Wills, Trusts & Estates Prof Blog

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

Friday, July 29, 2016

Transfer of Foreign Money to the U.S.

Wealthy foreignerWhat do you do if you are a wealthy multinational planning for part of your estate to go to the United States? One idea is to create a foreign grantor trust that receives tax benefits for the grantee. The trust will grow tax-free and any distributions made to beneficiaries will be tax-free as well. With the obsession of minimizing income tax, the United States is becoming the place to stash foreign wealth. This makes income tax management the key to most estate planning today. Additionally, estate planners are playing around with basis as a tax reduction technique through inheritance. Ultimately, there should be a three-part harmony: first, structure the trust properly; second, a thoughtful use of entities to compose the trust structure; and third, proper asset allocation.

See Carol J. Clouse, Death and Taxes for Wealthy Foreigners, Private Wealth, June 17, 2016.

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

July 29, 2016 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

Friday, July 22, 2016

Estate Planning for Your Move to a New State

Moving to a new stateIf you plan on moving to a new state, then you need to consider the new state’s rules governing your estate planning documents and taxes. Before moving to a new state, you should meet with your estate planning attorney to change your wills and trusts according to the new state’s laws. Also, it is important to review the roles of fiduciaries in that particular state because of specific executor requirements.

Furthermore, when moving to a new state, there are also tax implications you must review, and some states have significant variations. For tax purposes, you must be able to prove you abandoned your previous domicile and adopted the new domicile. This is important because, if not, you may still be liable for your old domicile’s income taxes or unexpected estate taxes.

See Day Pitney Estate Planning Update, Estate Planning Update July 2016 – Moving to a New State?, Day Pitney LLP, July 14, 2016.

Special thanks to Jay Stapleton (Quinn & Hary Marketing) for bringing this Article to my attention.

July 22, 2016 in Estate Administration, Estate Planning - Generally, Estate Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Monday, July 18, 2016

Book on Estate Planning Guide for Qualified Retirement Plan Benefits

Retirement book Louis A. Mezzullo recently published a book entitled, An Estate Planner’s Guide to Qualified Retirement Plan Benefits, Fifth Edition (ABA Book Publishing). Provided below is a summary of the book:

This ABA bestseller has helped thousands of estate planners understand the complex rules and regulations governing qualified retirement plan distributions and IRAs. Now newly updated, An Estate Planner’s Guide to Qualified Retirement Benefits provides expert and current guidance for structuring benefits from qualified retirement plans and IRAs, consistently relating key distribution issues to current estate planning practice. Topics covered include:

  • The different types of qualified plans and the tax and non-tax rules relating to them
  • The forms of distribution and the situations in which they need to be considered
  • Penalty taxes
  • Distribution requirements and how to calculate them
  • Income taxation and handling rollovers
  • Transfer taxes
  • Spousal rights, QDROs, and community property considerations
  • Estate and trust administration issues
  • Practical planning strategies to avoid penalty and excise taxes on distributions while incurring the lowest income tax

July 18, 2016 in Books, Books - For Practitioners, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Income Tax, Trusts | Permalink | Comments (0)

Saturday, July 16, 2016

CLE on Tax & Estate Planning in South Bend, Indiana

 CLEThe University of Notre Dame is hosting a CLE entitled, 42nd Annual Notre Dame Tax and Estate Planning Institute, which will take place on October 27–28, 2016 at South Bend’s Century Center on the banks of the St. Joseph River in downtown South Bend, Indiana at 120 South St. Joseph Street. Provided below is a description of the event:

The Institute will continue to present topics relevant for families exposed to the estate tax and for families with a net worth below the combined estate tax exemptions. The advantage of having simultaneous tracks is that one track will focus on creative planning for estate tax reduction, or even elimination, while the other track will cover topics relevant for all families, even families not exposed to the estate tax. Therefore, individuals attending the Institute can choose topics relevant to their clients.

As in the past, we clustered related topics together so that continuity can be enhanced. Of particular interest is the Thursday afternoon cluster on the use of trusts, culminating in a panel discussion on the three prior trust topics. A similar cluster deals with charitable planning.

The Institute presents topics that provide background attendees can use to expand their potential client base, such as how one can introduce both income tax planning and estate planning in the context of a divorce. This year the Institute added a session on the evolving area of Bitcoin, where the speaker will first explain the financial principles underlying virtual currencies and blockchains and then go on to how one can protect these unique assets. As in the past, the Institute will provide topics focused on income tax planning, such as obtaining income tax-free step up in basis at death and assignment of income to taxpayers in lower marginal income tax brackets, including elimination or deferral of state income taxes.

The Institute will also address a topic that is often overlooked: What the planning professional needs to do when there is a mistake in the documents or a mistake in one’s advice. The speaker will provide practical advice on how to deal with the aftermath of a mistake, including how to handle your firm’s partners, your firm’s malpractice carrier, how to manage the client, how to handle a possible IRS audit and what can be done to mitigate possible damage claims.

