Wills, Trusts & Estates Prof Blog

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

Thursday, June 23, 2022

Article: Would the Securing a Strong Retirement Act Secure More Retirement Equity?

Albert Feuer recently published an article entitled, Would the Securing a Strong Retirement Act Secure More Retirement Equity?, Tax Management Comp Plan Journal, 2022. Provided below is an abstract of the Article:

On March 29, 2022 the House approved H.R. 2954 that is titled the Securing a Strong Retirement Act of 2022 (the SECURE Act 2.0) by a vote of 414-5.

On May 26, 2022, a discussion draft of the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE & SHINE) Act of 2022 was released by the Senate Health, Education, Labor, and Pensions Committee Chair Senator Patty Murray (D-WA), and Ranking Member Senator Richard Burr (R-NC).

The article argues that despite providing tax incentives in excess of more than $70 billion, the bills in concert would intensify rather than diminish retirement benefit disparities, while leaving tens of millions of American families and workers with insufficient savings to retire comfortably. The article analyzes those bills’ provisions and describes:

• those bills’ provisions that would secure more retirement equity and how to improve those provisions,

• those bills’ provisions that would secure less retirement equity, and

• provisions that would secure more retirement equity, if added to the bills would secure more retirement equity.

June 23, 2022 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Thursday, June 9, 2022

Article: Substance Over Form in Transfer Tax Adjudication

Jay A. Soled and Richard Schmalbeck recently published an Article entitled, Substance Over Form in Transfer Tax Adjudication, Loyola of Los Angeles Law Review, 2022. Below is the abstract for the Article:

The elevated exemption level under the federal transfer tax system (now in excess of $23 million for a married couple) has opened up new and abusive tax-avoidance opportunities. In many areas of the tax law, the substance over form doctrine historically has been effective in controlling such abuses; however, for a myriad of reasons, transfer tax jurisprudence has been marred by the reluctance of courts to embrace this doctrine. In this analysis, we urge reconsideration of that posture.

June 9, 2022 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Saturday, May 14, 2022

Article: AI, Taxation, and Valuation

Jay A. Soled and Kathleen DeLaney Thomas recently published an article entitled, AI, Taxation, and Valuation, Iowa Law Review, Forthcoming 2023. Provided below is an abstract of the article: 

Virtually every tax system relies upon accurate asset valuations. In some cases, this is an easy identification exercise, and the exact fair market value of an asset is readily ascertainable. Often, however, the reverse is true, and ascertaining an asset’s fair market value yields, at best, a numerical range of possible outcomes. Taxpayers commonly capitalize upon this uncertainty in their reporting practices, such that tax compliance lags and the IRS has a difficult time fulfilling its oversight responsibilities. As a by-product of this dynamic, the Treasury suffers.

This Article explores how tax systems, utilizing artificial intelligence, can strategically address asset-valuation concerns, offering practical reforms that would help obviate this nettlesome and age-old problem. Indeed, if the IRS and Congress were to take advantage of this new and innovative technological approach, doing so would bode well for more accurate asset valuations and thereby foster greater tax compliance. Put somewhat differently, in the Information Era in which we exist, it is simply no longer true that accurate asset valuations are unattainable.

May 14, 2022 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Wednesday, May 11, 2022

Article: Trust Alteration and the Dead Hand Paradox

Jeffrey Pennell and Reid K. Weisbord recently published an article entitled, Trust Alteration and the Dead Hand Paradox, ACTEC Law Journal, 2023 Forthcoming. Provided below is the abstract:

Trusts are popular instruments for wealth transmission because they can be crafted to suit almost any imaginable estate planning goal that is not contrary to public policy. With the abrogation of the Rule Against Perpetuities in most states, settlors may impose trust terms that will be legally enforceable for scores of future generations, if not in perpetuity. Long-term and perpetual trusts, however, present a paradox of dead hand control, because the specificity and the durability of settlor-imposed restrictions tend to be inversely related. As donative preferences become increasingly specific and restrictive, trusts become less durable with the passage of time, as changing circumstances imperil the settlor’s original intent or render the trust unadministrable.

The proliferation of perpetual trusts underscores the salience and need for trust alteration, which coincides with significant reforms in the law governing trust modification. The common law always allowed courts to fortify settlor intent against obsolescence by modifying irrevocable trusts in conformity with the settlor’s material trust purposes. Reforms under the Uniform Trust Code have codified, expanded, clarified, and liberalized the standards for judicial modification. And, most recently, a majority of states have privatized trust modification by authorizing “trust decanting,” an extrajudicial technique that grants the power to trustees who have distributive discretion to convert a settlor’s original trust into a new instrument. This Article examines the current landscape by surveying recent developments in the judicial and extrajudicial modification of trusts.

