Wills, Trusts & Estates Prof Blog

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

Thursday, September 29, 2016

Spousal Lifetime Access Trusts

SLATModest 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.

 

September 29, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Trusts | Permalink | Comments (0)

New Rev. Proc. Allows QTIP Election with Portability Election

Qtip elecitonThe 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). 

See 26 CFR 601.201: Rulings and Determination Letters; Rev. Proc. 2016-49.

 

September 29, 2016 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Saturday, September 24, 2016

Article on Generation-Inflation Index for Taxation

Generation skipping transfer taxAlyssa 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. 

 

September 24, 2016 in Articles, Estate Planning - Generally, Generation-Skipping Transfer Tax | Permalink | Comments (0)

Friday, August 19, 2016

Section 2704 Proposed Regulations on Transfer Tax

Transfer taxThe 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. 

August 19, 2016 in Current Events, Estate Planning - Generally, Generation-Skipping Transfer Tax, New Legislation | Permalink | Comments (0)

Wednesday, August 3, 2016

Proposed Regulations for the Valuation of Interests

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.  

Download 2016-18370Proposed2704Regs

August 3, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Saturday, July 30, 2016

Article on Important Features of Your Farm Succession Plan

Farm succession planPaul 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.

July 30, 2016 in Articles, Estate Planning - Generally, Generation-Skipping Transfer Tax | Permalink | Comments (0)

Monday, July 18, 2016

Book on Estate Planning Guide for 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

July 18, 2016 in Books, Books - For Practitioners, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Income Tax, Trusts | Permalink | Comments (0)

Friday, July 8, 2016

Dynasty Trusts Today

Dynasty trustEstate plans can experience federal and state estate taxes eating away at the value of an asset, which can be defeating when trying to gift further generations. Dynasty trusts are normally created to avoid the estate and generation skipping transfer tax when assets are being left to grandchildren or great grandchildren. The Rule Against Perpetuities, however, has destroyed the creation of dynasty trusts for many years now. Although, several states have moved toward eliminating that rule, creating 365 and 500 year trusts.

See Ettinger Law Firm, Dynasty Trust Reexamined, NY Estate Planning Attorney Blog, May 21, 2016.

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

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

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)