Wills, Trusts & Estates Prof Blog

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

Thursday, March 26, 2020

Article on Wealth Transfer Tax Planning after the Tax Cuts and Jobs Act

TcjaJohn A. Miller and Jeffrey A. Maine recently published an Article entitled, Wealth Transfer Tax Planning after the Tax Cuts and Jobs Act, Wills, Trusts, & Estates Law eJournal (2020). Provided below is the abstract to the Article.

On December 17, 2017, Congress passed the Tax Cuts and Jobs Act (TCJA). Among its many impacts, the TCJA increased the inflation adjusted estate tax basic exclusion amount to $10,000,000 on a temporary basis. This has dramatic implications for many existing and future estate plans, including a major crossover impact on income tax planning. In this article we explain the operation of the federal wealth transfer taxes (the estate tax, the gift tax and the generation skipping transfer tax) in the wake of the TCJA and of the newly issued regulations interpreting the TCJA changes. We also explain the basic tax planning techniques for wealth transmission. The overall design of this article is to bring the reader into the current wealth transfer tax planning picture while providing references to more detailed treatments of particular topics within this broad field.

March 26, 2020 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Wednesday, March 25, 2020

Planning Amid Turmoil: 6 Gifting and Tax Strategies for the Current Environment

StockmarketMany investors may seem powerless with the market in such turmoil with heightened volatility and falling interest rates. The truth is that there are still many things one can control in this environment, including opportunities to provide for one's family and others that do not come around very often.

  • Donate to Support Your Communities
    • In 2020, you can deduct up to 60% of your adjusted gross income for gifts made to a public charity, and these deductions can offset normal earnings, such as salaries and bonuses, as well as dividend and interest payments and even capital gains.
  • Help Family Members Ride Out the Storm
    • Under the gift tax annual exclusion, an inidividual can give up to $15,000 in 2020 to each recipient without tax consequences, and for a married couple, the total is $30,000 per recipient.
  • Provide Long-Term Support by Using Your Exemption Amounts
    • Giving away assets that a person expects to appreciate as values recover makes use of their exemption while also shifting that appreciation to the next generation.
  • Use GRATs and CLTs to Make Additional Tax-Free Gifts
    • Grantor Retained Annuity Trusts (GRATs) and Charity Lead Trusts (CLTs) allow a person to pass the appreciation in the value of assets over a hurdle rate set by the IRS to their beneficiaries tax-free. Currently, the IRS hurdle rate is 1.8% and in April, the rate will drop to 1.2%. 
  • Refinance Your Debt and Family Loans
    • With interest rates at rock-bottom levels, it could make sense to refinance existing debt obligations such as a home mortgage and reduce the interest rate on any loans made to family members.
  • Convert Your Traditional IRA to a Roth
    • Since the taxes resulting from a conversion are based on the IRA’s balance at the time of conversion, depressed market prices help reduce the tax liability if an individual decides a ROTH conversion makes sense.

See Bryan Kirk, Planning Amid Turmoil: 6 Gifting and Tax Strategies for the Current Environment, Fiduciary Trust, March 18, 2020.

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

March 25, 2020 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets, Trusts | Permalink | Comments (0)

Tuesday, March 24, 2020

How to Use Exemption Now: Checklist for Spousal Lifetime Access Trusts (SLATs)

MoneyspouseUnder current law, the gift, estate, and generation skipping transfer tax (GST) exemption is $11,580,000, and double that amount for married couples. There are numerous reasons to utilize some or all of that amount now, especially since the exemption is temporary - it is set to lower back to pre-TCJA amounts in 2026. If there is a shift in administration in Washington before that, it could lower sooner.

Setting up trusts can be beneficial for using the tax exemption now and for protecting assets for future generations. But it may be prudent to place the property in a trust that benefit not only your children but also name yourself as a beneficiary so that you not completely cut off from the funds should the need arise for them. If you are married, you can set up a trust that names your spouse as a beneficiary. That way your spouse can access assets transferred as a beneficiary and you do not lose the ability to benefit from the wealth you accumulated. These trusts are sometimes called Spousal Lifetime Access Trusts or “SLATs.”

