Wills, Trusts & Estates Prof Blog

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

Friday, October 18, 2019

Article on Wealth Taxation: An Overview of the Issues

MoneyAlan D. Viard recently published an Article entitled, Wealth Taxation: An Overview of the Issues, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Two Democratic presidential candidates, Senator Elizabeth Warren (D-Massachusetts) and Senator Bernie Sanders (I-Vermont), have proposed annual wealth taxes. Annual wealth taxes have been adopted in a number of European countries (many of which later repealed them), but not in the United States. Although the proposed wealth tax rates appear low, they are equivalent to high-rate income taxes. Due to the pronounced concentration of wealth in the United States, a wealth tax would be highly progressive. The tax would probably reduce national saving and investment to some extent, although capital inflows would ameliorate the investment reduction. Congress would likely add exemptions for selected assets, which would be distortionary and diminish the tax’s revenue yield. The tax would face compliance and administration challenges due to undervaluation and concealment of assets and it might be ruled unconstitutional in the absence of suitable modifications. Although those challenges would probably not be insurmountable, it would be simpler and more prudent to pursue any desired increase in tax progressivity through reforms of the income tax and estate and gift taxes.

October 18, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Wednesday, September 25, 2019

Inflation Adjusted 2020 Figures Announced

IrsThe Internal Revenue Service has announced the inflation adjustments for the estate and gift tax exclusion, the generation-skipping transfer tax exemption, the gift tax exclusion and other estate planning rates for 2020.

  • The federal estate and gift tax exclusion amounts will increase by $180,000, from $11.4 million to $11.58 million.
  • The generation-skipping transfer (GST) tax exemption will also going to be $11,580,000.
  • The annual gift tax exclusion will remain the same at $15,000 per donor per donee per calendar year.
  • Trust and estate income tax rate brackets have also been released.
    • If income is less than $2,600, the tax is 10% of taxable income.
    • If income is over $2,600 but not over $9,450, the tax is $260 plus 24% of what is over $2,600.
    • If income is over $9,450 but not over $12,950, the tax is $1904 plus 35% of what is over $9,450.
    • The highest bracket comes in at amounts over $12,950, in which the tax is $3,129 plus 37% of the excess over $12,950.

See James V. Roberts, Inflation Adjusted 2020 Figures Announced, JamesVRoberts.com, September 25, 2019.

September 25, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (2)

Friday, September 20, 2019

Northern Illinois Law Seeks Entry Level Faculty

NIUNORTHERN ILLINOIS UNIVERSITY COLLEGE OF LAW invites applications for anticipated openings for two entry-level tenure-track faculty positions beginning August 2020. Duties include engaging in high quality research and teaching, as well as being an active participant in law school and university service. Requirements include a J.D. degree from an ABA accredited law school, an ability to engage in high quality research and teaching, and a willingness to actively participate in law school and university service.

We are particularly interested in candidates specializing in contracts, business associations, tax, torts, trusts and estates, and skills courses in the areas of pre-trial skills and/or business related skills.

If you have not registered for the AALS Faculty Recruitment Conference and wish to apply, please go to the position posting through the NIU applicant tracking system at the following link: http://employment.niu.edu/postings/47421.

Please note that to be officially considered for this position, a cover letter, resume, and a list of names/addresses/email addresses/phone numbers of three current professional references will be required as uploads to NIU’s applicant tracking system.

Please direct questions to Interim Assistant Dean for Student Affairs and Associate Professor Yolanda King, Chair of the Appointments Committee, Northern Illinois University College of Law, Swen Parson Hall, DeKalb Illinois 60115-2890 at lking@niu.edu , or Tita Kaus at 815-753-1068 tkaus@niu.edu . Preference will be given to applications received by September 24, 2019, although applications will be accepted until the positions are filled.

