Wills, Trusts & Estates Prof Blog

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

Friday, November 20, 2015

Estate Planning Issues Millennials Should Think About

MillennialYoung adults that are part of the Millennial generation have very distinctive estate planning needs. Discussions between Millennials and their parents about estate planning will be very important over the next 30 years as over $30 trillion in wealth is transferred from one generation to the next. Millennials need to carefully think about their own situation and what their goals are and then develop the right estate plan that suits their individual needs. Communication with family members and loved ones is also essential. It is a good idea for people to think about what sort of inheritance they might be expecting to receive and then plan accordingly.

See Ashley Thompson, Estate Planning Considerations for Millennials, Wealth Director, November 17, 2015.

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

November 20, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Saturday, November 14, 2015

Income-Shifting Strategies That Taxpayers Can Use

Income shiftingWealthy taxpayers with incomes above the threshold can be subjected to new taxes on investment income that takes a substantial bite out of the interest and dividends that they receive. The Affordable Care Act has assessed new taxes on the rich to pay and as a result has made income-shifting strategies more attractive for both single and joint filers. One technique that wealthy clients can use to reduce their taxable income involves gifting some of their assets to their kids, grandchildren, cousins, or other relatives. Taxpayers should learn about the gift tax exclusion and how they can get the maximum benefit from it. Another way for wealthy clients to move money to others indirectly can involve creating a Family Limited Partnership. A person could hire their relatives to perform routine tasks or simply bequeath their assets to family members. The bottom line is that there are many different methods that clients can use to move assets around to reduce or avoid certain taxes. It is a good idea to speak with an experienced estate planner to devise an individual strategy.

See Mark P. Cussen, Income-Shifting Strategies: How They Can Reduce Taxes, Investopedia, November 13, 2015.

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

November 14, 2015 in Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Wednesday, November 11, 2015

How Parents Can Help Their Adult Children

Adult childrenIn today's economy there are many young adults that are struggling to find work. Many of these young adults are now having to turn to their parents for financial support. It is important for parents to be aware of any gift tax implications they might have when providing financial assistance to their children. “Each individual has the ability to gift $14,000 a year to each person without using up any of his or her lifetime exclusion. A married couple can then gift $28,000 to an adult child without any gift tax impact at all.”

People should be aware that the $14,000 amount is inclusive of all gifts whether its direct gift or a withdrawal from a trust. The Internal Revenue Code also has a specific provision that lets parents pay their child's college tuition directly to the University without defining it as a “gift.” There are several other ways that parents can help their children. People should seek the advice of an experienced estate planner to design a strategy that is right for their individual circumstances.

See Stacie J. Rottenstreich and Karin Barkhorn, Helping Your Adult Children, Bryan Cave, November 11, 2015.

November 11, 2015 in Estate Planning - Generally, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Tuesday, November 10, 2015

How To Be More Efficient With '529' Accounts

CollegeThere are many parents and grandparents that love using '529' accounts to help their children and grandchildren pay for a college education.  According to the College Savings Plan Network these state-sponsored savings plans currently hold a record amount of assets with over $258.2 billion in over 12.3 million open accounts.  People should try to fund these college savings accounts as much as they can.  It is also a good idea to make contributions and withdrawals online, and they should consider using the automatic-contribution feature.  A grandparent-owned account does not count towards the families expected contribution on FAFSA applications so families should wait until the last FAFSA application has been filed before taking distributions from an account owned by a grandparent.  There are certain situations where estate or gift taxes are concerned when a '529' account might not be the best option, so families should seek professional advice about the best options. 

See Chana R. Schoenberger, How to Be Smarter With A '529' Account, The Wall Street Journal, November 8, 2015.


November 10, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Thursday, November 5, 2015

United States Is Now Leading Tax Haven In The World Says New Report

Piggy BankA new report shows the United States has become the leading center for foreign nationals to shelter assets from home jurisdiction taxes. The United States leap froged such perennial contenders as Luxembourg and Switzerland, two countries that have extensive industries based around secret banking, to become the dominant player in asset hiding. This ranking comes as surprise to many since the Obama administration has made the disclosure by foreign banks of the names of American clients hiding assets a priority. But while Washington is concerned about tracking down tax evading Americans, it has not been so keen on helping other nations do the same. In particular, it is the states that have the most friendly laws for shell corporations and foreign trust which drive the American tax haven industry. Due to the US government's reluctance to engage other countries in a mutual exchange of information on tax evaders, it is a safe bet the US will remain number one in this ranking for the foreseeable future.

See Simon Bowers, US overtakes Caymans and Singapore as haven for assets of super-rich, The Guardian, November 2, 2015.

Special thanks to Lewis Saret for bringing this article to my attention.

November 5, 2015 in Current Affairs, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Wednesday, November 4, 2015

Tax Issues That Beneficiaries Of Irrevocable Trusts Need To Think About

TapAny person that is going to be a beneficiary of an irrevocable trust should be aware of certain tax issues.  Whether an irrevocable trust will be subject to estate taxes after the trust maker or grantor passes away often depends on the terms of the trust and how it was created.  An irrevocable trust is typically treated as a separate legal entity that is not part of the estate of the trust maker.  It the trust creation is attended by a taxable gift then there might have to be a gift tax return which can have the consequence of reducing the estate tax exemption for the trust maker.  This column also discusses some of the complexities involved with irrevocable life insurance trusts (ILITs). Beneficiaries should consult some of the resources provided in this column for more information on the tax issues that their irrevocable trust might face.

