Wills, Trusts & Estates Prof Blog

Article on The Standard Business Deduction

Kathleen DeLaney Thomas recently published an Article entitled, The Standard Business Deduction, Tax Law: Tax Law & Policy eJournal (2018). Provided below is an abstract of the Article:

This paper describes a proposal for a standard business deduction ("SBD") for small businesses. The SBD would work like the regular standard deduction. The latter is a fixed amount that is claimed in lieu of claiming itemized deductions below the line. The SBD would be a fixed amount that is claimed above the line in lieu of deducting actual business expenses. Taxpayers claiming the SBD would report their gross business earnings, subtract the SBD, and arrive at net business income. No Schedule C would be necessary. Like the regular standard deduction, claiming the SBD would be optional for the taxpayer. If a taxpayer’s actual business expenses exceeded the SBD, he could instead opt to claim those expenses.

An SBD would greatly simplify the tax system for small business owners. Taxpayers who chose to claim it could be relieved of the burden of tracking business expenses during the year and could self-prepare their tax returns without the need for expensive tax preparation assistance. Not only would the SBD reduce socially wasteful taxpayer compliance costs, but it would also reduce IRS enforcement costs. Such simplification should be attractive to policymakers on both sides of the aisle and would benefit the government and taxpayers alike.

Tax Law Update: August 2018

Over the past months there have been a couple of important tax law updates that should be highlighted.

• Tax Court rules Internal Revenue Code Sections 2036, 2038 and 2703 applicable to multi-generational split-dollar

On Jule 18, 2018, the Tax Court denied an estate’s motion for summary judgment that IRC Sections 2036, 2038 and 2703 were inapplicable to the multi-generational split-dollar arrangement at issue. Multi-generational split-dollar arrangements typically involve a parent and child (or grandchild). An insurance trust buys a policy on the child, then the parent and the trust enter into a split-dollar agreement. The premium is often front-loaded so that the parent invests a large amount into the policy.

• North Carolina statute taxing New York trust’s income was unconstitutional

The Supreme Court of North Carolina affirmed the North Carolina Court of Appeals decision on June 8, 2018 that a state statute taxing a trust’s income based solely on the residence of the beneficiaries in North Carolina was unconstitutional under the U.S. Constitution and North Carolina Constitution. In The Kimberley Rice Kaestner 1992 Family Trust v. North Carolina Department of Revenue, the sole issue of the case was whether the North Carolina Department of Revenue (NCDR) could tax the income of the Kimberley Trust pursuant to N.C.G.S. Section 105-160.2 during tax years 2005 through 2008. N.C.G.S. Section 105-160.2 allows for the taxation of trust income “that is for the benefit of a resident of [North Carolina].”

See David A. Handler, Patricia H. Ring, & Thomas Norelli, Tax Law Update: August 2018, Wealth Management, July 25, 2018.

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

CLE on Estate Planning in Depth: Mistakes Fiduciaries See All the Time - and How to Fix Them

The American Law Institute is a web seminar entitled, Estate Planning in Depth: Mistakes Fiduciaries See All the Time - and How to Fix Them, on Thursday, August 23, 2018. Provided below is a description of the event:

Why You Should Attend

Most estate planning professionals have more experience discussing and drafting estate planning documents than actually administering those documents after a client’s death. As such, many of the decisions made during the planning and drafting process can seem largely theoretical, and many of the issues that can arise later are unanticipated.   Get inside guidance on the “little” issues in estate planning that can lead to big headaches later. Register for this practical webcast and learn about the mistakes most commonly encountered by fiduciaries and other estate settlement professionals and how to anticipate and avoid them when advising your clients.  

What You Will Learn

Topics to be discussed include:

Proper exercise of powers of appointment

The disposition of tangible personal property

The impact of various funding formulas

Tax apportionment clauses,

Alternative trust options, and more

This highly-rated session was originally presented at the ALI CLE course, Estate Planning in Depth, on June 24, 2018. Register now and get a front row seat at the rebroadcast!   Questions submitted during the program will be answered by email within two business days. In addition, all registrants receive a set of downloadable course materials to accompany the program.

Podcast: Situs and the Resident Trust

Should a client's trust pack up and hit the road? Is a change of situs a must if there are taxes to be saved?

