Wills, Trusts & Estates Prof Blog

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

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Friday, August 22, 2014

Understanding FATCA


Enacted in 2010, the Foreign Account Tax Compliance Act (FATCA) is America’s global tax law.  Not only does FATCA effect Americans, but its impact on the world is most astounding.  FATCA requires foreign banks to reveal Americans with accounts over $50,000 and non-compliant institutions could be frozen out of U.S. markets, thus, everyone is complying.  Provided below are a few facts about FATCA:

  1. FATCA Grew out of a Controversial Rule.  In 2009, the IRS struck a deal with UBS for $780 million in penalties and American names.  Since then, for hundreds of Swiss banks taking a DOJ deal, banking is more transparent. 
  2. China and Russia Agreed.  While Russia and China have been notoriously difficult, they are even on board with the agreement. 
  3. FBARs are Required.  FBARs predate FATCA, yet, be ready for duplicate reporting.  FATCA adds to the burden, and does not replace FBARs.  U.S. persons with foreign bank accounts exceeding $10,000 must file an FBAR by each June 30th
  4. No Repeal in Sight.  Republicans have mounted a repeal effort, however, there is no serious effort to repeal FATCA.  Canadians recently filed suit to block FATCA and prohibit handover of U.S. names to the IRS.  The legal claim challenges the constitutionality of the agreement the Canadian government struck with the United States.   
  5. Other Passports Won’t Work.  Dual nationals or U.S. Green Cardholders think they can bypass FATCA by using a non-U.S. passport and non-U.S. address with their foreign bank.  However, this is not possible.  Your bank and IRS will eventually figure it out. 

See Robert W. Wood, 10 Facts About FATCA, America’s Manifest Destiny Law Changing Banking Worldwide, Forbes, Aug. 19, 2014.

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

Wednesday, August 20, 2014

New Intestacy Law in England May Affect Foreign Investors

LawNew intestacy rules will go into effect in England and Wales October 1 of this year and may add additional incentive for U.S. investors with real estate properties in England or Wales to have a valid will in place. The new rules are part of the English Inheritance and Trustees’ Powers Act 2014. Under the new rules if an owner of real estate in England or Wales dies intestate the entire property will pass to a surviving spouse if there is one. If there are children as well as a spouse, then the rules do not change as much. However, the spouse will receive their share absolutely rather than as a life estate.  If these outcomes are not agreeable with an investor’s intentions, then the good news is that foreign wills will be recognized as long as they are valid and executed in the individual’s country of domicile or continuous residence, or where the individual is a national.

See Richard Norridge, Mark Johnson & Gareth Thomas, Changes to Inheritance and Intestacy Rules in England and Wales May Affect Overseas Property Investors, Herbert Smith Freehills, Aug. 12 2014.

August 20, 2014 in Estate Planning - Generally, Intestate Succession, New Legislation, Wills | Permalink | Comments (0) | TrackBack (0)

Friday, August 15, 2014

Missouri Amends State Constitution to Add Protection for Electronic Communication

LaptopDigital asset protection is a growing concern for individuals and planners. Last week, Missouri amended their state constitution to expressly protect “electronic communications and data” from search and seizure the same as other property. However, it is still unclear what the implications of this constitutional addition will be.

See Eugene Volokh, Missouri Voters Amend Constitution to Expressly Protect “Electronic Communications and Data”, The Washington Post, Aug. 6, 2014.

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

August 15, 2014 in Estate Planning - Generally, New Legislation, Technology, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, August 14, 2014

New Law Authorizing Access to Digital Assets

Computer 2On Tuesday, Delaware Governor Jack Markell signed legislation authorizing fiduciaries to access and control digital assets and accounts of those they represent.  The law recognizes that more people are piloting more of their lives online, which can pose challenges when a person dies or becomes incapacitated.  The new law permits fiduciaries to access email, social media, financial management, health care and other digital accounts. 

Developed by the Uniform Law Commission, this law is the first of its kind in the country. 

See Associated Press, Delaware Fiduciaries Gain Access to Digital Assets, The Washington Post, Aug. 12, 2014.

Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing this article to my attention.

August 14, 2014 in Estate Administration, Estate Planning - Generally, New Legislation, Technology, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, August 7, 2014

Auto IRA Bills Face Potential Problem

IRAThere have not been any states to pass a bill that authorizes employers in the private-sector to enroll their employees in IRA plans automatically. The idea is catching on though, with four states initiating studies on the issue, and 17 states considering passing a law to allow the practice. However, 14 of these states will have conflicting laws on the books if they do pass auto IRA legislation, as those 14 states currently have a law that requires an employee to first authorize any deductions that are taken by an employer.

