Wills, Trusts & Estates Prof Blog

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

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Wednesday, July 29, 2015

How To Transition Or Transfer A Business

TransferWhen it is time to transfer a business the process can be complex and involves more than just estate planning.  A business “transition” involves the transfer of a business asset or the whole entity when the current owner is ready to move on.  Typical procedures often involve a valuation of the business and the transfer of both tangible and intangible assets.  The transaction can involve a cash purchase of individual items, share interest, and/or stocks or certificates.  The time and complexity involved with a transfer often depends on the size and makeup of the business.  It is a good idea to seek out advice from an experienced estate planning attorney with sorting through these transition issues.

See Kyle E. Krull, P.A., How do I Transition or Transfer My Business, Wealth Management, July 28, 2015.

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

July 29, 2015 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)

The Balancing Act Involved With Charitable Giving

CharityWhen it comes to charitable giving there are multiple layers of intertwined motivations that are both personal and philanthropic.  A financial planner needs to perform a balancing act when assisting a client with overcoming conflicting desires in charitable giving.  This article discusses how financial planners will need to help their clients adapt to changes in the tax law dealing with charitable gift giving.  There will also be changes to how clients will handle charitable remainder unitrusts (CRUTs).  This article explains the different techniques advisers can use to help balance the client’s interest taking into account the interest of the beneficiary charity as well.  It discusses the different ways to structure split-interest gifts.  This article will hopefully provide more information about the importance of planning ahead when making charitable gifts. 

See Robert F. Sharpe, Jr., The Charitable Planning Balancing Act, Wealth Management, June 25, 2015.

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

July 29, 2015 in Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Regulations On Valuation Discounts May Be Close To Publication

TreasuryRumors are circulating that the Treasury Department is going to publish new regulations that will deal with planning for chapter 14 family businesses and entities.  In this edition of Capital Letters Ronald C. Aucutt discusses the valuation discount regulations that will affect the chapter 14 statutory structure.  The Treasury Department would like more durable rules for disregarding certain statutory restrictions.  The article discusses how the greenbook provides an outline for what type of regulations the Treasury is expected to release.  There will probably be intense reactions to the new regulations and it likely take many years for a final version to be implemented.  Many people will try to challenge or circumvent the new rules.  Others feel that the new proposed regulations will offer a more holistic approach to deductions. 

See Ronald C. Aucutt, Anticipated Valuation Discount Regulations, The American College of Trust and Estate Counsel, July 20, 2015.

Special thanks to Bob Moore (Wolf & Moore, P.C.) for bringing this article to my attention. 

July 29, 2015 in Current Affairs, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Some Tips On How To Plan For An Estate Containing Bitcoin

BitcoinBitcoin, and other cryptocurrencies, have spiked in popularity in recent years as users seek alternate payment forms and investment opportunities. However, the explosion in Bitcoin use has gotten ahead of the law and makes planning for an estate with the currency more complicated than one without. Here are some tips on steps to take if a cryptocurrency is part of estate:

  • The IRS has ruled that Bitcoin is property rather than currency for tax purposes. As a result, stepped up and down basis in Bitcoin may come into play and affect the amount of tax that will have to be paid if the coin is sold.
  • Since Bitcoin is a digital asset, it is imperative that the estate planner knows about the currency so they can include the proper notification to the trustee or executor or else risk loosing track of the Bitcoin.
  • Digital currencies are usually protected by an encryption key or password and cannot be accessed without that information. Thus, the estate planner or other trusted source needs to be given the key and passwords so that the Bitcoin may be transferred to the intended beneficiary.
  • When creating a power of attorney, explicitly state that the document grants the right to control any digital currencies as well as providing keys and passwords to access digital wallets.
  • If Bitcoins are a major part of a trust's assets, the prudent investor rule may come into play and force the trustee to diversify into other investments. This required diversification might not be required if the jurisdiction recognizes Bitcoin as a currency rather than personal property.

See Jeff Vandrew Jr.,5 Things Bitcoin Owners Must Do When Estate Planning, Coindesk, July 28, 2015.

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

July 29, 2015 in Estate Planning - Generally, Income Tax, Technology, Wills | Permalink | Comments (0)

Tuesday, July 28, 2015

Five Things Bitcoin Users Should Remember

BitcoinThe Internal Revenue Service (IRS) issued notice 2014-21 which stipulates that bitcoins will be treated as property instead of currency for tax purposes. There a five estate planning traps that people should watch out for when handling bitcoins:

  1. Keep track of step-up and step-down basis.  Bitcoin owners will want their heirs to benefit from the bitcoins stepped-up basis.  At the same time they will want to watch out for any step-down basis caused by the depreciation of the property. 
  2. Make sure executor or trustee has knowledge of bitcoin’s existence. When making an estate plan it is important to make sure the executor of your estate has knowledge of the existence of your bitcoin collection.
  3. Make sure executor or trustee knows about private key. Even if your executor or trustee knows about the existence of your bitcoin collection, they will also need to have your private key or login information so that they can have access to the bitcoins.
  4. Agent will need power of attorney to access bitcoins. It is important to remember to give your agent the power of attorney needed to access the bitcoins. 
  5. Beware of Prudent Investor Act. A lot of states have a prudent investor act that requires Trustees to diversify investment portfolios.  It is important to be aware of State law in this area and any sort of exceptions that might be in place.

