Wills, Trusts & Estates Prof Blog

How People Can Use The Combined Federal Gift And Estate Tax Exemption

Each individual person has a federal gift and estate tax exemption of $5.45 million. A person can use this exemption during their lifetime, after they die, or both if not all of it is used as gifts during that person’s lifetime. “When determining how best to make use of this exemption, make sure you consider – among other things – the federal income tax basis of any property you want to transfer during lifetime.” This article provides one of many examples of how a taxpayer can effectively use the estate and gift tax exemption. When conducting this type of planning it is important to take all the moving parts of an estate into consideration. It is a good idea to meet with a trust and estate attorney to go over any existing estate plans.

See Dana Reid, Effectively Utilize Your Combined Federal Gift and Estate Tax Exemption, Family Business Resource Center, February 29, 2016.

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

How Longer Lifespans Will Impact Retirement

As medical technology continues to advance people are living much longer lifespans. New developments in stem cell technology as well as other healthcare advances might actually reverse the aging process in many people. In 20 or 30 years the average person might be able to expect to live a much longer life than what the average person today can expect. This is going to have a major impact on retirement planning in the future. In today’s world people usually expect to retire and live out their golden years when they are about 65-67 years old. When people are living much longer lives in the future people may have to plan on working well past the age of 65. The whole idea of retirement might have to be changed, people are going to need to plan ahead to be able to afford to live for a long time after they reach retirement age.

See Laura Entis, What Does Retirement Mean When Aging May Soon Be a Thing of the Past?, Entrepreneur, February 29, 2016.

How Social Security Will Supplement Income In Retirement

Right now Social Security payments are a critical component of many retirees’ incomes, representing about half of retirement income for more than half of all married recipients of Social Security. This article provides important information on how much of an average person’s income is replaced by Social Security payments when they go into retirement. The amount of money that a person receives in Social Security payments will depend on many different factors including their work history and how much they earned. Social Security payments are funded from the payroll taxes that current workers’ pay into. There are concerns that as the baby boomers enter into retirement the pool of workers who pay into the Social Security system is going to shrink. Lawmakers are going to have to make major reforms to the Social Security system if they want to sustain it.

See Todd Campbell, How Much of My Income Will Social Security Replace in Retirement?, My San Antonio, February 28, 2016.

Donald Trump Is Not Facing An Ordinary Audit

During the last GOP debate Donald Trump said that the reason why he is not releasing his tax returns is because he is being audited by the IRS. It is true that there is no legal impediment to Donald Trump releasing his tax returns, but there is a reason why no experienced tax attorney would recommend him do it while being audited. The tax professionals working on Donald Trump’s taxes are probably facing numerous formal and informal inquiries from the IRS “Wealth Squad,” which is a specialized group of examiners who focus on wealthy taxpayers. “The Wealth Squad is designed to allow the IRS to better understand the sophisticated financial, business and investment arrangements of the taxpayer by engaging a team of specialists to take a unified, holistic look at the entire web of inter-related entities controlled by a high wealth individual to discover the entire economic picture of the enterprise and to assess the tax compliance of that overall enterprise.”

See Charles Rettig, No Ordinary Audit: Donald Trump Is Facing The IRS ‘Wealth Squad,’ Forbes, February 28, 2016.

Article On Forfeiture Provisions In Trusts

Deborah S. Gordon (Professor of Law, Drexel University School of Law) recently published an article entitled, Forfeiting Trust, 57 Wm. & Mary L. Rev. 455-512 (2015). Provided below is an abstract of the article:

This Article exposes the conflicting ways that courts and legislatures have been grappling with these clauses that pit settlor intent not against a general distaste for forfeiture but instead against fiduciary accountability. After examining the roots of this confusion, the Article proposes a more coherent approach to trust forfeiture clauses that recognizes property owners’ interests in facilitating smooth relationships between their trustees and beneficiaries without forfeiting the precious oversight that allows trusts and the parties to a trust relationship to function properly.