In accordance with applicable statutes and regulations, NIU is an equal opportunity employer and does not discriminate on the basis of race, color, national origin, ancestry, sex, religion, age, physical and mental disability, marital status, veteran status, sexual orientation, gender identity, gender expression, political affiliation, or any other factor unrelated to professional qualifications, and will comply with all applicable federal and state statutes, regulations and orders pertaining to nondiscrimination, equal opportunity and affirmative action.

In compliance with federal law, all persons hired will be required to verify identity and eligibility to work in the United States and to complete the required employment eligibility verification document form upon hire.

September 20, 2019 in Current Affairs, Estate Planning - Generally, Faculty Positions -- Permanent, Income Tax, Trusts | Permalink | Comments (0)

Tuesday, September 17, 2019

CLE on Probate Process, Procedures and Documents: All the Forms and Checklists in One Place

CLEThe National Business Institute is holding a webcast entitled, Probate Process, Procedures and Documents: All the Forms and Checklists in One, on Tuesday, October 15, 2019 at 9:00 AM - 4:00 PM Central. Provided below is a description of the event.

Navigate Probate with Confidence

When the client is no longer there to make his or her voice heard, the task of interpreting his/her wishes to accurately settle the estate falls on your shoulders. Do you have all the tools you will need? This program will provide you with a comprehensive overview of the probate process, equipping you with the checklists, forms and documents you will need to guide your clients through each time-sensitive procedure. Learn what to do and when to do it, from the initial petition to the final accounting. Register today!

    • Don't miss a step - learn how to map out the entire probate process by utilizing a master checklist.
    • Examine the essential content of the initial petition and understand the procedure for filing it.
    • Receive practical tips on valuing and recording assets to be included in the estate inventory.
    • Handle creditor notices and responses.
    • Understand key provisions of trusts and their impact on the probate process.
    • Learn what must be included in the final accounting and review sample tax returns.

Who Should Attend

This program is designed for attorneys. It will also benefit accountants and CPAs, trust officers, and paralegals.

Course Content

    • Probate Process and Executor Duties: The Master Checklist with Deadlines
    • Wills: Key Provisions, Validity, Interpreting Unique Instructions
    • Initial Petition and Letters of Authority: Content and Procedure
    • Estate Inventory: Valuing and Recording Assets
    • Creditor Notices and Responses
    • Trusts: Key Provisions, Trustee Duties, and the Trust's Impact on Probate
    • Final Accounting: What Must and Should Be Included
    • TAX Returns and Schedules for the Estate and the Decedent: Forms, Deadlines, Exentions (With Sample Returns)
    • Estate Closing and Distributions: Notices of Proposed Action, Petition to Discharge the Fiduciary, and Other Key Documents
    • Ethical Practice Considerations and Concerns in Probate

September 17, 2019 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Non-Probate Assets, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Friday, September 13, 2019

Article on Red States, Blue States: Lessons from the State Death Tax Credit and the 'SALT' Deduction.

SaltJeffrey A. Cooper recently published an Article entitled, Red States, Blue States: Lessons from the State Death Tax Credit and the 'SALT' Deduction, Tax Law: Tax Law & Policy eJournal (2019). Provided below is an abstract of the Article. 

Since 1861, every version of the federal income tax has included a deduction for state and local taxes (often referred to by its popular acronym “SALT”). Since this provision, the “SALT deduction,” minimizes the effect of state and local taxes on taxpayers, it offers greater benefits to those living in states that impose the highest tax burden — the high-tax “blue” states. In 2017, the Tax Cuts and Jobs Act marked a major shift in this long-established federal policy toward state taxes. Among its many provisions, the Act capped the SALT deduction at $10,000 per married couple, providing no Federal tax offset for amounts paid in excess of that amount.

In this article, I attempt to address two questions raised by this turn of events. First, how will states respond to this change in federal law? Second, does the capping of the SALT deduction represent a major shift in federal-state relations, an unprecedented attack on blue states, or is it simply politics as usual?

My novel approach to the subject is to consider these questions by exploring the similarities and contrasts between the income tax SALT deduction and the estate tax state death tax credit, which was established in 1924 and repealed in 2001. Viewing the 2017 legislation within this broader historical context more reveals trends and patterns, providing greater insight than would a study of the SALT deduction in isolation.

