Wills, Trusts & Estates Prof Blog

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

Friday, January 13, 2017

Donors to Give More over the Next Two Years

Philanthropy 2017A new report suggests that the outlook for philanthropy is positive for the next two years. Specifically, United States charitable giving will increase 3.6% this year and 3.8% next year. In contrast, over the past ten years, the average total increase was only 0.5%. Donations are expected to increase due to improvements in the overall economy and the stock market as well as increases in gross domestic product and household incomes. Philanthropic giving by foundations will comprise the greatest percentage of growth followed by donations from estates. Also, giving to health causes is predicted to grow the most at 8.5% in 2017. As a result, charitable organizations should seek to communicate their needs with potential donors. 

See Karen Demasters, Donors Predicted to Give More in 2017, 2018, Financial Advisor, January 13, 2017. 


January 13, 2017 in Current Events, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)

Article on Continuing Helping Clients Achieve Their Charitable Goals

Charitable goals Robert F. Sharpe, Jr. recently published an Article entitled, Adapting Longstanding Tools to Possible Changes: Continuing Helping Clients Achieve Their Charitable Goals, Tr. & Est. 62 (Jan. 2017). Provided below is a summary of the Article:

Insofar as philanthropic planning is concerned, 2016 was a year for debate on the future of charitable income tax incentives and the tax ramifications for private foundations, donor-advised funds (DAFs) and other charitable planning vehicles. 

During the lengthy presidential campaign, the major candidates proposed a number of tax reform plans that would serve to make charitable giving more or less attractive, depending on one’s income level, the amount and nature of their itemized deductions and other factors. Now that the dust has settled, here’s what we’re left with. 


January 13, 2017 in Articles, Current Events, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)

Wednesday, January 11, 2017

Article on Fiduciary Duties in 2017

Fiduciary 2016Gail E. Cohen recently published an Article entitled, In Like a Lamb, Out Like a Lion: For Fiduciaries, 2016 Started Out Quietly, but 2017 Promises to Be a Wild Ride, Tr. & Est. 28 (Jan. 2017). Provided below is a summary of the Article:

The year 2016 started out quietly, seemingly a continuation of the status quo. We continued acting as fiduciaries of trusts that took advantage of tried and true tax strategies. Professional fiduciaries received good news in April when the Supreme Judicial Court of Massachusetts overturned the troubling Pfannensitehl decision of 2015, thereby providing assurance that discretionary trusts weren’t subject to claims of divorcing spouses in Massachusetts. Later in the year, as expected, the Internal Revenue Service put forth long-awaited proposed regulations intended to curtail the use of valuation discounts in gift and estate planning for family entities. 

Then came Donald J. Trump. Seemingly everyone expected Hillary Clinton to win the presidency, thereby continuing the status quo, albeit with higher income taxes and higher estate and gift taxes (or at least a lower exemption from those taxes). Up until the election, there was a flurry of activity to take advantage of valuation discounts prior to the Internal Revenue Code Section 2704 regulations becoming final. Now, we don’t know exactly what 2017 will bring. 

A few items to watch: lower income tax rates; elimination of gifts of appreciated assets to private charities; elimination of estate and gift taxes and presumably the generation-skipping transfer (GST) tax; income tax at death or carryover basis; and non-adoption of the proposed IRC Section 2704 regulations. Looking ahead, we should examine the potential impact that these actions may have on professional fiduciaries. 


January 11, 2017 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Professional Responsibility, Trusts | Permalink | Comments (0)

Friday, January 6, 2017

Uncertain Death to the Death Tax?

Death taxesWith the election of Donald Trump, Americans want to know: will he follow through on his vow to deliver death to the death tax? There is a good chance that Trump will abolish the estate tax because it has become complicated and costly to administer and the increase in capital gains tax would provide a simpler system. The estate tax as well as its counterparts, the gift tax and the generation-skipping transfer tax, all bring complications while raising little revenue. In order to evaluate whether keeping these taxes, it will be important for the new President-elect to consider their social purposes.  

See Jeff Schlegel, Death to the Death Tax?, Financial Advisor, January 3, 2017. 


January 6, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Tax Efficiency While Alive and at Death

IRSWhen working to minimize your family’s tax burden, it is best to start while your parents are still alive. There are several strategies to help save your parents money in their later years and limit the taxes owed after their death. One way to reduce taxes while your parents are alive is to have them sell their stocks that have losses, which may allow them to take a tax deduction. If the stock is not sold, then upon your parent’s death there will be no tax deduction for the loss. On the other hand, they should keep stocks that have gains because their heirs will benefit from the stepped-up basis rule. For retirement accounts, like an IRA, it will be beneficial to allow the funds to grow tax-deferred, further allowing the money you would have paid in taxes to earn interest for many years. It may also be wise for those families with large estates to gift assets to beneficiaries while the parents are still alive, reducing their tax liability at death. Another efficient estate planning tool is the trust, which will provide less hassle to beneficiaries. Tax efficiency is a major asset in itself both while alive and at death, so it is important to plan accordingly. 

See Patrick O’Brien, How to Keep Your Parents’ Assets from the Taxman, Market Watch, January 6, 2017. 


