Friday, February 17, 2017
Foreword – The Supreme Court’s Estate Planning Jurisprudence by Bridget J. Crawford
The Four Horsemen and Estate Taxation by Jasper L. Cummings, Jr.
The U.S. Supreme Court and the Law of Trusts and Estates: A Law Reformer’s Perspective by Thomas P. Gallanis
Irwin v. Gavit: Income Is (Sometimes) in the Eye of the Beholder by William P. LaPiana
Taft v. Bowers: The Foundation for Non-Recognition Provisions in the Income Tax by James R. Repetti
Helvering v. Clifford: The Supreme Court Spoils the Broth by Mark L. Ascher
Helvering v. Horst: Gifts of Income from Property by Jerome M. Hesch & David J. Herzig
Helvering v. Safe Deposit & Trust Co.: Underestimating the Power of a Power of Appointment by Samuel A. Donaldson
Oklahoma Tax Commission v. United States: Death Taxes on Restricted Indian Personalty by Thomas E. Simmons
Smith v. Shaughnessy: Slippery Remainder Interests and the Intersection of Gift and Estate Taxes by Ann-Marie Rhodes & Erica E. Lord
Robinette v. Helvering: Valuation of Gifts to Split-Interest Trusts by Stephanie E. Heilborn & Cindy Zhou
Merril v. Fahs: Release of Marital Rights Is Insufficient Consideration for Transfer Tax Purposes by Kevin E. Packman
Fidelity-Philadelphia Trust Co. v. Smith: Form over Substance? by Deborah V. Dunn & Domingo P. Such, III
Commissioner v. Estate of Noel: The Double Life of Life Insurance by John McGown, Jr. & Jason Melville
Commissioner v. Estate of Bosch: 50 Years of Relevance by Jonathan G. Blattmachr & Madeline J. Rivlin
United States v. Estate of Grace: Seeking a More Objective Test for the Application of the Reciprocal Trust Doctrine by Dennis I. Belcher & Kristen Frances Hager
United States v. Byrum: Too Good to Be True? by Ronni G. Davidowitz & Jonathan C. Byer
Dickman v. Commissioner: Loans as Property Transfers by Carlyn S. McCaffrey & John C. McCaffrey
Commissioner v. Estate of Hubert: How the I.R.S. Stole Hubert’s Blessing by Kristen E. Caverly
United States v. Windsor: The Marital Deduction that Changed Marriage by Lee-ford Tritt
Friday, January 27, 2017
Russell James III recently published a book entitled, Visual Planned Giving: An Introduction to the Law & Taxation of Charitable Gift Planning (2017). Provided below is a summary of the book:
This book provides an introductory overview of the wide range of charitable gift planning topics with implications for income, capital gain, gift, estate and generation skipping transfer taxation, including elements of a gift, documentation requirements, valuation rules, income limitations, bargain sales, charitable gift annuities, charitable remainder trusts, charitable lead trusts, remainder interest deeds with retained life estate in homes and farms, life insurance, gifts of retirement assets, private foundations, and donor advised funds.
Tuesday, January 24, 2017
Les Raatz recently published an Article entitled, State Constitution Perpetuities Provision: Derivation, Meaning, and Application, 48 Ariz. St. L.J. 803 (2016). Provided below is an abstract of the Article:
The Rule Against Perpetuities, over the last decade or so, has attracted greater attention within areas of the estate planning bar. There are interrelated factors that are the primary reasons for this attention. One is the marketing of trusts that are designed to better protect against the ability of creditors of the beneficiaries of a trust to reach assets of the trust to satisfy their claims. Lengthening the period that such assets may remain unvested in beneficiaries in the trusts is touted as enhancing their value and usefulness. The longer period to defer vesting also has beneficial estate tax consequences. If trust property can be held for generations in a trust not subject to the common-law rule requiring the vesting of interests of the trust in the beneficiaries of the trust within a period ending twenty-one years after the death of the last to survive of those living when the trust became irrevocable, then inclusion of trust assets in the gross estates of beneficiaries for federal estate tax purposes is avoided to a greater extent.
