Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Thursday, July 2, 2015

DuPont Beneficiary Accuses Bank Of Trust Mismanagement

GavelAn heiress of the famed DuPont family is suing M&T Bank, as successor to the bought out Wilmington Trust Co., for mismanagement and unjust enrichment in connection with several trust managed by the bank. The heiress alleges that the bank intentionally invested in illiquid funds in order to profit from management fees gained from property that needed little oversight. She also accuses the bank of taking funds from other, unrelated trust for payment on a loan the bank made to her that was secured by a specific trust worth and had never been in arrears. Damages sought include the disgorgement of all profit made from the trust and the removal of the bank as trustee.

See Maureen Milford, Du Pont heiress paints unflattering picture of Wilmington Trust, Delaware Online, June 13, 2015.

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

July 2, 2015 in Estate Administration, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Wednesday, July 1, 2015

IRS Set To Issue New Regulations Taking Away Key Estate Planning Tactic

Beyer Blog IRS LogoSetting up a family partnership or LLC and transferring assets to the entity is a popular estate planning tactic. The transfer of certain assets that are considered illiquid, such as minority shares in a family corporation, receive a discount on the value of the asset. This tactic was originally created to protect the family of a minority share holder from having to sell for a bad deal in order to pay an inflated tax bill. However, estate planners seized on the rule and began to create entities that, while technically in compliance, violated the spirit of the valuation break by transferring items like a personal art collection and still getting the discount. The new regulations are expected in September and many planners are having clients form the entities now in order to protect against any changes.

See Robert Milburn, IRS Considers New Tax on Wealthy Families, Barron's, June 30, 2015.

July 1, 2015 in Estate Planning - Generally, Estate Tax, Income Tax, New Legislation | Permalink | Comments (0)

Friday, June 26, 2015

New Tax Policies Changing The Way People Plan For Retirement

ScaleThe American Taxpayer Relief Act of 2012 (ATRA) is introducing new top income and capital gains tax rates that will change the way people plan for retirement.  The new law will also phase out itemized deductions and personal exemptions for high income earners.  With new higher tax rates being implemented, wealthy couples and individuals are going to have to come up with new investment strategies.  This column examines the different ways people are going to have to adapt to the tax policy changes being made by ATRA.  For example, higher income tax payers will have to be careful that the distributions from a retirement account do not place them into a higher tax bracket.  Investors might also consider using the IRS section 1031 “like-kind” exchange provisions to offset the new top capital gains tax rate of 20%.  Estate planners will also need to advise clients to plan ahead for the personal exemption phase-out and itemized deduction limitations that the ATRA imposes. 

See Robert Powell, Higher tax rates force retirement redo, Market Watch, March 5, 2013.

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

June 26, 2015 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Thursday, June 25, 2015

The Tax Issues A Person’s Estate Will Face After Death

Tax frustrationWhen a person dies their estate could be subjected to a wide range of tax liabilities.  Even though most estates will not meet the minimum threshold needed to be liable for the Federal estate tax, they could still be on the hook for other state and federal taxes.  Some states have their own estate taxes, and there are also income taxes imposed on heirs who inherit certain retirement accounts. 

Heirs could face even more tax liabilities in the future if congress gets rid of the “stretch” IRA, which currently allows the IRA beneficiary to draw down on the account over time at a slow pace.  If this “stretch” IRA disappears then the beneficiaries would have to draw down on the IRA account within five years of the decedent’s death which could push them into a higher tax bracket.  This column gives advice on various techniques that could be used to avoid or minimize these potential tax liabilities.   

See Jonathan Clements, Another reason to worry about dying: taxes, Market Watch, June 15, 2015.

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

June 25, 2015 in Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Wednesday, June 24, 2015

Estate Planning Advice For Same-Sex Couples

Same sex coupleThe legal landscape that same-sex couples often face on a variety of estate planning issues is murky.  Financial advisers need to stay abreast of the latest legislative and legal developments at both the state and federal level.  Some of the estate-planning issues that affect same-sex couples include things like social security, pensions, taxation, wills, and trusts.  It is important for financial advisers to have a strong grasp of the state laws relating to all of these issues, state policies are not consistent, and estate planners will need to understand the local regulations.  The national policies governing same-sex relationships are going to continue to change with future court decisions.  Estate planners will need to have the latest information to provide better advice to clients who are in same-sex relationships.   

See Mark P. Cussen, Top Retirement Planning Tips For Same Sex Couples, Investopedia, June 23, 2015.  