For those that are not married, the alternative is a domestic asset protection trust, or DAPT. 19 states allow these self-settle trusts, and generally people from those states agree that the trusts serve their intended purpose. If you create this type of trust in a non-DAPT state, be aware of that in many jurisdictions, a self-settled trust is void as to the settlor's creditors.

See Martin Shenkman, How to Use Exemption Now: Checklist for Spousal Lifetime Access Trusts (SLATs), Forbes, March 22, 2020.

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

March 24, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation, Trusts | Permalink | Comments (0)

Sunday, March 8, 2020

CLE on Nonresident Investment in U.S. Real Estate: Tax Traps to Avoid

CLEThe American Law Institute is holding a webcast entitled, Nonresident Investment in U.S. Real Estate: Tax Traps to Avoid, Thursday, March 19, 2020 from 12:00 pm to 1:30 pm. Provided below is a description of the event.

Why You Should Attend

With financial centers around the world in turmoil, inbound investment into the United States continues, often into U.S. real estate. When foreigners invest in U.S. real property, however, there are a number of “tax traps” that can take away the benefit of an investment intended to be a safe haven.

In just 90 minutes, this webcast will cover some critical points in order to understand how to plan effectively for foreign investment into U.S. real estate, and provide guidance on how nonresident aliens can structure their investments to minimize income, gift, and estate tax exposure.

What You Will Learn

Two estate planners with extensive experience in cross-border tax planning and Fellows of ACTEC will discuss:

    • Income, gift, and estate taxation of NRAs as compared to U.S. citizens and residents
    • Challenges of the Foreign Investment in Real Property Tax Act (FIRPTA) and how to handle them
    • Comparison of different tax structures available to nonresident Aliens to hold U.S. real property
    • How 2017 tax reform has impacted real estate holding structures

All registrants will receive a set of downloadable course materials to accompany the program.

Who Should Attend

Estate planners, tax advisors, and other related professionals will benefit from this CLE jointly offered by ALI CLE and ACTEC.

March 8, 2020 in Articles, Conferences & CLE, Current Events, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Travel | Permalink | Comments (0)

Friday, March 6, 2020

Heirs of Ultra-Wealthy can Profit Even When Markets Plunge

StockmarketThe coronavirus is causing a panic worldwide and it is being felt domestically by the plunging stock market. Though many people are worried about the downward spiral of stocks, the super wealthy, or 0.1% of Americans, see it as a glimmer of hope in these dark times. 

The rich and their advisors take a longer-term view of market volatility because their beneficiaries are future generations -- some who haven’t even been born yet. “They have more money than they could ever spend,” Ali Hutchinson, a senior wealth planner at Brown Brothers Harriman, said of her ultra-wealthy clients. “Even though this volatility could go on for months, they’re not thinking about it in that short-term way. The smart ones are using it as an opportunity.” When stocks and interest rates are lower, the Internal Revenue Service cannot tax their wealth at the same level as before the dips, making it easier to pass money to the next generation tax-free. “You could almost say it’s a perfect storm for wealth-transfer planning,” said David Stein, a partner on the private client and tax team at Withersworldwide.

A Grantor Retained Annuity Trust (GRAT) is also an option that shows much more promise during times of damaged stocks. A wealthy family will put a stock or other asset in a GRAT, a transaction that is technically a loan. If the stock rises in value, those proceeds go to beneficiaries tax-free. If the stock drops, there’s no harm done and the shares just go back to the donor. The IRS requires that trusts pay interest back to the lender, the taxpayer that set up the GRAT. The rates, which are set by a formula and published each month, are a hurdle that GRAT investments must clear in order for returns to flow to beneficiaries. Stein expects the IRS’s April rate could drop to about 1.2% or even lower.

See Ben Steverman, Heirs of Ultra-Wealthy can Profit Even When Markets Plunge, Financial Advisor, March 6, 2020.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) and Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

March 6, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Trusts | Permalink | Comments (0)

Sunday, March 1, 2020

CLE on Annual Probate and Estate Administration Conference in Pennsylvania

CLEThe National Business Institute is holding a conference entitled, Annual Probate and Estate Administration Conference in Pennsylvania, on Wednesday, April 22, 2020 at 9:00 AM - 4:30 PM at the Hilton Garden Inn Lancaster in Lancaster, Pennsylvania. Provided below is a description of the event.

