Monday, August 14, 2017
The Internal Revenue Service (IRS) addressed income and gift-tax consequences relating to an incomplete non-grantor trust in PLR 201729009. In the case at issue, the settlor created an irrevocable trust in order to benefit himself, his wife, charitable organizations, siblings, and children. The trust instrument provided for a Distribution Committee to disperse income and principal from the trust to named beneficiaries for their health, education, maintenance, and support (HEMS).
After a request for rulings, the IRS concluded that the settlor’s contributions to the trust did not qualify as a gift for federal gift-tax purposes. This characterization entails that distributions from the trust will be treated as a return of the settlor’s property and, as such, will be included in the settlor’s gross estate upon death.
The IRS ruling also held that the powers maintained by the Distribution Committee were such that transfers to the trust were not complete with respect to the trust’s income interest; the relationship between the settlor and the committee allowed the settlor to retain too much power over distributions of income and principal.
See Jillian Merns, IRS Rules on Tax Ramifications of Incomplete Non-Grantor Trust, Wealth Management.com, August 2, 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Monday, August 7, 2017
Family business owners and their allies are trying to block rules proposed during the Obama-era that would curb valuation discounts and lead to increased estate taxes. Proponents for the rules claim it would end a loophole for the wealthy. With the discounts, family businesses are able to value their assets at reduced levels. This allows them to pass on their hard-earned wealth to beneficiaries free from some estate and gift taxes. Much of the conversation would be moot if President Trump is able to get rid of the estate tax. With this, the safest course of action is to undertake valuations based on current law. Even if repeal were to occur, it is not guaranteed to be permanent.
See Ashlea Ebeling, Hated Estate Tax Valuation Rules On Trump's Hit List, Forbes, August 1, 2017.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
Wednesday, August 2, 2017
It is possible to leave IRAs, 401ks, and other qualified plans to beneficiaries upon death. If done correctly, it is possible to avoid substantial portions of income and other various taxes. When placed in a trust, an initial $500,000 distribution from a qualified plan can pay out $1.5 million over a beneficiary’s lifetime. The assets from the qualified plan are not taxed when rolled over to the trust, but only when distributed to the beneficiary of the trust. This type of planning can be complex and it is best to seek professional advice for help.
See George, A Short Story of Jack, The Beanstalk and Survivor IRAs, Fox+Mattson, June 19, 2017.
Sunday, July 16, 2017
Trusts have become a fundamental piece of a comprehensive, modern-day estate plan. But even with careful and meticulous planning on the part of an attorney, a settlor's choice of an incompetent or dishonest trustee can upend the best-laid plans. Some potential complications may be avoided if the settlor chooses to remain in control of the trust. Looking from the settlor's perspective, there are six key pitfalls that must be considered when the settlor chooses this option.
First, planners should ensure that the settlor is interested in making a complete gift for the purposes of the gift tax. If the settlor retains certain powers as the trustee, a gift will remain incomplete until the powers are surrendered. Next, it is important that the settlor not retain possession, enjoyment, or the income from a gift to a trust. Third, a settlor should not include broad distribution powers like the sprinkle power or a power to invade the principal. Fourth, if the settlor has chosen not to be a trustee, it is important to make sure he has no power to remove and replace the current trustee. Fifth, a settlor should not be the trustee of an IRC § 2503(c) minor's trust. And finally, if the settlor wishes to retain administrative powers while serving as trustee, it is important that there is sufficient court oversight.
A very complex rule structure has evolved around trust creation and trustee selection. Drafting an estate plan is not an opportunity to become a creative legal wizard. Though clients may pressure their planners to stray from these structures to gain some perceived benefit, this area of the law requires strict adherence to previously settled rules.
See Mark R. Parthemer & Sasha A. Klein, Client Dilemma—Whom Can I Trust?, Probate & Property, July 2017.
Wednesday, June 28, 2017
The American Law Institute is holding a CLE entitled, Representing Estate and Trust Beneficiaries and Fiduciaries 2017, which will take place July 13-14, 2017, at the Sheraton Boston Hotel in Boston, Massachusetts. Provided below is a description of the event:
Why You Should Attend
Join us for an in-depth look at the divergent interests of trust and estate beneficiaries and fiduciaries! This unique program examines the ever-changing landscape that representatives of trust and estate beneficiaries and fiduciaries must navigate, focusing on industry practices that are, or are likely to be, the basis of complaint or conflict. Hear the perspectives of a broad-based faculty and get practical strategies for representing the interests of settlors, fiduciaries, and beneficiaries in controversies that can arise when administering complex trust and estates.
Updated for 2017, this year’s program devotes equal parts to the latest tax, litigation, liability, and fiduciary developments. Topics include:
Strategies for advancing fiduciary interests, without “crossing the line”
Techniques for advancing beneficiary interests, without enormous legal cost
The accounting strategy for the defender and the objector
The ethics of usual, if questionable, practices
New developments in state and federal law
The fiduciary litigation landscape—and potholes
Three areas where liability lays in wait
Investment management agreements, referral relationships, releases, reduced standards of care, and other trustee-friendly arrangements
Investment management tools and risk assessment metrics
Fixing the broken trust
The impartiality fallacy
What You Will Learn
If you advise fiduciaries or beneficiaries, look no further for sophisticated analysis and practical advice to skirt risk and provide a superior outcome for your clients.
