Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Monday, March 2, 2015

IRS Letters to Watch for and Answer Promptly

WriteWhile all letters received from the IRS should garner careful attention, some carry more quickly approaching deadlines and serious consequences if ignored. Here are three important letters that the IRS sends that require prompt attention:

  • Statutory Notice of Deficiency, which can be disputed if a Petition is filed within 90 days.
  • Final Notice of Intent to Levy, or Letter 1058, which can be appealed within 30 days.
  • Trust Fund Recovery Penalty, or Letter 1153, which can be appealed within 60 days.

See Paul G. Topolka, Tax Alert: Three Critical Letters from the IRS, Nexsen Pruet, Feb. 19, 2015.

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

March 2, 2015 in Income Tax | Permalink | Comments (0) | TrackBack (0)

Sunday, March 1, 2015

3 Roth IRA Considerations

Roth ira

There is no better way to secure your financial future than by taking advantage of the tax benefits offered by a Roth IRA.  These retirement accounts do not allow you to deduct contributions up front, but enable you to make tax-free withdrawals in retirement.  Before opening a Roth, learn the associated rules and limits.  Here are a few things to know:

  • Mind the Cap.  If your annual income is in the six figures, you may not be eligible to contribute to a Roth, because the IRS limits the use of Roth IRAs to those whose income falls below a certain threshold. 
  • Tax Breaks.  Roth IRAs do not offer an up-front tax break, so benefits of tax-free withdrawals can only be realized if your tax rate will be higher in retirement than it was when you were working. 
  • Health History.  By choosing a Roth IRA instead of a traditional IRA, you are assuming that you will live long enough to enjoy the tax benefit of those tax-free withdrawals.  It is important to consider your health and your likelihood of living decades into retirement, especially if you will be relying on Roth IRA withdrawals for income.

See Todd Campbell, 3 Things You Should Consider Before Contributing to a Roth IRA, The Motley Fool, Feb. 28, 2015.

March 1, 2015 in Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Friday, February 27, 2015

New York Takes Aggressive Stance on Residency

TaxesThough it is unclear whether tax related influences are the reason 55,000 individuals move from New York to Florida each year, New York is taking an aggressive stance on ex-New Yorkers when it comes to state taxes. The state puts the burden of proving non-New York residency on those that move and do not pay state income taxes, and in some cases that means proving location outside of the state for over half of the year down to each day. This can be a difficult task of trying to track down receipts and phone records to prove one's daily location.

See Bloomberg News, How New York Hunts Down Tax Refugees, Financial Advisor, Feb. 26, 2015.

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

February 27, 2015 in Income Tax | Permalink | Comments (0) | TrackBack (0)

Income Tax Regulations Draw Attention at Heckerling

TaxesAs I have previously discussed, income tax issues were a major focus at the 49th Annual Heckerling Institute on Estate Planning. One area of focus was recent income tax guidance from the IRS relating to trusts and estates issues, including final regulations on Section 1.67-4, which discusses the 2-percent floor in connection to estates and trusts.

See Kevin Matz, A View From the Audience at Heckerling: Part III, Wealth Management, Feb. 26, 2015.

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

February 27, 2015 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, February 23, 2015

Income Tax and Flexible Strategy Were Focus at Heckerling Institute

Estate PlanningThe most recent Heckerling Institute on Estate Planning, which marked 49 years of the Institute, focused on the importance of income tax in estate planning. An additional focus was on minimizing state estate taxes. With the focus on taxes, which are a quickly changing landscape, a flexible approach to estate planning that considered individual situations was highly preferred.

See Kevin Matz, A View From the Audience at Heckerling: Part I, Wealth Management, Feb. 18, 2015.

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

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

Monday, February 16, 2015

Tips on 2015 Capital Gains

Tax CutHere are some tips for tax planning on capital gains in 2015:

  • Know the trade date of the property before selling to determine whether it will be treated as a capital gain.
  • Carefully weigh which cost basis calculation method is preferable, such as the common First In, First Out.
  • Consider selling securities at a loss to cancel out gains.
  • Keep records of the purchase price and date for securities.
  • Consider taking greatly appreciated securities to the grave.

See Mark P. Cussen, Capital Gains Taxes in 2015, Investopedia, Feb. 12, 2015.

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

February 16, 2015 in Income Tax | Permalink | Comments (0) | TrackBack (0)

Saturday, February 14, 2015

Walmart Offers Direct2Cash Service for Tax Refunds

Tax RefundA new service is being provided by Walmart this tax season. The service is called Walmart Direct2Cash and allows customers to receive their tax refunds in cash by picking them up from a Walmart store. Walmart is not charging a fee for the service, but tax preparers that offer the option may charge up to $7 for the service.

See, Walmart Launches First-of-its-Kind Cash Pickup Option for Tax Refunds, Market Watch, Jan. 20, 2015.

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

February 14, 2015 in Income Tax | Permalink | Comments (0) | TrackBack (0)

Article on State Taxation of Trusts

John McGownJohn McGown, Jr. (Hawley Troxell Ennis & Hawley LLP, Boise, Idaho) recently published an article entitled, State Taxation of Trusts and Their Beneficiaries When There Are Multiple State Contacts, 39 ACTEC Law Journal No. 3 (Winter 2013).  Provided below is the introduction of the article:

This article examines the state income taxation of testamentary trusts and individual trust beneficiaries when there are multiple state contacts. For matters of illustration, the focus is on states comprising the Northwest Idaho, Wyoming, Montana, Washington, Oregon, Nevada, and Utah. Since three of these states have no individual income tax, the essence of the inquiry is limited to the state income tax systems of Idaho, Utah, Montana, and Oregon. Although the focus is on states in the Northwest, the concept applies nationwide. Before moving on to an examination of the state taxation topic, a review of the basic federal system of taxing trust income may be beneficial.

February 14, 2015 in Articles, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, February 13, 2015

2014 Qualified Adoption Expenses Form

Tax CreditThe current version of Form 8839 and instructions for 2014 has been released by the IRS. The updated form entitled Qualified Adoption Expenses, includes the updated maximum adoption credit and exclusion amount currently at $13,190 per eligible child.

See Amy M. Gordon, Changes to IRS Form for Qualified Adoption Expenses, Mondaq, Jan. 20, 2015.

February 13, 2015 in Income Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, February 12, 2015

Planning for Cohabiting Couples

Single

Fewer young people are taking the trip down the aisle, opting instead to cohabitate.  This is creating a variety of unique planning concerns. 

Data from the Pew Research Center showed that in 2012, 20 percent of American adults over 25 had never been married., compared to just 9 percent in 1960. Pew also pointed out that not all of these individuals are single: About 24 percent of Americans aged 25 to 34 who have never been married are currently cohabitating with a partner.  While the IRS may deem them single, they really are not. 

For some people, it can pay to be single as high-earners will be subject to higher taxes upon getting hitched.  Being single in the eyes of the law makes sense for a couple who might prefer to keep assets separate.  Furthermore, if you are not married to your long-term partner, and have a child from a previous relationship, the partner’s assets will not count for financial aid purposes. 

Despite some of the incentives to be single, clients who cohabitate would be incorrect to believe they have protection under state law.  Domestic partnership agreements can help address some of the thorny issues around what happens if there is a split.  Another important protection measure is to ensure the committed couple addresses each other in documents for power of attorney and health care proxies.  Asset titling and beneficiary designations are also important. 

See Darla Mercado, Declining Marriage Rates Present A Planning Conundrum for Long-Term Couples, Investment News, Feb. 9, 2015.

February 12, 2015 in Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)