Wills, Trusts & Estates Prof Blog

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

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Thursday, November 27, 2014

Date of Delivery For Gifts

Gift3With the holiday season in full swing, 'tis the season to review  date of delivery rules for charitable gifts, which determine the date that the gift was made and affect the tax consequences of the gift. Here are the general rules for determining date of delivery for some types of  property when given as a gift:

  • Securities: The day the securities are hand delivered and received by the charity, or the day the securities are mailed to the charity through the U.S. Postal Service.
  • Mutual fund shares: The day that the transfer from the fund's management to the charity is complete.
  • Checks: The day the check is mailed through the U.S. Postal service, and by certified mail and not post dated.
  • Tangible personal property: The day the gift is received through both possession and title.
  • Real estate: The day that the deed is received by the charity, or the date that the deed is recorded if required by local law to make the deed effective.
  • Gifts Made by credit cards: The day the bank makes the payment to the charity.
  • Donations made via a text message: The day the donor sends the text message.

See Conrad Teitell, Charitable Gifts: Date of Delivery Rules, Wealth Management, Nov. 24, 2014.

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

November 27, 2014 in Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 25, 2014

Finish Out the Year Tax Smart

Tax CutIn addition to the hustle and bustle of the holiday season, the end of the year is also a time to fit in some last minute tax related strategies. Here are three tips to have a tax smart end of the year:

  1. Don't forget about mutual fund distributions and consider offsetting gains with losses by selling stock of decreased value.
  2. For investors nearing or above the adjusted gross income threshold for application of the investment surtax, postponing the sale of appreciated securities or moving funds to tax-advantaged retirement accounts if possible, may be beneficial to avoid or lower the surtax.
  3. Consider giving appreciated securities as gifts, up to $14,000 can be gifted without the need for a gift-tax return.
  4. Consider donating appreciated securities to a charity that can accept them and deduct the securities' value and avoid the capital gains tax on those securities.

See Sandra Block, Smart Year-End Moves to Trim Your 2014 Tax Bill, Kiplinger's Personal Finance, Nov. 2014.

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

November 25, 2014 in Estate Planning - Generally, Gift Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Saturday, November 22, 2014

CLE on Tax Developments for Estate Planners

CLE Photo

The American Law Institute Continuing Legal Education (ALI CLE) is holding a CLE entitled, Recent Tax Developments for Estate Planners, on December 10, 2014 from 12:30 – 2:00 p.m. Eastern, available via telephone seminar or audio webcast.  Here is why you should attend:

Since the passage of the American Taxpayer Relief Act of 2012, plans to minimize estate taxes have been much less important for the majority of Americans. However, higher marginal income tax rates and the “Medicare” tax on net investment income can still negatively affect estates and beneficiaries.

As 2014 draws to a close, what recent tax developments should be considered by estate planners so that they can most effectively assist their clients with wealth management and estate planning? Join veteran estate planners with expertise in taxation issues for an enlightening discussion of caselaw and administrative and legislative changes that affect testators, grantors, and beneficiaries.

November 22, 2014 in Conferences & CLE, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

IRS Tax Tips on Charitable Gift Deductions

Tax QuestionsIn a special edition of IRS Tax Tips released on Monday, the IRS highlights some important rules to be aware of for individuals claiming charitable gift deductions. The tips include how to determine if the charity is a qualified charity for deduction purposes, rules for both monetary and household goods donations, and a reminder to get an acknowledgement statement from the charity as well as other record keeping requirements.

See Jiaqi Wang, IRS Issued Special Edition of Tax Tip for Charitable Gifts, Wealth Strategies Journal, Nov. 19, 2014.

