Wills, Trusts & Estates Prof Blog

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

Thursday, May 17, 2018

How to Be Richer in Retirement

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-17/d9bc9e55-a7c2-481e-8631-1e3644e9697d.pngTransitioning from a steady paycheck to retirement can be quite a shock for some. Even with careful saving and planning, knowing which funds to use to pay certain expenses may be a challenge.

"You have greatest control over your tax liability between the time you leave your job and your 70th birthday." This occurs because at the age of 70 you can take out the maximum Social Security benefit, as well as at 70 1/2 you must take yearly minimum distributions from a traditional IRA (if you have one). These required funds may incur a higher tax bill in your golden years than you anticipated.

Ty A. Bernicke, a financial planner in Altoona, Wisconsin, encourages clients to “diversify their tax planning” by dividing assets into three different buckets: taxable accounts; tax-deferred accounts, such as traditional IRAs and 401(k)s; and Roths.

See Deborah L. Jacobs, How to Be Richer in Retirement, DeborahJacobs.com, May 17, 2018.

May 17, 2018 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Wednesday, May 16, 2018

CLE on Top Estate Planning Techniques

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-16/4c913a31-ccc4-4b08-a2c9-058975428840.pngThe National Business Institute is holding a conference entitled, Top Estate Planning Techniques, which will take place on Monday, June 11, 2018 at the Holiday Inn Princeton in Princeton, New Jersey. Provided below is a description of the event:

Program Description

Focus Your Efforts on Techniques That Work

This engaging course will take you through the basics of estate planning and beyond with old and new techniques that our attendees have voted to be the most effective in their practice. Find out what makes these estate planning tools "superstars" and gain practical tips for maximizing their uses. Enroll today!

  • A simple will remains one of the most effective tools in estate planning - learn how to phrase it to maximize its effectiveness.
  • Gain practical tips for drafting legally defensible transaction agreements to make sure the gifts are properly documented.
  • Help your client transfer a business to beneficiaries without diminishing its value or surrendering too much control.
  • Protect yourself with thorough knowledge of laws and regulations governing the actions of fiduciaries.
  • Learn why it's important to know when to file the tax return for grantor trusts.
  • Determine whether a client qualifies as a beneficiary of a special needs trust and gain tips for drafting one.
  • Don't reinvent the wheel - modify our sample trust documents to create airtight qualified personal residence trusts.
  • Maximize your asset protection: learn how to make sure all your clients' assets are accounted for in the trust documents.
  • Create clear final instructions and last wishes to lift the burden of funeral planning from heirs.
  • Use spendthrift language in ILITs to limit the ability of beneficiaries to assign interest and creditors to make demands on the trustees to pay the debts of beneficiaries.

Who Should Attend

This basic level seminar offers an overview of the best practices in estate planning and will benefit:

  • Attorneys
  • Paralegals
  • Financial planners
  • Accountants and CPAs
  • Tax Professionals
  • Trust officers

Course Content

  1. Wills
  2. Annual Exclusion Gifting
  3. Tax and Estate Planning for Pension and IRA Assets
  4. Grantor Trusts
  5. Irrevocable Life Insurance Trusts
  6. Qualified Personal Residence Trusts
  7. Business Entities
  8. Special Needs Trusts
  9. Top Post-Mortem Planning Techniques

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 8.00 -  NJ
CLE 8.00 -  NY*
CLE 6.50 -  PA

Financial Planners – Financial Planners: 8.00

International Association for Continuing Education Training – IACET: 0.70

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 8.00 *

Professional Achievement in Continuing Education – PACE: 8.00

* denotes specialty credits

May 16, 2018 in Conferences & CLE, Estate Planning - Generally, Gift Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Monday, May 14, 2018

Article on Higher Education Savings and Planning: Tax and Nontax Considerations

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-14/afdd40aa-3bde-42dc-80d3-b2439c2203ff.pngF. Phillips Mann and Timothy M. Todd recently published an Article entitled, Higher Education Savings and Planning: Tax and Nontax Considerations, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article:

Funding higher education is among the critical financial decisions made by individuals and families. There are myriad options. Yet, the conventional wisdom — namely using Section 529 Plans — may not be the optimal vehicle to effectuate this goal. Therefore, this Article discusses various strategies to plan, save, and pay for higher education. It compares various savings methods including gifts, UTMA accounts, Section 529 Plans, trusts, and other vehicles. The analysis explores both tax and non-tax considerations, including the effect of different strategies on financial aid, transaction costs, investor control, income taxes, gift and estate taxes, flexibility, and creditor protection.

