Wills, Trusts & Estates Prof Blog

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

Friday, May 25, 2018

GST Tax Exemptions in Jeopardy

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-25/02fc22e7-9cd4-49d7-a482-7452b3182461.pngChapter 13 of the Internal Revenue Code specifically deals with the generation-skipping transfer (GST) tax, the tax which deals with transfers to individuals more than one generation below the donor. The belief of Congress is that property should be transferred once at every generation, so assets left to grandchildren should not avoid a taxation.

This tax generally applies to transfers made after October 22, 1986, but Congress grandfathered in transfers from irrevocable trusts that were in existence on September 25, 1985, but only if the transfer wasn’t made out of trust property that was added to the trust after that date or to income attributable to such later-contributed property. Altering these types of trusts can be tricky so that they do not lose their GST exemption. Modifications may generate irreversible damage to the trust and its beneficiaries. Any alterations, even simple ones, must be examined with a careful eye to ensure there are no unintended gift tax consequences and no accidental estate tax inclusion and that any exclusion from the GST taxing regime is retained. 

See Andrew M. Nernery and Brianna L. Guerrea, GST Tax Exemptions in Jeopardy, Wealth Management, May 18, 2018.

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

May 25, 2018 in Current Affairs, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0)

Sunday, May 20, 2018

Not So Simple Estate Planning Considerations After 2017 Tax "Simplification"

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-20/a482af22-dcf9-48f3-ad84-1aae27624a2e.pngAfter the Tax Cuts and Jobs Act passed in December of 2017, the majority of the public's focus has been on the changes to personal and business income tax. There has not been a lot of media attention or awareness on the legislation's modifications to how people should approach their estate planning.

The estate and gift tax exemption and the generation-skipping transfer tax exemption were both increased  to $11,180,000 per person. Therefore, during lifetime and at death, a married couple may now transfer a combined $22,360,000 to family and friends without any gift tax or estate tax. However, this increase only lasts until December 31, 2025.

Most individuals and couples believe that due to the change, there is less of a need for them to seek the advice of an estate planner. But with the magic that is the American government, Congress and the President have the ability to reverse the exemptions to 2017 amounts at any time, and with several elections in the time frame before the end of 2025, that possibility of fluctuation is all too real. In general, it is vital that anyone with an estate plan that has seen no alterations in 3 years speak to their estate planning attorney as soon as possible.

See Megan L.W. Jerabek, Not So Simple Estate Planning Considerations After 2017 Tax "Simplifications," National Tax Review, May 17, 2018.

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

May 20, 2018 in Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Tuesday, May 8, 2018

Estate Planning for Private Equity: What’s There to Know?

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-08/de3579e5-ca35-41b5-bdce-0f1e5c057336.pngPrivate equity managers have the ability to use giving to unlock more gifts. There are a few tips to know about estate planning for private equity.

Irrevocable gifts below the annual limit of $14,000 do not require the person giving the gift nor receiving the gift to pay taxes on it. Transferring assets at the moment of death will prevent them from being part of the taxable estate.

Defective grantor trusts and grantor retained annuity trusts are terrific tools to save money and transfer funds efficiently. But with the complexities that still exist from interest rates and taxes, it is never a bad idea to retain an estate planning attorney.

See Estate Planning for Private Equity: What’s There to Know?, FINSMES, May 4, 2018.

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

May 8, 2018 in Estate Administration, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (1)

Saturday, May 5, 2018

Family Conflict Top Estate Planning Challenge

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-04/067ef570-f71f-45b8-a653-5996dea62023.pngNo family is perfect, and this fact is most clear when individuals are faced with the daunting task of designating potential beneficiaries and guardians. A recent TD Wealth survey at the 52nd Annual Heckerling Institute on Estate Planning revealed that 44% of planning professionals believe that family conflict is the currently strongest threat to estate planning.

The loss of a loved one is never easy, but planning for it could make the emotional trauma more manageable. Ray Radigan, Head of Private Trust at TD Wealth, encourages clients to talk with estate planning professionals, tax advisors, and their family members as early as possible to decrease this challenge: “Losing loved ones can be difficult, and talking about what happens when a loved one is gone can be even tougher. We encourage families to start the dialogue early, and make sure they have the right people around the table from the beginning. That includes financial advisors, tax advisors, lawyers, accountants and family members.”