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


November 22, 2014 in Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Friday, November 21, 2014

Holiday To-Dos


The holidays are right around the corner, and now is the best time to work on your retirement finances.  Below is a list of finance needs to get out of the way so you can start enjoying the holidays:

  • 401(k). The current 401(k) contribution limit is $17,500.  For individuals 50 and older, you can add up to another $5,500 as a catch-up contribution.  Right now you should check your 401(k) account to see how much you have contributed since the beginning of the year.  If you have not maxed out your 401(k), this is your last chance to increase your contribution for 2014.
  • Roth IRA. The Roth IRA contribution limit is $5,500 for those under 50. If you are 50 or older the limit is $6,500.  Now is a good time to check your contributions and see if you can add any money to a Roth IRA account for 2014.  By contributing to a Roth, you will never have to pay tax on any gains after you meet withdrawal qualifications.
  • 529 Savings Plan. If you have a child, there is even more savings to do.  If you have any money leftover after taking care of retirement contributions, consider adding to a 529 college savings plan.  This can offset your state income tax and save you some cash next year.  The fund will also grow tax free for the purpose of funding higher education.  Since tuition costs are rapidly increasing, this may not be a bad idea.

See Joe Udo, 5 Financial Matters to Resolve Before the Holidays, Yahoo Finance, Nov. 20, 2014. 

November 21, 2014 in Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Thursday, November 20, 2014

Year-End Tax Tips

Tax planning

As 2014 is headed to a close, year-end tax planning will soon take the stage.  Below are a few strategies that may help in producing substantial tax savings:

  • Trust Distributions. Tax brackets for trust are more compressed compared to brackets for individuals.  Thus, trustees should consider making discretionary distributions of income to beneficiaries at the end of 2014 to reduce taxes. 
  • Harvesting Ordinary Income. This may be considered in order to “fill-up” your marginal tax bracket, which is especially true today with the advent of seven different ordinary income tax brackets. 
  • Harvesting Capital Gains. Taxpayers with a lower long-term capital gain bracket in 2014 should consider selling appreciated assets to take advantage of a lower tax rate. 
  • Harvesting Capital Losses. If a taxpayer recognized capital gains anytime this year, it might be best to harvest capital losses to offset the gains recognized.
  • Charitable Remainder Trusts. Taxpayers planning to make large sales at the end of the year should consider creating a CRAT or CRUT to smooth income. 
  • Charitable Lead Trusts. Consider creating a charitable lead trust (CLT) at the end of the year.  With a CLT, payments are made to the charitable beneficiary and at the end of the term any assets remaining in the trust pass to non-charitable remaindermen with favorable gift tax results.
  • Roth IRA Conversions. Whether a Roth IRA conversion is favorable for a taxpayer is fact dependent.  There are several ways to reduce the cost and risk associated with conversion.  One way to reduce cost is by staging it over several years to hold down the marginal tax rate applied to the conversion amount. 

See Robert S. Keebler, 2014 Year-End Tax Planning, Blog for Estate Planning Professionals, Nov. 3, 2014. 

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

November 20, 2014 in Estate Planning - Generally, Gift Tax, Income Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 19, 2014

Recent Changes That Create Need For Married Couples to Update Wills

MarriedThere have been recent changes to tax laws that create the need for married couples to review their wills, especially provisions intended for tax planning purposes. Here are three major changes that create a need for a reread:

  1. Estate Tax Exemption. In the past 10 years the exemption amount has risen from $600,000 to a little over $5 million this year, changing considerations for estate planning since what may have been a taxable estate when the will was last reviewed may no longer be.
  2. Portability. Now that a surviving spouse can inherit the unused portion of their deceased spouse's exemption, will provisions creating a bypass trust may no longer be needed.
  3. Income Tax. Increased income tax rates create a change in considerations for whether bypass trusts will be beneficial, especially with the addition of the portability option.

See Kirk R. Wilson, Estate Tax Provisions for Married Couples in Recent Wills, Trusts May be Obsolete--Part I, Your Houston News, Nov. 14, 2014.

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

November 19, 2014 in Estate Planning - Generally, Estate Tax, Income Tax, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 12, 2014

529 Rollover Rules

School tuition

In September, a Savingforcollege.com survey found that 21 percent of families with 529 plans were unsatisfied and looking for a new plan. 

Due to the rising costs of college, it is crucial to find a plan that offers good investment options.  If a 529’s performance has been less than average, or the fees are not competitive with that of peer funds, consider rolling the account over to a new 529 plan. 

