Wills, Trusts & Estates Prof Blog

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

Saturday, May 28, 2016

Study Shows that the Rich Are Not Moving to Avoid Taxes

MillionaireAre millionaires moving across the country to benefit from tax breaks? A study based on thirteen years of tax data shows that this assumption is principally untrue. Oftentimes, millionaires are moving for reasons that have nothing to do with taxes. They usually have community roots that have promoted their successfulness, which makes it hard to uproot.

            Florida is only one of seven states with no income tax. Most millionaire tax flight, however, travels to the Sunshine State. If the study removed Florida from the list of states drawing tax-avoiding millionaires, tax migration would be virtually nonexistent. But, honestly, relaxing under a palm tree facing the Caribbean Sea makes tax avoidance pretty tempting for just about anyone with millions of dollars to spend.

See Higher Taxes Don’t Scare Millionaires into Fleeing Their Homes After All, Private Wealth, May 26, 2016.

May 28, 2016 in Estate Tax, Income Tax | Permalink | Comments (0)

Friday, May 20, 2016

Article on Regulations Affecting the Deductibility of Investment Advisory Expenses

Math workDomingo P. Such, III & Tina D. Milligan recently published an article entitled, Understanding the Regulations Affecting the Deductibility of Investment Advisory Expenses by Individuals, Estates and Non-Grantor Trusts, Real Property, Trust and Estate Law Journal, Winter (2016). Provided below is their synopsis of the article:

            This Article addresses the new 2015 federal income tax rules governing the deductibility of investment advisory expenses and the confusion surrounding them. Specifically, the Article provides the context and impact of these new regulations, clarifies the current classification of investment advisory expenses, outlines methodologies for fiduciaries in unbundling fiduciary and investment advisory fees, and explains the limitations under current law. The Article also addresses the confusion surrounding the new rules for corporate fiduciaries, which require the “unbundling” of investment advisory fees when comingled with fiduciary fees using “any reasonable method.” The Article concludes that taxpayers should consult with their financial advisors and tax professionals to minimize the impact of deductibility limitations.

May 20, 2016 in Articles, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Sunday, May 15, 2016

Article On Tax Basis In Estate Planning

Pen and PaperPaul L. Caron (Pepperdine University School of Law) & Jay A. Soled (Professor, Rutgers University) recently published an article entitled, New Prominence of Tax Basis in Estate Planning, Tax Notes, Vol. 150, p. 1569 (2016). Provided below is an abstract of the article:

In this article, Caron and Soled discuss how section 1014(b)(6) offers a bridge for taxpayers to maximize the tax basis they have in their assets. Whether Congress should retain this anachronistic provision is an open issue. The authors explain the historical background of section 1014(b)(6), demonstrate the potential income tax savings from applying it, and outline several planning strategies to achieve those savings.

May 15, 2016 in Articles, Income Tax | Permalink | Comments (0)

Wednesday, May 11, 2016

United States Cracking Down On Using LLCs To Disguise Foreign Beneficial Owners

CharityThe United States is attempting to crack down on the use of LLCs to disguise foreign beneficial owners.  “The United States Department of Treasury issued proposed regulations that, if promulgated, would impose new disclosure obligations on domestic disregarded entities wholly owned by foreign persons (i.e., single-member limited liability companies).”  Entities that are affected by the new regulations will be required to report the identity of the beneficial owner to the IRS every year.  The purpose of the new regulation will be to strengthen civil and criminal tax enforcement and to assist other nations in obtaining information about their own taxpayers.  “Under the proposed regulations, any domestic disregarded entity owned by a foreign person would be subject to the provisions of Section 6038A of the Internal Revenue Code, which currently imposes annual reporting, recordkeeping, and other compliance requirements on certain foreign owned US corporations.”

See Kathy Keneally, Ellis L. Reemer, Michael A. Silva, Frank L. Jackson, Michael J. Scarduzio, and Ryan J. Coyle, US targets the use of LLCs to disguise foreign beneficial owners, DLA Piper, May 10, 2016.

May 11, 2016 in Current Affairs, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

IRS Shifts Policy To Combat Phone Scammers

IRSScammers calling up unsuspecting taxpayers seeking to get them to pay for fictitious tax bills has been a growing problem as of late with multiple measures being taken to combat the problem. Now the IRS is shifting a long standing policy when it comes to notifying taxpayers that they are subject to in-person field examinations by an agent. Previously a telephone call would be made to the taxpayer arranging a meeting but notice will now be given solely through the mail although the service admits that this step is taken out of caution rather than any specific instance of abuse of the procedure by fraudsters. However, this change does put the notice procedure for in-person exams in sync with the way the IRS normally informs taxpayers of levies. audits, and other issues. But, in any case, this is one more step in the right direction when it comes to protecting innocent taxpayers from the dishonest.