Another less considered estate and income tax consequence is the ability to cause inclusion of trust property in the gross estate of a decedent by means of the decedent springing the Delaware Tax Trap (“DTT”) in order to cause the basis of the property to be “stepped up” to its fair market value at the date of the decedent’s death when no estate tax would arise. The DTT occurs when a person holding a power of appointment over property in trust appoints the property in further trust effective upon the person’s death and grants another a power to thereafter appoint the property, which second power may be exercised to postpone vesting over a perpetuities period determined from a different date than the date of the perpetuities period applicable to the first power. The intentional triggering of the DTT is a new planning device that arose from the substantial increase in the federal estate tax exemption. If the beginning date applicable to the perpetuities period in which the property must vest pursuant to exercise of the second power would otherwise violate the common-law rule, then state legislation must permit the variance.
Thursday, January 19, 2017
Jonathan G. Blattmachr & Martin M. Shenkman recently published an Article entitled, Planning in a Time of Uncertainty: Part I—Why Hitting the Pause Button May Not Be the Optimal Approach, Tr. & Est. 106 (Jan. 2017). Provided below is an abstract of the Article:
The election of Donald J. Trump as our 45th President was largely unexpected. While it’s difficult to forecast the specifics of what that will mean during his term, and, perhaps, his second term, predictions can be useful to evaluate current planning. President-elect Trump has proposed wide-ranging changes to the nation’s tax system that will affect virtually all Americans and their advisors. He appears to have made tax legislation a priority for his administration. He’s suggested substantial reductions in corporate and individual tax rates and the simplification of the tax system generally through elimination of many deductions and other complexities. Estate planners, in particular, are already facing a dramatic impact on their practices, as many clients have hit the pause button on planning in anticipation of a possible repeal of the estate tax. This may not be the optimal approach for clients, and this two-part article will explore why.
Wednesday, January 11, 2017
Gail E. Cohen recently published an Article entitled, In Like a Lamb, Out Like a Lion: For Fiduciaries, 2016 Started Out Quietly, but 2017 Promises to Be a Wild Ride, Tr. & Est. 28 (Jan. 2017). Provided below is a summary of the Article:
The year 2016 started out quietly, seemingly a continuation of the status quo. We continued acting as fiduciaries of trusts that took advantage of tried and true tax strategies. Professional fiduciaries received good news in April when the Supreme Judicial Court of Massachusetts overturned the troubling Pfannensitehl decision of 2015, thereby providing assurance that discretionary trusts weren’t subject to claims of divorcing spouses in Massachusetts. Later in the year, as expected, the Internal Revenue Service put forth long-awaited proposed regulations intended to curtail the use of valuation discounts in gift and estate planning for family entities.
Then came Donald J. Trump. Seemingly everyone expected Hillary Clinton to win the presidency, thereby continuing the status quo, albeit with higher income taxes and higher estate and gift taxes (or at least a lower exemption from those taxes). Up until the election, there was a flurry of activity to take advantage of valuation discounts prior to the Internal Revenue Code Section 2704 regulations becoming final. Now, we don’t know exactly what 2017 will bring.
A few items to watch: lower income tax rates; elimination of gifts of appreciated assets to private charities; elimination of estate and gift taxes and presumably the generation-skipping transfer (GST) tax; income tax at death or carryover basis; and non-adoption of the proposed IRC Section 2704 regulations. Looking ahead, we should examine the potential impact that these actions may have on professional fiduciaries.
Monday, January 2, 2017
Ellen P. Aprill recently published an Article entitled, Charitable Class, Disaster Relief, and First Responders, 153 Tax Notes (2016). Provided below is an abstract of the Article:
The notion of charitable class bedevils tax law. The IRS has issued no precedential guidance regarding its scope or application. After the 9/11 terrorist attack, Congress enacted special provisions applicable only to victims of that disaster. In response to statements in the legislative history of those provisions, the IRS has changed several of its positions regarding the doctrine of charitable class, changes announced only in a publication on disaster relief. Nonetheless, disaster relief continues to raise difficult issues involving charitable class for Congress as well as the IRS. In the 15 years since 9/11, Congress has enacted special legislation to permit a small group of California firefighters and two New York police offers to be treated as satisfying the charitable class requirements.
