Wills, Trusts & Estates Prof Blog

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

Wednesday, February 10, 2016

President Obama Proposes Changes To Tax Policy In New Budget

White houseThis article describes the changes in tax policies that are suggested in Obama’s new proposed budget. “It contains tax provisions affecting education, health care, and retirement, as well as proposing extensive changes affecting businesses.” These proposed changes will impact things like the earned income tax credit, child and dependent care credit, and education credits. Some of the new proposals will also deal with community colleges and retirement savings. There are also proposals to increase the capital gains tax rate and to reduce tax benefits for high-income earners. Included in the proposals are also tax credit proposals designed to incentivize bringing jobs back to the United States. Many of these proposals will likely not be passed by a Republican controlled congress. There will probably have to be changes in order to secure the necessary bi-partisan support to pass these proposals into law.

See Alistair M. Nevius, President’s budget proposes many tax changes, Journal of Accountancy, February 9, 2016.

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

February 10, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Tuesday, February 9, 2016

Art And Collectibles Trendy New Way To Avoid Estate Taxes

ScissorsThe taxman is the mortal foe of any family that is facing a stiff estate tax as generational wealth moves it's way down through the family tree. But for some, a novel new way has been found that can lessen the tax impact; portfolios heavy in art and other collectibles that have fungible valuations. Due to the booming market for high end collectibles it is easy to place a valuation on items that, while comparable to the market at the time, will be undervalued down the line as prices rapidly rise. Combined with the fact that appraisals are highly subjective, it allows an estate to undervalue assets, or overvalue when donating to charity, without violating tax laws. However, tax authorities are now paying closer attention to this work around with the IRS creating a team that is dedicated to contesting low valuations. But even with the increased scrutiny, it is unlikely that the practice will decline in popularity due to the relative ease with which taxes can be avoided in many circumstances.

See Robert Frank, Revaluing Family Treasures for the Taxman, The New York Times, February 6, 2016.

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

February 9, 2016 in Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Monday, February 8, 2016

Estate Planning Tips To Remember This Tax Season

New estate planWith tax season approaching now is a good time to start reviewing the estate plan. It is important to review any changes in circumstances that might require making changes to a will or power of attorney. Make sure that the beneficiary designations for insurance plans, 401(k)s, IRAs, and other retirement plans are all updated. People might also consider the idea of creating a “living trust” to help channel assets directly to heirs. “The US Treasury Department recommends that owners of savings bonds prepare a list that records serial numbers, issuance dates, and the name and address on each bond, along with the Social Security number of the owner.” Finally, it is important for senior citizens to be wary of attending many of the free lunch seminars that they might get invited to.

See Julian Block, Estate Planning Reminders for This Tax Season, Accounting Web, February 8, 2016.

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

February 8, 2016 in Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Wednesday, February 3, 2016

Does A Deceased Person Have To File Taxes?

Business_expenseThis column discusses whether a deceased person is required to file a tax return. The date of death is when a decedent’s tax year ends and there is usually an executor appointed to handle legal matters that include any tax issues facing the estate. The estate might also have to file for federal and possibly state estate taxes if it meets the estate tax threshold. The executor is going to want to get a federal identification for the estate and also open accounts to handle estate’s financial affairs. “The executor will file two returns that year, an individual Form 1040 for pre-death earnings and a Form 1041, which is a fiduciary or estate rerun for the income through the end of the calendar year.” The role of an executor carries with it many fiduciary responsibilities and those who are accepting the role need to be aware any tax filing requirements.

See Edward J. Loughrey, Tax filing for the deceased, Bluffton Today, February 3, 2016.

February 3, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Monday, February 1, 2016

Gift Tax Return Traps To Avoid

Tax returnWhen people with taxable estates are trying to reduce their estate tax burden by making an inter-vivos gift they will need to properly prepare a federal gift tax return (Form 709). There can be many nuances in the details when people are filling out gift tax returns and they need to be careful to avoid any of the common traps that are mentioned in this column. They need to be sure to provide an adequate disclosure of any gift that they provide. A person who is filling out a gift tax return will also need to avoid failing to properly allocate their generation skipping transfer (GST) tax exemption. It is also important to not make an inappropriate election of gift splitting to third parties and to adequately report any sales that are made. This column discusses many of the important requirements that need to be met with gift tax returns.

See Michelle L. Ward, Six Traps to Avoid When Preparing Gift Tax Returns, Wealth Management, February 1, 2016.

