Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Sunday, August 23, 2015

Financial Planning Issues Same-Sex Couples Might Still Face

Same sexThis year’s Supreme Court decision legalizing same-sex marriage has brought about major changes to estate planning for same-sex couples.  There are still some bureaucratic hurdles that same-sex couples might face.  It is important to make sure that all financial and testamentary documents like trusts and wills are updated to reflect the changes in the law.  If a same-sex couple is thinking about getting married they should plan ahead carefully instead of rushing the decision.  Getting a pre-nuptial agreement is a very important estate planning decision.  It is also a good idea to apply for a Federal tax refund for health insurance payments made by a spouse.  Same-sex couples should seek out the advice of competent estate planners to help decide on all of these important issues.

See Melissa Montgomery-Fitzsimmons, A Checklist for Advising Same-Sex Clients, Financial Planning, August 21, 2015.

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

August 23, 2015 in Estate Planning - Generally, Estate Tax, Guardianship, Income Tax, Trusts, Wills | Permalink | Comments (0)

New Regulations From IRS Delayed Until 2016

IRS LogoThe due date required by newly enacted Section 6035 has been postponed until February 29th, 2016, by IRS Notice 2015-57. The section will require a statement be sent to beneficiaries of a property transfer from an estate that describes the value of the property interest. Originally, the new statements were due on August 31, 2015 but were delayed in order for the IRS to create guidance for taxpayers and conduct a public comment phase. 

See Sally P. Schreiber, IRS announces delayed due date for new estate basis reporting rules, Journal of Accountancy, August 21, 2015.

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

August 23, 2015 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Friday, August 21, 2015

New York Has An Unusual 133% Estate Tax “Cliff”

NewYorkThe State of New York has an unusual estate tax “cliff” of 133% that goes into effect when the value of the estate exceeds the State’s basic exclusion.  This cliff applies because of the reduction in the amount of credit that is used against the New York Estate Tax.  The marginal rate of 133% applies to the estates of decedents who passed away between April 1, 2015, and March 31, 2016.  Estates that are valued between $3,125,000 and $3,281,250 are subjected to the estate tax.  Individuals who may be impacted by this 133% tax rate should speak with a competent estate planner to decide on options.  One option mentioned in this article involves providing a bequest to a favorite charity in order to receive the necessary tax benefits.

See John D. Dadakis, New York’s 133% Estate Tax, Holland & Knight, August 17, 2015.

August 21, 2015 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

President Obama Signs New Basis Rules Into Law

ObamaPresident Obama has recently signed the Surface Transportation and Veterans Health Care Choice Improvement Act (Act) into law.  The new statute, signed on July 31, 2015, will impose limits on basis increasing planning for surviving spouses.  Portability rules have traditionally been a tool for a surviving spouse to use a deceased spouse’s spousal unused exclusion amount (DSEAU).  The main issue is whether a portability election obtained under Internal Revenue Code Section 2010 could combine with a QTIP election under Section 2056(b)(7) to give the surviving spouse a date-of-death basis.  Under the new rules “the use of an unnecessary QTIP election on the death of the first spouse to die doesn’t allow a date-of-death basis at the survivor’s death.”  

See Rodney L. Goodwin, New Federal Law Limits Basis Increase Planning at Death of Surviving Spouse, Wealth Management, August 20, 2015.

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

August 21, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0)

Thursday, August 20, 2015

Iowa Amends Inheritance Tax Exemption Provision

IowaThe State of Iowa has recently amended its inheritance laws to provide an estate tax exemption to the lineal descendants of step-children.  Iowa’s new statute, which will go into effect on July 1, 2016, will also clarify the term “lineal descendants” to include those who are descendants by adoption.  Specifically listing parents, grandparents, great-grandparents, children, and other certain relatives will no longer be required under the new law in Iowa.  The current exemptions that exist for surviving spouses and step children will also continue to remain in place. 

See Walter Kluwer Law & Business, Inheritance Tax Exemption Provision Amended, Resourcefullaw, August 20, 2015.

