Wills, Trusts & Estates Prof Blog

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

Thursday, August 29, 2019

Why You Should Change Your Will Now

WillIf you have made the adult decision to create a will, you have taken a step in the right direction. But even if you think that your estate is modest or you life has not changed much since you signed your will, it is still a good idea to review - just in case.

Federal laws regarding wills and estates are ever-changing, especially from one administration to another. State laws regarding inheritance and gift taxes can also be updated. You may have also written your will before a large promotion or before your parents died, leaving you a portion of their own estates. Often, parents want to protect their children from themselves. If your child is currently in a rebellious stage or not making the best choices, you may have to create a trust to ensure their assets are safe.

A person's estate plan should grow with them, and if you have not look at yours in a while, the time is now.

See Christine Fletcher, Why You Should Change Your Will Now, Forbes, August 27, 2019.

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

August 29, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)

Sunday, August 11, 2019

Beware, the IRS is Eyeing Your Inherited Money

TaxlawThose that attained their wealth through inheritance are always on guard in case laws change that can affect their taxes. Two recently passed legislative measure may cause wealthy individuals an appropriate level of paranoia.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 passed the House of Representatives almost unanimously, with a vote of 417-3. The Act says that its intention is to encourage more businesses to offer retirement plans and expand opportunities for workers to invest their retirement account funds. It increases the age that a person must take out required minimum distributions (RMDs) from their IRAs, from 70.5 to 72. All that sounds good, but here is the nefarious part: instead of using an IRS table to allow a beneficiary to drain an inherited IRA, non-spouse beneficiary must eliminate the IRAs funds within 10 years of the person's death.

The Tax Cuts and Jobs Act dramatically increased the federal gift and estate tax exemption, and each following year until 2026 will be adjusted for inflation. But the exemption is scheduled to revert back to the much-lower pre-TCJA level in 2026. What tax ramifications would there be for large gifts made during this time? Proposed IRS regulations issued late last year would provide some protection by stipulating that folks who make large gifts while the exemption is in place would not be penalized if the exemption reverts back.

See Beware, the IRS is Eyeing Your Inherited Money, Wealth Advisor, July 15, 2019.

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

August 11, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Non-Probate Assets | Permalink | Comments (0)

Wednesday, August 7, 2019

5 Key Tax Questions for Buying a Vacation Home Abroad

BeachThe allure and prestige of purchasing a vacation home in a foreign land is easy to understand. But there are several tax questions that must be asked to determine if the purchase is a prudent one.

  • Will buying a vacation home in a foreign country impact my U.S. income taxes?
    •  As long as a vacation home is purchased in an individual capacity and is not used to produce rental income, it should not trigger U.S. income tax.
  • Is the mortgage interest on my foreign vacation home deductible?
    • Yes, interest on up to $750,000 of principal is deductible as long as the debt was used to “acquire, construct or substantially improve” a primary residence or one secondary home. After 2025, the principal amount jumps up to $1 million.
  • If I incur foreign real estate taxes, are they deductible?
    • As of right now no, but starting 2026, the itemized deduction for foreign real estate taxes is scheduled to return.
  • I have a U.S. will and testament. Will it sufficiently address the eventual transfer of my foreign home to family or friends?
    • Different countries can have very different estate planning laws, so it is best to work with a tax attorney and an advisor to possibly create a foreign estate plan.
  • Do I risk exposure to double taxation from a wealth transfer perspective?
    • The U.S. estate and gift tax calculation includes the value of all your assets, including real estate abroad. If those foreign countries also impose a gift or estate tax, there may very well be double taxation.

See 5 Key Tax Questions for Buying a Vacation Home Abroad, Northern Trust, June 13, 2019.

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

August 7, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Travel, Trusts, Wills | Permalink | Comments (0)

Sunday, August 4, 2019

Book on Texas Estate Planning Statutes with Commentary: 2019-2021 Edition

TexasestatesbookGerry W. Beyer recently published a book entitled, Texas Estate Planning Statutes with Commentary: 2019-2021 Edition, (2019). Provided below is a summary of the book.

Texas Estate Planning Statutes with Commentary: 2019-2021 Edition is a compilation of Texas statutes that are significant to law school and paralegal courses related to estate planning, such as wills and estates, trusts, estate administration, probate, elder law, and guardianship. Changes made by the 2019 Texas Legislature are printed in red-lined format to make the revisions easy for the reader to locate. Many sections include carefully written commentary entitled Statutes in Context. These annotations provide background information, explanations, examples, and citations to key cases, which will assist the reader in identifying the significance of the statutes and how they operate.

August 4, 2019 in Books, Books - For Practitioners, Books - For the Classroom, Current Affairs, Estate Administration, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Intestate Succession, New Legislation, Trusts, Wills | Permalink | Comments (0)

Friday, August 2, 2019

Wealth Transfer Strategies for a Lower Interest Rate Environment

InterestratesInterest rates influence how wealth transfers are valued for tax reporting purposes, so it is important to take them into account with your planning. Here are some strategic ideas that can be taken advantage of during a low rate environment.