See Michael Cohn, IRS Changes Policy on In-Person Field Exam Notifications, Accounting Today, May 9, 2016.

May 11, 2016 in Income Tax | Permalink | Comments (0)

Tuesday, May 10, 2016

Outdated Social Security Rules Affecting Seniors’ Retirement Income

Social SecurityToday, 90% of seniors rely on Social Security to provide them with expenses for their retirement. There is a big concern, however, that not enough people are entering the workforce to cover the new payroll tax revenue.

The biggest issue concerning the system for the past 33 years is the taxation of Social Security benefits based on income thresholds. In 1983, Congress passed an amendment allowing Social Security benefits to be taxed up to 50% for those with an annual income of more than $25,000. This amendment was relative at the time but has since lost reasonableness due to unchanged tax income thresholds.

One way seniors can solve this problem and be proactive in their retirement planning is by having a withdrawal plan. This plan allows seniors to strategize how they will receive their distributions ahead of time, which could avoid bumping them into the higher tax bracket and ultimately save them money.

See Sean Williams, This 33-Year-Old Social Security Rule Is Wreaking Havoc on Seniors’ Retirement Income, The Motley Fool, May 8, 2016.

May 10, 2016 in Current Affairs, Elder Law, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Thursday, May 5, 2016

New Changes In Estate Planning Laws Provide Reason For Updating Estate Plan

New legislationMany people are revising and updating their estate plan because of recent changes to estate planning and tax laws.  Another reason for updating estate plans is the increase in the average life expectancy thanks to developments in modern health care.  This article discusses some of the recent changes in the law and why it is important for people to update their estate plans.  People need to update their planning if they are going to be impacted by estate and gift taxes.  Those who have trusts will also need to review their estate plans.  “Another very important development in estate planning is the use of proper beneficiary designations for qualified plans and IRA interests.”  There are many parents who have reason to be concerned about the property that they plan to leave to beneficiaries being subject to creditor or spousal claims, and they will want to take proactive estate planning measures. 

See Dickinson Wright PLLC, Recent Changes in Estate Planning Laws May be Cause for Review of Your Estate Plan, Lexology, May 4, 2016.

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

May 5, 2016 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Tuesday, May 3, 2016

Tax Deductions Most Americans Should Know About

Tax deductionsThis article provides important information about tax deductions that people can use whether or not they choose to itemize.  People should know about the potential adjustments to income that are available to them.  “There are about 20 potential adjustments to income listed on the IRS's website, but some of these apply to few taxpayers.”  There is a list of the more common adjustments that taxpayers can use which are provided in this article.  The article also provides a chart with information on how many Americans will typically use these deductions.  Some of the deductions discussed in this column, like the IRA deduction, are surprisingly underused.  “The bottom line: If you want to lower your tax bill, you should seriously consider contributing to a retirement account this year, and here's a guide to help you find the best option for you.”

See Matthew Frankel, The Only Tax Deductions Most Americans Can Use, The Motley Fool, April 30, 2016.

May 3, 2016 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

Harvard Law Professor Robert Sitkoff Gives Lecture On Estate Planning

Business_expenseHarvard Law Professor Robert Sitkoff made his contribution to the Last Lecture series with his March 29 lecture titled ‘Hope for the best; plan for the worst.’  This article provides a video of the lecture delivered by Mr. Sitkoff, who is an expert in trusts and estates.  “The Last Lecture Series, which is organized by the Class Marshals, asks popular HLS professors to give lectures addressing the graduating class.”  The main goal of the lecture was to discuss private law and to distinguish it from public law.  He discusses ways that the private law practice can be improved and how lawyers need to address their client’s concerns.  Another thing that he discusses is how law schools can work to improve the legal education that is provided to students to help get them more prepared for private practice.

See Raishay Lin, A trust and estates lawyer’s ‘last lecture’: ‘Hope for the best; plan for the worst’, Harvard Law Today, April 27, 2016.

May 3, 2016 in Estate Planning - Generally, Estate Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Monday, May 2, 2016

Important Information About Medicare Taxes In 2016

Medicare taxThis article discusses how there will be no adjustments to the Medicare tax that people will have to pay in 2016.  In the Affordable Care Act (ACA) congress had imposed a 0.9 percent tax on high income earners called the “Additional Medicare Tax” to help cover ACA costs.  Because of the low rate of inflation the baseline that triggers the additional tax will not be changed for the year 2016.  This might not be good news for some high income taxpayers because a bump in the baseline could have subjected less of their income to the tax.  This article provides the reader with a chart showing which income levels for both married and single taxpayers will trigger the additional Medicare tax. 

See Brian Stoffel, What You Need to Know About Medicare Taxes in 2016, My San Antonio, May 1, 2016.

May 2, 2016 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)