Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Wednesday, January 28, 2015

Estate Planning To-Do List

Estate plan 2

January is generally a busy month for estate planners as clients follow up on resolutions to get their estate plans in order.  Regardless of whether you are hearing from clients, consider being proactive with them since the beginning of the year is a perfect time to handle many estate planning tasks. Below is list to help update and review clients’ estate plans.

  1. Make exclusion Gifts Early.  Although many clients know that each year they can make annual exclusion gifts, they may not know the best possible time to make these gifts is at the beginning of the year.  This way, if something were to happen to a client during the course of the year, the value of the gift would already be outside of the estate for estate tax purposes. 
  2. Fund Revocable Trusts.  Help clients put assets into a revocable trust in order to provide quick access in the event of incapacity or death, and to keep personal affairs private. 
  3. Check Beneficiary Designations.  A common and potentially costly mistake involves outdated or never signed beneficiary designation forms.  For many clients, life insurance policies and retirement benefits represent valuable assets and if these are incorrect, making changes can be expensive or even impossible.
  4. Review Named Fiduciaries.  Choosing fiduciaries in an estate plan is critical.  Moreover, you must review these fiduciaries on a regular basis.  While a client may have named the right person or institution at a certain point in time, subsequent changes could have altered their situation. 
  5. Get Procrastinators to Act.  Even though it can be difficult to motivate an unmotivated client, an unexpected incapacity or death is even more difficult for a family and is not a rare occurrence.  It is critical to lay out your client’s options and ensure they understand the detriments of failing to have an estate plan in place. 

See Tracy Craig, Estate Planning Checklist: 5 Things to Do Now, Financial Planning, Jan. 27, 2015.

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

January 28, 2015 in Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, January 23, 2015

Article on Cavallaro v. Commissioner

Kerry Ryan

Kerry A. Ryan (Saint Louis University School of Law) recently published an article entitled, Merger is Indirect Gift in Cavallaro, Tax Notes, Vol. 146, No. 1 (2015).  Provided below is the article’s abstract from SSRN:

In Cavallaro v. Commissioner, the Tax Court held that a merger of two family-owned businesses resulted in a substantial taxable gift. The taxpayers avoided penalties by demonstrating that they relied in good faith on the mistaken advice of competent tax advisers.

January 23, 2015 in Articles, Estate Planning - Generally, Gift Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

Monday, January 12, 2015

CLE on Planning Techniques for Large Estates


The American Law Institute Continuing Legal Education (ALI CLE) is presenting a CLE entitled, Planning Techniques for Large Estates, on April 8 – 10, 2015 in Scottsdale, AZ.  Here is why you should attend:

Planning for large estates continues to be a technically demanding and dynamic area of practice. Don’t miss the best opportunity in 2015 to fine tune your knowledge and stay up-to-date!  

Attend this highly-rated course and get the latest information and planning techniques specifically for large estates. Learn, network, and strategize with your peers and a highly experienced faculty of trust and estate practitioners from across the country.

Featuring in-depth discussions of estate and gift tax issues and planning techniques, this year’s topics include:

  • business succession planning
  • charitable planning issues
  • legislative developments and outlook
  • remainder interest purchase planning techniques
  • postmortem estate planning
  • valuation issues
  • ethics and privileges

January 12, 2015 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Estate Tax Repeal Bill

Tax CutThe Death Tax Repeal Act (H.R. 173) has been filed by Texas Congressman Mac Thornberry that will repeal the Federal estate, gift, and generation-skipping taxes if passed. Thornberry described the "death tax" as "fundamentally unfair," and expressed concern for the impact of the tax on "small business owners, farmers, and ranchers," in his statements through a press release from his office released January 8, 2015. At the time of the press release there were 36 cosponsors to the bill.

See, Thornberry Introduces The Death Tax Repeal Act, Everything Lubbock, Jan. 10, 2015.

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

January 12, 2015 in Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Monday, January 5, 2015

Charity Fails To Fulfill Bequest Several Years After Donation

Anya Adams

In the months before a beloved pediatrician died, she chose two charities to include in her will.  Yet, six years later, one of the charities—the Land Conservancy of B.C. (TLC)—is mired in financial trouble and legal battles that could jeopardize the sizable donation Dr. Chrystal Kleiman made to the charity. 