  • Grantor Retained Annuity Trusts
    • Income Tax Advantages
      • The IRS does not look at the actual growth of the assets, so any appreciation above the hurdle rate is passed on to trust beneficiaries free of gift and estate taxes.
  • Charitable Lead Annuity Trusts
    • Tax-Free Transfer to Family Members
      • Any investment performance in excess of the hurdle rate passes tax free to the family members at the end of the trust’s term.
    • Minimizing CLAT Gift Tax Costs
      • If not structured right, gift taxes are a possibility, thus a CLAT should be structured to zero out at the end of its term, resulting in little or no gift tax.
  • Intra-Family Lending
    • No Gift Tax Liability
      • Good avenue to assist family members without incurring any gift tax liability.
    • Loan to Trusts that Benefit Family Members
      • If the trust is a grantor trust, the interest payments on the loan will not have an income tax consequence.
  • Selling Property to a Grantor Trust
    • Maximizing Leverages
    • Income Tax Advantages
      • There is no capital gain recognized when the property is sold to the trust, and the interest payments to the grantor are not considered taxable income.
    • Estate Tax Advantages
      • The assets are completely removed from his or her estate if the grantor outlives the terms of the promissory note.
    • Minimizing the Risk of Gift Tax
      • Make sure the assets are professionally appraised.

See Wealth Transfer Strategies for a Lower Interest Rate Environment, Fiduciary Trust, July 29, 2019.

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

August 2, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Tuesday, May 28, 2019

Does Your Estate Plan Fall Prey to 3 Big Tax Issues?

3Richard (Dick”) Oshins, Esquire from Las Vegas, Nevada, identified what he believes are three of the more sinister tax blunders that affect many estate plans. Upon your annual estate and financial plan review, it would be prudent to determine if it is effected by these three issues.

  • Not fixing Family Limited Partnerships (FLPs) and Limited Liability Companies (LLCs)
    • These types of entities were often formed to hold family investment or business assets for one of or more reasons, such as valuation discounts for estate and gift tax purposes. Another common purpose was to exert control, to hold family investments and, even after transferring interest, still retain that control over the entity. Lastly, these entities can provide must desired asset protection. 
    • But too often owners neglect proper maintenance and formalities with these entities, such as commingling personal funds with company funds or not having a properly signed governing instrument.
  • Not swapping out on irrevocable trusts
    • Irrevocable trusts are often used to remove assets from an estate to save on taxes, for asset protection, etc. If the trust is structured as a grantor trust, the income derived from the trust is reported on the income return of the grantor and not the trust itself. A common way to create a grantor trust is to give the settlor the power to swap or substitute personal assets for trust assets of equivalent value.
  • No selection of trust situs
    • Does your home state provide a good environment for your trust? If the tax system is harsher than others, you may be able to "rent" a better jurisdiction to reach your goals and avoid state income tax. When planning any new trust, discuss with your estate planning attorney the pros and cons of which state to use for the trust.

See Martin Shenkman, Does Your Estate Plan Fall Prey to 3 Big Tax Issues?, Forbes, May 27, 2019.

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

May 28, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Saturday, May 25, 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 Wednesday, June 5, 2019 from 8:30 AM - 4:40 PM at the Hilton Garden Inn San Antonio Airport in San Antonio, Texas. Provided below is a description of the event.

Program Description

Handling Probate from Initial Notices through the Estate Closing

This "a through z" guide to probate is designed to take you from the first days of the estate timeline through all the steps of marshaling and valuing estate assets, locating and paying the creditors, paying the beneficiaries, and laying the estate to rest. You will receive the latest updates on the probate court procedure and tax laws, practical guidance from experienced probate attorneys on using spousal elective share and resolving estate disputes, and sample forms and checklists to speed up the administration process. Build a solid foundation for your probate practice - register today!

  • Learn the procedure, rules and practical steps to effectively administer a probate.
  • Determine what form of administration is appropriate for a specific probate case.
  • Clarify the order of inheritance for an estate when there is no will.
  • Locate assets and obtain ownership documents more easily with a list of local and online resources.
  • Get a complete view of the sequence of events that must happen before the estate can be closed.
  • Identify common actions that trigger malpractice liability and get tips for staying in the clear.
  • Get practical advice for honoring or contesting all claims against the estate.
  • Find new ways to resolve liquidity issues that delay estate closing and final distributions and payments.
  • Learn what common closing mistakes can allow the estate to be re-opened, and how to avoid them.