See David H. Lenock, Family Conflict Tops the List of Estate Planning Challenge in 2018, Wealth Management.com, March 28, 2018.

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

May 5, 2018 in Estate Planning - Generally, Generation-Skipping Transfer Tax, Guardianship, Wills | Permalink | Comments (0)

Friday, May 4, 2018

Is Estate Planning Now Dead?

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-04/322ada81-6b7e-416f-b021-87558018c5c8.pngThe tax reform of 2017 increased the federal gift, estate, and generation-skipping tax to more than $11 million per person and $22 million per married couple. This increase means that less than 1% of Americans will be subject to these taxes. But these are not the only expenditures to be considered during estate planning.

SA number of states still have an estate and gift tax. For some taxpayers, it might prudent to change domiciles prior to passing away to avoid additional taxation. Another estate planning concern is probate. This process can be costly and inconvenient, and it can be greatly beneficial to avoid it if at all possible. Blended, as well as traditional families, have additional complications when it comes to the needs or issues of particular beneficiaries.

See Tracy Craig, Is Estate Planning Now Dead, Kilpinger, May 1, 2018.

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

May 4, 2018 in Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)

Wednesday, April 25, 2018

Article on Applicability of GST on Rectified Spirit and Extra Neutral Alcohol (ENA)

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-04-25/058bb565-4a24-4671-86d0-2f85ae155733.pngMayan Jain published an Article entitled, Applicability of GST on Rectified Spirit and Extra Neutral Alcohol (ENA), Tax Law: Tax Law & Policy eJournal (2018). Provided below is an abstract of the Article:

The said article is an IRAC (…) analysis which deals with the issues regarding the taxability of substances like alcohol for human consumption is taxable or not under the GST act. The article also talks about whether the substances such as Rectified Spirit and Extra Neutral alcohol (ENA) which are not for human consumption, are taxable under the GST act. It also enhances various case laws regarding the issues mentioned below and a clear picture with analysis and conclusion without leaving a scope of doubt.

April 25, 2018 in Articles, Estate Planning - Generally, Generation-Skipping Transfer Tax | Permalink | Comments (0)

Sunday, April 1, 2018

The New Tax Law: It’s Déjà Vu All Over Again

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-04-01/c989cafa-661c-450e-9053-25a91556c1cf.pngThe Tax Act represents the most significant rewrite of the United States tax code in over 30 years. Though the legislation was originally designed to simplify the tax code, this lofty goal was seemingly forgotten somewhere along the way and, in many instances, the new law has had the opposite effect. Many provisions are astonishingly complex. Advisors will need time to sift through the morass to discover those elusive opportunities for tax savings for clients. Until then, it is imperative for advisors to review their client’s existing plans to avoid any unintended consequences and as much estate, income, and GST over successive generations.

See Sasha A. Klein & Mark R. Parthemer, The New Tax Law: It’s Déjà Vu All Over Again, Probate and Property Magazine, March/April 2018.

April 1, 2018 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation | Permalink | Comments (0)

Tuesday, March 6, 2018

Estate Planning Strategies: How to Take Advantage of the New Federal Tax Reform,

'Oh, another thing! My friends think you're taking advantage of me and that you're just a dirt digger.'The passage of the Tax Cuts and Jobs Acts (TCJA) created major changes in the tax code that affect income taxes, businesses, and estate planning. Though many of the provisions are beneficial to taxpayers, some of these benefits may only be temporary. TCJA provisions relating to the federal estate, gift, and generation-skipping exemptions are designed to sunset on January 1, 2026, when the thresholds will revert to their 2017 levels. This potential for reversion without some congressional intervention makes it incredibly important for individuals to take advantage of the increased exemptions prior to the sunset date.

The most evident planning opportunity under the new tax laws involves full and early use of the higher exemptions limits. Like any gifting strategy, all future appreciation and income attributable to a gifted asset avoids future estate and gift taxation. Another planning technique involves the use of trusts. By creating a grantor trust, a settlor may make tax-free gifts to trust beneficiaries by payment of the income taxes incurred by the trust.

