Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Friday, August 28, 2015

IRA Charitable Rollover Excellent Benefit... If It Is Resurrected

TrustStarting in 2006, the IRS has allowed those over age 70 1/2 to make direct gifts to charity from their IRA account up to $100,000 per year. This rollover was a great benefit because it skipped the intermediate step of the funds being distributed to the taxpayer first, which created a tax liability, then having the after tax amount donated to charity. However, the authorization to allow this tax break expired in 2014 and, as of yet, has not been revived by Congress. But there is good news, using traditional methods of withdrawal from an IRA or other retirement account the taxpayer can still make the charitable donation without facing an additional tax liability. While alternative means are not as easy as under the old law, an individual can still fund their charitable activities while retaining many of the benefits the IRA rollover once allowed.

See Robert S. Sharpe Jr., Rolling With the Rollover, Wealth Management, August 27,2015.

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

August 28, 2015 in Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0)

Tuesday, August 25, 2015

A Land Trust Can Lead To Big Tax Savings

LandLarge holdings in land can lead to major tax consequences especially when the basis is low due to long time ownership. However, creating a land trust with a conservation easement can grant enormous tax relief to an estate. The easement, which freezes development on a piece of land, lowers the value of the property resulting in a reduced tax burden which can be claimed in one year with any overage spread over an additional five. In addition, conservation organizations may be willing to pay for the easement if it is guaranteed to preserve green space or preserve historic locals. However, an easement must be carefully considered as it will be almost impossible to remove or change once created. While this tool is not right for everyone, the right estate could gain much from this little used trust technique.

SeeDave Lindorff, Using Land Trusts as an Estate Planning Tool, Financial Planning, August 24, 2015.

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

August 25, 2015 in Income Tax, Trusts | Permalink | Comments (0)

Monday, August 24, 2015

9th Circuit Ruling Creates Potential Marriage Penalty

IRS LogoBruce Voss and Charles Sophy, unmarried domestic partners, each filed a home mortgage interest deduction on jointly owned properties under §163(h)(3) reaching the maximum allowed deduction. However, the IRS challenged the deductions saying that they were subject to the joint filing limit imposed on married couples and assessed new taxes. The ruling was challenged by the taxpayers and the tax court sided with the IRS before the case was appealed to the 9th Circuit Court of Appeals. In Voss v. Commissioner, the court held that each taxpayer was allowed to take the maximum deduction for a total of $2.2 million in deductions between them rather than the $1.1 million cap the IRS proposed. As a result, a de facto penalty is imposed on married high earners that are capped at the same deduction level as an unmarried couple filing separately for the home mortgage interest deduction.

See Laura Saunders,  Another Reason Not to Get Married, Wall Street Journal, August 21, 2015.

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

August 24, 2015 in Estate Planning - Generally, Income Tax, New Cases | Permalink | Comments (0)

Sunday, August 23, 2015

Financial Planning Issues Same-Sex Couples Might Still Face

Same sexThis year’s Supreme Court decision legalizing same-sex marriage has brought about major changes to estate planning for same-sex couples.  There are still some bureaucratic hurdles that same-sex couples might face.  It is important to make sure that all financial and testamentary documents like trusts and wills are updated to reflect the changes in the law.  If a same-sex couple is thinking about getting married they should plan ahead carefully instead of rushing the decision.  Getting a pre-nuptial agreement is a very important estate planning decision.  It is also a good idea to apply for a Federal tax refund for health insurance payments made by a spouse.  Same-sex couples should seek out the advice of competent estate planners to help decide on all of these important issues.

See Melissa Montgomery-Fitzsimmons, A Checklist for Advising Same-Sex Clients, Financial Planning, August 21, 2015.

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

August 23, 2015 in Estate Planning - Generally, Estate Tax, Guardianship, Income Tax, Trusts, Wills | Permalink | Comments (0)

New Regulations From IRS Delayed Until 2016

IRS LogoThe due date required by newly enacted Section 6035 has been postponed until February 29th, 2016, by IRS Notice 2015-57. The section will require a statement be sent to beneficiaries of a property transfer from an estate that describes the value of the property interest. Originally, the new statements were due on August 31, 2015 but were delayed in order for the IRS to create guidance for taxpayers and conduct a public comment phase. 

See Sally P. Schreiber, IRS announces delayed due date for new estate basis reporting rules, Journal of Accountancy, August 21, 2015.