Who Should Attend

This basic level seminar is designed for professionals who want to be more effective in handling the probate process, including:

  • Attorneys
  • Paralegals
  • CPAs and Accountants
  • Financial Planners and Wealth Managers
  • Tax Professionals
  • Trust Officers

Course Content

  • Initial Filing in Probate Court and Estate Timeline
  • Law of Intestate Succession
  • Inventory and Appraisement
  • Probate Property vs. Non-Probate Assets
  • Handling Claims Against the Estate
  • Tax Reporting and Post-Mortem Tax Matters
  • Ethics
  • Sale of Property and Distributions
  • Final Accounting and Closing the Estate
  • Probate Disputes and Litigation

May 25, 2019 in Conferences & CLE, Current Affairs, Estate Administration, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Intestate Succession, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Friday, May 17, 2019

CLE on Estate Planning: New Laws That Make Old Tools Obsolete

CLEThe National Business Institute is holding a teleconference entitled, Estate Planning: New Laws That Make Old Tools Obsolete, on Friday, June 7, 2019, from 10:00 AM to 11:30 AM Central. Provided below is a description of the event.

Program Description

Stay on the Cutting Edge of Your Practice

This timely update will review the latest changes in the rules and will offer new tools to adapt to the new regulatory environment. Make certain your clients get the most up-to-date representation - register today!

  • Get an incisive summary of the tax changes and their implications for existing planning tools.
  • Learn which deductions remain and how to obtain them.
  • Identify planning approaches that no longer help your clients.
  • Gain practical pointers for fixing old trusts.

Who Should Attend

This legal update is designed for attorneys. It will also benefit accountants and CPAs, trust and tax professionals, and paralegals.

Course Content

  • Leveraging and Reporting the Step Up in Basis (Recent IRS Guidance)
  • QPRT Replacements
  • Obsolete Small-to-Medium Size Estate Tools and How to Update Them
  • The Sky High Estate/Gift/GST Tax Exemption and the New Approaches it Dictates
  • Old Large Estate Techniques That No Longer Work and What to Replace Them With
  • Charitable Giving after TCJA
  • Using the QBI Deduction: New Opportunities
  • Fixing Other Old Trusts
  • What if? . . . How the Potential Clawback of the New Rules Affects Client Advice

May 17, 2019 in Conferences & CLE, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)

Friday, May 10, 2019

Section 1035-Your Way Out of Obsolete Life Insurance Trusts

IrsThe estate and gift tax exemption increase has had many people wondering if they still need a life insurance trust, a tool that was once hailed for its savings potential. For some clients, dismantling existing life insurance trusts may be the smartest move—but not without considering the repercussions of that approach.

One possibility is the fact that the gift exemption may change in the future and revert back to his previous level of between $5 and $6 million. Another factor for clients is that many reside in states that are subject to separate state estate and inheritance taxes, and the majority of these states kept their thresholds at the same level as they were before the tax reform. Meaning that if state taxes were an issue for the client pre-reform, they continue to present the same issues now. Taxpayers with liability concerns regarding a business should also consider asset protection.

The process of dismantling a life insurance trust is very straight forward. The client could choose to give the policy to his or her spouse, and if there are no other assets held in the trust, that would be the end of it. Sometimes there are issues with remainder beneficiaries. But even if they do want to dismantle the trust, clients understand that they will, continue to have ongoing life insurance needs, be it providing for loved ones or using the cash value of the policy during retirement. Enter the 1035 exchange.

The IRC Section 1035 exchange rules allow the owner of a financial product, such as a life insurance or annuity contract, to exchange one product for another without treating the transaction as a sale. No gain is realized, thus there is no tax liability. To qualify, the policy owner must stay the same, except the IRS has allowed a change when the original policy insured two lives in a second-to-die policy and the exchange policy is a single product due to the death of the second person.

See William H. Byrnes and Robert Bloink, Section 1035-Your Way Out of Obsolete Life Insurance Trusts, Think Advisor, April 17. 2019.

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

May 10, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Trusts | Permalink | Comments (0)

Monday, April 29, 2019

Beating Bernie’s Bill in 2019

BernieIn January of this year, Senator Bernie Sanders introduced S309, otherwise known as the “For the 99.8 Percent Act” in the Senate. Because many of the propositions within the bill deal with changes in the tax code, any person involved in estate planning or wealth preservation should meet with their financial advisor to determine the appropriate steps. If passed, the Act will become effective January 1, 2020. This most likely not occur now with the current political set-up, but if the Democrats in 2020 take control of the presidency, the House, and the Senate, there is a material risk that some or all of the proposals will be enacted.

The Act rolls backs many of the changes that occurred in the Tax Cuts and Jobs Act. These alterations include lowering the estate tax exemptions to $3.5 million; reduces gift tax exemptions to $1 million; raises the highest estate tax rate to 77%; includes in the gross estate of a decedent all unrealized appreciation in their “grantor” trusts; imposes material restrictions on the use of grantor retained annuity trust (GRATs); limits the duration of dynasty trusts to 50 years, even in states that allow them in perpetuity; eliminates almost all valuation discounts on transfers of privately held entities; and virtually eliminates most Crummey powers from trusts.

As these changes run the gambit for many prudent clients, they should speak with their advisors to determine if any strategies they are using will have to be altered.

See William D. Lipkind, Beating Bernie’s Bill in 2019, WinsonNesler.com, April 25, 2019.

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

April 29, 2019 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)