This Article concludes that the ubiquitous Section 529 Plan may not be as effective as conventional wisdom suggests. Indeed, we argue that Section 529 Plans are optimal only when capital can be exclusively committed to education funding, which may not be the most desirable savings tactic for a wide swath of American families who need to plan for other financial needs (e.g., retirement and unforeseen medical needs).

May 14, 2018 in Articles, Estate Planning - Generally, Gift Tax, Income Tax | Permalink | Comments (0)

Sunday, May 13, 2018

How the Tax Haven of Bermuda Played Key Role in £10 Billion Sackler Family Fortune

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-13/8a0e2c7b-5bff-4a06-86f4-8f78013b31e9.pngThe Sackler's owned pharmaceutical companies Napp and Mundipharma may vehemently deny that avoided paying taxes in Europe and Australia by diverting profits to the tax haven of Bermuda, sources from within the business say otherwise.

The company Napp produced pharmaceuticals in Cambridge, and from there would sell the drugs either to the National Health Service in the United Kingdom or to Mundipharma entities worldwide. The source claims "worldwide" in fact meant transferring the profits of the drugs to the simple office block in Bermuda called Mundipharma House before selling them to other countries. Mundipharma House is held in trust by the two branches of the Sackler family, Mortimer Sackler and his brother Raymond Sackler. This scheme allowed for Mortimer Sackler, who is non-domiciled in the United Kingdom, to avoid paying taxes on any part of the company's profits that were not remitted to the United Kingdom.

See David Cohen, The Sackler Files: How the Tax Haven of Bermuda Played Key Role in £10 Billion Family Fortune, Evening Standard, May 11, 2018.

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

May 13, 2018 in Current Affairs, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Friday, May 11, 2018

Billionaire Sackler was a Tax Avoider on an Industrial Scale

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-11/9064103f-ca42-47a0-943d-bbf761a799c0.pngMortimer Sackler, who lived in the famed Belgravia Square in London, was known for his philanthropic efforts in England and receiving naming rights due to gifts to art institutes. New light has been shined on the ways that Sackler avoided taxes beyond charitable gifts.

Mortimer Sackler's brother, Raymond, is a citizen of America and is domiciled in America, therefore he pays his taxes to America. Mortimer decided to renounce his American citizenship, become a resident of the United States but have no domicile "in any part of the UK.” This could result in Mortimer's portion - especially those in a tax haven such as Bermuda - in their shared business to be taxes less than his brother's. “The domicile of a person is not the same as his residence; you can be here 365 days of the year and still be non-domiciled provided (if you have a foreign domicile of origin) your intention is to leave."

See David Cohen, The Sackler File: Billionaire Liked to Parade as a Philanthropist.. in Fact He Was Tax Avoider on Industrial Scale, Evening Standard, May 11, 2018.

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

May 11, 2018 in Current Events, Estate Planning - Generally, Income Tax | Permalink | Comments (1)

Thursday, May 10, 2018

Reducing Your Future Tax Burden With a Roth IRA Conversion

 image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-10/5008310f-b88d-42f2-a8a5-492d598d30ae.pngIndependent retirement accounts, or IRA's, offer several benefits for those that seek to minimize their tax bills. A Roth IRA is built of after-tax dollars and therefore has tax-free earning potential and allow for tax-free distributions.

In the past, high earners were ineligible to contribute to a Roth IRA. The Internal Revenue Service recently removed the income cap for the conversion of traditional IRA's to Roths. Therefore earners of more than $135,000 individually or $199,000 as a couple may reduce their tax liabilities through a "backdoor" Roth IRA. If you have other sources of income, the assets in a Roth IRA are free to grow tax-free.

See Catherine Schnaubelt, Reducing Your Future Tax Burden With a Roth IRA Conversion, Forbes, May 3, 2018.

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

May 10, 2018 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Monday, May 7, 2018

Article on IRC Section 678 and the Beneficiary Deemed Owner Trust (BDOT)

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-07/3eec73c2-fcd0-4207-9ffc-9b641a83c59e.pngEdwin P. Morrow published an Article entitled, IRC Section 678 and the Beneficiary Deemed Owner Trust (BDOT), Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article:

This article explores Section 678 of the Internal Revenue Code and how and when a beneficiary is deemed to be the owner of a trust for income tax purposes and why and how a trust may be drafted in this manner.

Income tax benefits include simpler tax reporting, lower tax brackets, capital gains tax exclusions for residences, more favorable Section 179 expensing, disregarded transactions, S corporation status, charitable deductions for business income, life insurance and annuity rules, unlocking trapped capital losses, and many more benefits often overlooked. 

Asset protection for such trusts, while seemingly substandard, is hardly a disaster. Any ill effects of a withdrawal power can not only be counteracted but even turned into an advantage over other trust designs. A comparison chart at the end summarizes the various state asset protection statutes and law around powers of withdrawal and lapses.

