Wills, Trusts & Estates Prof Blog

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

Tuesday, June 28, 2016

Inheritance Considerations for Wealthy Estates

Inheriting moneyBeing submerged in one of the greatest wealth transfers in history, can force an estate planner to not only pay attention to financial strategies for a high-income individual’s estate but also the psychological and emotional impacts of such asset transfer. Wealthy individuals normally have more challenges creating a legacy due to the amount of assets and the various vehicles they use to pass their assets to the next generation.

Consequently, clients should have a comprehensive estate plan in order to accomplish their specific goals. Further, it is essential to understand the psychological and interpersonal issues that surround large inheritances due to their risky consequences. Allowing inexperienced heirs to become wealthy upon inheritance can surmount to unforeseen problems, which should be carefully planned for. First, the client must consider the specific concerns and risks for each wealthy individual and their family members. Second, the client should take into account the various alternatives to passing a legacy, including a debt-relief gift, contributions to educational funds, and special needs trusts. These steps will help take into account the reality of the family’s situation and what options are best for passing on their estate.

See Robert G. Kuchner, When Is an Inheritance Too Big?, Private Wealth Magazine, June 27, 2016.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this Article to my attention.

June 28, 2016 in Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Trusts, Wills | Permalink | Comments (0)

Tuesday, June 21, 2016

Portability and QTIP Election Do Not Produce Date-of-Death Basis on Death of Surviving Spouse

QTIP electionA recent private letter ruling concludes that portability and qualified terminable interest property (QTIP) election at the death of a first spouse would not produce a date-of-death basis for the death of the surviving spouse. An unnecessary QTIP election is void when an estate makes the election in trust for the benefit of a surviving spouse. This marital deduction is not allowed to reduce the estate tax liability at death because, as concluded, it was unnecessary. Ultimately, this will deny the date-of-death basis at the death of the surviving spouse. 

See Rodney L. Goodwin, IRS Rules No Date-of-Death Basis on Death of Surviving Spouse, Wealth Management, June 20, 2016.

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

June 21, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax | Permalink | Comments (0)

Wednesday, June 1, 2016

Book on Guide to Qualified Retirement Plan Benefits

Retirement book Louis A. Mezzullo recently published a book entitled, An Estate Planner’s Guide to Qualified Retirement Plan Benefits, Fifth Edition (ABA Book Publishing). Provided below is a summary of the book:

This ABA bestseller has helped thousands of estate planners understand the complex rules and regulations governing qualified retirement plan distributions and IRAs. Now newly updated, An Estate Planner’s Guide to Qualified Retirement Benefits provides expert and current guidance for structuring benefits from qualified retirement plans and IRAs, consistently relating key distribution issues to current estate planning practice. Topics covered include:

  • The different types of qualified plans and the tax and non-tax rules relating to them
  • The forms of distribution and the situations in which they need to be considered
  • Penalty taxes
  • Distribution requirements and how to calculate them
  • Income taxation and handling rollovers
  • Transfer taxes
  • Spousal rights, QDROs, and community property considerations
  • Estate and trust administration issues
  • Practical planning strategies to avoid penalty and excise taxes on distributions while incurring the lowest income tax

June 1, 2016 in Books, Books - For Practitioners, Estate Planning - Generally, Generation-Skipping Transfer Tax, Income Tax | Permalink | Comments (0)

Monday, May 23, 2016

Article on Estate and Gift Tax Reform

Bridget_Crawford_1Bridget J. Crawford recently published an article entitled, Valuation, Values, Norms: Proposals for Estate and Gift Tax Reform, Boston College Law Review, Vol. 57 (Forthcoming). Provided below is an abstract of the Article:

            In their contributions to the Symposium on The Centennial of the Estate and Gift Tax, Professor Joseph Dodge, Professor Wendy Gerzog, and Professor Kerry Ryan offer concrete proposals for improving the existing estate and gift tax system. Professor Dodge and Professor Gerzog are especially interested in accuracy in valuation, and advance specific proposals with respect to split-interest transfers and family limited partnerships. Professor Dodge makes an additional proposal to improve the generation-skipping transfer tax system, an understudied area of the law. Professor Gerzog’s Symposium contribution draws particular attention to the legal fiction on which the estate and gift tax marital deductions rely. She would restrict the availability of the deduction to only meaningful economic transfers to a spouse, consistent with a desire that tax results reflect the underlying substantive results. Professor Ryan also focuses on the estate and gift tax marital deduction, along with other wealth transfer tax benefits available to spouses. She imagines an expansion of those rules, showing how easily the law can be separated from economic substance. These authors' proposals are technically expert, relevant to the legislative and regulatory regime that taxpayers face daily, focused on solutions, and deeply engaged in understanding how well the law meets its goals.

May 23, 2016 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Thursday, May 5, 2016

New Changes In Estate Planning Laws Provide Reason For Updating Estate Plan

New legislationMany people are revising and updating their estate plan because of recent changes to estate planning and tax laws.  Another reason for updating estate plans is the increase in the average life expectancy thanks to developments in modern health care.  This article discusses some of the recent changes in the law and why it is important for people to update their estate plans.  People need to update their planning if they are going to be impacted by estate and gift taxes.  Those who have trusts will also need to review their estate plans.  “Another very important development in estate planning is the use of proper beneficiary designations for qualified plans and IRA interests.”  There are many parents who have reason to be concerned about the property that they plan to leave to beneficiaries being subject to creditor or spousal claims, and they will want to take proactive estate planning measures. 

