Wills, Trusts & Estates Prof Blog

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

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Saturday, April 12, 2014

Article on the Prospects of Estate Tax Reform

Estate tax

Paul L. Caron (Pepperdine University School of Law) and James R. Repetti (Boston College Law School) recently published an article entitled, Revitalizing the Estate Tax: Five Easy Pieces, Tax Notes, v. 142, 2014, p. 1231-1241.  Provided below is the abstract from SSRN: 

In a previous article, we argued that contrary to the state of the law over 35 years ago — when George Cooper wrote his seminal article on the estate tax (A Voluntary Tax? New Perspectives on Sophisticated Estate Tax Avoidance, 77 Colum. L. Rev. 161 (1977)) — taxpayers today generally ‘‘can reduce the value of assets subject to transfer tax in many instances only if they are willing to assume the risk that the reduction may be economically real and reduce the actual value of assets transferred to heirs or, alternatively, in narrow situations if they are willing to incur some tax risk.’’ (The Estate Tax Non-Gap: Why Repeal a Voluntary Tax?, 20 Stan. L. & Pol’y Rev. 153 (2009)) In another article, we documented the dramatic increase in income and wealth inequality over the past 30 years and the accompanying adverse social consequences and long-term negative effect on economic growth. (Occupy the Tax Code: Using the Estate Tax to Reduce Inequality and Spur Economic Growth, 40 Pepp. L. Rev. 1255 (2013)) We argued that tax policy historically has played an important role in reducing inequality and that the estate tax is a particularly apt reform vehicle in light of the role of inherited assets among the very rich and the adverse economic effects of that inherited wealth. In this article, we advance five estate and gift tax reform proposals that would generate needed revenue, reduce inequality, and contribute to economic growth: (1) disallow minority discounts when the transferred asset or business is controlled by family before and after the transfer; (2) maintain parity between the unified credit exemption amounts for the estate and gift taxes; (3) reduce the wealth transfer tax exemptions to $3.5 million, increase the maximum tax rate to 45 percent, and limit the generation-skipping transfer tax (GSST) exemption period to 50 years; (4) restrict the ability for gifts made in trust to qualify for the gift tax annual exclusion; and (5) impose a lifetime cap on the amount that can be contributed to a grantor retained annuity trust (GRAT).

This article was presented on January 17 at a symposium in Malibu, California cosponsored by Pepperdine University School of Law and Tax Analysts. Twenty of the nation’s leading tax academics, practitioners, and journalists gathered to discuss the prospects for tax reform as it is affected by two crises facing Washington: dangerously misaligned spending and tax policies, resulting in a crippling $17.4 trillion national debt; and the IRS’s alleged targeting of conservative political organizations. A video recording of the symposium is available online.

April 12, 2014 in Articles, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Sunday, April 6, 2014

Overview of the Federal Tax System

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The Joint Committee on Taxation has released its Overview of the Federal Tax System as in Effect for 2014. It provides a summary of the current 2014 tax system, consisting of four main elements--income tax on individuals and corporations (regular and alternative minimum tax); payroll taxes on wages (and self-employment income) to finance certain social insurance programs; estate, gift, and generation-skipping taxes (GSTs); and excise taxes on goods and services.



See Joint Committee on Taxation, Overview of the Federal Tax System as in Effect in 2014, JCX-25-14, Mar. 28, 2014.

April 6, 2014 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Monday, March 17, 2014

Obama Reveals Budget Proposal

ObamaPresident Obama has released his proposed 2015 budget, which would make many changes related to the estate tax and current estate planning tools. These changes include going back to 2009 estate rates that were in effect prior to the American Taxpayer Relief Act. The changes would take effect Jan. 1, 2018.

One of the proposed changes would reduce the tax exemption amount to $3.5 million for estate and generation-skipping transfers, and to $1 million for gifts given during life. The current tax exemption amount for transfers during life and at death is $5.34 million. The proposed budget would also raise the top tax rate from 40% to 45%. In addition to rate and exemption changes, the proposed budget would end the establishment of dynasty trusts. There are currently four states that allow trusts to continue indefinitely.

See Deborah Jacobs, Obama Budget Takes Aim at Popular Wealth Transfer Tools, Forbes, Mar. 4, 2014.

March 17, 2014 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Saturday, March 15, 2014

CLE on Planning for Medium-Sized Estates

CLEThe American Law Institute Continuing Legal Education (ALI CLE) is sponsoring a CLE entitled, Planning For Medium-Sized Estates: Practical Strategies for Estate, Gift, and Tax Planning, on Wednesday- Friday,  March 19- 21. Earn 21-25 CLE/ CPE credits, including ethics with just one program.  Provided below is a description of the event:

With the new permanence of portability and the groundbreaking decisions of the Supreme Court in United States v. Windsor and Hollingsworth v. Perry, estate planners have had to scramble to adjust to the new regulations, correct previous filings, update estate plans, and consider new tax and non-tax planning opportunities. Medium-sized estates, in particular, require a refreshed look so that clients can avoid negative tax consequences as well as take advantage of some new, potentially fruitful opportunities.

Topics Include:

how Windsor and Perry affect planning for same-sex couples – what’s different and what stays the same?
portability becoming permanent
generation-skipping transfer (GST) tax exemptions today
probate avoidance
and more!

