Wills, Trusts & Estates Prof Blog

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

Monday, October 12, 2015

New Regulations Coming For Taxes On Gifts By Expatriates

IRSThe IRS recently released a set of proposed regulations for section 2801 of the Internal Revenue Code which applies to gifts by those that have renounced US citizenship or permanent residence. 2801 will impose the maximum gift/estate tax rate on all property received by US citizens from expatriates that are covered by the law. The fair market value of the gift will be used to calculate the tax but may be reduced by the annual exclusion or for taxes paid on the gift in a foreign nation. The seven new regulations include definitions of key terms, instructions of the applicability of the law to certain persons, and explains the responsibilities of those that receive a qualifying gift. With an increasing number of Americans renouncing their citizenship, these regulations may become important for a great many individuals and their estate planners.

See Dina Kapur Sanna, IRS Issues Proposed Regs Taxing Gifts and Bequests From Covered Expatriates, Wealth Management, September 22, 2015.

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

October 12, 2015 in Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Saturday, October 3, 2015

Tips To Keep In Mind When A Client Makes Large Gifts To Family While Living

GiftsMost people will wait until death before making large transfers of property to family members and other heirs. However, some chose to make gifts during their lifetime so they can take enjoyment from helping a loved one and make sure that the money is going towards the intended cause. But there are several concerns that must be taken into account before gifting including the following:

  • Up to $14,000 per year can be given to any one individual with triggering a tax on the gift. This exclusion applies to each giver individually which allows a married couple to each give $14,000 which means a person, such as a child, can essentially take $28,000 per year tax free.
  • Direct payments to the providers of medical and dental care or an institute of higher education will not count towards the $14,000 yearly cap. This exclusion does not include any other educational expenses so room, board, and books and will still count if they are bought by a third party.
  • Many states have 529 college savings plans which allow up to five years of payments to be made in one year without facing gift taxes. In addition, the plans allow the money to be taken out tax free for educational expenses. However, any payments to a school not by the parents will hurt the ability of the student to receive financial aid in most circumstances so a wise move is to have parents set up the plan but have it funded by the giftor.

See Nick Clements, 4 Rules for Giving Your Heirs Money While You’re Alive, Next Avenue, October 2, 2015.

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

October 3, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Wills | Permalink | Comments (0)

Thursday, October 1, 2015

Estate Planning For Works Of Art Can Get Complex

Estate plan artArt collectors often face complex issues when it comes to estate planning.  These collectors must contemplate financial matters that relate to inheritance.  The planning surrounding art collections has tangible and intangible aspects often involving legacy issues.  There can be tax consequences for heirs that depend on how they are related to the deceased collector. 

Specialist advisers are out there that can handle issues surrounding art collections by focusing on tax and legal concerns in estate planning and philanthropy.  There are various estate planning techniques discussed in this article like placing the art collection into a trust or corporation.  The location and appraisal value of the art collection is also important when putting together a plan.  Collectors need to be aware of the laws and tax regulations that apply to their individual circumstances. 

See Conrad De Aenlle, Estate Planning Can Get Tricky When Art Is Concerned, The New York Times, October 1, 2015. 

October 1, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

How A Lifetime Gifting Programs Are A Way For Clients To Think About Wealth Transfers

CharityThis column discusses the importance of keeping an up-to-date estate plan when giving away assets.  As tax and estate law continues to change each year clients need to be aware of the impact that current laws have on inter-vivos gifts.  Clients should adopt a program for lifetime gifting.  One of the considerations that they need to think about is planning for their own financial needs.  Another consideration is the age of the donor and the size of the estate.  A donor-advised fund (DAF) might be a good way for a client to leave gifts to their loved ones while also establishing a philanthropic legacy.  It is extremely important for clients to not procrastinate on these decisions and to speak with a competent estate planning professional as soon as possible.  

See Scott Thompson, Lifetime Gift Planning: A New Way to Think About Wealth Transfer, Atlantic Trust Blog, September 30, 2015. 

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

October 1, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Tuesday, September 22, 2015

Open Letter To IRS Criticizing New Proposed Regulations

IrsThis letter written by attorney Richard L. Dees is critical of new proposed IRS regulations under Internal Revenue Code (IRC) Section 2704(b).  The letter goes into detail making the argument that the new regulations to modify the rules on valuation discounts would be declared invalid if those regulations are modeled after what was proposed in the green book explanation of Obama’s 2013 revenue proposals.  This lengthy and detailed letter does not simply stop with the technical arguments against the new proposed regulations validity.  The letter also reminds its reader of the failed history and enormous costs of past efforts by the IRS to implement similar objectives. 

