Wills, Trusts & Estates Prof Blog

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

Thursday, November 26, 2015

Reducing The Income Tax Bill Of A Trust

Trust estateThere are many estate tax planning benefits that trusts can provide. Some trusts even provide income tax benefits as well, and by reducing income tax people can be able to preserve more wealth for their heirs. The U.S. Tax Court ruled last year that a trust is able to “materially participate” in business activities for the purposes of passive activity loss (PAL) rules, and as a result creating income tax benefits by allowing more deductions for many trusts. “The PAL rules prevent taxpayers from deducting losses generated by “passive” business activities against “non-passive” income, such as wages and portfolio interest and dividends.” When it comes to determining what it means for a trust to materially participate in a business the definition of “materially” can become unclear. “The Tax Court disagreed with the IRS that a trust cannot materially participate in a business or qualify as a real estate professional.” This Tax Court ruling discussed in this article is another reason why it is important for people to update their estate plans.

See Tom Kosinski, Can You Reduce Your Trust's Income Tax Bill?, Orba Blog, November 18, 2015.

November 26, 2015 in Estate Planning - Generally, Estate Tax, Trusts | Permalink | Comments (0)

Wednesday, November 25, 2015

Changes To US Tax Court Rules Of Practice And Procedure Proposed By IRS

GavelThe Internal Revenue Service has recently proposed changes that would help improve tax court procedures. The changes would also enhance efficiencies for both the Tax Courts and the litigants that have cases. The new IRS proposals will cover a wide variety of procedural rules that will include “recommendations related to trial subpoenas, depositions and inadvertent disclosure of privileged material.” They have proposed a modification to Tax Court Rule 147 that “allow for the return of a subpoena duces tecum directed to third party custodian of records in advance of the trial calendar.” The IRS suggests that the subpoena should be returned at least 30 days before trial so that the other side can have time to review the documents. Another proposal is that the Tax Court adopt Fed. R. Civ. P. 26(b)(5)(B) which deals with the disclosure of privileged material. Finally, they have “recommended that the Court allow non-consensual depositions of party witnesses upon notice to the party without requiring leave of the Court by motion.”

See Richard A. Nessler, IRS Proposes Changes To US Tax Court Rules Of Practice And Procedure, Mondaq, November 25, 2015.

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

November 25, 2015 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Court Holds That Income Tax Refunds Are Property

IRSThe Tax Court has recently held in Estate of Russell Badgett, Jr. et al. v. Commissioner, that federal income tax refunds that were due to a decedent at the time of his death are to be included as a property interest in his gross estate for federal estate tax purposes. Internal Revenue Code Section 2033 requires the gross estate to include the value of all property. If there is no offsetting liability in existence then under Section 6402(c) of the Internal Revenue Code the IRS “shall” refund the balance of any tax over-payments to the taxpayer. The Tax Court held that Section 6402(c) did not apply to the Russell estate and the court upheld the Notice of Deficiency that the estate received. The full text of the Tax Court decision can be read here.

See Dawn S. Markowitz, Income Tax Refunds Constitute Property, Trusts & Estates, November 25, 2015.

November 25, 2015 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

UT School Of Law Presents The 63rd Annual Taxation Conference

CLEThe University of Texas School of Law is presenting a CLE entitled, 63rd Annual Taxation Conference, on December 3-4, at the Radisson Hotel and Suites in downtown Austin. Here are some details about the event:

The 63rd Annual Taxation Conference features an impressive slate of topics with regionally and nationally renowned speakers covering current trends, updates in tax regulation and policy, and much more. 

  • Gain insight into corporate taxation, reform efforts, and the state of the tax world with Mark Prater, Deputy Staff Director and Chief Tax Counsel for the United States Senate Finance Committee
  • Get the latest on Texas State and Local tax law changes, including the impact of recent legislative and judicial developments
  • Hear from Glenn A. Hegar, new Texas Comptroller of Public Accounts, on his plans for the office
  • Collect practical tips for working with foreign partnerships and real estate investments
  • Explore recent developments in federal income taxation with Professor Bruce McGovern
  • Earn up to 2.25 hours of ethics credit, including an hour on Ethics Landmines for 2015

November 25, 2015 in Conferences & CLE, Estate Tax, Income Tax | Permalink | Comments (0)

Friday, November 20, 2015

Including A Heritage Statement In An Estate Plan

Heritage statementIt is a common theme in human behavior for wealth to disappear within three generations. The first generation often creates the wealth through hard work and thrift. Then the second and third generations in a family will often spend everything until there is nothing left. Having a good estate plan is often not enough to preserve family wealth through the generations. Along with a monetary inheritance senior generations need to put more time and effort into providing their heirs with an educational inheritance as well. Heirs need to be taught the money management skills and the work ethic that allowed the first generation to build and keep the wealth in the first place. A heritage statement is a formal document that can sharpen a families’ vision about the priorities that they need to have. This column provides resources on how people can learn more about heritage statements.