March 15, 2014 in Conferences & CLE, Generation-Skipping Transfer Tax, New Cases, New Legislation | Permalink | Comments (0) | TrackBack (0)

Thursday, March 6, 2014

CLE on Planning for Medium-Sized Estates

CLEThe American Law Institute Continuing Legal Education (ALI CLE) is sponsoring a CLE entitled, Planning For Medium-Sized Estates: Practical Strategies for Estate, Gift, and Tax Planning, on Wednesday- Friday,  March 19- 21. Earn 21-25 CLE/ CPE credits, including ethics with just one program.  Provided below is a description of the event:

With the new permanence of portability and the groundbreaking decisions of the Supreme Court in United States v. Windsor and Hollingsworth v. Perry, estate planners have had to scramble to adjust to the new regulations, correct previous filings, update estate plans, and consider new tax and non-tax planning opportunities. Medium-sized estates, in particular, require a refreshed look so that clients can avoid negative tax consequences as well as take advantage of some new, potentially fruitful opportunities.

Topics Include:

how Windsor and Perry affect planning for same-sex couples – what’s different and what stays the same?
portability becoming permanent
generation-skipping transfer (GST) tax exemptions today
probate avoidance
and more!

March 6, 2014 in Conferences & CLE, Estate Planning - Generally, Generation-Skipping Transfer Tax, New Cases, New Legislation | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 4, 2014

New York Facing Significant Tax Law Changes

TaxAs I have previously discussed, New York Governor Cuomo’s Budget Bill proposes significant changes to the state’s tax laws. The changes would have a substantial impact on trusts and gifts made in New York, and alter the estate planning considerations when a New York resident beneficiary or testator is involved. These changes include:

  • Including gifts made during life in the decedents estate for calculating estate tax
  • Increasing the exclusion amount to $5.25 million and decreasing the top estate tax from 16% to 10%
  • Repealing the generation skipping transfer tax
  • Taxing nonresident trusts
  • Taxing incomplete gift non-grantor trusts the same as grantor trusts

See Milbank’s Trusts and Estates Group, New York Proposes Changes to the Application of Its Estate and GST Taxes and the Income Taxation of Trusts, Mondaq, Feb. 25, 2014.

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

March 4, 2014 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation, Non-Probate Assets, Trusts | Permalink | Comments (1) | TrackBack (0)

Wednesday, February 26, 2014

Expected 2015 Tax Changes

ChangeMajor tax changes are not expected for 2014 due to upcoming elections. However, the 2014 Green Book proposals foreshadow possible changes for 2015 that would affect estate planning. These Green Book proposals could change requirements and considerations for:

  • Estate, gift, and generation-skipping transfer tax
  • Grantor trusts
  • Grantor retained annuity trusts
  • Estate planning generally
  • Retirement accounts

See, Kevin Matz, Change on the Horizon for 2015?, WealthManagement.com, Feb. 14, 2014.

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

February 26, 2014 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 5, 2014

CLE on Planning for Medium-Sized Estates

CLEThe American Law Institute Continuing Legal Education (ALI CLE) is sponsoring a CLE entitled, Planning For Medium-Sized Estates: Practical Strategies for Estate, Gift, and Tax Planning, on Wednesday- Friday,  March 19- 21. Earn 21-25 CLE/ CPE credits, including ethics with just one program.  Provided below is a description of the event:

With the new permanence of portability and the groundbreaking decisions of the Supreme Court in United States v. Windsor and Hollingsworth v. Perry, estate planners have had to scramble to adjust to the new regulations, correct previous filings, update estate plans, and consider new tax and non-tax planning opportunities. Medium-sized estates, in particular, require a refreshed look so that clients can avoid negative tax consequences as well as take advantage of some new, potentially fruitful opportunities.

Topics Include:

how Windsor and Perry affect planning for same-sex couples – what’s different and what stays the same?
portability becoming permanent
generation-skipping transfer (GST) tax exemptions today
probate avoidance
and more!

February 5, 2014 in Conferences & CLE, Estate Planning - Generally, Generation-Skipping Transfer Tax | Permalink | Comments (0) | TrackBack (0)

Monday, February 3, 2014

Paying For Your Grandchildren's College Education

EstateplanningEstate Planning advisors have suggested three options for grandparents planning to pay for the cost of a college education for their grandkids.  

  1. An effective way to avoid gift and generation-skipping transfer tax is to make tuition payments directly to the school.
  2. Create grantor and Crummey trusts.
  3. Consider putting funds into a Section 2503(c) minor's trust.

See E. Hans Lundsten, Joseph Marion III, David Riedel, and Christina Scola Thanks, Grandma and Grandpa! 3 Estate-Planning -Friendly Strategies To Pay For A Gradchild's College Education, JD Supra, Jan. 29, 2014. 

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

February 3, 2014 in Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Friday, January 24, 2014

CLE on Planning for Medium-Sized Estates

CLEThe American Law Institute Continuing Legal Education (ALI CLE) is sponsoring a CLE entitled, Planning For Medium-Sized Estates: Practical Strategies for Estate, Gift, and Tax Planning, on Wednesday- Friday,  March 19- 21. Earn 21-25 CLE/ CPE credits, including ethics with just one program.  Provided below is a description of the event:

With the new permanence of portability and the groundbreaking decisions of the Supreme Court in United States v. Windsor and Hollingsworth v. Perry, estate planners have had to scramble to adjust to the new regulations, correct previous filings, update estate plans, and consider new tax and non-tax planning opportunities. Medium-sized estates, in particular, require a refreshed look so that clients can avoid negative tax consequences as well as take advantage of some new, potentially fruitful opportunities.

Topics Include:

how Windsor and Perry affect planning for same-sex couples – what’s different and what stays the same?
portability becoming permanent
generation-skipping transfer (GST) tax exemptions today
probate avoidance
and more!

January 24, 2014 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Generation-Skipping Transfer Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)