Wills, Trusts & Estates Prof Blog

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

Monday, March 11, 2019

How U.S. Tax Rules Apply to Inheritances and Gifts from Abroad

GiftAs Americans become more global within this modern society, they are asking estate planners questions about properties outside of the country's borders. One of the popular questions is whether an inheritance or gift from abroad will be taxed if brought into the United States. Usually, bequests are not subject to the income tax, and transfers by gift of property not situated in the U.S. from foreign nationals not domiciled in America are not subject to U.S. gift taxes. But depending on the circumstances, certain laws may still apply.

Foreign nationals who are green card holders are generally considered domiciled in the United States and as such are defined as lawful permanent residents. Residents and citizens are covered by one aspect of the estate and gift tax laws, and national without a green card may be considered domiciled for tax purposes. Transfers by foreign nationals not domiciled in the United States are covered by a different estate tax structure that imposes taxes on transfers of certain property situated in the United States.

If the decedent who bequeaths the asset is neither a U.S. citizen nor a foreign national domiciled in the United States, no U.S. estate tax is imposed on the transfer. There is also no tax resulting from the death transfer upon the beneficiary's receipt of a bequest. The United States also does not impose an income tax on inheritances brought into the country.

The United States has gift tax treaties which may eliminate the U.S. gift tax on certain transfers that are otherwise subject to gift taxes under the Code. An exemption from gift tax under a treaty is made on a gift tax return.

See How U.S. Tax Rules Apply to Inheritances and Gifts from Abroad, Find Law.com.

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

March 11, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Travel, Wills | Permalink | Comments (0)

Thursday, February 21, 2019

ING Trusts: The Hot Trend in HNW Estate Planning

TrustsThe tax reforms reflected in the 2017 Tax Cuts and Jobs Act continue to influence high net-work clients, especially the increased estate tax exemption, which at the moment is temporary until 2026. Incomplete Non-Grantor trusts, or ING trusts, can generate significant savings both in income taxes and in overall transfer taxes, meaning that it can be worthy to explore the ING trust strategy.

Central to the ING trust strategy is the presence of an “adverse party or parties" that have the ability to control the distributions of the trust to its beneficiaries. The parties can often include the creator of the trust or even the adult children of the creator. In many states - except New York - ING trusts enjoy reduced income taxes or even no state income tax at all. ING trusts are usually created in states that do not tax trust assets regardless of where the client lives.

Both the proposed and final Section 199A regulations complicate many non-grantor trust strategies by adding a new provision that requires aggregation of two or more trusts in certain circumstances. This is generally required when the trusts have substantially the came beneficiaries or grantors. For tax saving purposes, ING trusts will be most valuable to clients who have multiple natural beneficiaries who can each serve as beneficiary of one trust.

See Robert Bloink and William H. Byrnes, ING Trusts: The Hot Trend in HNW Estate Planning, Think Advisor, February 13, 2019.

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

February 21, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation, Trusts | Permalink | Comments (1)

Tuesday, February 19, 2019

One in Five UK Baby Boomers are Millionaires

UnionjackBaby boomers over the age of 65 are dramatically increasing in wealth in the United Kingdom with a 96% increase in the median household wealth from 2006 to 2016, according to Netwealth, a wealth manager that analyzed the Office for National Statistics’ Wealth and Assets surveys. In 2006, those over the age of 65 owned 28% of UK's household wealth and 10 years later than number had increased to 36%.

This age group appears to be getting wealthier due to time and luck. The 10 years studied coincides with the “peaks and troughs of interest rates for the UK,” according to Evangelos Assimakos, investment director at Rathbones in Edinburgh. Banks cut interest rates and provided financial stimulus, and the result was an inflation in financial assets, including property and share portfolios. In fact, now 20% of baby boomers are millionaires.

Younger households do not appear to have fared quite as well. Citizens between the ages of 35 and 44 (Generation X) saw a 5% fall, while the 25 to 34 (Millennials) experienced a 2% decrease. Though these numbers do not seem dire or extreme, they are a far cry from the extravagant increase that the older generation has seen.

With great power - or money - comes great responsibility - or planning. Experts advise that parents or grandparents wanting to assist a child decide if they want to do so with a gift or a loan. If the person decides on a gift, certain decisions should be made on when to transfer the property or cash as to avoid the inheritance tax, which follows the "seven-year rule." Though becoming increasingly expensive, trusts still remain a viable option to transfer wealth to younger generations. 

See Nikou Asgari, One in Five UK Baby Boomers are Millionaires, Financial Times, February 8, 2019.

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

February 19, 2019 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Trusts, Wills | Permalink | Comments (0)

Thursday, January 17, 2019

CLE on The Probate Process From Start to Finish

CLEThe National Business Institute is holding a conference entitled, The Probate Process From Start to Finish, on Tuesday, March 26, 2019 at the Embassy Suites by Hilton in Portland, Maine. Provided below is a description of the event.