Only $134,000 of the $707,000 Dr. Kleiman bequeathed to the Victoria based TLC has made its way to the Galiano Conservancy Associations $4 million Galiano Learning Centre.  In her will, Dr. Kleiman asked that her children work with TLC to identify a property that had a unique ecosystem. 

TLC took $106,050 from Kleiman’s bequeathment as an “administrative” fee, then in Dec. 2010 wrote a promissory note to the Galiano project for $600,000. Since that time, TLC has only paid the Galiano project $134,000.

Although TLC said the wishes of Dr. Kleiman have been honored, her children think otherwise.  Dr. Kleiman’s two children say they are not happy that a large portion of the money their mother gave to the charity is unaccounted for.  “She had a very specific wish.  It’s so sad, for my mom, and for the others who are being affected [by TLC’s financial troubles].” 

TLC is currently undergoing restructuring under CCAA rules in an attempt to avoid bankruptcy.  TLC will present its “plan of arrangement” to the creditors before being sent to the courts for approval.

See Susan Lazaruk, B.C. Family’s Trust Broken As Charity Bequest Still Unfulfilled Several Years After Donation, The Province, Jan. 5, 2014. 

January 5, 2015 in Estate Administration, Estate Planning - Generally, Gift Tax, Wills | Permalink | Comments (0) | TrackBack (0)

Sunday, January 4, 2015

Structuring A Family Farm Business


No matter what type of business you operate, a well-thought-out business plan is essential to your success.  Business planning covers all aspects of a business, from its legal structure, to marketing, to succession planning.  Businesses that forego putting a viable plan in place are taking tremendous risks.  This notion applies as much to a family farm business as it does a multinational corporation.

Family farms may be operated as sole proprietorships, corporations, limited partnerships, limited liability companies, or a combination of these legal entities.  Getting the business form correct is an important first step in planning because it can have a large impact on other aspects of the business. 

One of these is the valuation of the business for purposes of transfer tax.  This refers to taxation, which applies to the passing of title to property from one person to another, including estate tax and gift tax.  Another way legal structure can impact a family farm is by its effect on income taxation during the business’ operation and possibly even upon liquidation. 

See Determining How to Structure Your Family Farm Business, P.1, National Law Review, Jan. 3, 2015. 

January 4, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Monday, December 29, 2014

Gifting Stock to Charity


Whether it makes more sense to gift shares of stock to charity or simply sell the stock and donate the cash depends on whether the stock has increased or decreased in value since it had been purchased.  If its value has increased over time, it is better to donate the stock.  If you have owned the stock for more than a year, you may take the current value as a charitable deduction if you itemize and you do not have to pay tax on the appreciation.  On the other hand, if the investment has lost value, it is better to sell the stock and give the proceeds to charity.  Your deduction is still based on the current value of the stock; however, you get to use the loss to offset other gains.  If there is an excess loss, you may deduct $3,000 against other kinds of income. 

If you plan to gift stock to charity, act quickly.  “You need to let the organization know the name of the stock, the number of shares that are being transferred and the date you’re expecting them to arrive.  If the shares go straight from the broker by electronic transfer, the donor’s information doesn’t come through, and we can have a mystery on our hands trying to figure out where [the stocks] came from.”  Also inform the charity who the stock is from so you can get a receipt for the gift to keep in your tax files.

See Kimberly Lankford, How to Donate Stock to a Charity, Kiplinger, Dec. 26, 2014.

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

December 29, 2014 in Estate Planning - Generally, Gift Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Saturday, December 27, 2014

9 Financial Changes For 2015


The New Year is quickly approaching and provided below are a few changes that will affect your money in 2015 so that you may factor them into your financial plans:

