Wills, Trusts & Estates Prof Blog

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

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Sunday, December 21, 2014

Recently Introduced ASSET Act Could Allow Estate Tax Deferral

LawA newly introduced House bill could help business owners postpone estate tax to prevent parts of their businesses being sold in order to pay estate taxes after they die. The American Solution for Simplifying the Estate Tax Act of 2014 (ASSET) was created by a Maryland business owner and was introduced on December 11, by Representative Andy Harris as H.R. 5872. The ASSET Act would give individuals the option of paying an additional 1% income tax during life to allow their estate tax to be deferred until the estate is sold.

See Diana Furchtgott-Roth, This Tax Change Could Keep Your Business Alive After Your Death, Market Watch, Dec. 19, 2014.

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

December 21, 2014 in Estate Planning - Generally, Estate Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Friday, December 19, 2014

Taking Advantage of Current Estate Tax Breaks


December is a busy time for almost anyone.  Amidst the hustle and bustle, do not forget to take advantage of the current tax breaks offered under estate and gift planning laws.  If you miss these opportunities, they may not present themselves again.

One of the last tax breaks in the estate and gift tax system is your right to make gifts of $14,000 to any number of donees free of transfer tax this year.  In making these gifts, you are able to reduce your estate and avoid death taxes. 

If you make gifts in excess of the annual exclusion amounts, you will use some of your lifetime unified estate and gift tax exemption.  Yet, the sooner you use it, the more income and appreciation that will pass tax-free to your family in the future.  This is particularly true as the stock market continues to soar. 

If you are not comfortable in making gifts of $14,000 or of your $5.34 million exemption, you can put the gifts into a Crummey Trust instead.  A Crummey Trust (Gift Trust) can be designed so that you can take advantage of your annual exclusion gifts and still leave your family with access and control.  If your family needs access to the trust funds, the trust income and assets are available.  But if your family does not need them, they remain sheltered and grow. 

See John S. Lueken, How To Get The Most Out Of Your Year-End Gift And Estate Tax Planning, Bingham Greenebaum Doll, Dec. 15, 2014. 

December 19, 2014 in Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, December 18, 2014

Germany's Tax Exemption for Family Businesses Ruled Unconstitutional

Tax2As I have previously discussed, Germany's inheritance tax exemption for family operated companies was challenged in Germany's Constitutional Court. The court held yesterday that the current inheritance tax breaks for the family businesses are unconstitutional because they fail to give equal treatment to individuals and companies. The current exemption rules will continue for now, as lawmakers have a deadline for remedying the problem of mid-2016. However, lawmakers may be able to create a system that is more limited than the current rules that still offers some tax breaks to these companies.

See Reuters, German Court Declares Tax Breaks for Family-Run Firms Unconstitutional, The Economic Times, Dec. 17, 2014.

December 18, 2014 in Estate Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 17, 2014

German Business Owners Threatened by Tax Ruling


German business owners were warned they might be forced to slash investments and possibly sell holdings if they lose a privilege that has saved them billions in taxes. 

Germany’s constitutional court will decide whether families can continue to transfer companies from one generation to the next without paying estate taxes. 

Since most of the country’s three million small-and medium-sized companies are privately owned, political and business leaders will watch the ruling with dread.  “It is important for us that no jobs . . . will be destroyed as a consequence of this ruling or that the existence of companies will be threatened.” 

Under the current law, corporate assets can be passed tax free as long as the heirs keep the business for at least seven years.  “It is expected that Germany’s highest court will tighten the legal rules.  That would make the handing over of companies significantly more difficult.” 

One business owner, Manfred Fuchs, has passed on more than 95 percent of the family’s assets in the company.  “Without the exemption rule we may be forced to sell company shares and then you can’t rule out a hostile takeover,” he said.  “If something were to happen to my son and the privilege and no longer existed then, we’d face the same problem.  Where should we get the money from?  Our company needs to invest every year.”

See Karin Matussek and Nicholas Brautlecht, Billions in German Family Wealth Threatened by Tax Ruling, Bloomberg, Dec. 16, 2014.

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

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

Friday, December 12, 2014

Charitable Planning With Insurance Policies

BagPrior to the increase in the gift and estate tax exemptions, the focus on reducing tax consequences was higher than in the present financial climate. The increased exclusions have reduced the drive for tax focused estate planning for the many estates that now fall below the exclusion. While this change has reduced the incentives for charitable planning to reduce estate tax, it has created a new trend, which is to donate life insurance policies to charity. This trend was created because the same tax incentives that fueled large charitable giving contributions also fueled the desire to create life insurance policies to cover the estate tax cost. This type of charitable planning can create beneficial results, but experts also caution that some insurance policy based donations can create independent tax consequences and should be considered carefully.

See Warren S. Hersch, Charitable Planning in 2015: Weighing the Pros and Cons, Life Health Pro, Dec. 11, 2014.

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

December 12, 2014 in Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 10, 2014

Estate Planning Concerns For Singles


According to the Census Bureau, almost half of Americans ages 15 and older were single in 2013.  This compares with about one-third in 1970.  As there are more singles than ever before, these individuals end up facing some unique estate planning issues. 