This article reviews the use of charitable class in tax law, including its relationship to trust law, with particular attention on establishing new charitable purposes and classes. It then discusses disaster relief, both in the case of the 1995 Oklahoma City bombing and September 11, 2001 terrorist attack. This discussion includes consideration of the roles that crowdfunding and exemption based on lessening the burden of government play in addressing disasters. The next section of the article examines the special legislation that Congress has enacted for two small groups of first responders. The piece concludes by recommending that the IRS both undertake a study of charitable class in general and issue precedential guidance regarding charitable class in the context of disaster relief. It also urges Congress to consider holding hearings and enacting special legislation for first responders.
Monday, December 19, 2016
Christopher P. Woehrle recently published an Article entitled, Capital Without Borders: An Insider’s Research into the Advisors of the World’s Wealthy, Tr. & Est. (Dec. 2016). Provided below is a summary of the Article:
In Capital Without Borders: Wealth Managers and the One Percent, Dr. Brooke Harrington, associate professor of Economic Sociology at Copenhagen Business School, applies the principles of ethnography to learn the practice of wealth management and understand the outsized role of advisors in representing their clients. Her book is very timely, as the release of the Panama Papers spotlighted the issue of offshore tax havens, while the number of U.S. citizens renouncing their tax citizenship continues to climb. The self-perpetuating nature of the wealthy avoiding the payment of income and transfer taxes exacerbates global income and wealth inequality.
I’ll highlight the major findings from Dr. Harrington’s interviews with wealth managers, whose role she sees as the defenders of ultra-high-net-worth (UHNW) individuals and their families ($30 million minimum in investable assets) through legal and financial expertise. I’ll also examine the workhorse techniques of asset protection and the positioning of philanthropy. I’ll conclude with the policy implications of the owners of capital increasingly free of any tax home.
Wednesday, December 14, 2016
A recent Private Letter Ruling details the IRS conclusions regarding distributions from an irrevocable trust. A grantor had created an irrevocable non-grantor trust for the benefit of him, his spouse, his mother, and his issue with a distribution committee. The trust terms specified that all gifts to the trust were not completed gifts and any trust assets would be included in the grantor’s gross estate. One of the grantor’s inquiries was if he is considered the owner of the trust, which portions of income, deductions, and credits should he include in his taxable income during the time of the distribution committee’s service. The IRS concluded that the grantor was not the owner of the trust so long as the distribution committee served. In another ruling, the IRS concluded that two gifts made to the trust were not complete because the grantor retained some power over the trust’s distributions. Similarly, the IRS ruled that any distribution by a committee member pursuant to their powers would not be considered gifts subject to the federal gift tax but rather gifts by the grantor.
See Dawn S. Markowitz, What Constitutes Completed Gifts?, Wealth Management, December 13, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
The recent presidential election marks a good opportunity for retirees to review their long-term financial plans and implement new strategies, especially with Trump’s tax proposals. If you are a high net worth retiree, there are things you can do to protect yourself. With the proposed reduction in income tax brackets, it is important for these retirees to plan accordingly with discretionary income sources. Additionally, if Trump’s modification for tax deductions takes effect, retirees should reconsider their current deductions, specifically in the areas of mortgages and charitable donations. High net worth retirees should also understand that even if the estate tax is repealed, estate planning is still a necessity. Lastly, eliminating the basis “step up” will not allow retirees to avoid capital gains taxes upon death, so you should consider reducing your investment risk.
See Jeff Fosselman, What the Trump Tax Proposals Mean for High Net Worth Retirees, Forbes, December 12, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Thursday, December 8, 2016
With Donald Trump and a Republican Congress, it is likely we will see lower tax rates and a broader taxable income base. Republicans will, however, need to compromise on some core objectives. This Article provides the “Potential Tax Change Timeline” to some expected bills, debates, and legislation. Additionally, there is a “ Tax Change Watchlist” organized into three categories—individual income tax, corporate and pass-through income tax, and transfer tax—giving insight into the major changes detailed in Trump’s proposals.
See J.P. Morgan Advice Lab, The Tax Change Agenda: What’s Been Proposed—and Our Insights into What That May Mean for You, J.P. Morgan Private Bank (2016).