Program Description
Your Fundamental Guide to Probate
So your client wants you to handle a probate case - do you know where to start? Do you know the proper procedures to use, as well as the law? At this seminar, our experienced faculty will give you detailed, step-by-step information to confidently and ably navigate the system. Gain the confidence you need to reach a favorable outcome for your client when litigating in probate court. Enroll today!
Get a step-by-step walkthrough of a probate case complete with practice tips from seasoned practitioners.
Implement a complete estate timetable in order to know what needs to be done - and when.
Effectively guide the executor and the administrator through their various duties.
Avoid problems arising from creditors' claims and insolvency with our powerful strategies.
Know the secrets to confidently handling a spouse's elective share.
Forestall disagreements between beneficiaries: adhere to the guidelines of precedence in case of intestacy.
Get results for your client! Explore successful strategies for litigating in probate court.
Follow thorough closing procedures so accounting is complete before distribution takes place.

Who Should Attend
This basic level seminar will provide those who have limited probate experience with tips on successfully handling a probate case. This comprehensive seminar will benefit:
Attorneys
Paralegals
Accountants
Tax preparers
Trust officers
Financial planners
Estate planners

Course Content
Taking the First Step: Filing an Estate in Probate Court
Understanding the Role of the Personal Representative in Probate
Managing the Inventory
Administering the Estate Effectively
Maintaining an Ethical Balance in Probate Practice
Determining if Spouse's Elective Share is a Reasonable Option
Uncovering the Laws of Intestacy and How They May Apply
Litigating the Case in Probate Court
Putting the Case to Rest: Closing the Estate

January 17, 2019 in Conferences & CLE, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Wills | Permalink | Comments (0)

Tuesday, January 15, 2019

9 Ways to Gift Your Assets to Charity

Charity1Donating to charity can be done for a multitude of reasons: giving back to society, tax saving, creating or extending a family legacy, or standing behind a specific cause or foundation. Whatever the purpose behind the giving, it is important to understand the various ways you can give to maximize impact while reaping the applicable benefits.

Here are a number of avenues to donate your assets to charity.

  1. Outright Gifts of Cash, Securities and Real Estate
    • This is the easiest way, and the majority of charities accept this method.
  2. Giving Tangibles
    • Art and other collectibles are governed by different rules, and many charities may not be equipped to accept the gifts. If the organization is able to accept the gifts, the associated income tax deduction also depends on other factors.
  3. Charitable Gift Annuity
    • This arrangement is part charitable gift, part purchase of an annuity contract with a term equal to the life of the donor.
  4. Donor-Advised Funds
    • DAFs are accounts set up within a charitable organization, and the donor contributes personal assets to the account where the contribution can be invested and grow tax-free until a grant is made to a qualified charity.
  5. Retained Life Estate
    • The donor can gift a home, farm, or other form of property to a charitable organization but retain a life estate. When the donor dies, the property passes to the charity.
  6. Family Foundations
    • Foundations require significant administrative oversight, and the average person may not be able to create one. For those clients than can create a foundation, they can maintain complete control and pass that control on to others.
  7. Charitable Remainder Trust
    • This is an irrevocable trust where the grantor or other non-charity receives a certain stream of income during the term of the trust, then the remainder passes to a charitable organization when the trust ceases to exist.
  8. Charitable Lead Trust
    • This is an irrevocable trust where a charity or charities receive a certain amount during the term of the trust, then the remainder passes to the donor's heirs and the culmination of the trust.
  9. Charitable LLC
    • This is a new method, and is governed by applicable state corporate law. The LLC is not tax-exempt, but the income tax liability as well as deductions and losses are passed through.

See Catherine Schnaubelt , 9 Ways to Gift Your Assets to Charity, Forbes, January 9, 2019.

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

January 15, 2019 in Current Events, Estate Administration, Estate Planning - Generally, Gift Tax, Income Tax, Trusts | Permalink | Comments (1)

Spinning Straw into Gold: Modifying Irrevocable Trusts

TrustsIrrevocable trusts have been part of estate planning for years. They have been used for a variety of purposes, such as to remove assets from a person's estate in order to reduce taxes, to protect assets from creditors, and to provide management of assets for beneficiaries. Historically, these trusts could run for perhaps 100 years or so, but often terminated much earlier than that. More recently, many states have eliminated or modified their laws so as to allow trusts to run forever, or at least for periods that are, for all practical purposes, forever. In addition, creditor protection has become much more important to some persons given the litigious nature of our society. The larger generation-skipping tax exemption has also fueled an increased interest in keeping assets in trust to avoid future taxes. Thus, there are now many more trusts that will run for very long periods than used to be the case.

Many clients wish to have the benefits of an irrevocable trust but do not like the idea that the trust is actually irrevocable. Estate planners have also sought ways to modify trusts that are irrevocable as a result of changed circumstances or because the planner's client is the beneficiary who objects to the terms of the trust. In response to this, state laws have been evolving over time to permit changes to what were once instruments that could not be modified. These changes raise several issues, both legal and otherwise.

For fiduciaries, this brave new world can be a minefield, exposing the fiduciary to possible litigation for making, or perhaps for not making, a change that state law now permits.