The Latest Information for Handling Trusts and Estates

Probate and estates practice is in flux. Do you have all the current knowledge and tools you need? This practical legal course gives you the fundamental tax, legal and procedural guidance from experienced attorneys and probate court staff. Get an overview and crucial updates on laws and local procedures, tax planning and reporting, and key case law affecting trusts and estates. Register today!

    • Walk through the key estate procedures and get sample forms to help speed up the process.
    • Hear what probate court judges want you to know about top mistakes attorneys, trustees and executors make.
    • Get an overview of current aging and disability issues affecting your clients' estates.
    • Plan for and administer all types of assets, including digital, real estate and property in other states.
    • Ensure will validity at drafting and administration.
    • Get tax saving and reporting tips from the pros.
    • Review common trust issues at drafting and administration and get effective workarounds.
    • Guard your professional reputation with a legal ethics guide tailored to the trusts and estates practice.

Who Should Attend

This basic level seminar is designed for:

    • Attorneys
    • Accountants
    • Tax Professionals
    • Executors
    • Trust Officers
    • Paralegals

Course Content

    • Probate Judges Share Mistakes They've Seen
    • Affording Nursing Home Care and its Effects on the Decedent's Estate
    • New End-of-Life Options and the Effects of Voluntary Death on the Estate
    • Sale of Real Estate and Special Proceedings
    • Locating and Accessing All Assets Without the Traditional "Paper" Trail and Handling Digital Assets
    • New and Tricky Forms of Wills and Their Authenticatio
    • Determining Testator Capacity and Spotting Undue Influence
    • Tax Basis Reporting Requirements in Estate Administration
    • Tax Returns and Tax Saving Tidbits Under TCJA
    • IRA Beneficiary Designations and Inherited IRAs Update
    • Modifying Broken Trusts and Other Trust Management Conundrums Today
    • Legal Ethics Update

March 1, 2020 in Conferences & CLE, Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Cases, New Legislation, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Friday, February 21, 2020

Article on Valuation of Cryptocurrencies and ICO Tokens for Tax Purposes

BitcoinStevie D. Conlon, Anna Vayser, & Robert Schwaba recently published an Article entitled, Valuation of Cryptocurrencies and ICO Tokens for Tax Purposes, Est. Plan. & Cmty. Prop. L.J., Vol. 12 Book 1 (Fall 2019). Provided below is an abstract of the Article.

    Cryptocurrency valuations have fluctuated wildly. Valuation of bitcoin were dramatically off their peaks throughout most of 2018 and into 2019. This period is referred to as "Crypto-Winter." Recently, valuations have be rising. Is winter nearing its end? Will a "Crypto-Spring" emerge with coin and token valuations shooting up like budding plants?

    Moreover, cryptocurrencies and initial coin offering (ICO) tokens and their markets are nascent. The first cryptocurrency, Bitcoin, was launched in 2009, after the last major global financial recession. Day to day, valuations can vary widely from one exchange to another. The validity of process can be suspect due to concerns about particular exchanges or scams.

    These factors make valuation of cryptocurrencies and ICO tokens challenging. And yet, appropriate valuation of these instruments is critical for a range of reasons, including federal income, estate, and gift tax purposes.

February 21, 2020 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Technology | Permalink | Comments (0)

Thursday, February 20, 2020

2 Tax Strategies to Consider Ahead of the 2020 Election

TaxcalcThe race for the next presidential candidate on the Democratic ticket is starting to heat up, and the main talking points currently are climate change, infrastructure, and health insurance. But there are two points that matter to high wealth Americans: (1) lowering exemptions and raising rates for the estate and gift taxes, and (2) ending the valuation discount for closely held family businesses.