See Kyle E. Krull, Are there Any Tax Issues for Beneficiaries of Irrevocable Trusts to Consider?, Wealth Management, November 4, 2015.

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

November 4, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

UT School Of Law Presents The 62nd Annual Taxation Conference

CLEThe University of Texas School of Law is presenting a CLE entitled, 62nd Annual Taxation Conference, on December 3-4, at the Radisson Hotel and Suites in downtown Austin. Here are some details about the event:

The 62nd Annual Taxation Conference features an impressive slate of topics with regionally and nationally renowned speakers covering current trends, updates in tax regulation and policy, and much more.

2014 program highlights include:

  • Nina Olson, the National Taxpayer Advocate, analyzes the implications of reduced budgets and how they will affect taxpayers. Ms. Olsen is named to 2014’s “The 100 Most Influential People in Tax and Accounting” by Accounting Today
  • Former Deputy Assistant Secretary of the Treasury for Tax Policy, Michael Graetz, gives an update on the State of the Tax World in the 21st Century 
  • Gain insight on how the Appeals Judicial Approach and Culture (AJAC) Project is changing the IRS Office of Appeals process and what to keep in mind as the process evolves
  • C. Wells Hall, Nelson Mullins Riley & Scarborough LLP, Charlotte, NC, Laura Howell-Smith, Deloitte Tax LLP, Washington, DC, and Adrienne M. Mikolashek, Internal Revenue Service, Washington, DC (Invited), discuss the new 3.8% tax on net investment income under Section 1411
  • Hear perspectives from practitioners and a key government official on the effects of the new proposed regulations on partnership liability allocations
  • Learn about the sweeping legislative reforms made to the Texas franchise tax
  • Gain practical advice for offshore tax compliance from Charles P. Rettig, Hochman, Salkin, Rettig, Toscher & Perez, P.C., Beverly Hills, CA
  • Windsor One Year Later reviews the implications of the decision and Revenue Ruling 2013–17
  • Top 10 Ethics Issues that Get Tax Professionals in Trouble presented by Randy J. Curato, ALAS, Inc., Chicago, IL,Paul Koning, Koning Rubarts LLP, Dallas, TX, and Christopher S. Rizek, Caplin & Drysdale, Chartered, Washington, DC, offers advice on how to avoid potential costly mistakes with your clients

November 4, 2015 in Conferences & CLE, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Tuesday, November 3, 2015

How The Family Limited Partnership Can Be Used To Reduce Estate Tax Liabilities

Revocable trustIf a person died on or before the year 2015, and had an estate worth more than $5.43 million, that estate could be subjected to the federal estate tax.  There are very few options that a single individual has to limit or avoid federal estate tax liabilities.  One option that a person might consider involves transferring part of the taxable estate into a Family Limited Partnership.  This partnership arrangement can provide a person with certain tax advantages because the federal estate tax is only based on the fair market value of the property they owned when they passed away.  By transferring estate assets into the Family Limited Partnership the tax payer reduces the size of the estate that they individually own and are then able to decrease their estate tax liability. 

See Sandra W. Reed, Life Care Planning: The Family Limited Partnership Vehicle to Limit Liability and Estate Tax, Glen Rose Reporter, November 2, 2015.

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

November 3, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Trusts, Wills | Permalink | Comments (1)

Monday, November 2, 2015

4 Tax Mistakes That Business Owners Should Avoid Making

Estate taxIt is very common for business owners to make mistakes when it comes to taxes.  These are four of the big mistakes that businesses should avoid making when it comes to paying taxes:

  1. Don’t deduct personal expenses as business expenses.  The Internal Revenue Code (IRC) permits deductions for “ordinary and necessary expenses,” but those expenses must be related to the business.  A taxpayer cannot use this deduction for personal expenses. 
  2. Be careful to avoid too-good-to-be-true opportunities.  There are many tax breaks offered in the Federal Tax code, but business owners should be wary of promoters that offer something that looks too good to be true.
  3. Aggressive tax planning can lead to consequences.  Being overly aggressive in tax planning could potentially lead to expensive consequences. 
  4. Bad tax strategies can lead to other legal consequences.  Making mistakes in planning for taxes could potentially lead to other legal consequences. 

See Steve Parrish, 4 Tax Mistakes Business Owners Make And How To Avoid Them, Forbes, October 26, 2015.

November 2, 2015 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Wednesday, October 28, 2015

Tax Court Holds That Estate Is Not Liable For Gift Tax

IrsA Tax Court has recently held In Redstone v. Commissioner that a 1972 transfer of stock was made in the ordinary course of business for full and adequate consideration.  The court’s ruling means that the transfer was not a gift for federal gift tax purposes.  This article discusses the crucial details of the case and the reasoning behind the tax court’s decision.  The tax court had to consider whether the parties to a settlement agreement were settling a genuine dispute, and were not colluding to make the transaction appear to be something else.  According to the Court all the elements of an “arms-length” transaction existed in this case.  In order for a gift to be treated as being made “in the ordinary course of business,” it must be free from donative intent. 

See Dawn S. Markowitz, Estate Tax Not Liable for Gift Tax, Wealth Management, October 28, 2015.

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

October 28, 2015 in Current Affairs, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)