A common concern among singles is distributions.  When a spouse dies intestate the surviving husband or wife generally inherits most assets.  However, if you are single and die intestate, your estate could be distributed in ways you may not like.  “A lot of single people are socially involved and philanthropically active in their communities and have charitable intent, but if they don’t have an estate plan in place all their work dies with them.” 

Thus, in order to prevent your assets being distributed in ways you do not deem adequate, create a will and/or revocable living trust that states specifically how you want your assets to be dispersed after you die.  Also name an executor and/or trustee to carry out those wishes. 

Singles can also encounter problems with beneficiary designations.  If you are divorced, make sure your beneficiaries are up-to-date on IRAs, payable-on-death bank accounts, and life insurance policies.  If you fail to do so, an ex-spouse could end up with your assets. 

See Glenn Ruffenach, What Happens When Single People Die? Market Watch, Dec. 9, 2014.

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

December 10, 2014 in Estate Administration, Estate Planning - Generally, Estate Tax, Intestate Succession, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Corporate Exemption for Germany's Inheritance Tax Challenged as Unconstitutional

GavelThe current tax law in Germany allows for a full inheritance tax exemption for family run businesses if ownership and management are passed to the decedent's heirs. A current challenge to the constitutionality of the exemption is being heard and many tax lawyers are predicting the ruling to hold the exemption unconstitutional. A survey conducted early this year found that layoffs are expected for half of family-owned businesses in Germany, which make up 92% of all German companies, if the exemption is ordered to end.

See Andrea Thomas, Tax Battle in Germany Shakes Family Dynasties, The Wall Street Journal, Dec. 8, 2014.

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

December 10, 2014 in Estate Planning - Generally, Estate Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

Saturday, December 6, 2014

Gift a 529 Plan This Holiday Season

School tuition

With people flocking to malls and shopping centers to find the perfect holiday gift, the best gift may be that of higher education. 

Right now in the U.S., half of the country’s families are not saving for college.  Of those that are, the majority are using general savings accounts to fund soaring college expenses.  Yet, by using 529 plans, American families can invest for college using the power of tax-deferred compounding to accumulate more for education. 

Now is the perfect time for financial advisers to discuss these investment vehicles with clients and prospects.  529 plans allow contributors to front-load five years’ worth of their annual gift tax exclusion in a lump sum.  This allows individuals to gift up to $70,000 and married couples up to $140,000 per beneficiary.  For families with multiple children and grandchildren, this becomes a massive tax savings for the estate.  Moreover, 529s allow for greater flexibility with beneficiaries, so the funds are never blindly passing to the next generation.  Account owners always have control over how assets are dispersed, and there are no income limits or age restrictions. 

See Michael Conrath, The Season of Giving is the Perfect Time for 529 College Savings Plans, Investment News, Dec. 2, 2014. 

December 6, 2014 in Estate Planning - Generally, Estate Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Friday, December 5, 2014

Tax Reminders Moving Into 2015

Tax CutHere are some tips and reminders for estate, gift, and GST tax exemptions for the new year:

  • The federal estate tax exemption for estate, GST, and gift tax will increase to $5,430,000 in 2015.
  • The annual gift tax exclusion will not increase in 2015, but will remain at $14,000.
  • Portability allows a surviving spouse to increase their tax exemption for both estate and gift tax by using the deceased spouse's unused exemption.
  • Portability is not allowed for GST tax exemption or most state estate tax.
  • There is still time to take advantage of any unused 2014 annual gift tax exclusion, as long as the gifts are completed by December 31.

See Albert W. Gortz, et al., 2015 Estate, Gift and GST Tax Update: What This Means for Your Current Will, Revocable Trust and Estate Plan, The National Law Review, Dec. 3, 2014.

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

December 5, 2014 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, December 4, 2014

Estate Planning for Millennials

Last will and testament

Estate planning plays a significant role in our lives, yet today, many youths have no estate plan whatsoever. 

It is never too early to being drafting out the basic estate plan.  Below is a summary of what young adults should know, even if their highest earning years are still ahead.

  • Know your beneficiary designations. A young professional will likely have access to a retirement plan at work, and may have an individual retirement account.  It is important that they are revisiting who is listed as a beneficiary on each account.
  • Talk about life insurance. Coverage through the workplace may not be enough to sustain a surviving spouse and children.  If you are on the path to marriage and children, think about individual life insurance policies, ideally term coverage.
  • Create a health care proxy and power of attorney. “For singles, it’s even more important to consider who’s going to have your health care power of attorney.  Even a plain old power of attorney is very valuable.  You don’t have to be about to die to have one.”
  • Draft a will. If you do not have a will, your estate is subject to state intestacy laws and the estate could be settled in a manner you never intended. 
  • Discuss estate taxes. Even if you are too young to consider creating a trust, it is a good idea to be informed about the local tax environment. 

See Darla Mercado, Don’t Ignore Estate Planning for Millennial Clients, Investment News, Dec. 3, 2014.

Special thanks to Tom Weede for bringing this article to my attention.

December 4, 2014 in Estate Administration, Estate Planning - Generally, Estate Tax, Non-Probate Assets, Wills | Permalink | Comments (0) | TrackBack (0)