Wills, Trusts & Estates Prof Blog

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

Wednesday, June 21, 2017

Book on McCouch's Federal Income Taxation of Estates, Trusts, and Beneficiaries in a Nutshell

BookGrayson M.P. McCouch recently published a book entitled, McCouch's Federal Income Taxation of Estates, Trusts, and Beneficiaries in a Nutshell (2017). Provided below is a description of the book:

This comprehensive guide can serve either as a course supplement or as a refresher for members of the bar. Expert commentary summarizes the law and offers critical perspectives on the federal income taxation of estates, trusts, and beneficiaries, including the decedent’s final income tax return; classification of estates and trusts; income in respect of a decedent; distributable net income; simple and complex trusts; distributions; grantor trusts; charitable trusts; and foreign trusts. Additional chapters cover basic income, gift and estate tax concepts, accumulation distributions, and specially treated trusts.

June 21, 2017 in Books, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Saturday, June 3, 2017

Ultra-Rich Hiding Money

HsbcA 2007 leak of detailed records of 30,000 clients of HSBC Private Bank, a Swiss subsidiary of a British banking giant, is giving researchers a fresh view into the shadowy offshore banking world that had once been a relative unknown. US and Scandinavian researchers studying this data estimate that the top 0.01% of the wealth distribution own about half of all offshore assets. This represents roughly one-quarter of their total wealth. These wealthy few have relocated these funds in order to avoid paying taxes in their home countries. In Scandinavia, individuals with over $40 million in net wealth, the top 0.01%, avoid about 30% of their personal tax burden. This figure may be even higher in nations with poorly enforced laws. These findings clearly imply that governments are losing tax revenue that is being hidden by the ultra-wealthy. In order to recover these funds, governments worldwide would have to strengthen tax laws and start cracking down on tax evasion services provided by institutions firmly rooted in other sovereign territories. But, until the lucrative nature of these services is overshadowed by the penalties accrued, tax evasion is certain to continue.

See Ana Swanson, The Ultra-Rich Are Hiding Way More Money Overseas than Anyone Realized, The Washington Post, June 1, 2017.

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

June 3, 2017 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Tuesday, May 30, 2017

Dementia Taxes

TaxesIt seems as though it is becoming something of a social faux pas to admit to wanting to leave an inheritance to children. The newest mantra taken up by liberal economists and policy makers is the idea that passing on hard-earned and already-taxed assets to loved ones is among the great inequities of the day. This ideal is embodied in the recent “dementia tax.” Proponents advocate for a policy that would require a tax on those selfish individuals who did not have the decency to expire through an equitable and timely method. Such polices are fresh examples of a government failing to recognize the motivation of voters. The instinct to benefit loved ones after death is felt by rich and poor alike, and it is the part of the engine that drives continued social progress.

See Robert Shrimsley, Dementia Taxes and the Cursed Cult of Inheritance, Financial Times, May 24, 2017.

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

May 30, 2017 in Current Events, Disability Planning - Property Management, Elder Law, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Updating Wills After Tax Changes

TaxChanges in tax laws may very well affect the suitability of various provisions in a will. When state and federal tax laws are amended, added, or repealed, intelligent and forward-looking will provisions may no longer be effective to shield a decedent’s estate from heavy taxes. In some jurisdictions, New York for example, reformation of a will is sometimes possible after death. New York precedent allows (rarely) changes to a will if the reformation is consistent with the decedent’s intent to maximize tax savings. While reformation is a possible avenue to fix will provisions, it is usually best practice to revisit clients’ estate plans immediately after changes in tax laws to ensure tax-avoidance provisions remain effective.

See Carole M. Bass, Reforming a Will for Tax Savings, Wealth Management.com, May 19, 2017.

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

May 30, 2017 in Estate Planning - Generally, Income Tax, Wills | Permalink | Comments (0)

Tuesday, May 16, 2017

Article on Deducting Attorney's Fees

Deduct attorney's feesWesley L. Bowers recently published an Article entitled, Decoding the Deduction: What’s the Right Form to Use for Professional Fees?, Tr. & Est. 30 (Apr. 2017). Provided below is an abstract of the Article:

Given our current tax environment, more and more estate planning and administration professionals are diving (often times, reluctantly) into the abyss of the income tax world. One of the more frequent questions asked by attorneys, CPAs and other professionals during an estate administration is: “Where should we deduct professional fees (attorney, CPA, appraisal, etc.): on Form 706 or Form 1041?” What seems like a simple question at first blush is often extremely complicated and takes you through a labyrinth of decision trees, regulations and case law.