Under the Tax Cuts and Jobs Act (TCJA) of 2017, the current exemption amount for the federal estate tax was raised to $11.4 million for an individual and $23 million for a couple. Anything above that threshold is taxed at 40%. That exemption amount will remain in effect until 2025 or unless it is lowered by other legislation. Many progressive candidates have it stated in their campaign that they would like to lower that threshold and possibly even increase the tax rate above the exemption amount. If a Democrat does win the office of president, it is highly likely that these may occur. Chris Pegg, senior director of wealth planning for Wells Fargo Private Bank, says that "we’ve never had exemptions this large, and we’ve never had candidates talking about wealth redistribution. If you look at some of the dials that are most likely to be turned, I think the estate tax is one of them.”

Shortly after taking office, President Trump issued an executive order that told the Treasury Department to withdraw the regulations placed by President Obama that disallowed discounts for closely held family businesses. “Those regulations were shelved; they weren’t unwritten,” Pegg said. Though many progressive candidates are mentioning disallowing the discounts, the move would affect all family owned small businesses, not just those owned by the "1%," says Bill Smith, managing director in the national tax office of at CBIZ MHM, an accounting firm.

See Paul Sullivan, 2 Tax Strategies to Consider Ahead of the 2020 Election, New York Times, February 14, 2020.

Special thanks to Matthew Bogin, (Esq., Bogin Law), Joel C. Dobris (Professor of Law, UC Davis School of Law), and Mark J. Bade (CPA, GCMA, St. Louis, Missouri) for bringing this article to my attention.

February 20, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)

Tuesday, January 28, 2020

The Annual Gift Tax Exclusion: The Power of Early Gifting

Taxes2Many clients may be scrambling at the end of the year when it comes to certain tax related issues. But when it comes to annual gifting, acting earlier in the year may be more beneficial for a couple of reasons. The current annual gift tax exclusion amount is $15,000 per donee per individual, meaning a married couple may gift a single donee $30,000 with no gift tax consequences.

If you gift an asset with appreciation potential, such as stock or investment property, to an individual or trust, you are able to remove the appreciation and income from your tax base for the year of the gift as well as the following years. You also allow the recipient to benefit from the growth of the gift for the rest of that year.

However, the benefit to you of annual tax free gifts comes at the cost of the recipient receiving the asset with your cost basis. You may need to consider the recipient's tax liability for the gift. Annual exclusion gifting is most advantageous for individuals and married couples who expect to have a taxable estate for federal or state estate tax purposes, and with the passage of the Tax Cuts and Jobs Act in 2017, the threshold has more than doubled.

See The Annual Gift Tax Exclusion: The Power of Early, Wealth.NorthernTrust, January 2020.

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

January 28, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Friday, January 10, 2020

CLE on 2020 Tax Updates for Trusts and Estates

CLEThe National Business Institute is holding a video webcast entitled, 2020 Tax Updates for Trusts and Estates, on Thursday, January 30, 2020 from 9:00 AM - 4:00 PM central. Provided below is a description of the event.

Get the Latest Information and Tools to Save Clients on Taxes

This incisive course will get you up to speed on the year's developments in estate planning and asset protection tax laws so you can make tactical decisions and provide cutting -edge representation. Let our esteemed faculty guide you through ongoing legislative developments, key laws and rulings so you can enhance your tax planning strategy and ensure compliant returns - register today!

    • Clarify recent changes in tax law and regulation and prepare for their potential effects.
    • Analyze the most important case law of the year to glean future threats and opportunities for your clients.
    • Hear about new tax tools to add to your arsenal.
    • Get an advance look at future developments coming down the pike.

Who Should Attend

This essential tax update is for attorneys. Accountants, tax professionals, wealth managers, trust administrators/officers and paralegals will also benefit.

Course Content

    • Current Relevant Federal Tax Laws, Rates, Exemptions
    • Trust Tax Deductions under TCJA: Core Changes and Clear Guidance
    • IRS Tax Forms and Procedures Updates
    • Unpacking the Section 199A Changes and Opportunities
    • SECURE Act and Its Effect on IRA Planning
    • Current IRS Guidance and Enforcement Initiatives
    • Cross-Border Tax Issues Every Estate Planner Needs to Know
    • Reassessing and Repairing/Replacing Old Tax Planning Techniques
    • Legal Ethics and Tax Planning
    • Looking Ahead

January 10, 2020 in Conferences & CLE, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Income Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)