Wills, Trusts & Estates Prof Blog

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

Monday, March 27, 2017

Book on Experiencing Trusts & Estates

Experiencing trusts Alfred L. Brophy, Deborah Gordon, Norman P. Stein & Caryl Yzenbaard recently published a book entitled, Experiencing Trusts and Estates (2017). Provided below is a summary of the book:

This casebook takes a more experiential approach to the teaching of trusts and estates law. This first edition features recent cases and model documents in almost every chapter of the book; it also preserves many of the most famous and teachable trusts and estates cases. The opening chapters introduce students to issues around planning for incapacity and death and to accessible and understandable material on estate and gift taxes. The remainder of the book focuses on estate planning for low and moderate income individuals, professional responsibility issues as they arise in a trusts and estates practice, and traditional and contemporary cases and documents designed to expose students to the most important concerns that arise in a trusts and estates practice. Each chapter also features extensive notes and questions designed to help lead students through the major issues, and an appendix provides full versions of various historical “celebrity” wills and contemporary model trusts. A voluminous teacher’s manual accompanies the book, with briefs of every principal case and extensive notes designed to aid the teacher in advancing classroom discussion on nearly every note in the casebook. The teacher’s manual also includes additional problems and other materials designed to develop professional skills.

March 27, 2017 in Books, Books - For Practitioners, Current Events, Estate Planning - Generally, Estate Tax, Gift Tax, Trusts | Permalink | Comments (0)

Tuesday, February 28, 2017

Article on Post-EGTRRA Death Tax Landscape

Estate tax historyMary Ellen Wimberly published an Article entitled, No State Left Behind: An Analysis of the Post-EGTRRA Death Tax Landscape and an Argument for Kentucky to Repeal State Death Taxes, 104 Ky. L.J. 525 (2015). Provided below is an abstract of the Article:

Part I of this Note discusses how both types of death taxes (inheritance and estate taxes) have progressed through history, the radical changes to the state death tax system caused by EGTRRA, and the increase in the federal estate and gift tax exemptions. Part II details the current death tax system in Kentucky and explores the trend to repeal state death taxes in other states. Finally, Part III argues that Kentucky's minority approach is unfair for a number of reasons and advocates for state-level repeal to avoid the fleeing of valuable tax-paying individuals to retirement havens or border states without state death taxes. Specifically, Part III argues that Kentucky's current inheritance tax unfairly targets certain individuals, encourages “ante-mortem capital flight,” and does not generate enough income to justify its enforcement. Furthermore, Part III discounts some of the popular arguments in favor of keeping state death taxes, such as decreasing income inequality, providing revenue to states, and encouraging charitable giving.


February 28, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Friday, February 24, 2017

Article on Estate & Gift Tax Valuation Outlook for 2017

Estate and gift taWilliam H. Frazier recently published an Article entitled, Estate and Gift Tax Valuation Outlook for 2017: Hearing on Proposed Regs and Other Developments, Tr. & Est. 48 (Feb. 2017). Provided below is an abstract of the Article:

Since the release of the proposed changes to Internal Revenue Code Section 2704 on Aug. 2, 2016 (the proposed regs) and until the election of Donald J. Trump on Nov. 8, 2016, wealth taxpayers, family businesses, estate planners and business appraisers thought and talked about little else other than the possible valuation ramifications of these changes to the regulations. Many read the complicated and confusing document as a thinly disguised proscription of valuation discounts. Some interpreted the document as relatively benign. Others simply weren’t sure what the Internal Revenue Service was driving at and why this was even needed. 

Unexpectedly, the proposed regs didn’t exempt U.S. farms and family businesses. This was a great surprise to taxpayers and the estate-planning community. It was well known that the proposed regs might be forthcoming, but it was generally understood that any regulatory change would exempt family businesses. That it didn’t was a huge miscalculation by the Treasury, as this allowed the opponents of the proposed regs to tap into the same populism that swept Trump into office. Many perceived the proposed regs as a message that the IRS was unfairly targeting U.S. farms and family businesses, which were already challenged by foreign competitors and beleaguered by government regulations. The IRS received over 10,000 comment letters, an unprecedented amount. Almost all of the letters were negative, and almost all cited the attack on the family business as justification for the nullification of the proposed regs. 

Also contributing to the strong reaction from taxpayers and their advisors were two terms appearing in the document that, on even a relatively careful reading, indicated that the IRS was unleashing a novel and malevolent valuation construct that would eviscerate almost all forms of estate and succession planning. “Minimum value” was a new term coined by the IRS that essentially meant “enterprise value” for (the equity of) an operating business or net asset value for an investment or holding entity. “Disregarded restriction” meant any restriction that limited the ability of the holder of the interest to liquidate at less than minimum value in less than six months for cash. So, the first impression of the proposed regs was that it eliminated all valuation discounts. This belief was made more widespread by the publication of articles by well-known estate planners and appraisers stating that, under the proposed regs, the valuation of an equity interest of any member of a family control group must be made as if it had a “deemed” put right at minimum value. 