May 7, 2018 in Articles, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

Friday, May 4, 2018

Article on Reforming the U.S. Corporate Tax Code to Not Just Be Simple, But Be Sensible

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-04/5ce25a5f-2ec6-4bc1-8ea8-954309722ffd.pngEric Goldspiel published an Article entitled, Reforming the U.S. Corporate Tax Code to Not Just Be Simple, But Be Sensible, Tax Law & Policy eJournals (2018). Provided below is an abstract of the Article:

The​ ​complexity​ ​of​ ​people’s​ ​efforts​ ​to​ ​tax​ ​themselves​ ​has​ ​bedeviled​ ​minds​ ​for generations.​ ​​ ​Taxation​ ​has​ ​developed​ ​to​ ​raise​ ​revenue​ ​so​ ​that​ ​our​ ​governments’​ ​can​ ​function. Throughout​ ​time,​ ​it​ ​has​ ​come​ ​to​ ​be​ ​an​ ​expedient​ ​way​ ​to​ ​pursue​ ​other​ ​policies​ ​as​ ​well.​ ​​ ​​ ​Yet, using​ ​the​ ​tax​ ​code​ ​to​ ​pursue​ ​other​ ​policies​ ​has​ ​complicated​ ​the​ ​code​ ​itself​ ​excessively.​ ​​ ​In​ ​this paper,​ ​we​ ​will​ ​examine​ ​ongoing​ ​efforts​ ​to​ ​simplify​ ​the​ ​tax​ ​code,​ ​explore​ ​countervailing​ ​policy interests​ ​such​ ​as​ ​fairness​ ​and​ ​generating​ ​wealth,​ ​and​ ​consider​ ​whether​ ​the​ ​simultaneous​ ​drives​ ​to be​ ​simple,​ ​be​ ​fair​ ​and​ ​be​ ​affluent​ ​can​ ​all​ ​converge​ ​as​ ​we​ ​gain​ ​a​ ​greater​ ​understanding​ ​of​ ​taxpayer behavior.​ ​​ ​Next,​ ​we​ ​will​ ​explore​ ​the​ ​possibility​ ​of​ ​this​ ​convergence​ ​between​ ​simplicity,​ ​fairness and​ ​the​ ​drive​ ​to​ ​generate​ ​wealth​ ​in​ ​greater​ ​detail​ ​under​ ​one​ ​provision​ ​of​ ​the​ ​corporate​ ​tax​ ​code, expensing,​ ​whereby​ ​corporations​ ​potentially​ ​reduce​ ​their​ ​tax​ ​liability​ ​by​ ​investing​ ​in​ ​their​ ​own growth.

May 4, 2018 in Articles, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Wednesday, May 2, 2018

Article on Is Capping the Deduction for State and Local Taxes Constitutional?

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-02/fd9f2c00-2860-4722-a84a-aef4265550c0.pngErik M. Jensen published an Article entitled, Is Capping the Deduction for State and Local Taxes Constitutional?, Tax Law & Policy eJournals (2018). Provided below is an abstract of the Article:

In the Tax Cuts and Jobs Act of 2017, Congress capped the deduction available for state taxes not attributable to businesses or investments, and representatives of high-tax states are challenging the constitutionality of that cap — which, they argue, was motivated by animus. This article considers several possible rationales for a challenge — intergovernmental tax immunity, political animus in general, the uniformity rule, and equal protection — and concludes that the case for overturning the cap on constitutional grounds is weak at best.

May 2, 2018 in Articles, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Tax Reform’s Impact on Professional Sports

Money ballProfessional sports teams often use the 1031 Exchange for Like-Kind Property to defer tax liability on any trades or sales of property outside the current reporting period. This includes the most likely property trades: player contracts. Under prior law, tax payments for the contracts could be deferred to future tax years and in theory, indefinitely. The effect of tax reform makes this deferral no longer available to sports franchises.

The new tax law alters the 1031 Exchange. It is now only applicable real estate transactions, primarily the sales of real estate held for productive use in a trade or business or for investment. This means that every trade of property that is not real estate must have its tax burden carefully calculated and reported, even if the properties traded are highly similar.

Even with the change, sports teams still have quite an arsenal for tax breaks even without the 1031 Exchange. Tax reform did not alter the benefits of using depreciation of tangible assets, amortization of intangible assets, and the Roster Depreciation Allowance (specifically for player contracts).

See Harvey Bezozi, Tax Reform’s Impact on Professonial Sports, Wealth Management.com, April 30, 2018


May 2, 2018 in Current Affairs, Current Events, Estate Planning - Generally, Income Tax, New Legislation, Sports | Permalink | Comments (0)