Wills, Trusts & Estates Prof Blog

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

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Thursday, March 19, 2015

Congress Considers Estate Tax

Congress

After a member of Congress introduced legislation to repeal the estate tax, a House subcommittee held a hearing Wednesday on the subject.

Representative Kevin Brady (R-Texas), introduced the Death Tax Repeal Act of 2015 last month.  The bill would amend the Tax Code to repeal both the estate tax and the Generation-Skipping Transfer Tax.  Proponents of the bill argue that the estate tax hurts small businesses, family farmers and ranchers who hope to pass on their businesses to the next generation.  Yet, opponents point out that the estate tax only affects a few families, especially after the exemption amount was raised to $5 million. 

Ray Madoff, a professor at Boston College Law School, believes that Congress should not be hasty when it comes to repealing the estate tax.  He says that the estate tax promotes fairness in the tax system and provides an important source of revenue for the government.  According to the most recent estimates, the estate tax will generate about $294 billion over the next ten years.

See Michael Cohn, Congress Mulls Repeal of Estate Tax, Accounting Today, March 18, 2015.

March 19, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax | Permalink | Comments (0) | TrackBack (0)

Monday, March 9, 2015

PLR on GST and Gift Tax Consequences of Trusts Selling Farm

Gavel2A recent IRS private letter ruling considered the Generation-Skipping Transfer Tax, Gift Tax, and Estate consequences of a proposed sale of a farm owed by two trusts. The two trusts had different grantors, but essentially the same beneficiaries. The trusts had worked out a proposed sale of the farm to a limited partnership, which was owned by a descendent of both trusts' grantors.

In Private Letter Ruling 201509002, it was found that the trusts would not lose their GST tax-exempt status as a result of the sell, the sale would not be considered a taxable gift, and would not add to the amount the beneficiaries must claim in their estates

See Dawn S. Markowitz, GST Tax Exemption Preserved in Sale of Farm, Wealth Management, March 4, 2015.

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

March 9, 2015 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, March 6, 2015

Budget Proposal Targets HEETs

Tax4One of the President's budget proposals explained in the Treasury Green Book would "modify generation-skipping transfer (GST) tax treatment of health and education exclusion trusts (HEETs)." This proposed change would only exclude from GST tax, payments for medical care or school tuition when directly received by the provider or school from the donor, and not from a trust, such as a HEET.

See Stephanie Moll, Treasury Green Book Proposal: Health and Education Exclusion Trusts, Bryan Cave, March 5, 2015.

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

March 6, 2015 in Generation-Skipping Transfer Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 10, 2015

How the President's Tax Proposals Are Affecting Estate Planning

Estate tax2

In President Obama’s proposal for the fiscal year 2016 budget, he keeps many of his past proposes that include restoring transfer taxes and curtailing various estate planning techniques.  The President is also introducing some bold, new ideas.  Some of the proposals in the budget that would affect estate planning include:

  • Eliminating the Stepped-Up Basis at Death and Treating Transfers of Appreciated Property as Sales.  Under this new proposal, the donor or deceased owner of an appreciated asset would realize a capital gain at the time the asset is gifted or bequeathed to another.  The gain would be taxable income to the donor or the deceased’s estate. 
  • Restoring the Estate, Gift, and Generation-Skipping Transfer Tax.  This proposal has been on the President’s radar for quite some time.  In 2009, the top tax rate was 45%. The exemption amounts were $3.5 million for estate and GST taxes, and $1 million for gift taxes, with no indexing for inflation. Portability of the deceased spouse’s unused estate and gift tax exemptions would remain available. 
  • Restrictions on Grantor Retained Annuity Trusts (GRATs).  This would require GRATs to have a minimum ten-year term and a maximum term of the annuitant’s life expectancy plus ten years.  Moreover, the proposal would also require that a GRAT’s remainder interest at the time of creation have a minimum value of the greater of 25% of the value of the assets contributed or $500,000.
  • Expanding the Definition of “Executor.”  The Tax Code would expressly define an executor as applicable for all tax purposes, including authorization for the executor to handle the decedent’s pre-death tax liabilities.
  • Extending Liens on Estate Tax Deferrals for Certain Estates.  For estate tax deferrals where the estate consists largely of an interest in a closely held business, the proposal would extend the §6324(a)(1) estate tax lien through the entire deferral period, instead of the current ten-year period from the date of death. 

See Michelle L. Vesole, So Much for a Permanent Estate Tax Regime: The President’s Tax Proposals Affecting Estate Planning, Bloomberg BNA, Feb. 9, 2015.

