Wills, Trusts & Estates Prof Blog

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

Sunday, October 10, 2021

Article: Mega-IRAs, Boon or a Bane?

Albert Feuer recently published an article entitled Mega-IRAs, Boon or a Bane?, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article: Estate planning

Peter Thiel reportedly converted a 1999 Roth IRA investment of $1,700 in PayPal “founder’s shares,” into assets that appeared to be worth $7 billion on June 30, 2021. There are serious questions whether this IRA and other Mega-IRAs are entitled to the IRA tax benefits. The IRS should have the resources to challenge the tax exemption of any Mega-IRAs appearing to violate the current law. These Mega-IRAs will disappear when the IRS prevails. There should also be statutory changes to direct tax incentives not at Mega-IRAs and their owners, but at improving the retirement readiness of American working families. This was why traditional and Roth IRAs were introduced and why they are called individual retirement accounts. The following common-sense changes would help achieve this goal by narrowing the retirement savings focus of retirement tax incentives:

(1) All the IRAs of an individual whose traditional IRAs, Roth IRAs and designated Roth 401(k) IRAs have an aggregate value in excess of $5 million at the end of any calendar year shall be called Mega-IRAs and should lose their tax qualification if the Mega-IRAs do not distribute half of the excess by the end of the following year;

(2) All of an individual’s Mega-IRAs should lose their tax-qualification if the individual makes any contributions to any Mega-IRA for the following calendar year;

(3) The minimum required distribution rules applicable to traditional IRAs and designated Roth 401(k) IRAs should apply to Roth IRAs, i.e., annual distributions should start by April 1 of the year following the year, if any, the participant reaches age 72; and

(4) The annual excise tax for excess contribution to any IRA should be increased from 5% to 10% and should apply to the earnings associated with any excess contributions for the year at issue, rather than only to the excess contributions, as is now the case.

October 10, 2021 in Articles, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Saturday, October 9, 2021

Article: Singapore Trusts Law

Christopher Hare and Vincent Ooi recently published an article entitled, Singapore Trusts Law, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article. Trust

The development of an autochthonous legal system and jurisprudence in Singapore has meant that Singapore law has come a long way from its English roots. This is manifestly the case for the legal principles relating to trusts, where the efforts of our local judges, academics, lawmakers and practitioners have resulted in a rich jurisprudence that draws on the best legal thinking throughout the Commonwealth, while still retaining its own distinctive character. Developments in English law remain persuasive, although the Singapore courts have shown themselves ready to depart from these where they are inappropriate for the local context or where there are disagreements on principle. This is evident on such fundamental issues as the theoretical underpinnings of the express trust, the recognition of remedial constructive trusts and the approach to charitable trusts. Not only can legal divergence be important at a local level, but it can also give Singapore its own unique voice on the comparative and international plane.

As Singapore trusts law continues to develop, practitioners and students alike may increasingly find that scholarly works produced for the English legal market may not always accurately reflect the position adopted by Singapore’s higher courts nor advocate for policy positions that are appropriate for this jurisdiction. Accordingly, there was self-evidently the need for a textbook specifically addressing the legal principles and policies applicable to trusts in Singapore. Whilst other jurisdictions have been drawn upon in the absence of local precedent (unsurprisingly, English law still casts a rather long shadow), special care has been taken in writing this book to analyse local judicial precedents, legislation and academic writings where these are available.

This first edition of this book has been written with the syllabuses of the three local law schools in mind, focusing on the principal areas of trusts law as taught in these schools. Accordingly, the aim is that readers should find this book a helpful and accessible introduction to the principles of trusts law operating in Singapore, as it aims to lay out the fundamental concepts in a structured manner, without presuming prior knowledge of the subject matter. It is hoped that that the book may even act as useful refresher for the more seasoned practitioner and provide some additional insights in those areas where the book seeks to delve more deeply. Naturally, however, a book must be selective in its coverage. That said, it is envisioned that the book’s scope will be expanded in subsequent editions to include more detailed coverage of those areas that have greater practical significance, such as the private international law issues applicable to trusts, the use of trusts in the private client and wealth management contexts and the tax treatment of trusts. For this first edition, the authors have chosen to focus more on analysing the fundamental legal principles and theoretical foundations for trusts, rather than the myriad of issues that arise in practice. The law is stated as of 1 February 2021, although later developments have been included where possible.

