Wills, Trusts & Estates Prof Blog

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

Tuesday, August 23, 2016

Proposed Regulations Will Keep Wealthy Americans from Lowering Estate Taxes

IRSThe IRS will implement new rules likely limiting techniques used by rich individuals to lower their estate and gift taxes. These new regulations apply to valuation discounts, which allow people with assets greater than the current $5.45 million exemption to lower the value of their assets subject to gift and estate taxes. Asset owners of this type typically put their assets into a holding company that is not traded, giving shares of the company to family or charity. Subsequently, the assets’ value drops due to dispersed control of the company. The proposed regulations will allow the IRS to ignore these discounts.

See Laura Saunders, The Controversial Way Wealthy Americans Are Lowering Their Estate Taxes, Wall Street Journal, August 19, 2016.

Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing this article to my attention.

August 23, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Wednesday, August 10, 2016

Understanding the Rules for Gift Taxes

Gift taxesIf you want to give monetary gifts to your family, there are ways to minimize gift taxes and save money. More specifically, certain wealth transfers are excluded from the gift tax and are fully tax-free lifetime wealth transfers. The yearly gift tax exclusion is $14,000 for individuals and $28,000 for couples; if you or an individual spouse exceeds these limits, you must file a Form 709 gift tax return. For the lifetime exemption, the limit is $5.45 million for an individual and $10.9 million for a couple—as long as your lifetime gifts do not exceed these amounts, they cannot be taxed. When giving to a 529 Tuition Plan, you can give up to $70,000 in one year, using the exclusion value of five years, but you must wait four years before giving that individual another gift. Also, you may give an unlimited amount of tuition to the institution as opposed to giving it straight to the individual attending school. 

See Kansas & Missouri Estate Planning Blog, What Should My Clients Know About Gift Taxes?, Wealth Management, August 4, 2016.

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

August 10, 2016 in Estate Planning - Generally, Gift Tax | Permalink | Comments (1)

Friday, August 5, 2016

Proposed Regulations Elimination of Valuation Discounts

Family business transferThe IRS recently published proposed regulations, detailing its desire to curtail the use of valuation discounts used to transfer interests in family-controlled entities. These valuation discounts typically have allowed family members to receive the business at a reduced gift and estate tax cost. The new valuation rules will apply regardless of whether the business is active. A public hearing is scheduled for December 1, 2016, and shortly after, the rules will be published in final form. The valuation rules will apply to transfers occurring after the final form is published.

See Trusts and Estates Group Client Alert: Proposed Regulations Aim to Eliminate Many Valuation Discounts, Milbank, August 4, 2016.

August 5, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Wednesday, August 3, 2016

Proposed Regulations for the Valuation of Interests

The IRS recently released a notice of proposed rulemaking and notice of public hearing entitled, Estate, Gift, and Generation-Skipping Transfer Taxes; Restrictions on Liquidation of an Interest. Provided below is a summary on the proposed regulations:

This document contains proposed regulations concerning the valuation of interests in corporations and partnerships for estate, gift, and generation-skipping transfer (GST) tax purposes. Specifically, these proposed regulations concern the treatment of certain lapsing rights and restrictions on liquidation in determining the value of the transferred interests. These proposed regulations affect certain transferors of interests in corporations and partnerships and are necessary to prevent the undervaluation of such transferred interests.

Special thanks to Robert Wolf (Attorney, Tener, Van Kirk, Wolf & Moore, P.C.) for bringing this to my attention.  

Download 2016-18370Proposed2704Regs

August 3, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Thursday, July 7, 2016

Estate Planning for Retirees

RetireesIn the United States, the life expectancy continues to rise, meaning that Americans need more financial support as they age. If the aging population does not plan accordingly, they will be unable to maintain the quality of life they deserve during retirement. Estate planners need to help these retirement-age individuals address their new priorities accordingly. When planning for retirement, estate plans should pay attention to gift provisions, so that they do not take advantage of the retirees. Another examination is state income tax, which will effect where retirees establish residency. Estate planners should also consider a retirement trust for their clients, allowing children to disclaim all or some of the inherited retirement account benefits for their own kids.

See John M. Goralka, Estate Planning for an Aging Population, Wealth Management, July 5, 2016.

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

July 7, 2016 in Elder Law, Estate Planning - Generally, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Wednesday, June 15, 2016

Elective Sharing of Transfer Tax Exemption Between Spouses

Estate and gift taxKerry A. Ryan recently published an Article entitled, Marital Sharing of Transfer Tax Exemptions, 57 Boston College L. Rev. (2016). Provided below is an abstract of the Article:

This Article analyzes portability and its antecedents in order to distill a positive account of marital sharing of transfer tax exemption amounts. Prior to 2010, the estate and gift tax exemption equivalent was a nontransferable, separate tax attribute of each spouse. A spouse could only access his or her spouse’s effective exemption by shifting property into the other spouse’s tax base. With the enactment of portability, Congress decoupled tax-free availability of a spouse’s unified credit from the necessity of a prior intra-spousal transfer. All that is required is an election by the decedent spouse, via the executor, to share the decedent’s unused exemption equivalent with the surviving spouse. This Article argues that a logical extension of this progression in the law, presaged by several early proposals by the American Law Institute and the U.S. Treasury, would be a regime that authorized elective sharing of estate and gift tax exemption amounts between spouses, in any proportion, during life or at death.