To learn more about this topic, listen to the latest ACTEC podcast with ACTEC Fellows Rich Greenberg of Woodbridge, New Jersey; Dick Nenno of Wilmington, Delaware; and Margaret Sager of West Conshohocken, Pennsylvania entitled Situs and the Resident Trust.

Top Trends in Charitable Giving for High-Net-Worth Individuals

Provisions of the Tax Cuts and Jobs Acts (TCJA) has shifted the shifted the focus of charitable-giving to high-net-worth individuals and decreased the incentive for moderately wealthy individuals to donate to charitable organizations. The following are a few vehicles and concepts that high-net-worth donors and some moderately wealthy donors should be considering.

• Gift Bunching Combined with DAFs
  • Many Americans no longer itemize their deductions now that the TCJA increased the standard deduction to $24,000 per couple. The charitable deduction is an itemized deduction, so there is less incentive. For those that were used to giving less than the new standard deduction, a moderately wealthy individual can now set up a donor advised fund (“DAF”) either with a local community charity or with a financial institution-sponsored fund and give the aggregate amount to the DAF.
• Grantor Charitable Lead Annuity Trusts—CLATs
  • Grantor charitable lead annuity trust, or CLATs, can be set up where one or more charitable organizations receives a series of periodic payments for a number of years from a trust, after which time, the remaining amount left in the trust is paid to non-charitable beneficiaries, generally family members or trusts for their benefit, free of gift and estate tax.
• Holistic Tax And Estate Planning
  • Wealthy individuals can maximize the efficiency of charitable giving while retaining control over investments (such as family limited partnerships) and reducing taxes by integrating such charitable vehicles with FLPs or FLLCs.
• Almost Charitable LLC
  • An interesting current technique is actually no technique and produces no immediate charitable deduction. This is the use of a standard LLC as a centralized charitable giving fund. In this case, an individual forms an LLC and funds it with cash or other assets that he ultimately plans to give to charity.

See Seth Kaplan, Top Trends in Charitable Giving for High-Net-Worth Individuals, Financial Advisor, July 27, 2018.

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

Article on Give the People What They Want? The Onshoring of the Offshore

Lionel Smith recently published an Article entitled, Give the People What They Want? The Onshoring of the Offshore, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article:

The author argues that US law is in danger of undermining its own coherence in the pursuit of competition for trust business with offshore jurisdictions. This has happened partly due to a desire to allow those who create trusts to do whatever they wish. But US law, like other common law systems, has always imposed certain limits on freedom of choice in trust law; properly understood, those limits exist in order to protect a range of values that are just as important as settlors' freedom of choice. Losing sight of the importance of these limits threatens the integrity of the legal order.

New Alzheimer’s Drug Slows Memory Loss in Early Trial Results

For the first time in a large clinical trial, a drug was able to both reduce the plaques in the brains of patients and slow the progression of dementia. The trial involved 856 patients from the United States, Europe and Japan with early symptoms of cognitive decline. They were diagnosed with either mild cognitive impairment or mild Alzheimer’s dementia, and all had significant accumulations of the amyloid protein that clumps into plaques in people with the disease, said Dr. Lynn Kramer, chief medical officer of Eisai, a Japan-based company that developed the drug.

Many other drugs have managed to reduce amyloid levels but they did not ease memory decline or other cognitive difficulties. In the data presented Wednesday, the highest of the five doses of the new drug — an injection every two weeks of 10 milligrams per kilogram of a patient’s weight — both reduced amyloid levels and slowed cognitive decline when compared to patients who received placebo.

See Pam Belluck, New Alzheimer’s Drug Slows Memory Loss in Early Trial Results, New York Times, July 25, 2018.

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.

CLE on Estate Administration Steps and How to Avoid Problems

The National Business Institute is holding a video seminar entitled, Estate Administration Steps and How to Avoid Problems, on Tuesday, August 21, 2018. Provided below is a description of the event:

Program Description

Build a Solid Foundation for Your Estate Administration Practice

Understand the laws, procedures and key tasks involved in the estate administration process. Our experience faculty will share their knowledge of marshalling assets, managing distributions, tax filing, and estate closing to prepare you for your first (or next) case. Register today!

Identify key tasks of an executor.

Get a bird's eye view of the estate administration process and know what deadlines must be met.

