal Taxation of Estates, Trusts and Gifts: Cases, Problems and Materials Released

Bloom2Ira Mark Bloom (Justice David Josiah Brewer Distinguished Professor of Law Albany Law School) and Kenneth F. Joyce (SUNY Distinguished Teaching Professor of Law Emeritus SUNY Buffalo Law School) have recently released the Fourth Edition of their outstanding casebook entitled Federal Taxation of Estates, Trusts and Gifts: Cases, Problems and Materials along with a comprehensive Teacher's Manual.

Here is the publisher's description of the book:

This new edition of Federal Taxation of Estates, Trusts and Gifts again blends a traditional casebook approach with a problem method, to develop student understanding of the relevant rule structure pertinent to the transfer of wealth. The transactional organization facilitates student comprehension by repeatedly exposing students to certain themes, such as reason for deductibility, taxation based on passage of economic benefit, and valuation. This Fourth Edition also uses structured problems to facilitate an understanding of the doctrinal framework, analytical processes, and policy issues.

Federal Taxations of Estates, Trusts and Gifts presents a comprehensive study of the tax aspects involved in the wealth transfer process: Chapter 1 provides indispensable background on the federal wealth transfer and related income tax systems. Chapter 2 provides an overview of each of the tax systems. Chapters 3, 4, and 5 outline the basic structure of the gift, estate, and generation-skipping transfer tax systems and include an examination of underlying policy questions. Chapters 6 through 13 explore how the transfer tax systems, plus the relevant income tax rules-especially the grantor trust provisions of subchapter J-apply to various transactions, most of which are in the nature of testamentary substitutes. The income taxation of estates and non-grantor trusts and their beneficiaries is comprehensively covered in Chapter 14. The book ends with Chapter 15, which provides options for reforming, as well as alternatives to, the tax systems.

The Fourth Edition contains not only the changes made by the American Taxpayer Relief Act of 2012 as well as more recent developments, but also highlights a variety of estate planning considerations. While relying on well-recognized leading cases, it also includes recent and significant cases, rulings, and regulations that either break new ground or expand on existing law.

July 14, 2014 in Books - For the Classroom, Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)