June 15, 2016 in Articles, Estate Tax, Gift Tax | Permalink | Comments (0)

Monday, May 23, 2016

Article on Estate and Gift Tax Reform

Bridget_Crawford_1Bridget J. Crawford recently published an article entitled, Valuation, Values, Norms: Proposals for Estate and Gift Tax Reform, Boston College Law Review, Vol. 57 (Forthcoming). Provided below is an abstract of the Article:

            In their contributions to the Symposium on The Centennial of the Estate and Gift Tax, Professor Joseph Dodge, Professor Wendy Gerzog, and Professor Kerry Ryan offer concrete proposals for improving the existing estate and gift tax system. Professor Dodge and Professor Gerzog are especially interested in accuracy in valuation, and advance specific proposals with respect to split-interest transfers and family limited partnerships. Professor Dodge makes an additional proposal to improve the generation-skipping transfer tax system, an understudied area of the law. Professor Gerzog’s Symposium contribution draws particular attention to the legal fiction on which the estate and gift tax marital deductions rely. She would restrict the availability of the deduction to only meaningful economic transfers to a spouse, consistent with a desire that tax results reflect the underlying substantive results. Professor Ryan also focuses on the estate and gift tax marital deduction, along with other wealth transfer tax benefits available to spouses. She imagines an expansion of those rules, showing how easily the law can be separated from economic substance. These authors' proposals are technically expert, relevant to the legislative and regulatory regime that taxpayers face daily, focused on solutions, and deeply engaged in understanding how well the law meets its goals.

May 23, 2016 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Article on Importance of Estate Tax

Graetz_michaelMichael J. Graetz recently published an article entitled, 'Death Tax' Politics, Boston College Law Review, Vol. 57 (Nov. 2016). Provided below is an abstract of the Article:

            In his Keynote Address “Death Tax” Politics at the October 2, 2015 Boston College Law School and American College of Trust and Estate Counsel Symposium, The Centennial of the Estate and Gift Tax: Perspectives and Recommendations, Michael Graetz describes the fight over the repeal of the estate tax and its current diminished state. Graetz argues that the political battle over the repeal of the estate tax reflects a fundamental challenge to our nation’s progressive tax system. This Address concludes that a revitalized estate tax is important for managing the national debt and reducing massive inequalities in wealth.

May 23, 2016 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Thursday, May 5, 2016

New Changes In Estate Planning Laws Provide Reason For Updating Estate Plan

New legislationMany people are revising and updating their estate plan because of recent changes to estate planning and tax laws.  Another reason for updating estate plans is the increase in the average life expectancy thanks to developments in modern health care.  This article discusses some of the recent changes in the law and why it is important for people to update their estate plans.  People need to update their planning if they are going to be impacted by estate and gift taxes.  Those who have trusts will also need to review their estate plans.  “Another very important development in estate planning is the use of proper beneficiary designations for qualified plans and IRA interests.”  There are many parents who have reason to be concerned about the property that they plan to leave to beneficiaries being subject to creditor or spousal claims, and they will want to take proactive estate planning measures. 

See Dickinson Wright PLLC, Recent Changes in Estate Planning Laws May be Cause for Review of Your Estate Plan, Lexology, May 4, 2016.

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

May 5, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Tuesday, April 26, 2016

Tax Consequences Dealing With The Early Termination Of A Generation-Skipping Taxable Marital Trust

Irs2An IRS ruling recently held that a surviving spouse was the beneficiary of two marital trusts that were established under the late spouses revocable trust agreement.  One of these trusts was exempt from the generation-skipping transfer tax (GST) while the other was not.  “The provisions of each marital trust provided for the surviving spouse to receive all income during life and granted to the surviving spouse a testamentary general power of appointment (POA) over the assets in the GST taxable trust.”  This article discusses Revenue Procedure 2001-38 which sets forth a rule “that a qualified terminable interest property (QTIP) election is treated as null and void when the election isn’t necessary to reduce the estate tax liability to zero.”  They held that a release of a general Power of Attorney (POA) created a taxable gift under IRC Section 2514(b). 

See Andrew M. Nerney and Andrew B. Seiken, IRS Rules on Tax Consequences Associated With Early Termination of a Generation-Skipping Taxable Marital Trust, Wealth Management, April 25, 2016.

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

April 26, 2016 in Elder Law, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)