October 9, 2021 in Articles, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

GLOBAL HUNT FOR LOOTED TREASURES LEADS TO OFFSHORE TRUSTS

LatchfordGenial Englishman Douglas Latchford has been known for his love for ancient sculptures. Latchford even risked land mines to explore Khmer Empire cities in remote Cambodia. Since the 1970s, Latchford has built on of the world's largest private collections of Khmer treasures. 

Latchford's collection is mostly made up of Hindu and Buddhist sculpture. Latchford co-wrote three books on the subject, one which is called "Adoration and Glory," in which he wrote: 

The sculpture and architecture created by the Khmer to honor their gods and their rulers are among the major artistic masterpieces of the world. . ."

Although Latchford openly expressed his love for Khmer achievements, "he was also trafficking in and profiting from antiquities pillaged from that civilization's sacred temples, according to U.S. prosecutors. . ." According to U.S. prosecutors, the decades-long ransacking of Cambodian sites ranks as "one of the most devastating cultural thefts of the 20th century." 

Latchford was indicted in 2019, and the United States thought that hundreds of stolen items would be identified and returned. However, Latchford died before trial, leaving many questions unanswered—particularly what happened to all the money and looted treasures. 

Previosuly undisclosed records do shed some light to these questions as they describe secret offshore companies and trusts that Latchford and his family controlled. 

According to the ICIJ, three months after U.S. investigators began linking Latchford to looted artifacts, "he and his family members set up the first of two trusts named after Hindu gods Skanda and Siva. . ."

The Skanda Trust held Latchford's antiquities collection worth millions of dollars. Latchford's assets were eventually transferred from the Skanda Trust to the Siva Trust. 

Latchford's family assert that the trusts were formed for estate planning and tax purposes, but Cambodian officials continue to fight for the Khmer relics that were looted from them. 

As U.S. investigators continue to pursue the return of the looted items, an international hunt for the antiquities has commenced an examination of the global trade in art and has uncovered museums holding antiquities linked to Latchford. 

For more information See Peter Whoriskey, Malia Politzer, Delphine Reuter, & Spencer Woodman GLOBAL HUNT FOR LOOTED TREASURES LEADS TO OFFSHORE TRUSTS, Washington Post, October 5, 2021. 

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

October 9, 2021 in Estate Administration, Estate Planning - Generally, Religion, Travel, Trusts | Permalink | Comments (0)

The Next Step for Tax Policy Equity

Albert Feuer recently posted on SSRN his article entitled The Next Step for Tax Policy Equity. Here is the abstract of his article:

In September, the House of Representatives Ways and Means Committee released proposals requiring many employers without retirement plans to establish and automatically enroll employees in IRAs or simple 401(k) plans or in IRAs with the default contributions going to Roth IRAs. The proposals would also require a person whose employee benefit plans, Roth IRAs, and traditional IRAs have an aggregate balance greater than $10 million to withdraw at least 50% of the excess balance. Broadening those proposals to require Roth IRAs to comply with the same required minimum distribution (RMD) rules that now govern employee benefit plans and traditional IRAs, would better implement the common-sense policy of using tax incentives to encourage adequate retirement savings by focusing on retirement savings.

Roth IRAs and their participants are subject to the same RMD rules after the death of the IRA participant and the participant’s spouse, if any, as traditional IRAs and tax-advantaged pension and profit-sharing plans, including their Roth designated accounts,. Roth IRAs and their participants should also be subject to the same RMD rules during the life of the IRA participant and the IRA participant’s spouse, if any. An IRA violating those rules would lose its tax exemption, and a person failing to take a timely RMD would be subject to a 50% excise tax.