Download ND_TaxEstate_Oct2016 final brochure

July 16, 2016 in Conferences & CLE, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Friday, July 8, 2016

Post-Death Stretch IRA

Stretch IRAThe income tax treatment of a nonqualified portfolio of investments is far superior than post-death distributions from qualified plans and retirement accounts. The reasons for this are that retirement benefits do not receive a step-up in income tax basis at the owner’s death, retirement benefits must be distributed post-death, and retirement benefits are taxed as ordinary income tax. One option for minimizing this post-death income tax treatment is to withdrawal only the RMDs during the owner’s lifetime, which allows a smaller percentage of accumulated wealth to be subject to the full basis step-up at death. Another option is to convert a portion of the IRA to a Roth IRA, allowing for lower income tax rate on the withdrawals and more accumulation in the Roth. Lastly, an additional option would be to take small IRA distributions and invest the after-tax amount into life insurance.

See James G. Blase, Does a Stretch IRA Always Make Financial Sense?, Wealth Management, June 24, 2016.

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

July 8, 2016 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Thursday, July 7, 2016

Estate Planning for Retirees

RetireesIn the United States, the life expectancy continues to rise, meaning that Americans need more financial support as they age. If the aging population does not plan accordingly, they will be unable to maintain the quality of life they deserve during retirement. Estate planners need to help these retirement-age individuals address their new priorities accordingly. When planning for retirement, estate plans should pay attention to gift provisions, so that they do not take advantage of the retirees. Another examination is state income tax, which will effect where retirees establish residency. Estate planners should also consider a retirement trust for their clients, allowing children to disclaim all or some of the inherited retirement account benefits for their own kids.

See John M. Goralka, Estate Planning for an Aging Population, Wealth Management, July 5, 2016.

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

July 7, 2016 in Elder Law, Estate Planning - Generally, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Creating Flexibility in Trusts

Irrevocable trustIf you decide to make you trust irrevocable, it is important to determine whether you should add provisions that may enable trust modifications in changing times and circumstances. Things that may demand modification in the future, like trust distribution age, beneficiaries, trustees, and distribution amounts, could lead to regret from not only the grantor but the beneficiaries as well. Additionally, income and estate tax laws are constantly changing, which can create unintended scenarios for those involved. Consequently, several states have enacted statutes to permit the modification of irrevocable trust with tools like decanting, moving assets to various trusts, or allowing grantors and beneficiaries to consent informally to changes.

See Atlantic Trust, Creating Flexible Trusts in Uncertain Times, Wealth Management, July 1, 2016.

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

July 7, 2016 in Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0)

Tuesday, July 5, 2016

STABLE Accounts for Your Estate Plan

STABLE accountThe Achieving a Better Life Experience (ABLE) Act of 2014 will soon permit individuals to establish STABLE accounts in their estate plan for disabled family members. These accounts will allow family members to save money to be used throughout life concurrently with other government benefit programs for disabled family members. The earnings in these accounts will grow tax-free as long as they are utilized for qualified expenses. In order to establish a STABLE account, the individual must have been disabled before 26 years old and entitled to benefits under the SSI or SSDI programs.

See James Contini, James Contini Column: The Use of STABLE Accounts for the Estate Planning for Disabled Individuals, Times Reporter, July 3, 2016.

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

July 5, 2016 in Disability Planning - Health Care, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Friday, June 24, 2016

Donor-Advised Funds Are Costing American Charities

CharitiesThe United States relies heavily on charities, and in return, those that donate receive a generous tax break on the income donated. Experts argue that this charitable relationship is at risk due to a collective, managing, and distributive fund—donor-advised fund—that is obstructing the stream of money to those who need it. Instead of the money going directly to the charity of choice, it goes to a financial firm that acts as a middleman. These funds are considered legal charities that can distribute money over a long period of time, keeping it out of the hands of those charities that sincerely rely on the funds. As donor-advised funds are on the rise, an estimated $15 billion could be delayed to American charities.

See Ana Swanson, Wall Street Is Sitting on Billions Meant for American Charities, Washington Post, June 21, 2016.

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

June 24, 2016 in Estate Administration, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Saturday, June 18, 2016

How To Benefit from Sharing Your Art Collection in an Estate Plan

Art collectionThose with art collections would most enjoy their collection being appreciated for years and years after they are gone. One way to make this happen is to give a “fractional interest” in the collection to a charity or museum. By donating the art for 50% of the year while you enjoy it in the other half, you can claim major tax deductions. The catch? The IRS demands that the specified shared artwork be completely gifted no later than ten years after the original agreement is put into place. If you decide not to gift after ten years, the original tax deduction becomes income, which will be taxed accordingly. This method will allow you to have your gift and keep it, too!

See How To Share an Art Collection in an Estate Plan, Wealth Management, June 7, 2016.

June 18, 2016 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)