However, when it comes to switching plans, it is easy to get blind-sided.  Various rules and restrictions can cause the account owner to owe taxes and penalties that could have been avoided. 

Keep in mind a few important details when switching 529 plans.  First, when two plans are based in the same state, switching is an “investment change” and there are no tax penalties.  If you are switching from an in-state to an out-of-state plan, check your plan’s rules to see if you live in a state that requires “recapture” of any tax deductions that you took for your original in state plan.  Second, make sure to read the fine print, as some plans charge a processing fee for rollovers.  These costs can add up, and paying them may not be worth the switch.  Finally, ensure the transaction qualifies as a rollover rather than a distribution. Nonqualified distributions are liable for income taxes plus a 10 percent penalty on the earnings.

See Lindsay Gellman, How to Avoid Taxes, Penalties if Changing 529s, The Wall Street Journal, Nov. 9, 2014.

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

November 12, 2014 in Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 5, 2014

Article on Net Investment Income Tax

Net investment income tax

Mark R. Parthemer (Bessemer Trust) and Sasha A. Klein (Bessemer Trust) recently published an article entitled, Taking Control: Six Notable Strategies to Manage Net Investment Income Tax, Prob. & Prop., Nov./Dec. 2014, at 32.  Provided below is a portion of the article’s introduction:

At this point, many of your clients have filed their 2013 income tax returns—and what an eye-opener it was for some of them!  As advisors, we know 2013 brought with it higher income tax rates and new taxes, including the IRC § 1411 Net Investment Income Tax (NIIT), aka the 3.8% Medicare Surtax.  As a result of this filing season, now your clients do, too!

There has been a large focus by many advisors on NIIT (especially given that it is a relatively small tax at 3.8%).  But a lot of the writing and speaking thus far has been on learning about the tax—when it applies and to what.  As with any new tax, this is an important learning curve, and as the IRS continues to work with advisors on the publication of (so far) two sets of Proposed Regulations and one set of partial Final Regulations, there will be more to learn.

November 5, 2014 in Articles, Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Sunday, November 2, 2014

Tax Breaks for the 20-Somethings

Twenty somethings

For today’s young adults, paying more in taxes can have a devastating effect on their already struggling lifestyle.  Thus, taking advantage of every available tax break is vitally important to starting an independent financial life.  Fortunately, the IRS offers deductions, credits and other tax breaks that have a particular appeal for those in their 20s.  Below are some of the most popular:

  1. Educational Tax Breaks. Since many individuals in their 20s have not finished their education, education-related tax breaks can be valuable.  The American Opportunity Credit pays 100 percent of the first $2,000 and 25 percent of the next $2,000 in expenses for the first four years of college.  Also, the Lifetime Learning Credit will pay you up to 20 percent of eligible expenses of up to $10,000.
  2. Deduct Student Loan Interest. If student loans qualify, you can deduct up to $2,500 in interest on your loans against your taxable income.  Furthermore, you can claim this benefit even if you do not itemize other deductions.
  3. Open a Roth IRA. Oftentimes, early in your career you are in the lowest tax bracket, and opening a Roth IRA is a great way to save for retirement.  With a Roth, you will not get an up-front tax deduction on your contribution, but you also will not have to pay taxes when you withdraw money from your Roth in retirement. 
  4. Get the Retirement Savings Contributions Credit. Another reason to contribute to a Roth is that if you qualify, you can get the Retirement Savings Contribution Credit (Saver’s Credit).  This matches up to 50 percent of your retirement contribution in the form of a tax cut and is designed to offer an incentive to low-income taxpayers to start saving for retirement.  
  5. Earned Income Tax Credit. The Earned Income Tax Credit has become available to people without children and singles making up to $14,590 and joint filers with incomes up to $20,020 can get the credit.  One benefit of the EITC is that it is refundable, meaning you can collect it even if you otherwise do not have tax liability.

See Dan Caplinger, The 5 Best Tax Breaks for 20-Somethings, Daily Finance, Nov. 1, 2014.

November 2, 2014 in Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)