Wills, Trusts & Estates Prof Blog

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

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Sunday, April 20, 2014

Article on ATRA and the Heckerling Institute

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The changes wrought by the American Taxpayer Relief Act of 2012 were at the forefront of the 47th Annual Heckerling Institute on Estate Planning, a week-long conference for estate planning advisors.  For a summary of the speakers’ remarks on several important estate planning topics, read Estate Planning After ATRA: A Summary of the Heckerling Institute on Estate Planning by Martyn S. Babitz, J.D. (Hawthorn PNC). 

The four central points discussed at the Heckerling Institute about ATRA include:

  • Sense of permanence in federal transfer tax 
  • Role of income tax planning   
  • Portability as a planning consideration; and
  • Timing of significant gifts

April 20, 2014 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Friday, April 18, 2014

Article on Taxes and Estate Planning

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Barry Cushman (Notre Dame Law School) recently published an article entitled, Tax Recognition, St. Louis University Law Journal, Vol. 58, p. 825, 2014.  Provided below is the abstract from SSRN:

This article was prepared for the St. Louis University Law Journal’s “Teaching Trusts & Estates” issue. Many law students take a course in Trusts & Estates, but comparatively few enroll in a class devoted to the federal wealth transfer taxes. For most law students, the Trusts & Estates course provides the only opportunity for exposure to some of the basic features of the estate tax, the gift tax, the generation-skipping transfer tax, and some related features of the income tax. The coverage demands of the typical Trusts & Estates course do not allow for intensive discussion of these issues, but there are numerous opportunities to introduce relevant tax considerations while teaching the substantive law of wills and trusts. Using the Dukeminier & Sitkoff casebook as an example, this article explores the opportunities for interstitial recognition of the tax issues often lying just beneath the surface of private law disputes. Seizing the opportunities that these cases present to introduce some basic tax concepts and planning strategies can alert students to simple methods of tax savings and help them to avoid costly potential estate planning errors.

April 18, 2014 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Teaching, Trusts | Permalink | Comments (0) | TrackBack (0)

Saturday, April 12, 2014

Article on the Prospects of Estate Tax Reform

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Paul L. Caron (Pepperdine University School of Law) and James R. Repetti (Boston College Law School) recently published an article entitled, Revitalizing the Estate Tax: Five Easy Pieces, Tax Notes, v. 142, 2014, p. 1231-1241.  Provided below is the abstract from SSRN: 

In a previous article, we argued that contrary to the state of the law over 35 years ago — when George Cooper wrote his seminal article on the estate tax (A Voluntary Tax? New Perspectives on Sophisticated Estate Tax Avoidance, 77 Colum. L. Rev. 161 (1977)) — taxpayers today generally ‘‘can reduce the value of assets subject to transfer tax in many instances only if they are willing to assume the risk that the reduction may be economically real and reduce the actual value of assets transferred to heirs or, alternatively, in narrow situations if they are willing to incur some tax risk.’’ (The Estate Tax Non-Gap: Why Repeal a Voluntary Tax?, 20 Stan. L. & Pol’y Rev. 153 (2009)) In another article, we documented the dramatic increase in income and wealth inequality over the past 30 years and the accompanying adverse social consequences and long-term negative effect on economic growth. (Occupy the Tax Code: Using the Estate Tax to Reduce Inequality and Spur Economic Growth, 40 Pepp. L. Rev. 1255 (2013)) We argued that tax policy historically has played an important role in reducing inequality and that the estate tax is a particularly apt reform vehicle in light of the role of inherited assets among the very rich and the adverse economic effects of that inherited wealth. In this article, we advance five estate and gift tax reform proposals that would generate needed revenue, reduce inequality, and contribute to economic growth: (1) disallow minority discounts when the transferred asset or business is controlled by family before and after the transfer; (2) maintain parity between the unified credit exemption amounts for the estate and gift taxes; (3) reduce the wealth transfer tax exemptions to $3.5 million, increase the maximum tax rate to 45 percent, and limit the generation-skipping transfer tax (GSST) exemption period to 50 years; (4) restrict the ability for gifts made in trust to qualify for the gift tax annual exclusion; and (5) impose a lifetime cap on the amount that can be contributed to a grantor retained annuity trust (GRAT).

This article was presented on January 17 at a symposium in Malibu, California cosponsored by Pepperdine University School of Law and Tax Analysts. Twenty of the nation’s leading tax academics, practitioners, and journalists gathered to discuss the prospects for tax reform as it is affected by two crises facing Washington: dangerously misaligned spending and tax policies, resulting in a crippling $17.4 trillion national debt; and the IRS’s alleged targeting of conservative political organizations. A video recording of the symposium is available online.

April 12, 2014 in Articles, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Friday, April 11, 2014

Adjusting to Changes in Estate Planning

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Karen Ciegler Hansen has published an article addressing how practitioners in estate planning should deal with a variety of multilevel changes which may affect how to best craft an estate plan for clients. Among the topics discussed are changes in statutory law, shifting trends, changes in clients' lives and to the population at large, and a variety of specific situations that may require specialized attention or action.

See Karen Ciegler Hanson, The Modern Family and the Modern Estate, JDSupra, Apr. 2, 2014.