See Jeff Vandrew Jr., 5 Things Bitcoin Owners Must Do When Estate Planning, CoinDesk, July 28, 2015. 

July 28, 2015 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Sunday, July 26, 2015

The Impact Estate Planning Has On Single People

SinglePeople who are single often face their own set of issues when estate planning.  If a single person dies intestate then their property will be distributed in accordance to the laws of that person’s state.  It is usually just as important for a single person to have a will as it is for a married couple.  A person making a will should put some thought into who will inherit their personal property.  It is a good idea to designate who will have power of attorney to make medical and financial decisions in the event the single person loses capacity.  Making sure to plan ahead for possible state and federal estate taxes is also a wise strategy.  Any single person who wants to make an estate plan should speak with an Estate Attorney and Financial Planner to get professional advice. 

See Douglas Rothermich, Estate Planning For Single People, Forbes, June 18, 2015.

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

July 26, 2015 in Estate Planning - Generally, Guardianship, Income Tax, Trusts, Wills | Permalink | Comments (0)

Saturday, July 25, 2015

Seven Things Personal Estate Representatives Should Avoid Doing


Estate planningWhen acting as a personal representative for a decedents estate there are things that you need to remember not to do.  Here is a list of seven things a personal estate representative should avoid doing:

  1. Avoid early distribution of assets. Make sure to make a full assessment of potential claims the estate could face.
  2. Do not spend estate assets on personal expenses.  This should be self-explanatory, but some people may need a reminder of why this would be a bad idea.
  3. Never ignore tax issues.  Tax liabilities can pile up, so it is always important to stay on top paying them.
  4. Obey court orders.  A personal representative has to submit to the jurisdiction of the court and disobeying court orders can open him or her up to personal liability.
  5. Do not distribute funds until all bills are paid. It can often be difficult to get money back from somebody once it has been paid out. 
  6. Do not ignore any claims.  It is a good idea to stay on top of any potential claims that you might face.
  7. Do not go forward without seeking attorney advice.  Seeking out expert advice from somebody who understands probate law can be a good strategy.

See Unique Estate Law Blog, What [Not] To Do After A Death: Seven Things Personal Representatives Should Never Do, Wealth Management, June 1, 2015.

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

July 25, 2015 in Estate Planning - Generally, Estate Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

New York Rules On Estate Tax Liability For Single-Member LLC Interests

Albany capitolThe New York State Department of Taxation and Finance has recently issued an advisory opinion that could have an impact on single-member LLC interests.  The Federal tax entity classification election could determine whether property that is owned through an LLC by an out of state person is liable for New York estate taxes.  Taxation officials would want to know if the LLC interest is characterized as tax exempt intangible personal property or taxable real property.  The advisory opinion ruled that if the wholly owned LLC is disregarded for Federal taxing purposes then it would also be disregarded for State purposes thus leaving any of the real in-state property open to estate taxes.  More details of the opinion can be read here

See Michael J. Cataldo and Paul T. Casas, New York State Department of Taxation and Finance To Disregard Single-Member LLC Interests For New York Estate Tax, Pillsbury Law, July 14, 2015.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

July 25, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Friday, July 24, 2015

IRS Issues Ruling On The Unqualified Disclaimer Of A Surviving Spouse

TrusteeOn July 10, the Internal Revenue Service (IRS) issued a private letter ruling involving a surviving spouse who wanted to treat a marital trust he inherited as a qualified terminable interest property (QTIP) trust.  The trustee of the marital trust proposed splitting the trust into two shares with one being non-exempt from the GST tax.  The letter ruling held that the non-exempt share was to be treated as a QTIP, and that the subsequent disclaimer of the surviving spouse’s interest in the first trust would have any effect on elections for a federal estate tax marital deduction.  The IRS also held that the transfer of a qualifying income interest would be subjected to gift taxes.  Finally the IRS ruled that the income interest would not be valued at zero and the estate would not include a renounced property interest. 

See Jillian Merns, IRS Rules on Results of Surviving Spouse’s Unqualified Disclaimer, Wealth Management, July 17, 2015.

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

July 24, 2015 in Current Affairs, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

Eighth Circuit Court of Appeals Affirms Tax Court Decision On Self-Directed IRA

IRSThe Eighth Circuit Court of Appeals has recently affirmed a Tax Court decision that sustained penalties on a married couple using “their self-directed IRA plans to fund a business venture.”  The taxpayers created an LLC to sell use cars.  Two members were listed on the LLC operating agreement, one of them was a self-directed IRA owned by the husband.  The taxpayer was listed as the general manager and the LLC paid a salary.  The IRS imposed a notice of deficiency determining that the taxpayer committed prohibited transactions by giving his IRA membership interest in the LLC and receiving wages.  The Court of Appeals held that the taxpayers prohibited actions caused the IRA to lose its qualified status.  The Decision of the Eighth Circuit Court can be read here.

See Mel Schwarz, Dustin Stamper, and Shamik Trivedi, United States: Circuit Court Decision Reflects Risks Associated With Self-Directed IRA Plans, Mondaq, July 20, 2015.

July 24, 2015 in Current Affairs, Estate Planning - Generally, Income Tax | Permalink | Comments (0)