Subjecting Roth IRA participants to both the excess benefit distribution and the RMD rules would better limit the retirement tax incentives to retirement savings. Those with Mega-IRAs, such as Mr. Thiel’s multi-billion Roth IRA, could continue to receive tax incentives for reasonable-sized retirement accounts, but the tax incentives on any excess balances would be dramatically reduced. Participants with Roth or IRA accounts of any size would similarly be required to withdraw significant funds distributed during the expected life of the participant and the participant’s spouse, if any. This would permit Congress to adopt more equitable policies, such as making more funds available to encourage adequate retirement savings, such as increasing the matching savings credits to low-income tax payers who make contributions to tax-favored retirement plans above the Ways and Means proposed amount.

October 9, 2021 in Articles, Non-Probate Assets | Permalink | Comments (0)

Is This the Time to Harmonize the Required Minimum Distribution Rules?

Albert Feuer has recently posted his article entitled Is This the Time to Harmonize the Required Minimum Distribution Rules? on SSRN. Here is the abstract of his article:

In September, the House of Representatives Ways and Means Committee released proposals requiring many employers without retirement plans to establish and automatically enroll employees in IRAs with the default contributions going to Roth IRAs or in simple 401(k) plans. The proposals would also require a person whose employee benefit plans, Roth IRAs, and traditional IRAs have an aggregate balance in excess of $10 million to withdraw at least 50% of the excess balance. Broadening those proposals to require Roth IRAs to comply with the same required minimum distribution (RMD) rules that now govern employee benefit plans and traditional IRAs, would better implement the common-sense policy of using tax incentives to encourage adequate retirement savings by focusing on retirement savings.

Roth IRAs are subject to the same RMD rules, as traditional IRAs and tax-advantaged pension and profit-sharing plans, including their Roth designated accounts, after the death of the IRA participant and the participant’s spouse. They should also be subject to the same RMD rules during the life of the IRA participant and the IRA participant’s spouse, if any.

Subjecting Roth IRA participants to the excess benefit distribution and to the RMD rules would better limit retirement tax incentives to retirement savings. Those with Mega-IRAs, such as Mr. Thiel’s multi-billion Roth IRA, could continue to receive tax incentives for reasonable-sized retirement accounts, but the tax incentives on any excess balances would be dramatically reduced. Similarly, participants with Roth or IRA accounts of any size would be required to withdraw significant funds during the expected life of the participant and the participant’s spouse, if any. Such harmonization would permit Congress to make more funds available to encourage adequate retirement savings, such as providing larger savings credits to low-income tax payers who make contributions to tax-favored retirement plans than the Ways and Means proposal offers.

October 9, 2021 in Articles, Non-Probate Assets | Permalink | Comments (0)

Webinar: Tax & Estate Planning w/IRAs After the Secure Act

The following is from the program's announcement found here:

Tax and Estate Planning with IRAs after the Secure Act

3 NY CLE Credits: 3 Skills; Transitional and Non-transitional; 3 NJ CLE Credits: 3 General; 3 CPE Credits for CPAs (NY only)
 
Faculty:  Seymour Goldberg, Esq., CPA, MBA (Taxation), JD

Many taxpayers have accumulated a considerable amount of assets in their retirement accounts.  The Secure Act has created many new technical deadlines that must be followed in order to avoid IRS penalties. 

Tax planning and estate planning for your clients that have substantial retirement assets have become more important than ever.  You need to be aware of common errors that frequently take place.

This 3-credit CLE/CPE program includes:

  • Overview of the Retirement Distribution Rules under the Secure Act
  • Advantages of Trusts as IRA Beneficiary
  • Common Errors in Retirement Distribution Planning
  • Why many IRA beneficiary forms are defective
  • Statute of limitation issues including IRA penalties
  • Unintended Beneficiaries of Retirement Accounts or "My IRA is Going Where?"
  • And much more

ABOUT the INSTRUCTOR:  Seymour Goldberg, CPA, MBA (Taxation), JD is a senior partner in the law firm of Goldberg & Goldberg, P.C., Melville, New York. He has conducted over 100 continuing professional education programs for attorneys and CPAs in the area of IRA distributions and IRA compliance issues. He is a former IRS agent and IRS instructor. Mr. Goldberg is  the recipient of Outstanding Discussion Leader Awards from both the AICPA and the Foundation for Accounting Education.  His manuals written for the American Bar Association can be found in well over 100 law school libraries.  Two of his manuals cover IRA issues and IRS compliance issues involving IRAs.