August 20, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Trusts, Wills | Permalink | Comments (0)

Wednesday, August 19, 2015

Estate Planning Issues Faced By Foreign Nationals

Estate-planningA strong dollar and a booming real estate market has made the United States a popular destination for foreign investment.  An increase in foreign investment will bring about a large number of complex legal issues that foreign nationals will have to deal with.  For example, the estate tax exemption for a U.S. resident is $5.43 million while the exemption for a foreign national is only $60,000.  Financial advisor Shomari D. Hearn recommends that foreign nationals "make of their annual gift tax exemptions of $14,000" to try to reduce whatever tax burden they might face.  There are many different complex nuances with the estate planning laws dealing with foreign nationals.  Canadian citizens get the same estate tax exemptions as U.S. citizens because of a treaty that is in place. 

See Miriam Rozen, Special Estate Planning Needs For Foreign Clients, Financial Planning, August 18, 2015.

August 19, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Tuesday, August 18, 2015

IRS Issues New Regulations On Determining Basis Interest In CRTs

Crt2-editThe Internal Revenue Service (IRS) has issued new regulations that went into effect on August 12 that deal with determining the basis interest in Charitable Remainder Trusts (CRTs).  In the past a client would be able to use a charitable remainder annuity trust (CRAT) as a way to reduce the overall tax burden.  This article explains how a client and the remainder beneficiary could simultaneously sell their interest in the CRAT and as a result the client could claim a proportionate share of the CRATs basis.  As a result of this transaction the client would be able to walk away with a significantly reduced capital gains tax.  Under the new regulations a client would be required reduce the basis for his or her annuity interest by the proportionate share of both: “(1) the CRAT’s undistributed ordinary income, and (2) the CRAT’s undistributed net capital gain.”

See Jonathan Tidd, IRS Issues Final Regs on Sale of CRT Interests, Wealth Management, August 18, 2015.

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

August 18, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0)

Monday, August 17, 2015

Tax Law Change Imposes New Estate Basis Reporting Requirements

Irs-buildingCongress has recently passed the Surface Transportation and Veterans Healthcare Choice Improvement Act of 2015 that will make certain changes to tax law that will have an immediate impact on practitioners.  “Section 2004 of the act requires consistent reporting of basis between an estate and anyone acquiring property from the decedent and imposes new reporting requirements.”  The key provisions of this new legislation went into effect on July 31, 2015.  Section 1014 was amended by the act to require the basis of property inherited from a decedent be consistent with what was reported on the estate tax return.  Section 6035 was created to impose reporting requirements on the estate’s executor if the estate is required to file under Section 6018(a).  If the beneficiary is required to file under 6018(b) the same reporting requirements are imposed by the statute. 

See Alistair M. Nevius, J.D., New law imposes immediate estate basis reporting requirements, Journal of Accountancy, August 14, 2015.

August 17, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (1)

Thursday, August 13, 2015

Making Plans For Out-Of-State Property

Big mansionA Florida Appeals Court has recently affirmed that a State Probate Court has no jurisdiction over out of state real property.  The Court held that if a Will devises land owned in two or more states “the courts in each state construe it as to the lands located therein as if devised by separate wills.” Wealthy Clients could face a significant amount of hassle dealing with multiple probates involving real property located in more than one state.  It is a good idea to try to avoid probate entirely by keeping titles to property in two or more names and including a right of survivorship.  Make sure to keep the estate documents updated if there is a sudden change of circumstances like a death or a divorce.  Be aware of the location of the domicile for tax purposes and also stay abreast of state inheritance and estate taxes. 

See Tom Nawrocki, Dealing with out-of-state property issues in estate plans, Lifehealthpro, August 11, 2015.

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

August 13, 2015 in Estate Planning - Generally, Estate Tax, Income Tax, Intestate Succession, Wills | Permalink | Comments (0)

IRS Regulations Expected To Curtail Use Of Valuation Discount On Family Businesses

Beyer Blog IRS LogoThe IRS is expected to issue new regulations that will curtail the use of a valuation discount granted to closely held businesses for calculating estate tax. Estate planners have used family partnerships and LLC's as receptacles for assets that have an easy to determine value and where not meant to be protected. In some cases, cash has been transferred to an entity and then discounted to a lower value using a mechanism intended to help lessen the estate tax burden for legitimate small business owners. These tax breaks have become a political hot button due to the large amounts of revenue being lost with President Obama stating a change could bring in $18 billion over 10 years. The new regulations are expected to be released in mid September.

See Pail Sullivan, Navigating Tougher I.R.S. Rules for Family Partnerships, New York Times, August 7, 2015.

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

August 13, 2015 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)