This approach yields two results. First, analyzing state legislative responses to the 2001 estate tax changes helps to predict how state governments may respond to the 2017 income tax change and thus offers insight into the future evolution of state income tax regimes. Second, placing the 2017 Tax Act in a broader historical context reveals a pattern of federal interference with state tax regimes, yielding lessons about the interdependence of federal and state tax law as well as how a changing political climate can shape tax policy.

September 13, 2019 in Articles, Current Events, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Thursday, August 29, 2019

Democrats’ Emerging Tax Idea: Look Beyond Income, Target Wealth

CashbundleThe tax system of the United States may experience a serious overall if Democrats win the White House and Congress in the next election. Instead of simply taxing income, Democratic presidential candidates and legislators want to dive into taxing the wealth of the rich in America.

At the end of 2017, U.S. households had $3.8 trillion in unrealized gains in stocks and investment funds, and the majority of the value of estates over $100 million is comprised of those unrealized gains. Much has never been touched by individual income taxes and may never be because capital gains are taxed only when gains are realized through a sale and become income. “The whole tax system is stacked in favor of the tax-avoidance crowd,” said Senator Ron Wyden, who has outlined a plan for annual taxes on unrealized gains. Many of the agendas center on using wealth taxes to finance societal needs, such as expanding health-insurance coverage, combating climate change and aiding low-income households.

Experts across the political spectrum agree income inequality widened in recent decades, and wealth inequality even more. But there does not appear to be a consensus necessarily on what to do about it. Conservatives fear heavily taxing the wealthy will hinder investment and disrupt markets, while liberals believe the lighter tax rate on wealth compared to income is morally wrong and a contributor to wealth gaps between blacks and whites.

See Richard Rubin, Democrats’ Emerging Tax Idea: Look Beyond Income, Target Wealth, Wall Street Journal, 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 Planning - Generally, Income Tax | 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)

Article on Intergenerational Equity, Student Loan Debt, and Taxing Rich Dead People

TaxcalcVictoria J. Haneman recently published an Article entitled, Intergenerational Equity, Student Loan Debt, and Taxing Rich Dead People, Wills, Trusts, and Estates Law eJournal (2019). Provided below is an abstract of the Article.

Once upon a time, there was a generation of indentured servants called Millennials. They were beautiful and mysterious and clever and feckless, in the way that all young people can sometimes be. The Millennials had dreams of future careers in which they were near-mystical, all-powerful protectors of the planet, brunching on avocado toast, driving in electric cars, and eradicating golf courses from the earth. Droves of Millennials applied to universities, believing that a diploma was a barrier for entry to advance the careers of which they dreamt. Most were confronted with a conundrum: borrow to subsidize the dream career, with decades of (potentially unaffordable) payments when they were finally employed. The Generation Who Stole the World, commonly referred to as the Baby Boomers, had decided that unlimited access to debt was the most economically sound approach by which to offer equal opportunity in higher education — and the delectable irony of this tale is that the availability of debt caused (or at the very least, accompanied) the skyrocketing of costs. A vicious cycle resulted in an entire generation of educated Millennials having mortgaged their futures, and visibly sagging under the weight of the chains of their debt.

This hyperbolic tale leans into stereotypes for dramatic effect, but is also strikingly accurate in its rendering of higher education financing in the United States. The Boomer gerontocracy inherited the benefits of New Deal policies, with substantial public investment into infrastructure and education, but then gradually shifted the financing of higher education away from grants and towards student loan debt. Millennials have taken on 300% more student loan debt than their parents, with those borrowers between the ages of 25 and 34 each having an average of $42,000 in student loan debt. Student loan debt has more than doubled since 2009 and can no longer be ignored: according to projections in this Article, assuming the same steady rate of growth from 2004 to 2019, outstanding student loan debt will exceed $13.5 trillion within the next twenty years, far outpacing the projected growth of the Gross Domestic Product (GDP) of the United States.