Mr. Goldberg can be reached at 516-222-0422 or by email at info.goldbergira@gmail.com.

The New York and New Jersey CLE credits for this program will be issued by NYCLA 
The CPE credits* for this program will be issued by IRG Publications.
* CPA registrants must submit NYS CPA License Number after selecting registration option.

IRG Publications CPE details: 
Recommended CPE Credit Hours:  3 
Method of Presentation:  Webinar 
NY Sponsor:  IRG Publications 
Sponsor License No:  002963 
Subject area:  Taxation
Learning objective:  To  acquire knowledge involving tax planning and IRS compliance issues when dealing with IRA assets after the Secure Act
Level:  Intermediate 
Prerequisite:  Basic knowledge of taxation

Member (CLE Credit): $85
Non-member (CLE Credit): $105
CPA (CPE Credit ONLY): $75
JD/CPA Member (CLE & CPE Credit): $105
JD/CPA Non-Member (CLE & CPE Credit): $125

You must be signed in to register. If you do not have an account, you can create it for free.
For technical and account related issues, please contact us at dradjabov@nycla.org

October 9, 2021 in Conferences & CLE, Non-Probate Assets | Permalink | Comments (0)

Friday, October 8, 2021

Article: Closing Gaps in the Estate and Gift Tax Base

Daniel J. Hemel and Robert Lord recently published an article entitled, Closing Gaps in the Estate and Gift Tax Base, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article: Estate planning

Three transfer tax minimization mechanisms—zeroed-out grantor retained annuity trusts (GRATs), intentionally defective grantor trusts (IDGTs), and family-controlled entities with steep valuation discounts—significantly shrink the federal estate and gift tax base. This white paper explains how Congress can close all three loopholes. We estimate that these actions—along with complementary base-protecting and base-expanding proposals—would raise more than $65 billion over the fiscal year 2022 to fiscal year 2031 window (and possibly much more than $65 billion). They also would enhance the progressivity of the federal tax system and bolster the long-term revenue-raising capacity of the estate and gift taxes.

To summarize key conclusions:

— Congress should repeal section 2702(b)(1), the provision that enables high-net-worth individuals to achieve extraordinary transfer tax savings via GRATs;

— Congress should harmonize the income tax and transfer tax treatment of IDGTs,
preferably by treating these trusts as nongrantor trusts for income tax purposes;

— Congress should limit lack-of-marketability discounts and eliminate lack-of-control discounts with respect to transfers of interests in family-controlled entities; and

— Congress should supplement these three reforms with additional base-protecting and base-broadening measures: shifting to a tax-inclusive base for gift taxes; limiting the gift tax annual exclusion for transfers in trust; and expanding the requirement of consistency in value for transfer and income tax purposes.

All of these steps remain relevant—and in some respects, even more urgent—if Congress enacts the Biden-Harris administration’s capital income tax reform proposal, which would limit the tax-free step-up in basis at death to the first $1 million of unrealized gains ($2 million per couple). Unless Congress secures the estate and gift tax base, high-net-worth taxpayers will respond to stepped-up basis reform by exploiting transfer-tax loopholes even more aggressively. For this reason, estate and gift tax loophole closers and stepped-up basis reform should be considered complements, not substitutes.

October 8, 2021 in Articles, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Thursday, October 7, 2021

What’s next in Britney Spears’ conservatorship after her father is suspended? Legal experts weigh in

SpearsWhat's next for Britney Spears? Well, legal experts say that Spears could still be asked for a mental evaluation to fully determine if termination of her conservatorship is granted.

Last Wednesday, a judge ruled to suspend Jamie P. Spears from overseeing the conservatorship that has "held a firm grip on [Britney's] life for over a dozen years." 

Britney Spears's attorney, Mathew Rosengart—in a not so shy way—told the court that Jamie should have been removed as conservator of Britney's estate long ago. Rosengart stated that Spears "wants, needs, and deserves an orderly transition" and argued that Spears "has been abused by this man for the last decade and since her childhood." 

