Wills, Trusts & Estates Prof Blog

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

Monday, January 1, 2018

Why the New Tax Bill May Drive Retailers to Hire Less, Automate More

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-31/863fccf6-32d7-410e-9787-d42913ec04f5.pngCompanies like Amazon and Wal-Mart have been attempting for years to integrate automation into their warehouses and brick-and-mortar stores to better mitigate the high cost of labor. The capital expenditures required for increasing automation can be incredibly expensive and are not always worth the outlay. Under the Tax Cuts and Jobs Act, companies can now immediately write off the cost of new equipment instead of being required to do it over an extended period of time. This provides some incentive to further automation efforts now while the deductions are still allowed. Corey Goodman, a partner specializing in tax at Cleary Gottlieb Steen & Hamilton, noted that if the “prices of equipment don’t change, you might see companies accelerate plans to buy equipment they were already thinking about buying.” With these sweeping changes in the tax code, retailers may intensify efforts at decreasing labor costs via automation, which may subvert the administration’s efforts at increasing available jobs.

See Lauren Hirsch, Why the New Tax Bill May Drive Retailers to Hire Less, Automate More, CNBC, December 28, 2017.

January 1, 2018 in Current Events, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Sunday, December 31, 2017

New Tax Plan: Here’s What You Should Know

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-30/b5e7f5fe-5e65-46a5-83f6-d8d9a9ea78d8.pngThe passage of the Tax Cuts and Jobs Act represents the most sweeping tax code revision in decades. Most of its provisions will take effect in January of 2018, with many expiring after 2025 and none effecting taxpayers’ 2017 tax returns. Some of the major provisions are: 1) a change in tax brackets, 2) an increased standard deduction, 3) the reduction or elimination of some itemized deductions, 4) an increase in the child tax credit, 5) the elimination of the dependent deduction and personal exemption, 6) a change to the Alternative Minimum Tax, 7) changes to the treatment of income generated by pass-through entities, and 8) a lower corporate tax rate. It is important for investors to remain resolute in the face of these substantial changes and to remember the effect on personal tax liability depends upon individual circumstances.

See Hayden Adams, New Tax Plan: Here’s What You Should Know, Charles Schwab, December 20, 2017.

December 31, 2017 in Current Events, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Saturday, December 30, 2017

Tax Changes Are Coming on Monday: Here’s When It Will Affect You

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-29/ac447468-2303-44a2-9820-54399dabafc6.pngA number of changes borne of the updated tax code are slated for delivery on Monday. The bill adds exemptions and makes cuts to the corporate, individual, and international tax rates, but only a few of these provisions are actually permanent. The individual tax cut, an increased exemption for the alternative minimum tax, a doubled exemption for estate taxes, and the expanded child tax credit all go into effect on Monday and they all expire by 2025. Starting in 2019, alimony payments will no longer be deductible for newly-divorced couples and the individual mandate for the Affordable Care Act will be repealed. Finally, beginning in 2022, companies may no longer immediately write off their entire research and development expenses. Instead, companies will have to spread those costs over a span of five years.

See Michael Sheetz, Tax Changes Are Coming on Monday: Here’s When It Will Affect You, CNBC, December 28, 2017.

December 30, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Legislation | Permalink | Comments (0)

Friday, December 29, 2017

Clawback Under New Tax Law

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-29/a7745b54-dc00-4a44-8a5c-e11196607c47.pngIn 2012, the Senate introduced a bill designed to address problems caused by the constantly shifting estate and gift tax thresholds. Despite the potentially severe consequences this issue can cause for an individual taxpayer, under the new tax law, the Senate allows the IRS to handle the problem rather than adopting language from the 2012 bill. A possible reason for failing to adopt the provision is that the 2012 bill language may have been too insubstantial. If the 2012 bill language had been adopted, it would be possible for a taxpayer to distribute $11 million to his children while alive and then die in 2026, when the exclusion amount has reverted to an inflation-adjusted $5.5 million, with no estate tax consequences. But, if the same taxpayer had given his children $5.5 million while living and subsequently passed away in 2026 with a $5.5 million estate, he would be subject to a 40% estate tax. At face value, this system appears unbalanced and likely deserves more consideration.

See James G. Blase, Clawback Under New Tax Law, Wealth Management.com, December 27, 2017.

December 29, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Tuesday, December 26, 2017

New Rules, New Opportunities: What Financial Advisors Need to Know About the Tax Cuts and Jobs Act

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-25/b6d7b11e-cf57-4ccd-96ed-f96d0e047d8f.pngThe passage of the Tax Cuts and Jobs Act (TCJA) represents a veritable overhaul of almost every aspect of the U.S. tax code. The bill will take effect at the start of the year, raising the estate tax exemption, lowering the corporate tax rate, eliminating many itemized deductions, and creating a new deduction for pass-through income. The sheer size of the bill and the haste with which it was passed likely means the implications of its passage will not be fully realized for quite some time. Regardless, the impact of the new law on the economy and the stock market is sure to be substantial. A number of companies, AT&T and Wells Fargo among them, have already announced they will increase wages and bonuses for their employees in response to the law.