There is a glaring gap in academic literature with regard to the choice to primarily lean upon student loan indebtedness to finance higher education, the unsustainability of such an approach, and the intergenerational equity of shifting debt from this generation to the next. Those crafting public policy have implicitly shirked away from notions of intergenerational sustainability in its management of higher education financing — with the (perhaps unintentional) result that higher education financing is operating on Ponzi principles. Forward-looking higher-education policy must be rooted in notions of intergenerational equity: a society is intergenerationally just when each generation does its best to contribute its fair share towards succeeding generations, avoiding serious harm to future generations, with a consciousness of the needs that may exist in the future. This Article fills a gap by considering the way in which debt is used (and potentially abused) as a common pool resource and that the management of a common pool resource arguably carries with it intergenerational equity obligations. The first in a two part series, this Article proposes a way forward with a creative solution — the repurposing of the gratuitous tax system such that the revenues are earmarked and dedicated to the retooling of higher education finance in the United States.

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

Wednesday, July 24, 2019

Let the 'Zombie' Tax Extenders Die, Groups Urge Congress

TaxcalcOpponents to a package of tax extender bills approved by the House Ways & Means Committee on June 20 let their voices be heard this past week on Capitol Hill at a panel hosted by the Committee for a Responsible Federal Budget. The extender bills include H.R. 3298, The Child Care Quality and Access Act of 2019; H.R. 3299, The Promoting Respect for Individuals’ Dignity and Equality (PRIDE) Act of 2019; H.R. 3300, The Economic Mobility Act of 2019; H.R. 3301, The Taxpayer Certainty and Disaster Tax Relief Act of 2019.

The extender bills have been nicknamed "zombie bills" because they had previously expired within the last two years and proponents of them want to revive them from the grave. The Committee for a Responsible Federal Budget estimates that the extenders package would add $150 billion to the debt over 10 years with interest, and $710 billion over 10 years if the temporary policies were permanently extended due to only one of the bills being offset. That singular offset is in HR 3301, which would reverse the 2017 tax law’s estate tax exemption increase three years earlier than scheduled.

See Melanie Waddell, Let the 'Zombie' Tax Extenders Die, Groups Urge Congress, Think Advisor, July 22, 2019.

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

July 24, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Income Tax, New Legislation | Permalink | Comments (0)

Sunday, July 7, 2019

Article on No Orchard, No Capital Gain

OrchardCalvin H. Johnson recently published an Article entitled, No Orchard, No Capital Gain, Tax Law: Tax Law & Policy eJournal (2019). Provided below is an abstract of the Article.

As a matter of principle, capital gain is the gain from invested capital or basis. If the taxpayer has no basis in something of value it sells, there is no capital gain.

The principle that capital gain is gain from capital is embedded in the ordinary English language meaning of “capital gain,” which reflects the long history of the English property system going back into feudal tenures. Property purchased by expenses charged to the income interest remains part of the income interest and does not become capital gain reserved for the next heir.

Moreover, the combination of deduction of inputs into a transaction and preferential capital gain rates for the output is a mismatch that creates an inappropriate negative tax or subsidy. The subsidy does not “clearly reflect income.”

Finally, preferential rates for capital gain provide relief from what Irving Fisher called a double tax on capital, but if there is no capital, there is no double tax and thus no capital gain. This means that, like compensation, the sale of a contract to perform future services, of body parts, of self-developed goodwill, or of an income interest are ordinary assets, not capital.

While capital gain has a principled meaning, there are cases that do not conform to the principles. The recent Tax Court Memorandum Decision, Greenteam Materials Recovery Facility PN v. Commissioner, treated the sale of a contract in which the taxpayer had no basis as if it were a capital asset. Compensation for services and self-developed goodwill are also sometimes treated as capital assets, which is a violation of the principled meaning of capital gain.

July 7, 2019 in Articles, Estate Planning - Generally, Income Tax | Permalink | Comments (0)