Wills, Trusts & Estates Prof Blog

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

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Tuesday, September 2, 2014

IRS 2014-2015 Priority Guidance Plan Released

IRSThe 2014-2015 Priority Guidance Plan, which lists 317 priority projects for the IRS, was released last Tuesday. Among the many tax issues to be addressed through the projects, estate and trusts issues have made the lists. The plans provide the IRS with priorities for releasing guidance on tax issues, and are subject to change throughout the year so that the IRS can address new developments and tax concerns.

See Mike Godfrey, IRS Issues 2014-2015 Priority Guidance Plan, Tax News, Aug. 29, 2014.

September 2, 2014 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Sunday, August 31, 2014

Celebrity Tax Liens All Too Common

Vanessa williams

Fifty-one year old singer-actress Vanessa William owes the federal government $369,249 on her 2011 earnings for which the IRS filed a federal tax lien. 

Although this could be a misunderstanding between notices and her advisers, it is serious.  Tax liens can be about income, property, or even estate taxes; and they are all about getting paid. 

Despite their high earnings, celebrities often find themselves in this situation as their tax bills slip through the cracks.  Lindsay Lohan’s missed bills lead to a $94,000 tax lien.  IRS tax liens cover all your property even that acquired after the lien is imposed.  The courts use it to establish priority in bankruptcy proceedings and real estate sales. 

Liens last ten years, and generally release automatically if the IRS has not refilled them.  Yet, it is better to get them removed sooner rather than later.

See Robert W. Wood, Vanessa Williams Slapped With Six Figure Tax Lien, Forbes, Aug. 29, 2014.

August 31, 2014 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Saturday, August 30, 2014

Tax Management Portfolio on Estate Planning

Tax PlanningThe third edition of the Tax Management Portfolio, Estate Planning, has been published by William P. Streng, Esq. (Vinson & Elkins Professor of Law, University of Houston Law Center). This Portfolio provides helpful guidance for estate planning professionals. Provided below is a description of the Portfolio from Bloomberg BNA.

Estate Planning is designed as an authoritative and practical working tool for attorneys, accountants, and others involved in estate planning practice. The basic estate, gift, and trust planning concepts are presented in a descriptive and conveniently accessible form. Written by William P. Streng, Esq., Vinson & Elkins Professor of Law, University of Houston Law Center, and Consultant, Bracewell & Giuliani LLP, this Portfolio analyzes the development of an estate planning strategy; fundamentals of the federal transfer tax system and related federal income tax rules; lifetime donative asset transfers; gratuitous property transfers at death; generation-skipping transfers; special property transfer planning considerations (e.g., community property, life insurance, charitable transfers, closely held corporations); and post-mortem planning.

August 30, 2014 in Books, Books - For Practitioners, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 27, 2014

Ranking Assets: Which to Keep and Which to Cash Out First

Pro-ConIf low taxes for the estate and heirs is the goal, then it is important to consider the tax burdens that accompany various assets when prioritizing which to hold onto and which to cut ties from. Below is a ranking of nine assets from best to worst based on income tax consequences:

  1. Partnership Shares
  2. Artwork, Gold, and Other Collectables
  3. Highly Appreciated Stock
  4. Roth Accounts and Funds
  5. Moderately Appreciated Stock 
  6. IRA Accounts that are Taxable
  7. Bonds
  8. Cash
  9. Depreciated Securities

See William Baldwin, Estate Planning: A Ranking of Good Assets and Bad Assets, Forbes, Aug. 25, 2014.

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

August 27, 2014 in Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Friday, August 22, 2014

Estate Planning Under New York's Tax Laws

Money money money

Previously in New York, estates worth one million or less were exempt for New York tax.  Presently, the exemption is $2,062,500.  It increases to $3.125 million in 2015, $4,187,500 in 2016 and $5.250 million in 2017.  If you die leaving more than 105 percent of the prevailing New York exemption, your entire estate is subject to New York tax.  However, you would be no worse off than before the law changed, since the old $1 million exemption is manufactured into the new tax rates.

See Lynn Brenner, Estate Planning Under New York’s Estate Tax Exemption Rules, Newsday, Aug. 21, 2014. 