Applications of the modern rules of trust alteration have prevented beneficiaries from accelerating the termination of long-term trusts and allowed fiduciaries to reinvigorate older trusts for subsequent generations. By strengthening the grip of dead hand control and reinforcing the durability of settlor intent, these trust alteration rules also tend to increase the concentration of private wealth in the hands of trust fiduciaries, who are entrusted by settlors to protect the trust corpus from beneficiary improvidence, taxation, and creditors. The Article concludes by situating modern trust alteration rules within the current debate about wealth inequality in the United States.

May 11, 2022 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Trusts | Permalink | Comments (0)

Monday, May 2, 2022

Article: Wealth Tax Design: Lessons from Estate Tax Avoidance

Jason S. Oh and Etc M. Zolt recently published an article entitled, Wealth Tax Design: Lessons from Estate Tax Avoidance, Tax Law Review (2021). Provided below is the abstract to the Article: Estate planning

Presidential candidates Elizabeth Warren and Bernie Sanders have both proposed ambitious new annual wealth taxes based on academic work by Emmanuel Saez and Gabriel Zucman. They project these proposals to raise trillions of dollars over the next ten years. Some critics challenge the Saez-Zucman approach to measuring the aggregate wealth of those subject to a wealth tax. Other critics including Larry Summers and Natasha Sarin have used data from estate tax returns and the relatively small amount of revenue the estate tax currently rai
ses to question the revenue projections of these proposals. This comparison can be useful only if one thinks carefully about specific estate tax strategies and how these strategies translate to an annual wealth tax. This article engages in that exercise. When one takes a closer look at estate tax avoidance and how it maps onto an annual wealth tax, a much more complex narrative emerges.


That narrative has four major themes. First, there are some estate tax planning techniques (like valuation games and charitable contributions) which pose similar challenges to an annual wealth tax. These structures provide some support for critics like Summers and Sarin who argue that the annual wealth tax will struggle to raise the projected revenue. Second, other structures (such as grantor-retained annuity trusts ) work well to minimize estate taxes but are of limited use for structuring around an annual wealth tax. Projecting wealth tax revenue using estate tax revenue without considering the revenue consequences of these strategies will understate wealth tax revenue. Third, other techniques (including the use of lifetime estate/gift exemptions) highlight possible synergies between an estate and wealth tax. In many ways, a robust estate tax will make the wealth tax harder to avoid and vice-versa. The converse is also true: a poorly designed estate/gift tax will undermine an annual wealth tax. Adopting a wealth tax without strengthening the gift and estate makes little sense. Fourth, one of the major lessons of estate tax planning is that it is much easier to minimize estate taxes on future wealth than existing wealth. A myriad of techniques allow taxpayers to “freeze” the value of assets for estate tax purposes. Freezing techniques will also prove helpful in minimizing wealth taxes. It is possible that even a well-designed wealth tax will have a base that shrinks rather than grows over time.

May 2, 2022 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Friday, April 29, 2022

Urban-Brookings Tax Policy Center Webcast: Wealth taxation in defense of equal citizenship

The following is from an announcement by the Urban-Brookings Tax Policy Center:

Wealth inequality is often discussed in terms of its economic effects rather than its political implications. But money is a form of power, and the wealthy exert an outsized influence on politics. Wealth taxation has the potential, therefore, not only to reduce the concentration of economic power in America, but to strengthen democracy itself. 

On Monday, May 2, the Urban-Brookings Tax Policy Center will host an event considering wealth taxation as a tool of democratic reform. Jeremy Bearer-Friend, associate professor of law at George Washington University Law School, and Vanessa Williamson, senior fellow in Governance Studies at the Brookings Institution, will present their new paper, exploring and updating an underappreciated wealth tax proposal made by the American revolutionary, Thomas Paine, in his 1792 book, “Rights of Man.” Phyllis Taite, professor of law at Oklahoma City University School of Law, will address the potential effects of wealth taxation on the racial wealth gap, and Rakeen Mabud, chief economist at the Groundwork Collaborative, will discuss how taxation fits into a broader reconsideration of economic policy’s political and social purposes. 

Follow this link to register for the program.

April 29, 2022 in Conferences & CLE, Estate Tax | Permalink | Comments (0)

Wednesday, April 27, 2022

All in the Family - Introducing Family-Owned Life Insurance (aka FOLI)

Estate planningFamily-Owned Life Insurance™ (FOLI) is a new planning tool that refers to the specialty use of private placement life insurance policies for family offices, which is closely related to the concept of Corporate Owned Life Insurance (COLI), Bank Owned Life Insurance (BOLI), and Insurance Only Life Insurance (IOLI). 

FOLI allows a family office to utilize investment capital on an income and estate tax-free basis and is not dictated by the size of the family, health status, or longevity of the patriarch and matriarch. As an added bonus, the policy can be quickly issued because there is no need for medical underwriting and unlike COLI, BOLI, and IOLI, IRC Sec 101(j) is not applicable. Some critics say that the strategy is not long-lasting, however, large corporations and banks have been utilizing COLI, BOLI, and IOLI for at least 50 years. 