See John Iekel, State Auto IRA Bills Face an Inconvenient Wrinkle, July 18, 2014.

August 7, 2014 in Estate Planning - Generally, New Legislation, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 6, 2014

Estate Tax Elimination Battle Continues

Estate tax2

With the upcoming election, many people believe that the latest Republican attempt to repeal the estate tax is purely a political ploy. 

The estate tax may not even have any real benefit to the government.  It raised just $13.7 billion last year, which is just a tiny fraction of the federal tax revenues.  The Congressional Joint Committee on Tax has issued numerous reports during the years that state and estate tax is actually a net revenue loser for the government.

Proponents of the estate tax claim it is necessary because it keeps wealth from accumulating in too few hands.  Yet, opponents claim the opposite happens because of the estate tax.  Since larger taxable estates use tax-exempt foundations, they not only hold wealth but also avoid both the estate tax and income tax to keep on accumulating more wealth. 

Meanwhile, those running for Congress will anticipate estate tax antagonists to keep the campaign contributions to keep coming. 

See Dennis Kleinfeld, Is Estate Tax Repeal Fight a Shakedown? Money News, Aug. 4, 2014.

August 6, 2014 in Estate Planning - Generally, Estate Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Digital Assets Bill Pending Signature in Delaware

LaptopAs I have previously discussed, a bill on digital asset access for executors is pending in Delaware. The bill has passed the Delaware Legislature and the bill’s fate is now up to Governor Jack Markell. The bill is similar to the model law for digital asset treatment after the death of the account holder. Like the model law, the Delaware bill gives the executor of an estate access to digital assets even if the “terms of service” for the account say otherwise. The individual can still choose for a different outcome than the default rule that the bill will create by specifying their wishes.

See Jenni Bergal, Access to Online Accounts of Deceased Not a Given, The Columbus Dispatch, August 3, 2014.

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

August 6, 2014 in Estate Administration, Estate Planning - Generally, New Legislation, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Saturday, August 2, 2014

Abolishing the Medical-Device Excise Tax

Obama signs

Many people wonder why the medical-device excise tax still exists.  The tax is universally despised since it is an Obamacare revenue raiser, taking 2.3 percent off the sales of medical devices in the United States.   Outside liquor and tobacco, many Americans do not suffer excise taxes, which are imposed on gross sales, notwithstanding of a company’s profitability. 

Repealing the excise tax has bipartisan support in both the House and Senate.  Since the tax took effect in 2013, research has confirmed that domestic sales were suffering for medical devices.  For example, Johnson & Johnson’s medical device and diagnostic sales were down 1.5 percent in the U.S. in the first half of 2014.  In order to protect American jobs and medical innovation, there needs to be a new approach.

See John Graham, Repealing the Medical-Device Excise Tax: Next Steps, Forbes, Aug. 1, 2014. 

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

August 2, 2014 in Estate Planning - Generally, New Legislation | Permalink | Comments (0) | TrackBack (0)

Thursday, July 31, 2014

House Passes Charitable Giving Tax Breaks

LawThe “America Gives More Act of 2014” passed in the House earlier this month. If passed the act will extend the charitable IRA rollover and the enhanced conservation easement breaks which have expired. The act would also enact two new charitable giving tax breaks, which include extending the time to make charitable gifts to the tax return due date and changing the two tier excise tax for investment earnings by private foundations to a flat 1% rate.

 See Ashlea Ebling, 4 Charitable Giving Tax Breaks in Play, Forbes, July 18, 2014.

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

July 31, 2014 in Estate Planning - Generally, Gift Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 30, 2014

Rules of Rollovers


Until recently, if you owned more than one IRA, you could rollover each once a year.  However, thanks to a U.S. Tax Court opinion, IRA certificate of deposit rollovers could be “very risky” for older investors. 

The court ruled that the once-a-year rollover limit applies to the investor, not to the individual IRA; thus, no matter how many IRAs you own, only one rollover is permitted in any 12-month period.  The IRS announced that this ruling would not take effect until 2015. 

To avoid problems you can use a direct IRA-to-IRA transfers rather than 60-day rollovers.  With a transfer, the firs bank with the maturing CD sends the money directly to the second bank, and you are never in possession of the money.  “You can make as many direct transfers in a year as you want without any worries.”

Although the IRS will not immediately enforce the rule, experts encourage IRA owners to follow it immediately.  It is unclear when the 365-day clock begins.

See Susan B. Garland, Avoid Rollovers of IRA CDs, Dallas News, July 29, 2014.

July 30, 2014 in Estate Planning - Generally, New Legislation, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)