  1. You can stash more money into some retirement plans.  Maximum contributions for 401(k)s and 403(b)s will rise by $500.
  2. You can save for retirement through the Obama Administration’s new myRA option.  “My Retirement Account” should be available to some people in 2015.  This will be a no-fee Roth IRA for people whose employers do not currently offer retirement plans.  The federal government will guarantee myRA income and employee after tax contributions will be made through payroll deductions. 
  3. You will be limited on the number of nontaxable IRA rollovers you can make.  The IRS will cap these rollovers to one every twelve months. 
  4. The income limit to claim the Saver’s Credit will rise.  In 2015, it will rise by $1,000 for married couples filing jointly and by $500 for singles. 
  5. The standard deduction will also increase.  For singles it will go up by $100 and for married couples filing jointly $200.
  6. There will be a small increase in the personal exemption and the amount you can save in a Flexible Spending Account (FSA).  Both will increase by $50.  The personal exemption will be $4,000 and the FSA limit rises to $2,500 next year. 
  7. The Alternative Minimum Tax exemption will increase 1.5%.  The exemption amount will be $53,000 for individuals and $83,400 for married couples filing jointly. 
  8. Social Security payments will go up, as well as the amount of income subject to Social Security taxes.  Benefits checks for Social Security recipients will rise by 1.7% because of the annual Cost of Living Adjustment. 
  9. The Obamacare penalty for failing to obtain health insurance in 2015 will more than triple.  In 2014, the penalty was $95 per adult or 1% of income.  In 2015 it will be $325 per person or 2% of income.

See Richard Eisenberg, 9 Changes That Will Affect Your Money In 2015, Forbes, Dec. 26, 2014. 

December 27, 2014 in Estate Planning - Generally, Gift Tax, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 24, 2014

Getting the Most Out of Charitable Donations

Charity 2

As we quickly approach the year-end and think about making gifts to charity, it is important to understand the tax efficient ways to make your donation.  First, you will only be able to write off charitable contributions if you will itemize your 2014 federal tax return.  Second, you generally cannot deduct more than fifty percent of your adjusted gross income for cash contributions or above thirty percent for donations of appreciated property to public charities.  Lastly, for any cash or non-cash donation over $250, you need to have the charity’s acknowledgment of the gift before filing your tax return.  Provided below are tips on how to get the most out of charitable donations:

  1. Appreciated Securities.  By donating significantly appreciated publicly traded stock you have held over a year, you can deduct the fair market value of the stock and will not owe taxes on any appreciation.
  2. Clothes and Household Goods. When you make these donations to a thrift store, the IRS often lets you claim a deduction for the amount you would get by selling them.
  3. Art. If you donate artwork that the group will auction off or sell, your deduction will be limited to your cost.  However, if the organization uses the art for its tax-exempt purpose, you can claim a donation for its fair market value.
  4. Contributions from IRA Accounts.  The IRS allows people 70 ½ and older to make charitable contributions of up to $100,000 directly from their IRA and have them count toward their required minimum distributions.  This tax break was renewed for 2014. 

See David Levi, 5 Smart Tax-Savers For Year-End Charitable Giving, Forbes, Dec. 23, 2014.

December 24, 2014 in Estate Planning - Generally, Gift Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 23, 2014

Donating Bitcoin To Charity

Bitcoin 2

In recent years, Bitcoin has received much attention in the realm of virtual currencies.  This is partly because of its incredible growth in value, going from less than $1 in 2011 to nearly $1,000 at the end of 2013. 

Along with the growing popularity of Bitcoin, the number of charitable organizations that accept virtual currencies has been growing.  Simultaneously, virtual currencies have been under scrutiny by the government.  In March, the Internal Revenue Service issued an opinion on the taxation of virtual currencies, ruling they should be treated as property rather than currency.  That creates administrative problems for Bitcoin users, while also allowing donors to obtain generous charitable income tax deductions for donating Bitcoin that is worth more than they paid for it. 

If you plan on making a charitable donation with your virtual currencies, it is important to understand the process.  You first must determine whether the charity you want to donate accepts virtual currency; then donate the currency; finally, determine the value of the charitable deduction. 

When determining your tax deduction, the IRS allows different deductions depending on the period of time that you held the property.  If you held Bitcoins for more than a year, you can deduct the full fair market value of the donation, up to 30 percent of your adjusted gross income.  If you held the Bitcoins for less than a year, your deduction is only equal to the cost of Bitcoins to you, or their present value—whichever is less. 

See Janet Novack, How To Donate Bitcoin To Charity And Get A Big Tax Deduction, Forbes, Dec. 22, 2014.

December 23, 2014 in Estate Planning - Generally, Gift Tax, Income Tax, Web/Tech | Permalink | Comments (0) | TrackBack (0)