Most ultra-high net worth families do not require additional life insurance for estate liquidity planning purposes and are looking for a tool where they can invest and grow on an income and estate tax-free basis for generations to come. FOLI is a variable universal life policy that can be issued with full underwriting, simplified underwriting, and guaranteed issue underwriting with the mortality risk reinsured by investment-grade reinsurers. Like all PPLI policies, investment options are customizable.

For more information:

See Gerald R. Nowotny, “All in the Family – Introducing Family-Owned Life Insurance™ (aka FOLI)“, Law Office of Gerald R. Nowotny, April 15, 2022. 

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

April 27, 2022 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Friday, April 22, 2022

ACTEC Shares Useful Resources

ACTEC 2022 Pocket Tax Tables  (helpful resource for professionals)

The ACTEC Pocket Tax Tables guide is a handy resource available for download as a pdf, online and mobile devices, and as a printed booklet. Content includes tables for Income Tax; Social Security; Estate and Gift Tax; Generation-Skipping Transfer Tax; Treasury Unisex Actuarial Table Examples; Inflation-Adjusted Numbers; Life Expectancy Tables; Qualified Plans, including SECURE Act details; Interest Rates; and Charitable Deduction.

ACTEC Trust and Estate Talk  (podcast series for professionals)

The Future of Digital Assets and the Dollar  Estate planning and family law attorneys share what to be aware of and some pitfalls when drafting premarital agreements and prenups.

Capital Letter No. 56: The Administration’s Fiscal Year 2023 Budget Proposals 

ACTEC Fellow Ronald D. Aucutt offers commentary regarding the Treasury Department's "General Explanations of the Administration's Fiscal Year 2023 Revenue Proposals" and how it provides a few new and a lot of previously presented ideas.

ACTEC Trust and Estate Talk  (podcast series for professionals)

California Tax Trap and Residency for Trusts - Words of caution for trust fiduciaries, beneficiaries and residents; CA has liberal definitions of who is considered a resident and subjected to tax on trusts.  

April 22, 2022 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Thursday, April 21, 2022

Death by Deduction: Section 2058 and the Decline of State Death Taxes

Jeffrey A. Cooper recently published an article entitled, Death by Deduction: Section 2058 and the Decline of State Death Taxes, Wills, Trusts, & Estates Law ejournal (2022). Provided below is the abstract to the Article: Estate planning

This article illustrates how, and seeks to explain why, the deduction for state estate taxes (Internal Revenue Code Section 2058) seems to have had no meaningful effect on state tax policy.

Since the deduction for state estate taxes reduces the amount of federal estate taxes paid, the net effect is to shift to the federal government some of the cost of these state death taxes. Prevailing theories of tax policy suggest that state governments will structure their tax systems to maximize this type of available deduction. But theory has not borne out in practice. To the contrary, most states have responded to enactment of Section 2058 not by restructuring their existing state estate taxes to maximize this federal deduction but rather by entirely abandoning state estate taxes. While a remaining group continue to impose those taxes, they have failed to structure those taxes in a manner that would optimize the deduction. In short, the 2058 deduction seems to have had extremely little, or perhaps entirely no, effect on state estate tax policy.

This article explores state responses to Section 2058, yielding important lessons about the operation of state legislatures, the political climate surrounding progressive taxation, and the interplay of federal and state taxes.

April 21, 2022 in Articles, Estate Administration, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Wednesday, April 20, 2022

Article: Approaching Equitable Retirement Tax Incentives

Albert Feuer recently published an article entitled, Approaching Equitable Retirement Tax Incentives, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article: Estate planning

In September, the Ways-and-Means Committee of the House approved proposals to substantially improve the equity of retirement tax incentives for American workers. The new requirement that employers automatically enroll employees in a simple defined contribution plan, and the new refundable retirement savings tax credits, both do so. One major proposal needs to be added. Roth individual retirement accounts and annuities (IRAs) must be subject to the same required minimum distribution (RMD) rules as traditional IRAs. Other Committee proposals may be improved. Simplify the new excess balance distribution rules for a taxpayer, whose aggregate IRA and defined contribution accounts exceed $10 million at the end of a tax year. Harmonize the sanctions for excess balance violations with those for RMD rule violations. Simplify the new Roth IRA conversion rules. Remove the income threshold triggers for the new limits. Increase reporting about participant and beneficiary individual accounts.

Congress is now considering how to better implement the common-sense principle that tax incentives to encourage adequate retirement savings be focused on retirement savings. By increasing transparency and the benefits directed at those with inadequate retirement saving as described herein, and reducing loopholes and undue complexity, Congress may not only increase the equity and efficacy of our huge retirement tax incentives and our tax system, but boost Americans’ confidence in their government.

Keywords: minimum required distributions, MRDs, required minimum distributions, RMDs, pension plans, defined contribution plans, 401(k) plans, retirement plans, IRAs, Roth IRA, participant, beneficiary, income tax, tax deferral, tax incentive, withdrawal, distribution, estate planning, equity, inequality

April 20, 2022 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)