Wills, Trusts & Estates Prof Blog

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

Tuesday, January 17, 2017

Trump's Treasury Pick Makes Use of Dynasty Trust

Dynasty trust trumpDonald Trump recently appointed Steven Mnuchin to lead the United States Treasury Department, but is the new appointee taking advantage of a tax loophole? A federal ethics disclosure revealed that Mnuchin placed assets worth $32.9 million into the Steven Mnuchin Dynasty Trust I, allowing him to shield wealth from estate taxes for many generations to come. Only an elite few wealthy families actually need the help of a dynasty trust—those that intend to benefit the generations well beyond their children and grandchildren. The Obama Administration has called for changes to these types of tax loopholes, while Trump is looking to make them virtually useless for planning one’s estate. 

See Zachary R. Mider, Trump’s Treasury Pick May Have Used Tax Loophole Obama Attacked, Financial Advisor, January 12, 2017. 

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


January 17, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Trusts | Permalink | Comments (0)

Monday, January 16, 2017

Article on Key State Tax Planning Developments

State taxesSharon L. Klein recently published an Article entitled, The State of the States: 2016—An Update of Key Planning Developments, Tr. & Est. 82 (Jan. 2017). Provided below is an abstract of the Article:

To be more competitive, some jurisdictions with separate estate taxes have been increasing the amount that’s exempt from state estate taxes or even phasing out their estate or inheritance taxes. President-elect Donald J. Trump campaigned on eliminating the federal estate tax. A repeal of the federal estate tax would have a significant trickle-down effect at the state level on a number of issues. In particular, some states peg their estate tax exemption amounts to the federal exemption amount and might need to take specific action to decouple. What happens at the federal level remains to be seen. In the meantime, here’s the latest state-level activity. 


January 16, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Saturday, January 14, 2017

Article on Lifetime Transfers of Appreciating Assets

Lifetime transfersDavid A. Handler & Patricia Ring recently published an Article entitled, Lifetime Transfers of Appreciating Assets: When Does It Pay?, Tr. & Est. 74 (Jan. 2017). Provided below is a summary of the Article:

The American Taxpayer Relief Act of 2012 (ATRA) solidified the irrelevance of the federal estate tax for all but a tiny percentage of the American population by setting the federal estate tax exemption at $5 million, indexed for inflation. “Portability,” which allows a surviving spouse to use any unused portion of his last deceased spouse’s federal estate tax exemption, became permanent law. As a result, with minimal planning, a married couple can now transfer nearly $11 million to their children and/or other non-charitable beneficiaries at their deaths without incurring any federal estate tax. 

The basis of appreciated assets that are included in a taxpayer’s estate is stepped-up to fair market value (FMV), eliminating any built-in gains on these assets. This is true even if the taxpayer’s estate isn’t subject to estate tax (for example, the estate is less than the federal exemption or passes to a surviving spouse).

Given the higher tax rates for capital gains, this basis step-up is more valuable than ever. Even those few taxpayers who still have taxable estates should think carefully before making lifetime transfers of assets to their beneficiaries. Although such transfers would remove the transferred assets (and any post-transfer appreciation) from their estate for estate tax purposes, the basis of these assets wouldn’t be stepped-up at their deaths. As a result, substantial gains could be recognized and taxes on such gains payable when such assets are later sold by the transferees. 

It isn’t easy to determine whether the benefit of the estate tax savings that will be achieved by transferring an asset during a taxpayer’s life will likely outweigh the cost of subsequent capital gains taxes when the recipients later dispose of the asset. As we’ll discuss, the lower the asset’s basis as a percentage of its value, the more the asset must appreciate for a lifetime transfer of the asset to provide a net tax benefit.  


January 14, 2017 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Wednesday, January 11, 2017

Article on Fiduciary Duties in 2017

Fiduciary 2016Gail E. Cohen recently published an Article entitled, In Like a Lamb, Out Like a Lion: For Fiduciaries, 2016 Started Out Quietly, but 2017 Promises to Be a Wild Ride, Tr. & Est. 28 (Jan. 2017). Provided below is a summary of the Article:

The year 2016 started out quietly, seemingly a continuation of the status quo. We continued acting as fiduciaries of trusts that took advantage of tried and true tax strategies. Professional fiduciaries received good news in April when the Supreme Judicial Court of Massachusetts overturned the troubling Pfannensitehl decision of 2015, thereby providing assurance that discretionary trusts weren’t subject to claims of divorcing spouses in Massachusetts. Later in the year, as expected, the Internal Revenue Service put forth long-awaited proposed regulations intended to curtail the use of valuation discounts in gift and estate planning for family entities. 

Then came Donald J. Trump. Seemingly everyone expected Hillary Clinton to win the presidency, thereby continuing the status quo, albeit with higher income taxes and higher estate and gift taxes (or at least a lower exemption from those taxes). Up until the election, there was a flurry of activity to take advantage of valuation discounts prior to the Internal Revenue Code Section 2704 regulations becoming final. Now, we don’t know exactly what 2017 will bring. 

A few items to watch: lower income tax rates; elimination of gifts of appreciated assets to private charities; elimination of estate and gift taxes and presumably the generation-skipping transfer (GST) tax; income tax at death or carryover basis; and non-adoption of the proposed IRC Section 2704 regulations. Looking ahead, we should examine the potential impact that these actions may have on professional fiduciaries. 