See Gregg M. Simon, Gregory B. Mann, & Luke Harriman, Estate Planning Strategies: How to Take Advantage of the New Federal Tax Reform, National Law Review, February 21, 2018.

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

March 6, 2018 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation, Trusts | Permalink | Comments (0)

Monday, February 26, 2018

2018 Changes to Federal, Maryland and D.C. Estate Tax Laws

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-02-26/ce07e0f4-1c6d-4b8b-a384-989fa76ea249.pngThe Tax Cuts and Jobs Act markedly altered prior law relating to the taxation of corporations and individuals. This includes changes to the gift, estate, and generations-skipping tax (GST) provisions. Under the federal law, unmarried individuals may exempt up to $11.2 million from federal gift and estate tax. Married couples may exclude double this amount, as long as the surviving spouse files a timely estate tax return electing portability. The marginal tax rate for estates that exceed the threshold exclusion amounts remains at 40%.

In Maryland, the estate tax exemption increases to $4 million in 2018. The marks a massive jump from the $1 million exclusion allowed in 2017. After 2019, Maryland’s exclusion thresholds will mirror the federal limits. Until 2019, the portability election for spouses is not available. In 2007, Virginia repealed its estate tax and continues to have neither a gift nor the estate tax. The District of Columbia’s (DC) estate tax exemption now matches the federal exemptions except for the portability election for spouses. Like Virginia and Maryland, DC has no gift tax.

See 2018 Changes to Federal, Maryland and D.C. Estate Tax Laws, Whiteford, Taylor, & Preston, LLP, January 9, 2018.

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

February 26, 2018 in Current Affairs, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Book on Guide to the New World of Taxes

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-02-26/8f52879e-2378-4a22-ad24-a955fab8040e.pngLaura Saunders, Richard Ruben, & The Wall Street Journal Staff recently published a book entitled, Guide to the New World of Taxes (2018). Provided below is some information about the book:

ABOUT THE OFFER

How much money will you keep in your pocket in 2018? Navigate the biggest tax overhaul in 30 years as The Wall Street Journal brings you this handy e-book that helps you understand what the new tax laws mean for you, your company and the country.

Compiled by trusted WSJ reporters and editors—stay informed on the changes and what families, homeowners, retirees, investors, professionals and small-business owners need to know.

What's Covered?

The Big Picture

  • Tax Rates and Brackets
  • Standard Deduction and Personal Exemption
  • Child and Dependent Tax Credits
  • Withholding
  • Taxes on Investment Income
  • Alternative Minimum Tax
  • Individual Mandate
  • Home-Sellers’ Exemption
  • The Marriage Penalty
  • Estate and Gift Tax

Deductions

  • State and Local Tax Deductions
  • Mortgage-Interest Deduction
  • Charitable-Donation Deductions
  • Medical-Expenses Deduction
  • Alimony
  • Other Deductions

Retirement and Education

  • Retirement Savings
  • Retiree Tax Issues
  • 529 Education Savings Accounts
  • Other Education Tax Benefits

For Business Owners

  • Pass-Through Income
  • Debt Interest Payments
  • Depreciation

The Tax Landscape

  • Political Path of Tax Overhaul
  • The Economic Impact
  • What Investors Need to Know
  • The Overhaul and Your Industry

ABOUT THE JOURNAL REPORT

You can now purchase a special printing on high-quality paper of The Wall Street Journal "Guide to the New Tax Law" for $8, plus free shipping. The newspaper section is a very popular and timely item-by-item look at the law's changes, and what they mean for individuals and businesses. To purchase, click here.

Note: The e-book was updated on Feb. 13 to reflect the following correction. The tax overhaul didn't repeal the deduction for gambling losses on Schedule A. An earlier version of the e-book incorrectly reported the deduction had been repealed. 

On Feb. 15, the e-book was updated to reflect the following correction. In a hypothetical example of a person refinancing an existing mortgage of $800,000 for $900,000, with the additional $100,000 taken as cash, the National Association of Realtors said that the person could deduct interest only on $800,000 of the refinancing. In the earlier version, the NAR incorrectly said that none of the interest on the $900,000 refinancing would be deductible.

 

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

February 26, 2018 in Books, Books - For Practitioners, Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation | Permalink | Comments (0)