The traditional answer of where to deduct professional fees was often to deduct them on Form 706, simply because more estates were subject to the estate tax in prior years when the exemptions were significantly lower, and the estate tax rate was traditionally much higher than an estate’s income tax rate. Now, however, this question has become even more complicated to answer due in large part to the proximity between the effective estate tax rate (currently, 40 percent) and an estate’s income tax rate (currently, a top bracket of 39.6 percent, with a potential 3.8 percent net investment income tax). In addition, the introduction of portability has changed the traditional estate-planning model, and more estate tax returns are now filed when not otherwise required to take advantage of the portability features. With so many recent changes and a myriad of possible planning structures, it’s no wonder many are confused as to how to answer a seemingly simple question: “Where should I deduct attorney’s fees?”

May 16, 2017 in Articles, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Friday, May 12, 2017

Article on State Income Tax for Trusts

Minimize state income taxTerry LaBant recently published an Article entitled, Where Does Your Trust Live?: How to Minimize State Income Taxes, Tr. & Est. 20 (Apr. 2017). Provided below is an abstract of the Article:

State income tax laws have become much more complicated for trusts. Trusts can become subject to tax in multiple states based on the random intersection of various state laws. It’s important for estate planners to understand the key principles that drive state trust income taxation and methods to plan ahead for minimizing them. Ideally, effective state income tax planning will help advisors add value to the key family relationships they’ve developed with the plans they originally created for transfer tax planning purposes.

May 12, 2017 in Articles, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

"Dead" Man Resurrected After 29 Years

IRSUnited States Senator Amy Klobuchar has helped a man solve his issues with the IRS, which declared him dead for twenty-nine years. The government now recognizes Adam Ronning as alive after the senator helped to reverse the false declaration. Nationally, the IRS declares 9,000 living Americans dead each year, which are represented in the government’s “Death Master File.” For Ronning, he has been declared dead since he was four years old, but as an adult, he has always paid his taxes and only received half or none of his return since 2009. Ronning claims that the government owes him an approximately $20,000 tax refund.

See Karen Bleier, Living Man Declared Dead by IRS for 29 Years Resurrected by U.S. Senator, CBS News, May 10, 2017.

May 12, 2017 in Current Events, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Friday, April 28, 2017

Tax Judge Rules Appraiser Placed Lowball Valuation on Estate's Painting

The youngerA Sotheby’s official appraised a painting by Pieter Bruegel the Younger back in 2005 at $500,000, but when the owner of the piece went to sell the painting, it drew more than four times that amount, selling for $2.1 million. So why such a wide gap between the estimated and actual value? The appraiser claimed that artwork prices spiked due to a large influx of Russian buyers who were eager to obtain old masters. However, the United States Tax Court took issue with this matter in a recent decision, ruling that the appraiser had most likely placed a lowball estimate on the piece to “curry favor” with the owner, an estate likely facing a substantial tax bill. With the IRS viewing valuations for artworks in income, estate, and gift tax returns as a potential area for abuse, it comes at no surprise that the IRS challenged the low value placed on the painting, seeking an additional $781,488 in taxes from the estate.

See Colin Moynihan, Don’t Blame the Russians, Tax Judge Tells Sotheby’s Expert, N.Y. Times, April 23, 2017.

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

April 28, 2017 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Cases | Permalink | Comments (0)

Wednesday, April 26, 2017

Trump Administration Rolls Out New Tax Plan

Tax proposalToday, President Trump proposed his new tax plan, which promises to repeal the estate tax. The proposal also reduces the number of income tax brackets and slashes the corporate tax rate. The Trump Administration is calling this blueprint one of the largest tax cuts and overhauls in tax history, vowing to create economic growth and jobs.

See Alan Rappeport & Julie Hirschfeld Davis, White House Proposes Slashing Tax Rates for Individuals and Businesses, N.Y. Times, April 26, 2017.

April 26, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Income Tax, New Legislation | Permalink | Comments (0)

Wednesday, April 19, 2017

The Future of the Gift Tax

Gift taxAt this point, Americans are convinced that the estate tax will be eliminated, but what about the gift tax? Estate planners are cautioning that this uncertainty should not be taken lightly, as changes to the gift tax could create undesired tax ramifications or potentially make it easier to avoid taxes. Because the gift tax is often viewed as a backstop to the estate tax, some may view their combined elimination as a sound option, but not so fast. The gift tax also backstops the income tax, potentially allowing people to play games and income-shift, while realizing a reduced number of tax brackets. One way to prevent taxpayers from playing income-shifting games is to increase the capital gains tax; however, this strategy could ultimately create further complications for dynasty trusts. Whatever the outcome may be, it is important for estate planners to advise their clients on the potential consequences of any changes to the gift tax.

See Allyson Versprille, Gift Tax Tweaks Could Lead to Unsavory Avoidance Tactics, Bloomberg, April 10, 2017.

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

April 19, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)