Learn what's involved in the process of closing the estate.

Protect your professional reputation with a tailored legal ethics guide.

Who Should Attend

This legal program is designed for attorneys. It will also benefit CPAs and accountants, wealth managers, tax professionals, trust officers, and paralegals.

Course Content

Probate Process Overview and Case Intake

Initial Steps of the Estate Administration Process

Assets Marshalling, Valuation, Inventory

Creditor Claims and Debt Repayment

Common Issues in Estate Administration

Estate Administration Tax Issues

Distribution and Estate Closing

Ethics and Estate Administration

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 6.00 -  AK*
CLE 6.00 -  AL*
CLE 6.00 -  AR*
CLE 6.00 -  AZ*
CLE 6.00 -  CA*
CLE 7.00 -  CO*
CLE 6.00 -  CT*
CLE 6.00 -  DE*
CLE 7.00 -  FL*
CLE 6.00 -  GA*
CLE 6.00 -  HI*
CLE 6.00 -  IA*
CLE 6.00 -  ID*
CLE 6.00 -  IL*
CLE 6.00 -  IN*
CLE 7.00 -  KS*
CLE 6.00 -  KY*
CLE 6.00 -  LA*
CLE 6.00 -  ME*
CLE 6.00 -  MN*
CLE 7.20 -  MO*
CLE 6.00 -  MP*
CLE 6.00 -  MS*
CLE 6.00 -  MT*
CLE 6.00 -  NC*
CLE 6.00 -  ND*
CLE 6.00 -  NE*
CLE 6.00 -  NH*
CLE 7.20 -  NJ*
CLE 6.00 -  NM*
CLE 6.00 -  NV*
CLE 7.00 -  NY*
CLE 6.00 -  OH*
CLE 7.00 -  OK*
CLE 6.00 -  OR*
CLE 6.00 -  PA*
CLE 7.00 -  RI*
CLE 6.00 -  SC*
CLE 6.00 -  TN*
CLE 6.00 -  TX*
CLE 6.00 -  UT*
CLE 6.00 -  VA*
CLE 6.00 -  VT*
CLE 6.00 -  WA*
CLE 7.00 -  WI*
CLE 7.20 -  WV*
CLE 6.00 -  WY*

Continuing Professional Education for Accountants

Credit Hrs State
CPE for Accountants 7.00 -  AZ
CPE for Accountants 7.00 -  NY*
CPE for Accountants 7.00 -  WA
CPE for Accountants 7.00 -  WI
* denotes specialty credits

Medicare Advantage is About to Change. Here’s What You Should Know.

For decades, family members and doctors of individuals on medicare have lamented the narrow coverage the non-medicinal aspect of preventable issues, such as grab bars in showers for the elderly woman that may slip or an air conditioner for the aging gentleman with asthma. Medicare would easily pay for the expensive emergency room trips, services, and medications, but would not have assisted with the less costly preventative measures.

This appears to be changing. Those enrolled in Medicare Advantage will have their "supplemental benefits" definition reinterpreted according to Medicare officials. Private insurers that underwrite Advantage plans will have the ability to tack on a longer list services if they are deemed in any way health-related, such as: "Adult day care programs. Home aides to help with activities of daily living, like bathing and dressing. Palliative care at home for some patients. Home safety devices and modifications like grab bars and wheelchair ramps. Transportation to medical appointments. "

“What I find most fundamental is the recognition, . . . that this bright line between ‘medically necessary’ and things necessary to maintain health — like proper nutrition and transportation to a doctor’s office — is an illusion,” says Dr. Diane Meier, a geriatrician who directs the Center to Advance Palliative Care at the Icahn School of Medicine at Mount Sinai in New York.

See Paul Span, Medicare Advantage is About to Change. Here’s What You Should Know, New York Times, July 20, 2018.

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.

Podcast: The Digital Will Revolution

Ever heard of an electronic will?  Listen to the latest ACTEC podcast on the topic of the Digital Will Revolution. 

Millennials are known as the disruption generation. Now they are bringing that disruption to an estate planner’s law practice with the electronic will. Listen to ACTEC Fellows Robert Fleming of Tucson, Arizona and Suzanne Brown Walsh of Hartford, Connecticut, and learn all about it.