February 24, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Monday, February 20, 2017

How Will We Make Up for the Estate Tax Repeal?

Estate tax repealAs we all know, President Trump has promised to repeal the estate tax, claiming that the tax is just plain wrong. It is easy to say that our country should repeal the estate tax, considering so few families actually pay the tax, but other tax areas will have to give in order to make up for the loss. The estate tax has two siblings—the gift tax and the generation-skipping tax. As of now, it is unclear how President Trump will balance the three taxes. His campaign website sketched out a plan that involved replacing the estate tax with a tax on all capital gains and no mention of the other two taxes. Ultimately, with the estate tax only generating 0.005% of annual tax collections, the tax incites more of a political debate than a federal revenue one. 

See Brian J. O’Connor, Once Again, the Estate Tax May Die, N.Y. Times, February 18, 2017. 

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.


February 20, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0)

Friday, February 17, 2017

Articles in the ACTEC Law Journal

Actec ljSeveral authors recently published Articles in the American College of Trust and Estate Counsel (ACTEC) L.J., Volume 42 (2016). Provided below are the Articles’ titles and authors:

Foreword – The Supreme Court’s Estate Planning Jurisprudence by Bridget J. Crawford

The Four Horsemen and Estate Taxation by Jasper L. Cummings, Jr. 

The U.S. Supreme Court and the Law of Trusts and Estates: A Law Reformer’s Perspective by Thomas P. Gallanis

Irwin v. Gavit: Income Is (Sometimes) in the Eye of the Beholder by William P. LaPiana

Taft v. Bowers: The Foundation for Non-Recognition Provisions in the Income Tax by James R. Repetti

Helvering v. Clifford: The Supreme Court Spoils the Broth by Mark L. Ascher 

Helvering v. Horst: Gifts of Income from Property by Jerome M. Hesch & David J. Herzig

Helvering v. Safe Deposit & Trust Co.: Underestimating the Power of a Power of Appointment by Samuel A. Donaldson

Oklahoma Tax Commission v. United States: Death Taxes on Restricted Indian Personalty by Thomas E. Simmons 

Smith v. Shaughnessy: Slippery Remainder Interests and the Intersection of Gift and Estate Taxes by Ann-Marie Rhodes & Erica E. Lord 

Robinette v. Helvering: Valuation of Gifts to Split-Interest Trusts by Stephanie E. Heilborn & Cindy Zhou

Merril v. Fahs: Release of Marital Rights Is Insufficient Consideration for Transfer Tax Purposes by Kevin E. Packman 

Fidelity-Philadelphia Trust Co. v. Smith: Form over Substance? by Deborah V. Dunn & Domingo P. Such, III

Commissioner v. Estate of Noel: The Double Life of Life Insurance by John McGown, Jr. & Jason Melville 

Commissioner v. Estate of Bosch: 50 Years of Relevance by Jonathan G. Blattmachr & Madeline J. Rivlin 

United States v. Estate of Grace: Seeking a More Objective Test for the Application of the Reciprocal Trust Doctrine by Dennis I. Belcher & Kristen Frances Hager 

United States v. Byrum: Too Good to Be True? by Ronni G. Davidowitz & Jonathan C. Byer

Dickman v. Commissioner: Loans as Property Transfers by Carlyn S. McCaffrey & John C. McCaffrey

Commissioner v. Estate of Hubert: How the I.R.S. Stole Hubert’s Blessing by Kristen E. Caverly

United States v. Windsor: The Marital Deduction that Changed Marriage by Lee-ford Tritt


February 17, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Tuesday, February 7, 2017

Intent to Levy Sustained in Late-Filed Gift Tax Return Case

Gift tax irsIn United States v. Estate of Lillian Beckenfeld, the Tax Court sided with the IRS, upholding that a collection action against an estate was valid. In 2013, Beckenfeld’s estate filed a late gift tax return for the year 2007. Accordingly, the IRS assessed additions to the tax, which added up to $951,411.34. Upon sending in the check to pay additional payments and interest, Beckenfeld’s estate included instructions that the IRS followed but ultimately left the gift tax liability unpaid. After an appeal, the IRS issued a notice, sustaining its intent to levy.   

See Dawn S. Markowitz, Collection Action for Late-Filed Gift Tax Return Upheld, Wealth Management, February 6, 2017. 


February 7, 2017 in Current Events, Estate Planning - Generally, Gift Tax, New Cases | Permalink | Comments (0)

What Is Charitable Inheritance?