According to David Glass, a certified family law attorney with a Ph.D in clinical psychology, told Fox News that the next step is for the judge presiding over the case to rule on whether the entire conservatorship will end completely. 

Glass stated, "[t]he heat had been turned up and the court felt compelled to suspend Jamie since its hands were tied. . .All of the documentary info, all of the claims by Britney herself, added up to it not being in Britney's interest to have her father involved—without any finding that Jamie did anything wrong." 

Glass also asserted that the court should still ask for a mental health evaluation, when the next hearing comes up around November 12. 

See Julius Young, What’s next in Britney Spears’ conservatorship after her father is suspended? Legal experts weigh in, Fox News, September 29, 2021. 

October 7, 2021 in Estate Administration, Estate Planning - Generally, Guardianship | Permalink | Comments (0)

Wednesday, October 6, 2021

Covid Forcing Wealthy To Speed Up Business Succession Plans, Retirement

COVIDThe Covid crisis had a significant impact on all sorts of businesses. Many of us heard of and witnessed firsthand the negative impact Covid had on small businesses, and even wealthy businesses.

One positive consequence that was created out of the Covid crisis was the push for wealthy business owners to "hasten retirement and speed up succession plans."

The "Success and Succession" study, "which looked at the impacts of Covid on business decision making among high-and ultra-high-net-worth business owners, found that two-thirds reported that the pandemic accelerated plans to retire or sell their business." 

The Ipsos study surveyed 150 business owners with 2,500 employees, a net worth of about $2 million to $10 million and investable assets of more than $5 million. 

The research indicated that "21% of wealthy business owners applied for loans through the Paycheck Protection Program, 21% closed branches or satellite offices, 19% laid off employees and half of wealthy business owners planned to sell their businesses." 

Also, the research showed that 34% of respondents retired early and 35% accelerated their succession plans. 

Most of the business owners (88%) plan to leave their businesses to a family member, including spouses, children and grandchildren. Many are confident (89%) that the next generation will be a successful steward of their business, the survey found.

It is clear, based on the research, that the Covid crisis forced wealthy business owners to weather challenges that they may not have seen coming. Uncertain times are a great reminder of why it is always a good thing to have a plan, along with an advisor to help you create that plan and adhere to it in times of stress. 

See Jacqueline Sergeant, Covid Forcing Wealthy To Speed Up Business Succession Plans, Retirement, Financial Advisor Magazine, September 17, 2021. 

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

October 6, 2021 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, October 5, 2021

Breaking Down Gayle Benson’s Plan To Keep New Orleans Saints, Pelicans Local

BensonGayle Benson's succession plan includes keeping the New Orleans Saints and New Orleans Pelicans around for decades to come. 

According to the Times-Picayune series detailing the plan, "proceeds from the sale of both the New Orleans Saints and New Orleans Pelicans will go to local charities and all purchase negotiations will seek to ensure both teams remain in the city."

Apparently, the NFL has already approved the deal, and the NBA is expected to do so as well. Both leagues would have to approve any new ownership groups. 

As expected, New Orleans will see a humongous windfall—$5 billion or more—once the Saints and Pelicans are sold. The inly problem this brings is the New Orleans doesn't have extra billionaires lying around to purchase the teams. 

Tom Benson bought the Saints for $70 million in 1985, but are now the 46th most valuable sporting team in the world, valued at $3 billion. In the current market, the Pelicans would likely sell for approximately $1.5 to $1.8 billion. 

The Saints and Pelicans may be in need for a savior to swoop in the way Tom Benson did years ago. The Saints are "one of the most beloved brands in sports," which may be the very reason why they may face steep challenges in finding a new, reliable owner.

Tom Benson left the teams to Gayle Benson, who will leave them to New Orleans, who will—hopefully—be prepared to take on the challenge. 

See Christoper Dodson, Breaking Down Gayle Benson’s Plan To Keep New Orleans Saints, Pelicans Local, Forbes, October 3, 2021. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

October 5, 2021 in Estate Administration, Estate Planning - Generally, Sports | Permalink | Comments (0)