Wills, Trusts & Estates Prof Blog

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

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)

Thursday, November 26, 2020

Article on 2019 Developments in Connecticut Estate and Probate Law

Jeffrey A. Cooper, John R. Ivimey, & Katherine Mulry recently published an article entitled, 2019 Developments in Connecticut Estate and Probate Law, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article. 

This Article provides a summary of recent developments affecting Connecticut estate planning and probate practice. Part I discusses 2019 legislative developments. Part II surveys selected 2019 case law relevant to the field.

November 26, 2020 in Articles, Current Affairs, Current Events, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Friday, November 20, 2020

Biden Won’t Enforce DOL's Revamped ESG Policy, State Street Says

Estate planningPresident-elect Joe Biden's administration has gotten to work around the topic of retirement policy. It appears that the Biden administration will be focusing on ordering non-enforcement of the U.S. Department of Labor's "revamped ESG rule." 

The DOL modified the rule in response to a slew of criticism, but the Biden administration is "likely to do a sweep of all regulatory agencies to ensure that regulations encourage environmental social and governance investing and that companies address climate change, racial equity, and inclusion" said Melissa Kahn, State Street's managing director. 

Kahn further stated, “I think the Biden administration will say, ‘Let’s put a hold on any enforcement of this regulation.’ Whether they decide to pull back the regulation entirely or make revisions remains to be seen, but the first thing they can do is put in place a non-enforcement policy.” 

Kahn also predicted that the Biden administration will focus on fiduciary regulation. There still remains a great deal of uncertainty around the topic of fiduciary regulation, so it would not be surprising for the Biden administration to revisit the topic and possibly make corrections to the DOL's fiduciary rule pertaining to investment advice. 

The uncertainty has made it difficult for financial advisors regarding the recommendation of rollover space and whether it is a fiduciary act or not. 

Kahn stated that she does not believe the Democrats will win both Senate seats in Georgia, leaving control of the Senate in the hands of the GOP. 

See Tracey Longo, Biden Won’t Enforce DOL's Revamped ESG Policy, State Street Says, Financial Advisor Mag, November 17, 2020.

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

November 20, 2020 in Current Affairs, Current Events, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Monday, November 2, 2020

Wisconsin Hospitalized And Quarantined Electors Can Use Agent To Help Vote

VoteWisconsin has enacted the Hospitalized Electors Process to allow those who are hospitalized or quarantined to vote using an agent. This move came after a surge in Covid-19 cases in this state that will put thousands of electors either hospitalized or quarantined. 

Under the Hospitalized Electors Process, the voter is the one to designate the agent. If the voter is not registered to vote, the agent can register for them at the same time that the agent applies for the electors ballot. 

The agent only needs to bring the application for the ballot and a form of photo identification. The ballot will also need to be cast in the presence of a witness.

This Process will allow more people to vote while also maintaining the safeguards put in place to stifle the spread of Covid 19. 

See Wisconsin Hospitalized And Quarantined Electors Can Use Agent To Help Vote, Probate Stars, October 30, 2020. 

November 2, 2020 in Current Affairs, Current Events, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Friday, October 30, 2020

Federal Estate Tax Exemption Is Set to Expire – Are You Prepared?

EstateplanningAs the presidential election draws closer, so does the threat to the historically high estate tax exemptions. Due to the Tax Cuts and Jobs Act (TCJA) the lifetime gift, estate, and generation-skipping tax exemptions doubled the exemption, raising it to $11.58 million (adjusted for inflation) in 2020. Which is the highest it has ever been. 

Unfortunately, this high exemption will not last forever, and could be gone sooner rather than later. Therefore, it may be a good idea for you to take advantage of the exemption, or encourage clients to do so. 

As of now, the exemption rates are not set to sunset until the beginning of 2026, but the exemptions could sunset much sooner, especially if Joe Biden is elected. 

A few things you could do in preparation for the estate tax exemption sunset include: 

  • Consider Gifting Away Assets to Reduce Estate Taxes While You Still Can 
  • Take Advantage of Lower Valuations and Low Interest Rates
  • Consider Acting Now to Avoid the Last-Minute Rush 

See Chuck Cavanaugh, Federal Estate Tax Exemption Is Set to Expire – Are You Prepared?, Kiplinger, October 14, 2020. 

