Wills, Trusts & Estates Prof Blog

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

Thursday, December 3, 2020

14 important end of year tax planning tips

TaxesAlthough the end of the year is approaching, there are still financial steps that you can take to set yourself up for tax savings. 

Discussed below are 14 tax planning tips that you can use before the end of the year.

1. Qualifying for a QBI Deduction

The Qualified Business Income deduction can be used for owners of many pass-through businesses. 

2. Analyzing Cost Segregation

"Cost segregation is a tax planning tool that accelerates the rate of depreciation of property components to thereby lower the amount of taxable income."

3. Carrying Back Net Operating Losses

4. Converting to a Roth IRA

5. Transferring to an Irrevocable Trust

6. Establishing Profit Sharing and Defined Benefit Plans

7. Funding an Employer-Sponsored 401(k) Plan

8. Claiming Disaster Loss Funds

"As all 50 states, the District of Columbia, and five U.S. territories were declared disaster areas resulting from the COVID-19 pandemic, every U.S. business may be eligible for refunds from certain types of disaster losses."

9. Setting Up a Charitable Trust

10. Looking into Tax-Loss Harvesting

11. Contributing to 529 Plans

12. Accelerating AMT Refunds

13. Maximizing Flex Savings Account

14. Gifting Funds to Children and Grandchildren 

If you believe that any of these strategies will be useful for you in tax planning, or want to find which strategies best fit your plan, you should talk to a financial advisor who can advise you accordingly.

See Syed Nishat, 14 important end of year tax planning tips, Wall Street Alliance Group, November 11, 2020.

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

December 3, 2020 | Permalink | Comments (0)

How Ancestry Kits Upend Estate Plans and Create Estate & Trust Litigation

Estate planningThe blog post discussed below is best enjoyed if preceded by Family History of the Smiths and Alexanders.

Randall, son of Johnny, gave his sister Twyla a 23 and Me ancestry kit as a gift in order to learn more about their genes. The gift came after their father (Johnny) became sick with Alzheimer's. After Twyla took the test, Stevie Jenkins appeared after her results revealed that she was Twyla's half sister. Stevie happened to show up at the time Johnny's estate was being probated. 

Since Stevie's existence was unknown to the Personal Representative, she was not given notice of the estate being probated. If the estate is still open (it appears to be) Stevie would need to prove that she is Johnny's daughter, which could be done using a DNA test. If Stevie is Johnny's daughter, she could argue that she is entitled to a portion of Johnny's estate as an "omitted heir." 

In order to be successful, Stevie would need to show, "Stevie would need to prove either (1) she was born (or adopted) after Johnny executed his Will in April 2013 (making Stevie about seven years old, which is unrealistic); or (2) Johnny believed Stevie to be dead. It is unclear on the facts provided whether Johnny knew of Stevie’s existence, but Stevie would need to try to prove that Johnny believed she was dead." 

Stevie could also look for broad language that would allow her to fit herself into the Will. 

As crazy as this situation appears, it is not uncommon. Ancestry kits have allowed people search their family history, bringing up siblings and other family members that they may have never known about. Thus, family secrets have come to light which may often lead in litigation and family battles over estate shares. 

See Ann Hetherwick Cahill, How Ancestry Kits Upend Estate Plans and Create Estate & Trust Litigation, Burns & Levinson: Beyond the Will Blog, November 26, 2020. 

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

December 3, 2020 in Estate Administration, Estate Planning - Generally, Science | Permalink | Comments (0)

Wednesday, December 2, 2020


Estate planningOn November 17, 2020, the Treasury Department and the IRS released their Priority Guidance Plan for the 12 months from July 2020 through June 2021. 

The American College of Trust and Estate Counsel (ACTEC) posted an overview of what the Treasury and the IRS will focus on for the next seven months. 

Part 1 of the plan is titled "Implementation of Tax Cuts and Jobs Act (TCJA)" and contains 38 items. Of the 38 items, there are two in particular that will interest estate planners. 

Item 4 of Part 1 will have some focus on the deduction of estate and trust expenses. The item includes Notice 2018-61 which was originally published on July 30, 2018, which stated, "“the Treasury Department and the IRS intend to issue regulations clarifying that estates and non-grantor trusts may continue to deduct expenses described in section 67(e)(1)” despite the eight-year “suspension” of section 67(a) in the 2017 Tax Act by new section 67(g)." 

Item 33 of Part 1 provides "significant reinforcement for the proposition that the death of the grantor does not by itself cause the recognition of gain with respect to appreciated assets held in a grantor trust."