January 11, 2017 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Professional Responsibility, Trusts | Permalink | Comments (0)

Tuesday, January 10, 2017

Article on the Effect of 2016 Twists & Turns on Estate Planning

2016 estate planningCharles A. Redd recently published an Article entitled, A Turbulent Time of Twists and Turns: Two Controversial Sets of Proposed Regs and a Startling Election Victory May Impact Tax Policy and Laws, Tr. & Est. 20 (Jan. 2017). Provided below is a summary of the Article:

The year 2016 was remarkable and exciting for estate-planning professionals. Among many noteworthy developments, the Internal Revenue Service promulgated two important and controversial compilations of proposed regulations (proposed regs), two significant Tax Court cases were resolved in favor of taxpayers and the election on Nov. 8 produced a startling victory for Donald J. Trump and the Republicans that will certainly have substantial impact on the nation’s tax policy and tax laws. 


January 10, 2017 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Friday, January 6, 2017

Uncertain Death to the Death Tax?

Death taxesWith the election of Donald Trump, Americans want to know: will he follow through on his vow to deliver death to the death tax? There is a good chance that Trump will abolish the estate tax because it has become complicated and costly to administer and the increase in capital gains tax would provide a simpler system. The estate tax as well as its counterparts, the gift tax and the generation-skipping transfer tax, all bring complications while raising little revenue. In order to evaluate whether keeping these taxes, it will be important for the new President-elect to consider their social purposes.  

See Jeff Schlegel, Death to the Death Tax?, Financial Advisor, January 3, 2017. 


January 6, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Tax Efficiency While Alive and at Death

IRSWhen working to minimize your family’s tax burden, it is best to start while your parents are still alive. There are several strategies to help save your parents money in their later years and limit the taxes owed after their death. One way to reduce taxes while your parents are alive is to have them sell their stocks that have losses, which may allow them to take a tax deduction. If the stock is not sold, then upon your parent’s death there will be no tax deduction for the loss. On the other hand, they should keep stocks that have gains because their heirs will benefit from the stepped-up basis rule. For retirement accounts, like an IRA, it will be beneficial to allow the funds to grow tax-deferred, further allowing the money you would have paid in taxes to earn interest for many years. It may also be wise for those families with large estates to gift assets to beneficiaries while the parents are still alive, reducing their tax liability at death. Another efficient estate planning tool is the trust, which will provide less hassle to beneficiaries. Tax efficiency is a major asset in itself both while alive and at death, so it is important to plan accordingly. 

See Patrick O’Brien, How to Keep Your Parents’ Assets from the Taxman, Market Watch, January 6, 2017. 


January 6, 2017 in Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets, Trusts | Permalink | Comments (0)

Thursday, January 5, 2017

Article on Estate Tax Treatment of Life Insurance at Divorce

Estate tax life insuranceDanielle E. Miller recently published an Article entitled, Estate Tax Impact of Life Insurance Required by Divorce, Estate Planning (Dec. 2016). Provided below is an abstract of the Article:

Life insurance often assumes an important role in a marital settlement agreement or divorce decree. One party may be required to maintain for life a policy insuring himself or herself that names the former spouse as beneficiary. Alternatively, the party may be required to keep life insurance in force as security for alimony or other payments to the former spouse. Depending on the structure of the obligation to maintain insurance, the policy proceeds may be subject to tax in the insured’s estate for federal estate tax purposes.

This article discusses the steps to consider in order to anticipate the federal estate tax treatment of that insurance policy and obligation.

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


January 5, 2017 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Thursday, December 29, 2016

Article on Strategies for Selling Your Business

Selling your businessMatthew S. Bart recently published an Article entitled, The Power of Preparation: Help Your Client Develop Strategies in Advance of Selling His Business, Tr. & Est. (Dec. 2016). Provided below is a summary of the Article:

A client’s decision to sell his business may be the single most important decision he makes in his lifetime and requires him to apply the same level of care that made him successful in business to planning for life after the sale is complete. The decision made in the immediate years before the sale is completed can have a tremendous impact on the wealth created and preserved for future generations. 

Selling a business results in unique challenges for the owners of privately held businesses. The sale of the business itself requires extensive and effective planning. Assembling the right team of advisors—attorneys, accountants and investment bankers—helps to ensure that the owners receive the most value for the business that they built. The sale of the business also converts wealth formerly held within the business to liquid assets, often to a level beyond the owner’s imagination. That “new” wealth needs to be structured and managed to meet the goals and needs of the owners for both their own lifetimes and for future generations. 

Here are some steps you can help your clients take to prepare for the sale of their business to maximize the value transferred to future generations, provide protection from creditors and minimize estate taxes. There’s no one-size-fits-all approach to this kind of planning, as each situation has different facts and circumstances. I’ve come up with the case study below to provide insight into the different tools you can discuss with your clients. 


December 29, 2016 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

How to Retain Your Clients' Heirs

Retain heirsGeneration shifting and wealth transferring can allow for major business building opportunities. Not only does expertise in this area help ensure your clients retain more wealth, but it also can help your firm retain your clients’ heirs. A study showed that attracting and retaining heirs is one of the most important means for advisors’ pursuit of greater profitability. With the baby boomers earmarking much of their wealth for future generations, it is important that these transfers of wealth are managed with care through an effective estate plan. Subsequently, a holistic approach that is successful for every family member will be a way for financial advisors to attract and retain these heirs. An estate plans that helps your clients accumulate more wealth and safeguards it for future generations will certainly be an important business strategy. 

See Laurence Greenberg, Inheriting Heirs Will Secure Your Firm’s Future, LifeHealthPro, December 28, 2016. 

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


December 29, 2016 in Estate Planning - Generally, Estate Tax, Trusts | Permalink | Comments (0)