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

February 1, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Tuesday, January 26, 2016

What To Expect From New Changes To Estate Planning Laws

Estate planning changesThere are not that many major changes to estate planning laws coming in 2016, but there are a few subtle and evolving changes that clients and planners should be aware about. People need to be aware of the IRS provisions that were made permanent in the Protecting Americans from Tax Hikes (PATH) Act of 2015. One of the most important changes deals with the limitations on tax advantages for spin-off transactions involving a real estate investment trust (REIT). “The new rules say that a REIT spin-off qualifies for tax-free treatment only if, immediately after the distribution, both the distributing and controlled parties to the transaction qualified as REITs.” There have also been changes that will permit tax-payers over the age of 70 ½ to make tax-free charitable donations directly from their IRA accounts under certain conditions specified in the regulations. This article also discusses the changes to the rules dealing with annual gift tax exclusions.

See Tom Nawrocki, Changes to estate planning laws in 2016: what to expect, Life Health Pro, January 22, 2016.

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

January 26, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Tuesday, January 5, 2016

Key Dates In 2016 That Retirees Need To Watch Out For

Year 2016This article provides a list of 15 important dates that retirees will need to watch out for in the year 2016. Retirees that are reading this article will want to put these dates down on their colanders to avoid getting into financial trouble. Missing some of these deadlines can have moderate to serious financial consequences, so it is important for people to stay on top of things. These dates cover deadlines dealing with taxes, social security, and health insurance. Staying on top of estate planning can be costly and time consuming, but these are the important dates that people should do everything they can to avoid forgetting. It is also important to meet with a competent estate planner to get personalized estate planning advice.

See Rachel L Sheedy, 15 Deadlines Retirees Can’t Afford to Miss in 2016, Kiplinger, January 2016.

January 5, 2016 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

CLE On Income Taxation Of Estates And Trusts

CLE PictureBloomberg BNA is sponsoring a free CLE entitled, Fundamentals and Planning for the Income Taxation of Estates and Trusts, scheduled to take place on Thursday, January 21, 2016 from 12:30 to 1:30PM eastern time, online. Here are some details about the event:

 Learn the essentials to craft a plan for the income taxation of estates and trusts. Understand the importance of tax planning in light of the tax brackets for trusts, which are extremely compressed compared to individuals . Trusts are also subject to Medicare tax. Our webinar will explore minimizing federal income taxes, capital gains treatment, year-end and after-year-end planning, impact of grantor trust status, and basis of grantor trust assets.

Educational Objectives:
• Understand how to deem capital gains to be part of the distribution to a beneficiary
• Learn tax planning which can be done after December 31st
• Explore the impact of grantor trust status and gain the ability to swap assets
• Review the basis of the trust assets after the death of the grantor

January 5, 2016 in Conferences & CLE, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (2)

Sunday, December 27, 2015

Tips For Protecting An Estate From Capital Gains Taxes

Estate capital gains taxesThere are many people that are going to want to find ways to protect their estates from capital gains taxes. Most Americans will not have to worry about federal estate taxes because of the very high exemption, but long-term and short-term capital gains taxes is still something people need to plan for. This article discusses some of the best ways that people can plan around capital gains taxes to try to lower them. It is important to understand the tax rules for gift giving. A person is going to want to consider undoing a trust and up-streaming a gift. A couple should think about using a special kind of trust known as a Joint-exempt step-up Trust (JEST) for highly-appreciated assets. It is also important to take advantage of the home sale tax exclusion, and use the 1031 exchange for investments in real-estate and artwork.

See John O. McManus, 5 ways to protect your estate from capital gains taxes, Market Watch, December 25, 2015.

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

December 27, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Friday, December 25, 2015

Tax Breaks That People Should Know About

New legislationCongress has recently passed the Protecting Americans from Tax Hikes Act of 2015 which will extend a number of important tax breaks that people should know about. The new PATH Act is unique because it will make some of the tax extenders permanent. This legislation will make enhancements to the child tax credit, American Opportunity tax credit, and the earned income tax credit permanent. “In addition to the $1,000 credit per child, those claiming the child tax credit will now be entitled to a refundable credit to the extent of 15 percent of earned income in excess of $3,000 (the amount was scheduled to increase to $10,000 in 2018).” Taxpayers that are 70 ½ or older will be able to permanently make tax-free charitable donations directly from their IRA accounts. The new legislation will also have important incentives for small business, and it will also have an impact on health care related expenses.

See Robert Bloink and William H. Byrnes, Post-PATH: The new tax breaks you need to know, Life Health Pro, December 21, 2015.

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

December 25, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Non-Probate Assets | Permalink | Comments (0)