The Priority Guidance Plan also includes information on burden reduction, relief regarding GST exemption allocations and elections, and more general guidance. The ACTEC website also provides information on omissions from the Priority Guidance Plan. 

The aforementioned information and more is available in the source cited below. 

See 2020-2021 TREASURY-IRS PRIORITY GUIDANCE PLAN, The American College of Trust and Estate Counsel, November 30, 2020. 

December 2, 2020 in Current Events, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)

Rich get richer? Here’s the math

RichEconomic inequality has been a prevalent issue in our country for a long time, but according to Brookings, coronavirus has led to "the most unequal [recession] in modern U.S. history." 

Due to the inequality, the old saying "the rich get richer" has never rang more true. A study from the International Monetary Fund showed that one major factor for the widening divide is that the wealthy invest better. 

Bigger and better investments lead to bigger and better returns. "The numbers show that someone in the 75th percentile of wealth distribution investing $1 in 2004 would have yielded a 50% return to $1.50 by the end of 2015. The elite in the top 0.1% would have yielded a return of 140% to $2.40 on that same dollar." 

The wealthy tend to earn higher returns even on their more conservative investments. 

Malacrino also suggests that financial sophistication, financial information, and entrepreneurial talent are also important factors. These factors also make returns more persistent over time. 

 See Shawn Langlois, Rich get richer? Here’s the math, Market Watch, November 30, 2020.

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

December 2, 2020 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, December 1, 2020

Man who became a millionaire after living on $200 a month says these are the downsides of a windfall

LorenLoren Krytzer's life changed when he sold an old family heirloom: a Navajo blanket from the 1800s. Turns out the blanket was worth $1.5 million. 

Prior to selling the blanket, Loren was unemployed and survived off of monthly disability checks. Loren lost his leg in a terrible car accident that was nearly fatal. It is safe to say that the sale of the blanket saved Loren's life has he want from a little shack in California to a $250,000 home. 

However, Loren made it clear that windfalls do come with unexpected challenges like "tax hurdles and family drama." 

Loren stated that he is losing close to $10,000 a year in insurance and property taxes. Also, Loren's disability checks were cut off and with no source of income, he will have to move somewhere with a lower cost of living. 

Loren stated that him and his wife are planning on selling their house and moving to Idaho, where taxes are lower and living is more affordable. 

On top of the taxes, Loren stated that as soon as his family members found out about the windfall, they began asking for a cut of the money, creating a lot of anxiety for Loren. Loren's sister even threatened to sue him. 

Seems that Loren's family does not understand that even with the windfall, he is not rich and cannot just blow the money and buy his children whatever they want. 

Apart from buying a Dodge Challenger SRT8 from West Coast Customs and a new home, Loren said that he spent wisely and even invested part of the money. 

Loren says that although his life became easier after getting the money, he has not changed. 

“I firmly believe I’m here because years ago I turned my life around,” he says. “The things I’ve been through, I tell people it’s a strong faith and a strong mind. Without those things you’re not going to make it.”

See Zack Guzman, Man who became a millionaire after living on $200 a month says these are the downsides of a windfall, CNBC, November 30, 2020. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

December 1, 2020 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Individual Tax Planning Following the November 2020 Elections

TaxThe presidential election has passed and individual tax planning remains a touchy subject as there is a lot of uncertainty surrounding the topic. As of now, it is unclear what the remainder of this year holds, much less what the beginning of 2021 has in store. 

As of now, it appears that the Democrats will control the House of Representatives, it is unclear which party will control the U.S. Senate. Unfortunately, the uncertainty regarding the Senate will remain until the run-off for the two U.S. Senate seats in Georgia occurs in January 5, 2021. 

There has been a lot of talk about potential changes to tax policy under a Joe Biden presidency and if the Democrats end up in control of the House and the Senate, the changes are more than likely to occur. 

With this in mind, individuals are taking advantage of the current tax exemptions just in case they are gone in 2021. 

The potential changes would have an effect on taxes on Income, Capital Gains, and Estate taxes. 

If these changes worry you or you will simply just miss the current tax exemptions you have available to you, now is the time to get your affairs in order and take the necessary steps to utilize the exemptions. 

For strategies and tips to use to take advantage of tax exemptions, see the article cited below. 

See Mark J. Andres, Individual Tax Planning Following the November 2020 Elections, National Law Review, November 25, 2020. 

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

December 1, 2020 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Monday, November 30, 2020

‘Wealth tax risks worsening defective CGT system’

Estate planning"The UK system of taxing capital is broken but introducing a wealth tax risks making the situation worse, a former top civil servant at HM Revenue & Customs said." 

Edward Troup, previously first permanent secretary at HMRC, suggested that MPs tackle the already existing defects of the wealth tax system before any further steps are taken.