Representing Estate and Trust Beneficiaries and Fiduciaries 2017 examines developments in the estate and trust world from the wide-ranging perspectives of settlors, fiduciaries, and beneficiaries. An outstanding national faculty of trust and estate practitioners, wealth managers, and trust administrators addresses such key topics as:
Fiduciary litigation developments
Tax planning and state taxation of trust income
Liability in existing trusts
Modeling and metrics for monitoring trust issues
Register today! Hear from some of the best in the business in an environment that promotes formal discussion, as well as personal connections, with faculty and other experienced trust and estate professionals from across the country. Get the insights you need to advise your clients and respond to their toughest questions.
Going green in 2017! Course materials will be available in electronic format for download the week before and during the course. Print materials will not be distributed. All registrants are advised to bring laptops or tablets to the course to view the course materials, including updates.
Tuition for this Live Course is $1,699.00.
Tuition for this Video Webcast is $1,299.00.
Tuition for the webcast includes a set of electronic course materials and access to the webcast.
This course is available in individual webcast segments
Wednesday, June 21, 2017
New Edition of "McCouch's Federal Income Taxation of Estates, Trusts, and Beneficiaries in a Nutshell" Released
Grayson M.P. McCouch recently published a book entitled, McCouch's Federal Income Taxation of Estates, Trusts, and Beneficiaries in a Nutshell (2017). Provided below is a description of the book:
This comprehensive guide can serve either as a course supplement or as a refresher for members of the bar. Expert commentary summarizes the law and offers critical perspectives on the federal income taxation of estates, trusts, and beneficiaries, including the decedent’s final income tax return; classification of estates and trusts; income in respect of a decedent; distributable net income; simple and complex trusts; distributions; grantor trusts; charitable trusts; and foreign trusts. Additional chapters cover basic income, gift and estate tax concepts, accumulation distributions, and specially treated trusts.
Tuesday, June 20, 2017
Steven J. Oshins, Esq., AEP (Distinguished) is an award-winning attorney practicing in Las Vegas, Nevada. He maintains clients throughout the United States. Oshins recently sat down for an in-depth interview covering a variety of topics. Part I of his interview considers the use of the Nevada Asset Protection Trust. Part II focuses on the Hybrid Nevada Asset Protection Trust, and Part III looks at the Nevada Incomplete Non-Grantor Trust. Part IV discusses Nevada Dynasty Trusts and reviews recent developments regarding these trusts.
Monday, June 12, 2017
Paul B. Brown has worked for the super wealthy. His former employers include individuals that have owned toys ranging from his-and-hers 747s to luxury yachts with private submarines. In the years Brown spent working for people who spend many times more on their hobbies than he spends on his mortgage, Brown realized that he and his wife are definitely not part of this extremely restricted club of the ultra-affluent. But, Brown and his wife are relatively successful. Brown’s wife has a nationally recognized consulting business and Brown writes a book every decade or so that enjoy moderate success. The pair has put their four children through expensive private colleges and are now enjoying the extra discretionary income that comes with adult children that have all left the home. Having a bit of extra money, Brown and his wife did something unusual; they started giving their children their inheritances.
The impetus behind this decision considered a number of factors. One simple reason for the early gift was that their children needed the money. Buying new homes and having their own children placed Brown’s children in a position where they could use the extra funds to make down payments and fund college education. Brown wanted to help now, when he could spare the money and when his kids really needed the extra funds. Another consideration was the oddity of having children looking forward, even at some subconscious level, to receiving a windfall at Brown’s demise. Each of his children had varying reactions to the receipt of their early inheritance, but all accepted and used the money for their own unique needs. Brown says that he is not worried about how they use the money and remains content with the early provision.
See Paul B. Brown, Why I Am Giving My Children Their Inheritance Now, The New York Times, June 9, 2017.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
On Friday, the IRS issued taxpayer-friendly guidelines allowing certain estates to make a late portability election if they had previously failed to make a timely election (Rev. Proc. 2017-34). Portability elections allow surviving spouses to use a decedent’s unused exemption amount for estate and gift taxes purposes. Previously, the IRS provided a simplified method for obtaining an extension for filing, but that grieving-spouse-friendly method expired at the end of 2014. Since then, the regulations available for filing an extension have been onerous and time-consuming. The new method for filing an extension provided under Rev. Proc. 2017-34 demands much less time and effort.
See Sally P. Schreiber, IRS Provides Simplified Method to Request an Extension of Time to Make a Portability Election, Journal of Accountancy, June 9, 2017.
Special thanks to Jerome Borison (Professor at University of Denver Sturm College of Law) & Kevin Staker for bringing this article to my attention.
Saturday, June 10, 2017
Åsbjørn Melkevik recently published an Article entitled, A Tax Dead on Arrival: Classical Liberalism, Inheritance, and Social Mobility, Wills, Trusts, & Estate Law eJournal (2017). Provided below is an abstract of the Article:
Historically, it is safe to say that very few laws did as much to stoke inequality as laws touching descents and hereditary transmissions. This paper attempts to see if the classical liberal tradition can endorse inheritance taxation so as to further fair equality of opportunity, as well as to lessen inequality of undeserved wealth. It argues that fair equality of opportunity is a necessary feature of market societies to make sure that they remain competitive. Hence, inheritance taxation is most likely necessary from a classical liberal point of view as an instrument of social mobility to counter notable problems of social immobility, say hereditary vocational stratification, which a system of private property rights creates.
Special thanks to Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) for bringing this article to my attention.