See Sarah Change & Scott Bieber, Spinning Straw into Gold: Modifying Irrevocable Trusts, ThompsonCoburn.com, January 8, 2019.

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

January 15, 2019 in Articles, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation, Trusts | Permalink | Comments (0)

Friday, January 11, 2019

Article on Fiduciary Litigation in Louisiana: Litigation Against the Mandatary (Agent), Executor, and Trustee

LsuElizabeth Ruth Carter recently published an Article entitled, Fiduciary Litigation in Louisiana: Litigation Against the Mandatary (Agent), Executor, and Trustee, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article. 

These materials were created and presented in connection with LSU's annual Estate Planning Seminar. The paper explores the various types of fiduciary litigation in Louisiana that arises in the estate planning and administration setting. The paper considers the various types of actions and remedies available, the types of proceedings, and the parties with standing.

January 11, 2019 in Articles, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Trusts, Wills | Permalink | Comments (0)

Tuesday, January 8, 2019

Where Not to Die in 2019

TaxlawThough the estate tax exemption now only applies to the wealthiest of individuals, there are still 17 states and D.C. that impose state either an state tax or an inheritance on their citizens. Some states apply the tax for all estates, some are only for larger estates. Maryland is the only state that applies both taxes. Several states rebelled when the exemption increased drastically, and have their own amounts far below the federal level. If you are in a state that has a minimum and you are nearing the cliff of having to pay out, proper estate planning is vital.

In New York state, individuals can make deathbed gifts starting in 2019 without the assets being applied toward the decedent's estate. The exclusion amount in New York is $5.47 million, approximately half of what the increased federal estate tax exemption is under the Tax Cuts and Jobs Act. So to stay under the exemption amount, a New Yorker no longer has to gift items three years out - in can be at the time of their demise.

Connecticut is the one state that could potentially have an exemption amount that’s higher than the federal exclusion amount—in 2026. For 2019, it’s set at $3.6 million, then scheduled to increase to $5.1 million in 2020, $7.1 million in 2021, $9.1 million in 2022, and to match the federal exemption amount in 2023.

See Ashlea Ebeling, Where Not to Die in 2019, Forbes, December 12, 2018.

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

January 8, 2019 in Estate Administration, Estate Planning - Generally, Gift Tax, New Legislation, Wills | Permalink | Comments (0)

Sunday, January 6, 2019

Big Changes in Tax Law: New Rates Likely to Affect Everyone

TaxesThough having to pay taxes is a constant of life, the particulars of the tax law changes with every year. 

“The biggest tax law change in 30 years is in effect for 2018. Everyone, whether their tax situation is simple or complex will be impacted,” says ENJ Financial Tax Manager Whitney Gum, CPA. The major changes are larger brackets and a drop in rates, meaning the same taxable income last year will be at a lower rate.

Some itemized deductions may be limited, but could include medical expenses, state and local taxes, mortgage interest and donations to charities. The local and state tax deductions have a cap at $10,000, and corporate tax rate has decreased to a flat 21%.

“Another huge change, is the implementation of the Qualified Business Income Deduction (QBID),” Gum said. “This is a 20% deduction equal to the amount of qualified business income of sole proprietorships, partnerships, and S corporations. This is an area where planning is very important to make sure the taxpayer is receiving the maximum benefit of this deduction.”

See Dawnita Fogleman, Big Changes in Tax Law: New Rates Likely to Affect Everyone, Woodward News, January 1, 2019.

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

January 6, 2019 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Legislation | Permalink | Comments (1)

Thursday, December 27, 2018

CLE on Planning Techniques for Larges Estates

CLEThe American Law Institute is holding a conference entitled, Planning Techniques for Larges Estates, on Wednesday - ‎Friday, ‎April ‎3 - ‎5, 2019 at the Hilton Resort & Villas in Scottsdale, Arizona. Provided below is a description of the event.

Why You Should Attend
A successful planning strategy for high-net-worth clients involves advanced estate planning techniques that minimizes taxes, protects assets and preserves wealth. Don’t miss out on this unique opportunity to keep up to date on the most innovative wealth transfer strategies from a faculty of leading large estate planners and tax experts!

Here’s what past course attendees have said:

"Very good speakers and content. The lunches provided easy networking opportunities."

"Excellent and substantive as usual, thank you for a great program!"

"Very well presented and the written materials will be useful."

"Wonderful program. Learned a lot. Will take it again in the future."

What You Will Learn
Attend this highly-rated course and get the latest sophisticated planning strategies specifically for large estates. Learn, network, and strategize with your peers and a highly experienced faculty of trust and estate practitioners from across the country. Each panel provides real examples and practical applications that will help you develop a plan for your clients to efficiently transfer wealth to their heirs and favorite charities, protect their family and businesses, grow assets, and minimize taxes.

This year’s estate planning and strategic wealth transfer topics include:

Sales to IDITs, GRATs, etc.
Life Insurance as a integral part of a well thought-out estate plan
Best way to pass assets using GST
Incorporating trusts into retirement plans
Advantages of charitable giving
Using entitites in estate planning

December 27, 2018 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts, Wills | Permalink | Comments (0)