Considerations To Keep In Mind For Taking Social Security At 67

For the majority of Americans, those born after 1960, full retirement age is reached at 67. However, there is some flexibility with those age 62 being able to take reduced monthly benefits while those to waiting past 67 can receive bumps. Here are a few considerations to keep in mind when deciding at what age to file:

• The common myth is that filing before age 67 will result in an overall reduction in benefits. However, that is only true for monthly benefits since total lifetime benefits are designed to be the same regardless of age.
• Those who are waiting to take social security benefits to take advantage of the file and suspend strategy might be in for a disappointment. The popular method of taking a spousal benefit along with suspending the wage earners payout to gain a boost comes to an end on April 29, 2016. So if you were waiting to file solely to take advantage of the loophole then no reason to wait any longer.
• For those that remain working at a later age, waiting to take benefits can allow the monthly payout to grow. Waiting past 67 gets an %8 boost per year until age 70 so if there is still an income stream to live on then taking later benefits can give you more financial wiggle room down the line.

See Brian Stoffel, Social Security: 3 Terrible Reasons to File for Benefits at 67, My San Antonio, February 27, 2016.

War On Cash Could Push Wealthy Into Substitutes Such As Art, Precious Metals

In recent weeks, several high profile individuals have come out in support of cutting back on, or completely eliminating, the use of high value bank notes such as the $100 and €500 bills. Supporters of the cut argue that the notes are primarily used for nefarious purposes such as drug trafficking or tax evasion and serve little use for the vast majority of people.  However, a shift away from producing high denomination currency would hurt those, including high net-worth individuals and businesses, that seek to keep large currency stores on hand for instant liquidity without the need of banks. As a result, some have speculated that commodities and collectibles, such as works of art or precious metals like gold, will replace cash as a store of value. However, the alternatives would lack many of the advantages of money and be subject to market fluctuation along with less instant liquidity. But no official action has been taken by the EU or US which, along side support for the currency from other countries, likely means charges will not be coming anytime soon.

See James Saft, War on cash to pump up silver, wine, art, gold, Reuters, February 25, 2016.

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

 

University Of Arizona Law School Now Accepts GRE Scores For Admissions

For decades, the LSAT has virtually been the only admissions test used by law schools when it comes to evaluating prospective students. The test has been praised for it's ability to predict first year success but has also been the target of withering attacks on the narrow focus of the skills being tested. In response to those complaints, the University of Arizona School of Law has decided to ditch their LSAT only policy and accept scores from the GRE, a test used primarily for non-law graduate schools. Arizona has stated that they have studies showing that the GRE is as good a predictor of law school success which allows them to use it under ABA accreditation rules. However, the school would be the only ABA accredited school in the nation to not rely on the LSAT which makes the results of this trial run important for other schools considering a change. It will be very interesting to see how this experiment turns out due to the implications it could have for law schools everywhere.

See Sara Randazzo, Move Over LSAT, Here Comes the GRE, The Wall Street Journal, February 22, 2016.

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

Statistics About Cousin Marriage In The United States

This column examines some of the statistical data about cousin marriage in the United States. “An estimated 0.2 percent of marriages in the United States are between individuals who are second cousins or closer — that means there are about 250,000 people in America in those relationships.” These are older statistics, but there are some experts who think that the numbers might be rising in the near future. The term that is often used to describe these sorts of marriages is consanguinity, and this article provides a map showing the global prevalence of these sorts of relationships. These types of relationships are rare in the United States, but there are other parts of the world where consanguinity is more common. In the United States 25 states currently ban marriage between first cousins and there are other states that have restrictions on it.

See Mona Chalabi, How Many Americans Are Married To Their Cousins?, Five Thirty Eight, May 15, 2015.

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

Changes With Asset Basis Reporting At Death

There is both good and bad news concerning some of the recent changes in estate tax law. One piece of good news for taxpayers is the fact that the estate tax exemption for both individuals and married couples is going to increase. One new added burden that will be placed on taxpayers is a requirement of having to file an IRS Form 8971 with Form 706. The purpose of this requirement is to make sure that the value reported on the assets in the estate tax return is the same as the value reported by the beneficiary on the sale of those assets. This Form 8971 will make it easier for the IRS to track the basis of an estate’s assets. These changes will place more stringent reporting requirements on executors, accountants, and attorneys who are preparing estate tax returns.

See John P. Dedon, Good News and Bad News- Reporting Assets’ Basis Upon Death, The National Law Review, February 24, 2016.

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