For wealth planners and advisors, the TCJA offers a number of opportunities. First, the 20% deduction for pass-through entities may make it worthwhile to reclassify income as deriving from a stake in a pass-through business structure. Next, the increased threshold for the federal estate tax exemption creates a window of opportunity for creating dynasty trusts. Finally, tax planning has an increased sense of urgency as taxpayers may now only deduct $10,000 in local and state taxes. In high-tax states, utilizing trusts to decrease tax liability is much more appealing and worthwhile.

See Jennifer Kelly, New Rules, New Opportunities: What Financial Advisors Need to Know About the Tax Cuts and Jobs Act, Wealth Advisor, December 21, 2017.

Special thanks to Jerry Cooper for bringing this article to my attention.

December 26, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Income Tax, New Legislation, Trusts | Permalink | Comments (0)

Sunday, December 24, 2017

Congress Votes on Tax Bill: What the ‘Tax Cuts and Jobs Act’ Means for You

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-24/8c4a83ab-9599-419b-aaf8-bddfdcbff9fb.pngPresident Trump signed tax reform legislation into law on Friday, which marked his first major legislative victory since taking office. The bill passed through the Senate with a narrow 51 to 48 vote. The bill reduces the corporate tax rate from the current 35% to 21%. It keeps seven tax brackets for individuals, but reduces rates in five. The Affordable Care Act’s penalty for failing to carry insurance has been removed, the estate tax exemption levels have doubled, and local and state property tax deductions are allowed up to $10,000.

See Madeline Farber, Sam Chamberlain & Kaitlyn Schallhorn, Congress Votes on Tax Bill: What the ‘Tax Cuts and Jobs Act’ Means for You, December 22, 2017.

December 24, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Income Tax, New Legislation | Permalink | Comments (0)

Thursday, December 21, 2017

Middle Class to Get 23% of Tax Cuts for Individuals Under GOP Bill

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-20/46cb71e4-453d-431c-b863-235148a3e276.pngThe most recent version of the House’s rejected tax reform bill aims to provide middle-income households with over $60 billion in tax cuts by 2019. Congress’s Joint Committee on Taxation released its analysis of the bill late Monday. The data show that 23% of the proposed cuts will go directly to individuals. The calculations leading to this conclusion are based on households earning between $20,000 and $100,000 per year, which account for nearly half of all U.S. tax filers.

See Siobhan Hughes & Shayndi Raice, Middle Class to Get 23% of Tax Cuts for Individuals Under GOP Bill, Wall Street Journal, December 19, 2017.

December 21, 2017 in Current Events, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Wednesday, December 20, 2017

House to Vote Again on Tax Overhaul After Senate Glitch

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-20/369c4da2-da00-45e2-8951-0c49ac8194e9.pngThe Senate was unable to accept some provisions included in the House’s version of tax reform legislation. Specifically, the Senate stuck down provisions concerning the taxation of college endowment funds and tax-advantaged college savings accounts. This hiccup is an embarrassment to Republican lawmakers, who jubilantly celebrated as they sent the bill to the Senate for a vote. Democrats have pointed to the stall of the bill as an indication that it is being pushed through the process with too much haste. Oddly, this complaint rings eerily familiar, as many Republicans highlighted the parallels between feeding the goose for foie gras and the passage of the Affordable Care Act. Still, the Senate’s passage of the bill looks relatively certain once the distasteful provisions are removed.

See Brian Faler, House to Vote Again on Tax Overhaul After Senate Glitch, Politico, December 19, 2017.

December 20, 2017 in Current Events, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Thursday, December 14, 2017

The Finance 202: Senate to Draw Red Line on Estate Levy as Part of Tax Negotiations

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-14/92dd7887-6a01-4b17-b7b1-3f779bba837d.pngThe tumultuous travels of the tax reform bill are not quite yet at an end. House Republicans have drawn the proverbial line in the sand regarding the estate tax. They are pushing for full repeal while the Senate is only willing to double the exemption limits. Republican leaders may note this split as a nonstarter, as the margin for error in the Senate is extremely thin. As it stands, the Senate can only lose two votes and still manage to pass the bill. Sen. Susan Collins (R-Maine) highlighted this issue in a statement while on CBS’s “Face the Nation”: “I always wait until the final version of the bill is brought before us, before I make a final decision on whether or not to support it. There are major differences between the House and Senate bills. And I don't know where the bill is going to come out.”

See Tory Newmyer, The Finance 202: Senate to Draw Red Line on Estate Levy as Part of Tax Negotiations, The Washington Post, December 11, 2017.

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

December 14, 2017 in Current Events, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Wednesday, December 13, 2017

The Death of Tax Deductions? Actions to Consider Before Year End

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2017-12-13/f5b22cf6-8a3c-44ef-8dd9-b178fbacea83.pngThe narrowly-approved tax bill that just passed through the Senate offers a number of potential benefits in addition to possible drawbacks. Many taxpayers may face lower overall tax rates, but those who rely heavily on exemptions and itemized deductions may not be quite as fortunate. These individuals may be subject to higher tax rates in 2018 and beyond. To prepare for these possible changes, it might be a good time to consolidate a few years of charitable gifts, pay property taxes early, and pre-pay state income taxes. With significant implications for some taxpayers, it is important to devise a strategy to accommodate the looming tax reform.  

See Craig Richards, The Death of Tax Deductions? Actions to Consider Before Year End, Fiduciary Trust International, December 7, 2017.

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

December 13, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | Permalink | Comments (0)