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

August 23, 2015 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Friday, August 21, 2015

President Obama Signs New Basis Rules Into Law

ObamaPresident Obama has recently signed the Surface Transportation and Veterans Health Care Choice Improvement Act (Act) into law.  The new statute, signed on July 31, 2015, will impose limits on basis increasing planning for surviving spouses.  Portability rules have traditionally been a tool for a surviving spouse to use a deceased spouse’s spousal unused exclusion amount (DSEAU).  The main issue is whether a portability election obtained under Internal Revenue Code Section 2010 could combine with a QTIP election under Section 2056(b)(7) to give the surviving spouse a date-of-death basis.  Under the new rules “the use of an unnecessary QTIP election on the death of the first spouse to die doesn’t allow a date-of-death basis at the survivor’s death.”  

See Rodney L. Goodwin, New Federal Law Limits Basis Increase Planning at Death of Surviving Spouse, Wealth Management, August 20, 2015.

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

August 21, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0)

Wednesday, August 19, 2015

Estate Planning Issues Faced By Foreign Nationals

Estate-planningA strong dollar and a booming real estate market has made the United States a popular destination for foreign investment.  An increase in foreign investment will bring about a large number of complex legal issues that foreign nationals will have to deal with.  For example, the estate tax exemption for a U.S. resident is $5.43 million while the exemption for a foreign national is only $60,000.  Financial advisor Shomari D. Hearn recommends that foreign nationals "make of their annual gift tax exemptions of $14,000" to try to reduce whatever tax burden they might face.  There are many different complex nuances with the estate planning laws dealing with foreign nationals.  Canadian citizens get the same estate tax exemptions as U.S. citizens because of a treaty that is in place. 

See Miriam Rozen, Special Estate Planning Needs For Foreign Clients, Financial Planning, August 18, 2015.

August 19, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Tuesday, August 18, 2015

IRS Issues New Regulations On Determining Basis Interest In CRTs

Crt2-editThe Internal Revenue Service (IRS) has issued new regulations that went into effect on August 12 that deal with determining the basis interest in Charitable Remainder Trusts (CRTs).  In the past a client would be able to use a charitable remainder annuity trust (CRAT) as a way to reduce the overall tax burden.  This article explains how a client and the remainder beneficiary could simultaneously sell their interest in the CRAT and as a result the client could claim a proportionate share of the CRATs basis.  As a result of this transaction the client would be able to walk away with a significantly reduced capital gains tax.  Under the new regulations a client would be required reduce the basis for his or her annuity interest by the proportionate share of both: “(1) the CRAT’s undistributed ordinary income, and (2) the CRAT’s undistributed net capital gain.”

See Jonathan Tidd, IRS Issues Final Regs on Sale of CRT Interests, Wealth Management, August 18, 2015.

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

August 18, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0)

Monday, August 17, 2015

Tax Law Change Imposes New Estate Basis Reporting Requirements

Irs-buildingCongress has recently passed the Surface Transportation and Veterans Healthcare Choice Improvement Act of 2015 that will make certain changes to tax law that will have an immediate impact on practitioners.  “Section 2004 of the act requires consistent reporting of basis between an estate and anyone acquiring property from the decedent and imposes new reporting requirements.”  The key provisions of this new legislation went into effect on July 31, 2015.  Section 1014 was amended by the act to require the basis of property inherited from a decedent be consistent with what was reported on the estate tax return.  Section 6035 was created to impose reporting requirements on the estate’s executor if the estate is required to file under Section 6018(a).  If the beneficiary is required to file under 6018(b) the same reporting requirements are imposed by the statute. 

See Alistair M. Nevius, J.D., New law imposes immediate estate basis reporting requirements, Journal of Accountancy, August 14, 2015.

August 17, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (1)

Sunday, August 16, 2015

Information About Retirement Account Rollovers

Roth_IRAWhen a person retires from employment and moves a 401K account balance into an IRA account they are engaging in what is called a “rollover.”  This article summary describes some of the different types of account transfers that the term “rollover” applies to.  A rollover by an account owner involves the direct account-to-account transfer by the custodian.  In a spousal rollover a surviving spouse can take maximum advantage of income tax deferral rules by moving untaxed account proceeds into his or her own IRA retirement account.  The account balance can also be transferred to a designated beneficiary in an inherited account rollover.  Finally, Section 402(c)(11) was recently added to The Pension Protection Act to make it easier for a non-spouse beneficiary to rollover a 401K or other retirement plan into an IRA account. 

See Thomas W. Abendroth, Retirement Account Rollovers, The National Law Review, August 15, 2015.

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

August 16, 2015 in Elder Law, Estate Planning - Generally, Income Tax, Trusts, Wills | Permalink | Comments (0)