See Dickinson Wright PLLC, Recent Changes in Estate Planning Laws May be Cause for Review of Your Estate Plan, Lexology, May 4, 2016.

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

May 5, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Tuesday, April 26, 2016

Tax Consequences Dealing With The Early Termination Of A Generation-Skipping Taxable Marital Trust

Irs2An IRS ruling recently held that a surviving spouse was the beneficiary of two marital trusts that were established under the late spouses revocable trust agreement.  One of these trusts was exempt from the generation-skipping transfer tax (GST) while the other was not.  “The provisions of each marital trust provided for the surviving spouse to receive all income during life and granted to the surviving spouse a testamentary general power of appointment (POA) over the assets in the GST taxable trust.”  This article discusses Revenue Procedure 2001-38 which sets forth a rule “that a qualified terminable interest property (QTIP) election is treated as null and void when the election isn’t necessary to reduce the estate tax liability to zero.”  They held that a release of a general Power of Attorney (POA) created a taxable gift under IRC Section 2514(b). 

See Andrew M. Nerney and Andrew B. Seiken, IRS Rules on Tax Consequences Associated With Early Termination of a Generation-Skipping Taxable Marital Trust, Wealth Management, April 25, 2016.

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

April 26, 2016 in Elder Law, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Wednesday, April 13, 2016

Why E-Filing Is A Good Idea

File earlyConverting to E-filing makes paying taxes easier.  In 2015 more than 129 million Americans electronically filed their tax returns.  E-filing tax returns increases the odds of the filings being accurate.  The information in the electronic filing is encrypted and the IRS has been taking more steps recently to crack down on identity theft.  The process of e-filing is convenient and there are programs available for people who meet certain requirements.  Faster tax refunds are another advantage of electronically filing your tax returns.  People who e-file can also receive assistance with the tax provisions of the Affordable Care Act.  There are also payment options available to people who have to pay the federal government money.  There is an April 18 deadline that is fast approaching and taxpayers will need to act quick if they want to avoid the consequences of missing the deadline.

See Frank Ellis, Six reasons to e-file your taxes in 2016, Examiner, April 13, 2016.

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

April 13, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Technology, Web/Tech | Permalink | Comments (0)

Monday, April 11, 2016

Late Filing Excuses That Might Work With The IRS

Late filingThe deadline for filing tax returns is fast approaching, and there are many people who will probably miss the deadline.  This article discusses some of the more reasonable excuses for not filing on time which the IRS might accept.  Whether the IRS will accept the excuse will often depend on the person’s individual circumstances.  The IRS might be understanding if the taxpayer is grieving the loss of a family member or recently suffered a health crises or loss of employment.  They would probably be less understanding if the person just blew off filing a tax return for no good reason.  There is also a first-time penalty abatement waiver, and as a result everyone basically gets one free pass if they forget to file on time.  The best thing to do is avoid these issues by filing on time before the deadline.

See Lisa Kiplinger, What late-filing excuses work with the IRS, The Arizona Republic, April 11, 2016.

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

April 11, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Helping Adult Children With Finances

Adult children2This article tells people what they should know when providing financial assistance to their adult children.  When making a loan to an adult child the parent or guardian should make sure that they follow the proper IRS rules regarding rates.  If it is a gift then they should familiarize themselves with the $14 thousand exemption rate and what sort of exceptions exist that might allow them to exceed the exemption amount.  “Any other uses of the funds exceeding the $14,000 exemption amount requires that the donor submit a Gift Tax Return (Form 709, available at www.irs.gov) when filing her income taxes for the year in which the gifted amount exceeds the $14,000 limit.”  Clients will also need to factor in the consequences of their adult children not paying back the loan.  Finally, this article discusses the need for parents or guardians to strive to keep the peace in their family. 

See Kevin McKinley, Giving Adult Children A Helping Hand, Wealth Management, April 11, 2016.

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

April 11, 2016 in Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Friday, April 8, 2016

Funding An Irrevocable Life Insurance Trust Without Making Any Taxable Gifts

Trust fundThis article points out how people can fund life insurance policies in an irrevocable life insurance trust (ILIT) without the funds being classified as taxable gifts.  Under current Treasury regulations the trust can also be generation-skipping.  Up until 2003 there were only three ways to get money into an ILIT: “(1) outright gifts, (2) economic benefit split-dollar arrangement, and (3) an existing funded trust.”  Another technique is the split-dollar arrangement which can be used to reduce the gift amount relative to the premium amount.  Internal Revenue Code Section 7872 was a no-gift way to fund an ILIT that emerged on September 17, 2003, covering loans between related parties.  There are two exit strategies discussed in this article involving either having the death benefit rise each year or investing the lump sum and using the growth of the investment as the source to draw from when repaying the loan.  Treasury Regulation Section 1.7872-15 deals with how the IRS will treat the ILIT funding as a loan.

See Richard L. Harris, No-gift Irrevocable Life Insurance Trust Funding, Wealth Strategies Journal, April 7, 2016.

April 8, 2016 in Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0)