See Why Should I Consider Including a “Heritage Statement” as Part of My Estate Planning?, The Law Offices of Kyle E. Krull P.A., November 19, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

November 20, 2015 in Estate Planning - Generally, Estate Tax, Income Tax, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Estate Planning Issues Millennials Should Think About

MillennialYoung adults that are part of the Millennial generation have very distinctive estate planning needs. Discussions between Millennials and their parents about estate planning will be very important over the next 30 years as over $30 trillion in wealth is transferred from one generation to the next. Millennials need to carefully think about their own situation and what their goals are and then develop the right estate plan that suits their individual needs. Communication with family members and loved ones is also essential. It is a good idea for people to think about what sort of inheritance they might be expecting to receive and then plan accordingly.

See Ashley Thompson, Estate Planning Considerations for Millennials, Wealth Director, November 17, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

November 20, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Thursday, November 19, 2015

Article On The Economy of Charitable Giving


Allison Anna Tait (Professor, University of Richmond School of Law) recently published an article entitled,The Secret Economy of Charitable Giving, Boston University Law Review Vol. 95, 2015. Provided below is an abstract of the article:

Charitable giving is big business. In 2009, the Internal Revenue Service reported close to 100,000 private foundations, almost double the number from fifteen years earlier. Some of these charitable trusts, like the Gates Foundation, are multi-billion dollar enterprises. Trust instruments and other governing documents set forth the terms that control these gifts. Because charitable trusts can exist in perpetuity, however, changing circumstances sometimes render the terms difficult to fulfill. Courts can apply cy pres, a doctrine that allows for the modification of gift restrictions, but in the past courts have tended to apply cy pres narrowly and privilege donor intent above all other considerations. Recent reforms, however, have moved courts toward a more flexible application of the doctrine. In this Article, I analyze certain high-profile cases that have driven these reforms — including the presumption of general charitable intent, the recognition of “wasteful” as a criterion, and the deployment of deviation — and explain how these reforms represent positive change. Moreover, I provide a theoretical grounding to account for the correctness of these reforms. I argue that charitable giving should be understood as embedded in a nexus of material and social exchanges — part of the “charitable gift economy.” I describe how charitable giving provides a range of benefits to donors, including both tangible tax benefits and intangible benefits such as status, social identity, and “warm glow.” Based on this understanding of the charitable gift economy, courts and charities alike should embrace current reforms and seek to expand them further.

November 19, 2015 in Articles, Estate Tax | Permalink | Comments (0)

Wednesday, November 18, 2015

Famed Artist Used British In Lieu Statute To Reduce Estate Tax

ArticlePictureThe estate of famed artist Lucien Freud has received estate tax relief of nearly £3 million after it donated a collection of sketches and letters and to the National Portrait Gallery. The full extent of the donation is not yet known but it does include drawings which formed the basis of a number of later works including of Freud's second wife Lady Blackwood. The donation was made under an early 20th century law which allows an estate to donate cultural artifacts to the nation for a reduction of death dues.

See Mark Brown, Lucian Freud archive given to nation in lieu of £2.9m in inheritance tax, The Guardian, November 16, 2015.

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

November 18, 2015 in Current Affairs, Current Events, Estate Tax | Permalink | Comments (0)

Monday, November 16, 2015

Retirement Account Mistakes That Can Snare Investors

Financial plannerThe rules surrounding IRAs, 401(k)s, and other retirement accounts can be very complicated and can snare even the smartest of lawyers, financial advisors, and accountants. When trying to avoid the penalties and taxes on taking an early withdrawal from a traditional IRA or 401(k) account before the age of 59 ½ it is important to understand the exceptions. This article discusses the 11 separate exceptions for early withdrawals that people need to be aware of and careful when using. It is also extremely important to keep beneficiary forms up to date and avoid any of the “death traps” discussed in this article when passing on assets to loved ones. This column also discusses the “stretch IRA” and the debates taking place among lawmakers about its future.

See Janet Novack, Retirement Account Mistakes – Not For Dummies, Forbes, November 15, 2015.

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

November 16, 2015 in Estate Planning - Generally, Estate Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Thursday, November 12, 2015

Estate Planning For Different Generations

GenerationsWhen it comes to working with clients in different age groups each generation has its own set of needs and expectations. Whether a person is a millennial or a baby boomer will have a major impact on their attitudes and the decisions that they make. A good estate planner needs to be aware of how the life-cycle and aging process will shape people’s perspective. It is also very important to be aware of generational similarities as well as differences. There are certain needs and expectations that are common with all age groups. By paying attention to generational details estate planners will be able to provide better services that can be tailored to a client’s individual needs.

See Stephen Boswell and Kevin Nichols, Decision-Making Across Generations, Wealth Management, November 12, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

November 12, 2015 in Elder Law, Estate Planning - Generally, Estate Tax, Intestate Succession, Trusts, Wills | Permalink | Comments (0)