“We have a lot of taxes on various aspects of capital . . . none of them work properly,” said Sir Edward on Wednesday, citing capital gains, inheritance and council taxes as examples. “It’s always better to try and fix what you’ve got than to pile something else on top of it.”

Sir Edward suggested that politicians shift their focus to considering whether the current wealth taxing system is working correctly.

Sir Edward also stated, “There is a real risk that we are looking at putting something new and difficult and probably pretty inefficient [a wealth tax] on top of some already non-working taxes.”

It appears that the debate surrounding new wealth taxes continues to intensify during the pandemic pushing the government to consider how to repair the damage.

See Emma Agyemang, Wealth tax risks worsening defective CGT system’, Financial Times (UK), November 19, 2020.

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

November 30, 2020 in Current Affairs, Current Events, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

2021 Inflation Adjustments of Interest to International Tax Practitioners

Estate planningThe IRS recently released its annual Revenue Procedure containing inflation-adjustments for 2021.

 Of interest to international tax and estate planning practitioners are the following:

  • Estate and Gift Tax Basic Exclusion Amount: $11,700,000
  • Gift Tax Annual Exclusion Amount: $15,000
  • Increased Annual Exclusion for Gifts to Non-U.S. Citizen Spouses: $159,000
  • Tax Liability Threshold for Covered Expatriate Status: $172,000
  • Gain Exclusion Amount for Covered Expatriates: $744,000
  • Foreign Earned Income Exclusion Amount: $108,700


"Practitioners should note that the estate and gift tax basic exclusion amount is only available to U.S. citizens and U.S. domiciliaries. Foreign individuals do not receive any exclusion amount for U.S. gift tax purposes (other than the annual exclusion amounts) and only receive a $60,000 exemption for U.S. estate tax purposes."

November 30, 2020 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Sunday, November 29, 2020

Maximizing End-of-Year Charitable Giving

Estate planningThe holiday season is quickly approaching, which also means it is a popular time for charitable giving. Donors can be philanthropic in their charitable giving while also gaining tax advantages. 

One way donors can take advantage of these is to include a provision in your will or trust, which will provide a part of your estate to a charitable organization. Providing a gift to a charitable organization may allow your estate to receive an estate tax deduction. 

You can also gift securities through lifetime gifts. This method will allow the chosen charitable organization to receive the full value of stock and will allow you to take an income tax charitable deduction. 

You can also gift your IRA to a designated organization upon your death. This strategy requires you to file a beneficiary designation form with the IRA administrator. You can either gift the entire IRA or you can set a specific percentage for the organization to receive. The organization will not have to pay income taxes for withdrawals and will receive the full value of the gift. There is also another tax break for older donors that gift out of their IRA. 

See Eileen Y. Lee Berger, Maximizing End-of-Year Charitable Giving, Bowditch & Dewey, November 25, 2020. 

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

November 29, 2020 in Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)

Saturday, November 28, 2020

Article: The Law of High-Wealth Exceptionalism

Allison Anna Tait recently published an article entitled, The Law of High-Wealth Exceptionalism , Alabama Law Review (2020). Provided below is the abstract to the Article. 

No family is an island.But some families would like to be--at least when it comes to wealth preservation and they depend on what this Article calls the law of high-wealth exceptionalism to facilitate their success. The law of high-wealth exceptionalism has been forged over the years from the twinned scripts of wealth management and family wealth law, both of which constitute high-wealth families as sovereign entities capable of self-regulation and deserving of exemption from the rules that govern ordinary wealth families. Consequently, high-wealth families take advantage of complicated estate planning techniques and highly favorable wealth rules in order to build walls around their family fortunes and construct bespoke governance systems. Hiding in plain sight, the law of high-wealth exceptionalism protects, privileges, and enables high-wealth families in their own particular form of organizational sovereignty. The fact that high-wealth families operate according to their own rules might seem totally unconnected to the political lives and financial health of original wealth families. However, high-wealth exceptionalism intensifies old harms and creates new ones within the larger policy. To begin, the law of high-wealth exceptionalism increases systemic risk in financial Markets, shifts tax burdens from high-wealth to lower wealth families, and widens the wealth gap. Compounding these problems, high-wealth family exceptionalism facilitates the growth of plutarchic and patrimonial system of government in which power is based on family wealth and privilege flows in a circuit between a small number of already exceptionally resourced families. Understanding how the lax of high-wealth exceptionalism functions is, consequently, an important step in identifying hidden levers of wealth inequality, and addressing the resulting democratic deficit.

November 28, 2020 in Articles, Estate Planning - Generally | Permalink | Comments (0)