See Richard L. Dees, Attorney Criticizes Possible Changes to Valuation Discount Rules, Tax Analysists, August 31, 2015.

Special thanks to Richard L. Dees (McDermott Will & Emery) for bringing this article to my attention.

September 22, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Saturday, September 19, 2015

The Inflation-Adjusted Figures For 2016 Estate And Gift Taxes Have Been Released

IrsThomson Reuters Checkpoint have recent calculated the projected inflation-adjusted amounts for a number of different tax figures.  The organization has based its calculations on the consumer price index (CPI) for the 12-month period that ended on August 31, 2015.  It is important to remember that these Thomson Reuters Checkpoint figures are not the official figures that the IRS will release later this year.  Right now the gift and estate tax exemptions, gift tax annual exclusion, and the annual exclusion for gifts to non-citizen spouses are all projected to increase in 2016.  The gift tax annual exclusion is projected to remain the same.  

See Lana Hompluem and Alan M. Singer, Thomson Reuters Checkpoint calculates projected inflation-adjusted figures for estate and gift taxes for 2016, Bryan Cave LLP, September 17, 2015.

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

September 19, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Anticipated Exclusions Amounts For Estate And Gift Taxes Revealed

IRSWolters Kluwer Tax & Accounting has released its anticipated numbers for the 2016 estate and gift tax exclusions based upon inflationary trends. In 2016 the estate tax exclusion is expected to be $5.45 million for an individual and $10.9 for a married couple. The annual, as opposed to lifetime, gift tax exclusion for 2016 is expected to be $14,000 which remains the same with the last step up occurring in 2014 when the exclusion rose from $13,000. These two numbers are incredibly important in the estate planning community and should be taken into account when preparing for the next year.

See Ashlea Ebeling, The 2016 Projections For Estate And Gift Tax Limits, Forbes, September 18, 2015.

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

September 19, 2015 in Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Friday, September 18, 2015

IRS Provides Guidance On Regulations Dealing With Expatriate Transfers

IrsThe Internal Revenue Service (IRS) has finally issued long awaited guidance on § 2801 of the Internal Revenue Code.  The Heroes Earnings Assistance and Relief Tax Act of 2008 added § 2801 to impose a tax on U.S. citizens or residence that receive a transfer from certain expatriates.  The IRS has in the past deferred the reporting and tax requirements of § 2801 until they could publish the final regulations.  Now after seven years the IRS is finally publishing the final regulations that will govern this Internal Revenue Code section.  The IRS is also developing a Form 708 that taxpayers will be able to fill out in order to comply with the reporting requirements.

See Michelle L. Vesole, Long-Awaited Guidance On The New §2801 Tax Finally Makes Its Appearance, Bloomberg BNA, September 17, 2015.

September 18, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Thursday, September 17, 2015

Tax Court Issues Ruling On Gift Tax Applied To Property Transfer

IRSOn Wednesday the U.S. tax court issued an opinion stating that an agreement to pay the estate tax on a transferred property lowered the value of that property and exempted the beneficiaries from a $1.8 million gift tax on the transfer.  The court reasoned that a hypothetical agreement between a willing buyer and seller to pay the estate tax would be a detriment to the buyer and would cause such a buyer to ask for a reduction in the price of the property.  This decision will provide estate planners with more clarity on how gift taxes are to be applied.  The U.S. tax court decision can be read here.

See Eric Kroh, Tax Court Wipes Out $1.8 M Gift Tax On Property Transfer, Law 360, September 16, 2015.

September 17, 2015 in Current Affairs, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)

Wednesday, September 16, 2015

Tax Planning For Expensive Luxury Vehicles

FerrariThere are many high income earners that like to collect expensive high-end cars that might face difficult tax issues if they do not plan correctly.  This article discusses some of the tax planning strategies that luxury car owners can use to reduce expenses.  It is important to be aware of the complexities of capital gains tax laws and individuals should know what sort of gain in value their vehicle has had.  Being aware of the different local tax laws that each state has is also extremely important.  Different states have their own set of income, estate, gift, and property tax laws that could impact any sort of inheritance concerning a luxury high-end vehicle.  Using a trust might be a good way to bypass certain taxes.  This article provides important advice on how trusts and other estate planning strategies can be used by clients.

See Todd Ganos, Tax Planning For Ferraris And Other Ultra-High-End Collector Cars, Forbes, September 14, 2015.

September 16, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)