January 6, 2017 in Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets, Trusts | Permalink | Comments (0)

Wednesday, December 14, 2016

Completed Gifts in an Irrevocable Trust

Completed giftsA recent Private Letter Ruling details the IRS conclusions regarding distributions from an irrevocable trust. A grantor had created an irrevocable non-grantor trust for the benefit of him, his spouse, his mother, and his issue with a distribution committee. The trust terms specified that all gifts to the trust were not completed gifts and any trust assets would be included in the grantor’s gross estate. One of the grantor’s inquiries was if he is considered the owner of the trust, which portions of income, deductions, and credits should he include in his taxable income during the time of the distribution committee’s service. The IRS concluded that the grantor was not the owner of the trust so long as the distribution committee served. In another ruling, the IRS concluded that two gifts made to the trust were not complete because the grantor retained some power over the trust’s distributions. Similarly, the IRS ruled that any distribution by a committee member pursuant to their powers would not be considered gifts subject to the federal gift tax but rather gifts by the grantor.  

See Dawn S. Markowitz, What Constitutes Completed Gifts?, Wealth Management, December 13, 2016. 

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


December 14, 2016 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

The Effect of Trump's Tax Proposals on High Net Worth Reitrees

High net worth retireesThe recent presidential election marks a good opportunity for retirees to review their long-term financial plans and implement new strategies, especially with Trump’s tax proposals. If you are a high net worth retiree, there are things you can do to protect yourself. With the proposed reduction in income tax brackets, it is important for these retirees to plan accordingly with discretionary income sources. Additionally, if Trump’s modification for tax deductions takes effect, retirees should reconsider their current deductions, specifically in the areas of mortgages and charitable donations. High net worth retirees should also understand that even if the estate tax is repealed, estate planning is still a necessity. Lastly, eliminating the basis “step up” will not allow retirees to avoid capital gains taxes upon death, so you should consider reducing your investment risk. 

See Jeff Fosselman, What the Trump Tax Proposals Mean for High Net Worth Retirees, Forbes, December 12, 2016. 

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


December 14, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Sunday, December 11, 2016

How Trump's Business Decisions Will Effect His Taxes

Trump businessIn order to avoid conflicts of interest, Donald Trump will need to confront some major tax issues when determining what to do with his real estate empire. If Trump decides to outright gift his businesses to his children, it will come with a hefty tax bill—gifts have a 40% tax rate over the lifetime exemption. The practical decision would be to put his business assets into a blind trust in which he still has beneficial ownership without control. If Trump decides to not “materially participate” in his real estate businesses, the passive loss rules could apply to him—rules that treat real estate professionals as having active real estate activities rather than passive. However, some suspect that these rules will not affect our future president because he can use loss carryforwards. Trump could also sell or divest his businesses, which would allow him to receive a significant tax break. All of these issues regarding his business holdings will be addressed at a December 15 news conference.

See Allyson Versprille, Tax Implications of Trump’s Business Decisions: A Primer, Big Law Business, December 9, 2016.

Special thanks to Richard Behrendt (Director of Estate Planning, Annex Wealth Management) for bringing this article to my attention.  

December 11, 2016 in Current Events, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)

Sunday, November 20, 2016

The Future of Estate Planning Under President Trump

Estate plan2With a recent Republican clean sweep heading to the White House, all eyes are on Washington for the potential elimination of the estate and gift taxes. Repeal of the estate and gift taxes is not entirely certain, but given such uncertainty, the world of estate planning has an unknown future. If the estate tax is repealed, the focus of estate planning would no longer be estate tax planning but asset protection planning. However, if there is no carryover cost basis and step-up basis in the remains, then it can be damaging to remove the assets from the estate as opposed to retaining the property and enjoying a step-up in basis at death. Ultimately, estate planning will be at a standstill for the next several months until it becomes obvious how the Republican Party will deal with the estate tax.

See Jonathan G. Blattmachr & Martin M. Shenkman, The Future of Estate Planning and Potential Repeal Under President Trump, Nerd's Eye View, November 16, 2016.

November 20, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Saturday, November 19, 2016

The Benefits of Grantor Retained Annuity Trusts

GratA grantor retained annuity trust (GRAT) can help families remove their businesses from the taxable estate. This type of trust is established by a grantor, who transfers assets to the GRAT for a specified term. Normally, the GRAT document is written to provide that the grantor (often a parent) retains the right to receive 100% of the initial fair market value of the transferred assets by way of annual fixed payments. With these payments, the grantor receives a rate of return based on an IRS-prescribed interest rate—the “7520 rate.” The benefit of a GRAT is that if at the end of the trust’s specified term assets remain in the trust, then the named beneficiaries inherit the asset without additional gift tax consequences. On the other hand, the major problem with a GRAT is that if the grantor dies within the specified term, the assets remaining in the trust revert back to the grantor’s taxable estate, not evading any gift taxes. 

See Craig W. Smalley, The Beauty of Grantor Retained Annuity Trusts, Accounting Web, November 18, 2016.

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

November 19, 2016 in Estate Planning - Generally, Estate Tax, Gift Tax, Trusts | Permalink | Comments (0)