August 22, 2014 in Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Understanding FATCA

IRC

Enacted in 2010, the Foreign Account Tax Compliance Act (FATCA) is America’s global tax law.  Not only does FATCA effect Americans, but its impact on the world is most astounding.  FATCA requires foreign banks to reveal Americans with accounts over $50,000 and non-compliant institutions could be frozen out of U.S. markets, thus, everyone is complying.  Provided below are a few facts about FATCA:

  1. FATCA Grew out of a Controversial Rule.  In 2009, the IRS struck a deal with UBS for $780 million in penalties and American names.  Since then, for hundreds of Swiss banks taking a DOJ deal, banking is more transparent. 
  2. China and Russia Agreed.  While Russia and China have been notoriously difficult, they are even on board with the agreement. 
  3. FBARs are Required.  FBARs predate FATCA, yet, be ready for duplicate reporting.  FATCA adds to the burden, and does not replace FBARs.  U.S. persons with foreign bank accounts exceeding $10,000 must file an FBAR by each June 30th
  4. No Repeal in Sight.  Republicans have mounted a repeal effort, however, there is no serious effort to repeal FATCA.  Canadians recently filed suit to block FATCA and prohibit handover of U.S. names to the IRS.  The legal claim challenges the constitutionality of the agreement the Canadian government struck with the United States.   
  5. Other Passports Won’t Work.  Dual nationals or U.S. Green Cardholders think they can bypass FATCA by using a non-U.S. passport and non-U.S. address with their foreign bank.  However, this is not possible.  Your bank and IRS will eventually figure it out. 

See Robert W. Wood, 10 Facts About FATCA, America’s Manifest Destiny Law Changing Banking Worldwide, Forbes, Aug. 19, 2014.

August 22, 2014 in Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 19, 2014

Picking Up the Taxes

Estate tax2

When a loved one dies, all financial debacles do not automatically disappear.  Someone must step up to handle the resulting financial matters.  This person is often named in the decedent’s will as the estate executor; yet if there is no will, the probate court may appoint an executor.  If you end up with the job, you will identify the estate’s assets, pay off its debts, and then distribute what is left to the rightful heirs and beneficiaries.  You are also responsible for filing any required tax returns and paying any taxes due. 

There are several tax issues executors should be cognizant of including those appearing on the income tax return.  Make sure to look out for medical expenses.  If large uninsured medical expenses were incurred but not paid before death, the executor must choose how they are treated for federal income tax purposes.

You may also have to file a federal income tax return for the estate.  Once an individual has passed away, any income generated by his or her holdings after death becomes part of the estate and is taxed on the estate’s own federal income tax return.  

See Bill Bischoff, Dying Doesn’t Make the Taxman Go Away, Market Watch, Aug. 19, 2014.

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

August 19, 2014 in Estate Administration, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Rising Costs of Raising a Child

Children 3

New parents should be warned that it could cost almost a quarter of a million dollars to raise a child—not including the cost of college.  According to newly released estimates from the U.S Department of Agriculture, raising a child born in 2013 to the age of 18, it will cost a middle-income couple just over $245,000. 

While childcare and health care costs are rising, the country’s median income remains where it was before the recession.  Growing transportation and food costs also consume a large part of family budgets.   

For families who are trying to cut costs, consider looking on local parenting blogs or websites to find everything from free baby clothes to a family looking to share a nanny.  Make sure to take advantage of tax credits.  Many employers offer tax-advantaged accounts that let parents pay for health and child care expenses with before-tax dollars.  Moreover, make sure to plan ahead.  Expectant parents should prepare for the added costs ahead of time and try to save each month.

See Melanie Hicken, Average Cost to Raise a Child Hits $245,00, ABC 7, Aug. 18, 2014.

August 19, 2014 in Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 12, 2014

Three Estate Planning Tips for Limiting Taxes

Tax CutFreezing the value of assets and keeping the value of an estate from appreciating overtime can reduce the amount of taxes for an estate. Here are three estate planning tools to reduce the taxes faced by the estate.

  1. Put assets into a Family Limited Partnership to keep asset value from increasing and decrease taxes
  2. Create an Intentional Defective Grantor Trust and pay the taxes with non-trust funds to maximize trust income and decrease the value of the estate
  3. Use a Grantor Retained Annuity Trust to freeze the value of assets and keep the overall taxable value of the estate from increasing

See Brian Luster & Steven Abernathy, 3 Ways to Avoid Tax Hits in Estate Planning, Medical Economics, June 10, 2014.

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

August 12, 2014 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

The Importance of Pre-Nuptial Estate Planning Discussions Post Windsor

CoupleIn a post-Windsor world, married same-sex couples now have equal treatment for federal tax purposes, creating new considerations for estate planning for same-sex couples. Now, all couples should give great weight to the importance of having talks about finances prior to marriage. A recent National Fatherhood Institute survey reveals that communication and finances are the top two causes of divorce. It is important that all couples discuss the financial basics, such as spending habits and expense sharing, as well as their goals for retirement and estate planning.

See Don McNay, Same Sex Marriage, Taxes and Winning the Lottery, Huffington Post, Aug. 10, 2014.

August 12, 2014 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)