DafBecause most Americans do not have to worry about the estate tax, they should begin to focus on who should receive their wealth, how much they should receive, and the reasons why. Clients are often worried about letting their children inherit too much to the point it could keep them from developing their own lives. In addition to this concern, Americans are also strongly supporting charitable organizations and experiencing the joys of gift giving; as a result, more clients are providing for charitable contributions in their estate plans. Charitable giving, however, reduces taxes, which means leaving more to their heirs. So, where does the balance lie? “Charitable inheritance” assesses the inheritance plan and sets up a donor-advisor fund for clients to set aside inheritance assets that will allow heirs to continue their parents’ legacies and build their own.  

See Charlie Jordan, Charitable Inheritance Dilemmas, Financial Advisor, February 1, 2017. 


February 7, 2017 in Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Friday, January 27, 2017

Book on Law & Taxation of Charitable Gift Planning

VpgRussell James III recently published a book entitled, Visual Planned Giving: An Introduction to the Law & Taxation of Charitable Gift Planning (2017). Provided below is a summary of the book:

This book provides an introductory overview of the wide range of charitable gift planning topics with implications for income, capital gain, gift, estate and generation skipping transfer taxation, including elements of a gift, documentation requirements, valuation rules, income limitations, bargain sales, charitable gift annuities, charitable remainder trusts, charitable lead trusts, remainder interest deeds with retained life estate in homes and farms, life insurance, gifts of retirement assets, private foundations, and donor advised funds.


January 27, 2017 in Books, Books - For Practitioners, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Monday, January 23, 2017

Article on "Reality of Sale" Framework for IDGT Sales for Estate Tax Purposes

10 seedingElizabeth Carrott Minnigh, Jerome M. Hesch & Richard A. Oshins recently published an Article entitled, Reality of Sale: The Supreme Court Does Not Believe in the 10% Seeding Gift, So Why Would You?, 42 Tax Mgmt. Est. Gifts & Tr. J. 10 (2017). Provided below is an abstract of the Article: (subscriber login information required for link)

An installment note sale to a grantor trust is a popular and powerful wealth-shifting strategy. The sale is typically accomplished in three steps. First, the owner creates an intentionally defective grantor trust (IDGT). Second, the grantor funds that trust with ‘‘seed’’ money. Third, typically after a reasonable waiting period, to avoid any potential application of the step transaction doctrine, the grantor sells assets to the trust for a note. Since the grantor sold an asset to a grantor trust (i.e., the grantor’s alter ego for income tax purposes), there is no sale for income tax purposes. The expectation is that the deferred payment obligation will be satisfied out of the future cash flow from the acquired asset, and that any excess cash and appreciation associated therewith will inure to the benefit of the purchasing trust. The note typically bears interest at the Applicable Federal Rate (AFR), and thereby avoids treatment as a gift loan under §7872(f)(3). The grantor-seller also takes a secured interest in the transferred property. Pursuant to Rev. Rul. 85-13, the sale will be income tax-free because for income tax purposes the seller and the purchaser are the same person. Rarely does an intra-family loan contain commercial loan terms, but as long as reasonable formalities are observed, the transaction should be treated as a sale, not a gift, for estate and gift tax purposes. 

This Article will examine the formalities necessary to ensure the sale will be respected for transfer tax purposes. First, we will look at the requirements to avoid the potential application of §2036 or §2702. Second, we will review the holdings in several income tax cases, particularly four U.S. Supreme Court cases, outlining the framework for determining when a sale should be respected. Finally, this Article will propose a ‘‘Reality of Sale’’ framework for analyzing sales to IDGTs for estate tax purposes based on this long history of income tax cases on the same issue, which the authors contend should replace reliance on the 10% seed money rule of thumb approach commonly used. Our objective is to provide guidance with respect to how the courts evaluate whether to respect or disregard loans between related parties. 


January 23, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Trusts | Permalink | Comments (0)

Thursday, January 19, 2017

Article on Why Hitting the Pause Button for Your Taxes May Not Be Optimal

Trump taxes2Jonathan G. Blattmachr & Martin M. Shenkman recently published an Article entitled, Planning in a Time of Uncertainty: Part I—Why Hitting the Pause Button May Not Be the Optimal Approach, Tr. & Est. 106 (Jan. 2017). Provided below is an abstract of the Article:

The election of Donald J. Trump as our 45th President was largely unexpected. While it’s difficult to forecast the specifics of what that will mean during his term, and, perhaps, his second term, predictions can be useful to evaluate current planning. President-elect Trump has proposed wide-ranging changes to the nation’s tax system that will affect virtually all Americans and their advisors. He appears to have made tax legislation a priority for his administration. He’s suggested substantial reductions in corporate and individual tax rates and the simplification of the tax system generally through elimination of many deductions and other complexities. Estate planners, in particular, are already facing a dramatic impact on their practices, as many clients have hit the pause button on planning in anticipation of a possible repeal of the estate tax. This may not be the optimal approach for clients, and this two-part article will explore why. 


January 19, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)