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

April 11, 2014 in Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Sunday, April 6, 2014

Overview of the Federal Tax System

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The Joint Committee on Taxation has released its Overview of the Federal Tax System as in Effect for 2014. It provides a summary of the current 2014 tax system, consisting of four main elements--income tax on individuals and corporations (regular and alternative minimum tax); payroll taxes on wages (and self-employment income) to finance certain social insurance programs; estate, gift, and generation-skipping taxes (GSTs); and excise taxes on goods and services.



See Joint Committee on Taxation, Overview of the Federal Tax System as in Effect in 2014, JCX-25-14, Mar. 28, 2014.

April 6, 2014 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 26, 2014

IRS Correspondence Provides Guidance on Rescinded Gifts and Gift Tax Refunds

IRS-100wiRecently, Tax Notes made an IRS email available to tax payers. The guidance that the IRS provides states that a refund of gift taxes is permitted when the gift is properly rescinded and the taxpayer has received funds from the original gift.

See Theodore Waggner, IRS E-Email Correspondence: Guidance on Refund of Gift Taxes in Connection with Rescinded Gifts, Wealth Strategies Journal 2.0, Mar.25, 2014.

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

March 26, 2014 in Gift Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 19, 2014

Forbes Tax Guide

Tax QuestionsWith tax season upon us, The Forbes 2014 Tax Guide provides tips and advice for preparing taxes, and will be updated weekly until the April 15th tax deadline. In addition to general tax information, the guide includes information helpful for estate planning, such as:

  • General information on estate taxes
  • Tips for maximizing charity deductions
  • Current limits for making lifetime gifts tax free
  • How location of death affects taxes
  • Information on inherited IRAs

See Janet Novack, The Forbes 2014 Tax Guide, Forbes, Mar. 2014.

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

March 19, 2014 in Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Monday, March 17, 2014

Obama Reveals Budget Proposal

ObamaPresident Obama has released his proposed 2015 budget, which would make many changes related to the estate tax and current estate planning tools. These changes include going back to 2009 estate rates that were in effect prior to the American Taxpayer Relief Act. The changes would take effect Jan. 1, 2018.

One of the proposed changes would reduce the tax exemption amount to $3.5 million for estate and generation-skipping transfers, and to $1 million for gifts given during life. The current tax exemption amount for transfers during life and at death is $5.34 million. The proposed budget would also raise the top tax rate from 40% to 45%. In addition to rate and exemption changes, the proposed budget would end the establishment of dynasty trusts. There are currently four states that allow trusts to continue indefinitely.

See Deborah Jacobs, Obama Budget Takes Aim at Popular Wealth Transfer Tools, Forbes, Mar. 4, 2014.

March 17, 2014 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, March 14, 2014

Article on Gift Planning with Formula Clauses

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N. Todd Angkatavanich (Withers Bergman, LLP), Liam D. Crane (Stoel Rives, LLP), Stephen Putnoki-Higgins (Withers Bergman, LLP) recently published an article entitled, Gift Planning with Formula Clauses: From Procter’s Progeny to Wandry World (Part 2), 28 Prob. & Prop. 37 (March/April 2014).  Provided below is the introduction:

Historically, the IRS has generally viewed valuation clauses with hostility, taking the position that they violate public policy by disincentivizing IRS gift tax return audits.  This antagonistic view of valuation clauses has been supported, until recently, by the weight of judicial precedent.  But particular rulings from the past decade, both in the U.S. Tax Court and at the federal appellate level, have indicated a softening of this view and have provided some guidance for certain acceptable uses of valuation clauses.

This softening was recently illustrated in the Tax Court’s March 2012 decision in Wandry v. Commissioner, 103 T.C.M. (CCH) 1472 (2012), which upheld a formula gift of as many units of a closely held LLC as equaled a specified dollar amount.  Along with a number of cases from the past decade that were indicative of a growing acceptance of formula transfers in certain circumstances, Wandry, has given many estate planners reason to believe that valuation clauses are becoming a less controversial, and therefore safer, way to reduce gift tax exposure when planning with hard-to-value assets. 

The first part of this article, which appeared in the January/February issue of Probate & Property, provided an in-depth overview of valuation clause jurisprudence, from its genesis in the Fourth Circuit’s Procter decision of 1944 to several 21st century TAMs that still echo the public policy concerns first voiced in Procter.  The first part having tracked the path by which the IRS established its antagonistic view of valuation clauses, the second part will provide an analysis of the Wandry ruling and of how practitioners should view it against the backdrop of over 50 years of jurisprudence on this controversial topic.  But first this article will examine several rulings from the past decade that evidence a gradual change in the way valuation clauses are viewed, before finally turning its focus toward the aforementioned discussion on Wandry and its implications for the future use of valuation clauses. 

March 14, 2014 in Articles, Gift Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

Monday, March 10, 2014

Gift Tax Annual Exclusion Proposal

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The Treasury Department has released a new proposal in the Green Book to limit the use of the gift tax annual exclusion for gifts to trusts.

Gifts of $14,000 per person, per year can currently be made in trust through the use of a “Crummey” withdrawal power.  These powers are often used to make gifts to irrevocable life insurance trusts.

The Green Book proposal imposes an annual limit of $50,000 per donor on the donor’s transfers of property, making transfers in excess of $50,000 in a single year taxable even if total gifts to each individual donee doesn’t exceed $14,000.

See Farhad Aghdami, Obama Administration Announces Gift Tax Exclusion Proposal, JD Supra Business Advisor, March 7, 2014.

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

March 10, 2014 in Gift Tax, New Legislation, Trusts | Permalink | Comments (0) | TrackBack (0)