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

October 30, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Gift Tax, New Legislation | Permalink | Comments (0)

Wednesday, October 28, 2020

Billionaire Robert Smith Admits He Cheated On Taxes For 15 Years

TaxRobert F. Smith, is known as a "brilliant investor who built Vista Equity Partners into a private equity powerhouse and a generous philanthropist lauded for paying off student debt of Morehouse College's entire graduating class last year." 

However, on Thursday, federal prosecutors claimed that Smith concealed income and evaded taxes for 15 years. 

Smith avoided prosecution by cooperating in a case against Robert Brockman, who was has been accused of using a "web pf Caribbean entities to hide $2 billion in income in what prosecutors called the largest U.S. tax case ever against an individual."

Smith admitted that he repeatedly made false filings with the IRS, even after he attempted to enter an amnesty program in 2014. Smith has signed a non-prosecution agreement and has also agreed to pay more than $139 million in back taxes, interests and penalties. 

"Smith admitted that he used $2.5 million in untaxed funds to buy and renovate a vacation home in Sonoma, California, paying for it in 2005 with private equity funds deposited into accounts in the British Virgin Islands and Banque Bonhote in Switzerland."

"In 2014, Smith directed Excelsior to contribute $182 million in shares in a Nevis-based entity, Flash Holdings LLC. The shares went to Fund II Foundation, a U.S.-based charity that he co-founded. Smith falsely claimed that he’d been required to make that charitable contribution as part of his original agreement with Brockman. Had it been true that the offshore assets had always been designated for charity, it could have supported the view that Smith didn’t owe taxes on them." 

There are also many other instances where Smith used funds to build homes and other properties using money he concealed from the IRS. 

See Neil Weinberg & David Voreacos, Billionaire Robert Smith Admits He Cheated On Taxes For 15 Years, Financial Adviser Magazine, October 16, 2020. 

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

October 28, 2020 in Current Affairs, Current Events, Estate Planning - Generally, Income Tax, New Cases | Permalink | Comments (0)

Saturday, October 10, 2020

Estate Planning Tips as We Emerge from a Pandemic and Head into a Presidential Election

EstateThis year has been full of surprises, some of them good, but many of them bad, even heartbreaking. 2020 has been quite unusual, making it the perfect time to think about estate planning.

Here are tips to consider when working through your estate plan in the last few months of 2020:

  • Planning with Continued Low Interest Rates 

You may be able to take advantage of Grantor Retained Annuity Trusts (GRATs) or Charitable Lead Annuity Trusts (CLATs) to take advantage of the historically low interest rates. 

  • Lower Values in Commercial Real Estate 

Now is an ideal time to gift interests in property assets, which can be used to take advantage of the current tax exemption.

  • Checking the Existing Basic Estate Plan 

Now is the time to go back over your estate plan to make sure your wishes are adequately reflected. You should review your testamentary provisions and should consider testamentary tax strategies that take the upcoming Presidential Election into account. 

  • Check Advance Directives and Durable Powers of Attorney

Given the uncertainty due to the pandemic, now is a good time to consider an advance directive for health care and to designate a durable power of attorney.

  • Checking Existing Estate Planning Strategies

Review your estate planning strategies to ensure that they are still effective. Given the uncertainty and change that this year has produced, your strategies may need updating.

  • Renegotiate Family Loans 

The provisions in your loans or other documents many no longer be desirable or there may now be batter strategy for you. You may be able to renegotiate and amend the provisions of these documents to better align with your strategy.

  • Using (or Losing) AEA before 2021 (or 2026).

The $11.58M Tax exemption is expected eclipse at the start of 2026, however, this may happen sooner if Former VP Joe Biden is elected. Therefore, if you do not take advantage of the exemption, you may lose it forever. 

  • Don't Forget about the GST: Are Existing Trusts Being Optimized
  • Strategize about Business Succession and Long-Range Planning

The lockdown that began in March not only locked down the economy, "it created a unique environment for business owners to stop and reflect about their enterprises and the future." It may be time to consider business succession and create a favorable strategy to plan for the future.