June 24, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Monday, June 22, 2015

How A Charitable Remainder Unitrust (CRUT) Might Be A Good Investment Strategy

Estate planningThe Charitable Remainder Unitrust (CRUT) is making a comeback as families are looking for ways to bypass some of the taxation issues facing traditional IRA’s.  Distributions from a traditional IRA are taxed at regular income tax rates.  Families could stretch an IRA to get years of tax-deferred growth, but people often do not appreciate the tax issues and it is human nature to want to cash out. 

A CRUT can solve many of the problems that come up with traditional IRA’s.  A person should include a provision for a ‘testamentary’ CRUT in their Will and then name the CRUT as the beneficiary on their IRA form.  The CRUT will make annual payments to the designated heir or heirs for a fixed number of years, with the listed charity receiving the remainder.  One other benefit is that large charities that are named as beneficiaries will often manage the trust for free. 

See Ashlea Ebeling, The Charitable IRA Stretch For Kids, Siblings, Parents, Forbes, June 17, 2015.

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

June 22, 2015 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

Thursday, June 18, 2015

What Would Tax Policy Be Under A Trump Administration

Cutting TaxesNow that noted reality television personalty and king of the comb-over Donald Trump has announced for the Republican presidential nomination it is time to take a look at his tax plan.Trump has evolved over the years with his proposals in the late 90's looking to impose a large wealth tax on all estate worth over $10 million to massive tax cuts today. His current plan, the parts that have been revealed at least, seem committed to large tax cuts across all brackets, elimination of corporate and estate taxes, and reduction in the capital gains rate. No part of the plan explained how to pay for the tax cuts and the campaign has not given any indication an explanation will be given.

See Tony Nitti, Donald Trump Announces Bid For Presidency: What Is His Tax Plan?, Forbes, June 16, 2015.

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

June 18, 2015 in Current Affairs, Estate Tax, Income Tax | Permalink | Comments (0)

Tuesday, June 16, 2015

IRS Has Released Estate Tax Exemption Final Portability Rules

IRSThe Internal Revenue Service has issued final rules regulating the portability of a deceased spousal unused exclusion (DSUE) amount to the surviving spouse.  This final rule will apply to the estates of individuals who die on or after June 12, 2015.  The new regulation will also grant an extension for electing portability to estates that fall below the threshold listed in Sec. 6018 of the Internal Revenue Code.  “In addition, the final regulations include changes that clarify certain rules about the application of the portability rules to qualified domestic trusts, the availability of a DSUE amount by a surviving spouse who becomes a citizen of the United States, and the impact of credits in Secs. 2012 through 2015 on computing the DSUE amount.”

See Sally P. Schreiber, J.D., IRS issues final portability rules for estate tax exemptions, Journal of Accountancy, June 15, 2015.

June 16, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0)

Monday, June 15, 2015

How The Upcoming Supreme Court Same-Sex Marriage Decision Will Affect Couples

Same-sex marriageThe Supreme Court will come out with a decision this month that could potentially legalize same-sex marriage marriages nationwide.  If the Supreme Court does rule in favor of same-sex marriage it will impact affected couples in a number of ways.  Married same-sex couples will be able to file joint tax returns.  The upcoming Supreme Court decision would also cause major changes in the way States will treat same-sex estate planning and divorces.  Same-sex couples would also be treated equally to heterosexual couples on matters dealing with social security and veterans’ benefits.  A change in the law would also give same-sex spouses the ability to make important medical decisions. 

See Tara Siegel Bernard, The Same-Sex Marriage Decision: What’s at Stake for Couples, The New York Times, June 14, 2015.

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

June 15, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Guardianship, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Friday, June 12, 2015

The Benefits Charitable Donations Have On Estate Planning

DonateDonating assets to charity is not only a good way to give back to society, charitable giving can also have financial benefits for estate planning.  The IRS permits taxpayers to deduct charitable donations up to 50% of their adjusted gross income.  A taxpayer can reduce his or her taxable income by itemizing charitable deductions.  Being able to deduct charitable donations from taxes can give a client the freedom to use their assets to support causes that are important to them.  The Client can set up a charitable trust that could be viable for a long length of time, thus teaching future heirs the benefits of charitable giving.  The financial and philanthropic benefits of charitable giving for both estate planning and the greater good of society are too numerous to pass up. 

See Jason Notte, Why Charitable Donations Are Great for Your Retirement and Estate Planning, The Street, June 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.

June 12, 2015 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)