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

February 10, 2015 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, January 12, 2015

GST Tax Exemption Retained After Trust Merger

Gavel2Private Letter Ruling 201448018 allowed for two identical trusts to be merged into one trust without forfeiting the trust's exemption from generation-skipping transfer tax. The two identical trusts, each created by a member of a married couple, had the same grandchildren beneficiaries, and the merger would not create new beneficiaries. Further no additional principal was added to either trust after they became irrevocable on the death of the grantor, which occurred prior to the Sept. 26, 1985 deadline for GST tax exemption.

See Dawn S. Markowitz, Trust Consolidation, Dec. 1, 2014.

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

January 12, 2015 in Estate Planning - Generally, Generation-Skipping Transfer Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Estate Tax Repeal Bill

Tax CutThe Death Tax Repeal Act (H.R. 173) has been filed by Texas Congressman Mac Thornberry that will repeal the Federal estate, gift, and generation-skipping taxes if passed. Thornberry described the "death tax" as "fundamentally unfair," and expressed concern for the impact of the tax on "small business owners, farmers, and ranchers," in his statements through a press release from his office released January 8, 2015. At the time of the press release there were 36 cosponsors to the bill.

See, Thornberry Introduces The Death Tax Repeal Act, Everything Lubbock, Jan. 10, 2015.

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

January 12, 2015 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | 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)

Saturday, November 29, 2014

Looking Back at Estate Planning in 2014

Look2014 was mostly a year of stability for estate planning, but did include some significant developments. The current exclusion amounts for estate, gift, and generation-skipping transfer tax is at a historical high at $5.34 million currently and expected to be $5.43 million for 2015. Portability for gift and estate tax exclusions by a surviving spouse has been a focus of estate planning considerations this year, as well as heightened attention to income tax as a result of increased income tax rates. One significant development in 2014 that garnered much attention was the US Supreme Court decision in Clark v. Remeker, which held inherited IRAs do not fall under bankruptcy protection.

See David M. Allen, Mal L. Barasch, Victor H. Bezman & Diane B. Burks, 2014 Year-End Estate Planning Advisory, The National Law Review, Nov. 28, 2014.

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

November 29, 2014 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Friday, October 31, 2014

Book on Federal Gift, Estate, and Generation-Skipping Transfer Taxation of Life Insurance

Federal Gift, Estate, and Generation-Skipping Transfer Taxation of Life InsuranceLawrence Brody & Mary Ann Mancini published the third edition of their book entitled, Federal Gift, Estate, and Generation-Skipping Transfer Taxation of Life Insurance. Provided below is a description of the book from ABA:

This concise primer will guide you in minimizing the transfer tax of an estate plan and avoiding the pitfalls that can occur. The authors discuss gift tax issues, estate taxation of life insurance, generation-skipping transfer tax and its application to life insurance and irrevocable life insurance trusts, community property considerations, and more.

Now updated and completely revised, this volume in the popular Insurance Counselor series will help you take full advantage of minimizing the transfer taxation of the estate plan as well as avoid the many pitfalls that can arise. The first chapter deals with life insurance as a gift, informing you about the valuation of policies and their qualification for the gift tax annual exclusion. Among the areas discussed are:

  • Outright transfers, transfers in trust, indirect gifts
  • The uses and issues relating to Crummey powers
  • The gift tax marital deduction

Further issues discussed in the second chapter are the gift tax, including consideration of cases when a gift occurs with respect to a life insurance policy, the valuation of the gift, and the availability of the gift tax annual exclusion and the gift tax charitable or marital deduction. The third chapter deals with the estate taxation of life insurance, with emphasis on the two IRC sections that have particular application to life insurance: sections 2035 and 2042. The fourth chapter discusses the generation-skipping transfer tax and its application to life insurance and irrevocable life insurance trusts, while the final chapter specifically addresses important community property considerations.

October 31, 2014 in Books, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 17, 2014

Article on Gain from the Value of a Good Valuation

Tax QuestionsEdward A. Renn, James I. Dougherty & Marissa Dungey recently published an article entitled, Gain from the Value of a Good Valuation, 28 Probate & Property No. 5 (Sept. & Oct. 2014).  Provided below is an excerpt from the introduction of the article:

Estate, gift, and generation-skipping transfer (GST) taxes all target and tax the transfer of property from a donor to a done. Obtaining a value of the property when computing the potential tax liability and structuring transfers is essential to tax-efficient planning and proper tax reporting. With easy-to-value assets, such as cash or marketable securities, valuations are straightforward. For other assets such as closely held business interests or art, determining the correct value is a task easier said than done. If hard-to-value assets are overvalued, the taxpayer will overpay on taxes (or unnecessarily use a portion of the taxpayer’s lifetime exemption). If the assets are determined to be undervalued by the IRS on audit, in addition to the time and expense of the audit and additional tax or use of credits, the taxpayer will have to pay interest on the underpayment of tax and may be subject to penalties.

September 17, 2014 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)