  • Consider State Estate and Income Tax Effects on Your Domicile 

See Joseph P. Scorese, Estate Planning Tips as We Emerge from a Pandemic and Head into a Presidential Election, Sills Cummis & Gross P.C., October 8, 2020. 

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

October 10, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Thursday, October 8, 2020

Estate Planning and Business Transition Issues Not to Overlook Before the Year-End

PlanAlthough 2020 has seemed to drag on for an eternity, it is closely coming to an end. This means, it is time to do a review and possibly an update of your estate plan. There are a few things that you should take into consideration as you are looking towards making changes to your estate plan. 

Discussed below are a few considerations that you may want to keep in mind as you take on this estate planning journey. 

Year-End Gift Giving

Federal gift tax exemptions are at an all-time high sitting at $11.58M per person. As the end of the year is approaching, and a presidential election coming up next month, this is a "use-it-or-lose-it type of exemption. Potential effective areas to take advantage of this exemption are:

  • Marketable securities
  • Business interests
  • Charitable gifts
  • Appreciated long-term capital assets

Estate Planning

Estate and gift tax planning rollbacks may be an area which you should apply more focus. Come 2026, the exemption is set to roll back making the exemption amount $5M. If taxpayers fail to take advantage of the exemption before December 31, 2020, they might lose the exemption. This is why it is a great time to consider making a lifetime gift. 

Year-End Charitable Giving

"The 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) encourages additional charitable giving in 2020." The Act increases the "charitable deduction adjusted income percentage from 60% to 100% for itemizing taxpayers." 

Year-End Planning for Income Tax Issues

Future tax situations are up in the air and time is running out for taxpayers to discuss with their tax and estate planning professionals. Possible changes include:

  • Individual income tax rates—state and federal
  • Carry back losses
  • Basis or cost
  • C corporation losses
  • 1031 Exchanges
  • Capital gain rates
  • Estate and gift tax exemption amounts
  • Suspension of required minimum distributions for qualified retirement plan accounts

Refer to the article cited below for a in depth discussion of valuations and how valuation issues may come into play.

See Carmen Calzacorta, Matthew Bisturis, Dan Eller, Alicia Lowe, June Wiyrick Flores, Samantha MacBeth, & Thomas Tongue, Estate Planning and Business Transition Issues Not to Overlook Before the Year-End, Schwabe, Williamson, & Wyatt, October 6, 2020. 

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

October 8, 2020 in Current Affairs, Current Events, Estate Planning - Generally, Gift Tax, Income Tax | Permalink | Comments (0)

Monday, September 28, 2020

Are you prepared to die? I am, and that’s the right way to live.

EstateplanningOf the near 202,000 Americans who have died unexpectedly from COVID-19 in the past 7 months, most of them were likely not planning for a sudden death. According to caring.com, "fewer than half of those 55 and older had completed estate-planning documents. The number 1 reason being they "haven't gotten around to it." 

However, the concerns surrounding COVID-19 has lead to a "boom" in estate planning. Estate planning checklists have begun to appear online to provide guidance on planning for life before and after death.

If there is one thing to take away from the risks of the Coronavirus, it is the importance of estate planning. Procrastination poses a risk that will go unnoticed for years if not checked. Keeping your will and living will updated is necessary in order to be prepared to die. 

Being prepared to die and being ready to go are not the same thing, of course. However, you can never be ready to go if you are not prepared to die; through end-of-life planning, you can get there. 

See Steven Petrow, Are you prepared to die? I am, and that’s the right way to live., Washington Post, September 26, 2020. 

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

September 28, 2020 in Current Affairs, Current Events, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Tuesday, September 22, 2020

IRS Expands E-Signature Policy to Include Gift and Estate Tax Returns and Foreign Trust Reporting Forms

IRSThe IRS announced that it would temporarily accept e-signatures on certain forms. These forms included Form 8832, Entity Classification Election. Also, on September 10, the IRS expanded the list. The forms added to the list included:

Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return; Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts; and Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner.

The e-signature policy will only apply to forms submitted on or before December 31, 2020. 

See Paul J. D'Alessandro, Jr., IRS Expands E-Signature Policy to Include Gift and Estate Tax Returns and Foreign Trust Reporting Forms, Bilzin Sumberg, September 11, 2020. 

 

September 22, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Income Tax | Permalink | Comments (0)