Thursday, November 17, 2016
In light of Donald Trump’s election and his pre-election tax platform, you should consider several tax planning strategies as part of your year-end planning. McManus & Associates have listed the ten items below to complete before the end of 2016.
- Accelerate your income tax deductions.
- Postpone receipt of income.
- Do not buy any capital assets this year.
- Make gifts to charities and family foundations with appreciated assets.
- Harvest losses to offset capital gains.
- Establish and fund qualified plans.
- Identify assets and amounts to make proper GRAT distributions before April 17, 2017.
- Make annual exclusion gifts to chosen loved ones of $28,000 (per married couple).
- Make distributions of income from trust accounts and estate accounts to lower the income tax liability.
- Host annual meetings for your family office, partnerships and foundations.
See Top 10 Tax Planning Tasks to Complete Before the End of 2016 in Light of President-Elect Trump’s Proposals, McManus & Associates, November 16, 2016.
Special thanks to Lauren DuBois (Media Inquiries, McManus & Associates) for bringing this article to my attention.
Sunday, November 13, 2016
If our new President-elect follows through with his campaign promises, wealthy families may find it easier to accumulate dynastic levels of wealth. A repeal of the estate tax will break down the guard against generational wealth, but Trump wants to still impose a tax on capital gains above $10 million upon the sale of assets. This plan, however, would allow rich inheritors to never pay capital gains if they did not sell their assets, unlike modest inheritors who normally sell or spend what they get. Additionally, as for charitable deductions, contributions of appreciated assets into the decedent or decedent’s relative’s private charity will be disallowed with a cap of $200,000 per couple, limiting the incentive for the rich to be charitable. Further, some speculate that we could be saying goodbye to the gift tax and generation-skipping tax as well, which would have a greater economic impact than the repeal of the estate tax. Trump’s tax proposals will contribute to further concentrations of wealth, carving out the perfect resting spot for dynastic wealth.
See Paul Sullivan, Trump’s Changes to the Tax Codes May Encourage Dynastic Wealth, N.Y. Times, November 11, 2016.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) & Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Friday, November 11, 2016
The digital economy makes it easy for people and money to move across international borders. If the United States is not involved, then this movement will not have an effect on a person’s U.S. tax situation, and in general a nonresident of the United States will have few, if any, interactions with the IRS. But as more and more foreign citizens look to the United States as a place to invest, it becomes important for planners to be aware of the transfer tax laws that apply to nonresidents. Why? When a nonresident becomes a “resident” of the United States for transfer tax purposes, the rules change dramatically, and the tax consequences, if not planned for, can be severe.
Thursday, September 29, 2016
Modest net worth individuals need to balance their desire to make lifetime gifts with the need to maintain adequate funds to support their future. For married couples, a spousal lifetime access trust (SLAT) provides a solution. One spouse (donor-spouse) places assets into an irrevocable trust using their gift tax exemption. The SLAT names the non-donor spouse (beneficiary-spouse) as the beneficiary, allowing the trustee to make distributions to the beneficiary-spouse during life. SLATs provide several benefits, including the ability of the trust to benefit multiple generations without incurring additional estate or generation-skipping transfer taxes.
See Spousal Lifetime Access Trusts (SLATs), Lexology, August 3, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
The 2010 amendment of IRC § 2010(c) allowed an estate executor to make a portability election; therefore, influencing the decision to make a qualified terminable interest property (QTIP) election. A QTIP election reduces the decedent’s taxable estate, further maximizing the amount of unused exclusion available for the decedent’s surviving spouse. Accordingly, the executor electing portability of the decedent’s unused applicable exclusion amount may wish to make a QTIP election, regardless of whether the QTIP election reduces the estate tax liability to zero.
Rev. Proc. 2001-38, 2001-24 I.R.B. 1335 details a procedure for which the IRS will disregard and nullify federal estate, gift, and generation-skipping transfer tax for purposes of a QTIP election made when the election was unnecessary to reduce the estate tax liability to zero. With the use of portability elections, the ability to void and nullify QTIP elections in Rev. Proc. 2001-38 may bring questions over the ability of the decedent’s estate to make an unnecessary QTIP election for the sake of maximizing the available unused exclusion amount. Subsequently, this revenue procedure modifies and supersedes Rev. Proc. 2001-38. It confirms the IRS procedures for disregarding a QTIP election, but excludes those estates that made a portability election in accordance with § 2010(c).
Saturday, September 24, 2016
Alyssa A. DiRusso recently published an Article entitled, The Generation-Skipping Transfer Tax and Sociological Shifts in Generational Length: Proposing a Generation-Inflation Index for Taxation, 41 Am. C. Tr. & Est. Couns. L.J. 307 (Fall 2015/Winter 2016). Provided below is a summary of the Article:
Having begun with an introduction, Part II of the article gives an overview of the GST tax and its history. Part III notes sociological changes relevant to generational length such as childbearing age and life expectancy. Part IV notes the effective use of inflation indices throughout the Code to use as a model for generation inflation. Part V formally proposes an inflation index for generational length for GST tax purposes. Part VI concludes the article.
Friday, August 19, 2016
The section 2704 new proposed regulations may be the most significant regulations in the transfer tax area in a long time, resulting in substantial restrictions on valuation discounts for transfers of interests in family entities. Please click here for a detailed analysis of the Section 2704 proposed regulations and planning implications.
Wednesday, August 3, 2016
The IRS recently released a notice of proposed rulemaking and notice of public hearing entitled, Estate, Gift, and Generation-Skipping Transfer Taxes; Restrictions on Liquidation of an Interest. Provided below is a summary on the proposed regulations:
This document contains proposed regulations concerning the valuation of interests in corporations and partnerships for estate, gift, and generation-skipping transfer (GST) tax purposes. Specifically, these proposed regulations concern the treatment of certain lapsing rights and restrictions on liquidation in determining the value of the transferred interests. These proposed regulations affect certain transferors of interests in corporations and partnerships and are necessary to prevent the undervaluation of such transferred interests.
Special thanks to Robert Wolf (Attorney, Tener, Van Kirk, Wolf & Moore, P.C.) for bringing this to my attention.
Saturday, July 30, 2016
Paul Goeringer recently published an Article entitled, Property Ownership and Transferring Are Important Features of Your Farm Succession Plan, (2016). Provided below is an abstract of the Article:
How property is owned can impact your farm succession plan, but can also aid in allowing ease of transfer to the next generation. This publication is an Extension fact sheet draft covering what producers need to consider on property ownership when developing a succession plan.
Monday, July 18, 2016
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