Estate Planning

Estate Planning – When the Only Certainty is Unpredictability

By Allan B. Cutrow and Jeffrey K. Eisen

 

Donald Trump is now the President, and both chambers of Congress are under Republican control. Thus, we appear to be poised for potentially substantial changes in the estate tax, gift tax, generation-skipping transfer tax, and income tax laws. However, as with all other aspects of political life in America today, it is impossible to predict at this time what ultimate changes will materialize. The only clear thing is the lack of clarity.

  1. Is the Estate Tax History? First, there is the perpetual Republican promise, supported by the President, of “repealing” the estate tax. Last time the estate tax was “repealed” (in 2001), it really meant eight years of gradually increased exemptions and gradually decreased rates, followed by one year of repeal (2010), followed by the return of the estate tax with even greater exemptions and lower rates, which is where we are today. Will this happen again? Will the estate tax just disappear retroactive to 1/1/17 or perhaps on 1/1/18? Will deficit hawks decide that even the relatively tiny revenue generated by the estate tax is worth keeping to avoid a political fight with Democrats? (more…)

Important New Guidance on Charitable Remainder Annuity Trusts

 

By David Wheeler Newman

The Internal Revenue Service has issued important new guidance that can allow a charitable remainder annuity trust (CRAT) to qualify under Internal Revenue Code section 664 in a low-interest environment.

Background

Section 664 confers substantial tax benefits on charitable remainder trusts that meet its requirements. These are irrevocable trusts that during their term distribute a formula amount to one or more non-charitable beneficiaries, with the remainder distributed to charity upon termination of the trusts. There are two allowable formulas. A charitable remainder unitrust (CRUT) distributes a fixed percentage of the value of trust assets determined every year. There are some allowable variations for CRUT distributions, but in general this means that distributions from a CRUT can go up or down from year to year, depending on increases or decreases in the value of trust assets. While CRUTs are by far the more popular of the two main varieties, some clients and donors prefer the CRAT, which distributes the same amount every year during its term, which is fixed at the time the trust is created and which must be at least 5% of the value of assets contributed to the trust. (more…)

Valuation Rule for Early Termination of Net-Income Charitable Remainder Unitrusts

By David Wheeler Newman

Under Internal Revenue Code § 664, a qualified charitable remainder unitrust each year during its term distributes to a non-charitable beneficiary a fixed percentage (5% or greater) of the value of trust assets, determined annually (the unitrust amount).  Assets remaining in the CRUT at the end of its term are distributed to charity.  Section 664(d) provides that a qualified CRUT may limit distributions to the non-charitable beneficiary to the lesser of the unitrust amount or trust income under fiduciary accounting principles (a net-income CRUT, or NICRUT), and may pay the non-charitable beneficiary any trust income in excess of the unitrust amount to the extent that aggregate distributions in prior years were less than the aggregate unitrust amounts as a result of the net-income limitation (a net-income with make-up CRUT, or NIMCRUT). (more…)

Four Lessons Learned from Prince’s Estate (So Far)

By Jeffrey K. Eisen

Several of the events surrounding the initial administration of Prince’s estate provide lessons applicable to all estate plans, not just celebrity estate plans.

  1. If You Don’t Have an Estate Plan, the State Will Write One For You. Prince died without a Will.  Because he was not married at the time of his death and he had no surviving parents, children or grandchildren, his sister, and his five half-brothers and half-sisters each will inherit one-sixth of his estate.  Two other half-siblings died before Prince, apparently leaving no children of their own; otherwise, they would be entitled to part of the estate as well.

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Higher Learning: A Potentially Expensive Lesson About 529 Plans

By Karl de Costa

A “529 qualified tuition plan” is an education savings plan designed to encourage and help families set aside funds for future college costs.  It’s named after Section 529 of the Internal Revenue Code, which created this type of plan in 1996.

Americans have an estimated $248 billion currently invested in 529 plans.  And it’s easy to understand why.  Generally speaking, 529 plans offer an impressive array of income tax and estate tax breaks, plus other benefits.

  • Earnings on funds within the plan grow federal and California tax-free as long as the money is taken out to pay for qualified education-related expenses of the designated beneficiary, such as tuition, fees, books, computers, and room and board. (more…)

No Password? See You In Court?

By Seth W. Krasilovsky

Many headlines have been generated over recent attempts to recover highly desired data from a locked smart device after the death of the device’s owner.  While the legal battle between Apple and the FBI over information stored by one of the San Bernardino shooting suspects in an iPhone pitted law enforcement against the technology community, it should also serve as a high profile reminder of the need to address digital passwords as part of an estate plan. (more…)

The Charitable IRA Rollover is Now Permanent!

By David Wheeler Newman

Under the normal rules, an IRA distribution is included in the gross income of a donor, who then may claim a charitable income tax deduction if she contributes that money to charity. There has been a special rule for qualified charitable distributions, which has been extended on a temporary basis every two years, with the last such extension expiring at the end of 2014. This special rule, which has proven to be very important for charitable gift planning, has finally been made permanent by the Protecting Americans from Tax Hikes (PATH) Act, signed by President Obama on December 18, 2015, effective for distributions made in 2015. (more…)

The Numbers Are In… er, Projected

By S. Eva Wolf

The Numbers Are In… er, Projected: Increases to the Estate, Gift, and Generation-Skipping Transfer Tax Exclusions.

While the official numbers will not be released until later this year, the following projections are unlikely to change since they are based on the average Consumer Price Index for the 12 month period ending August 31, 2015. (more…)

It’s Just a Simple Will

By Allan B. Cutrow

Often times, people believe their wills (or other estate planning documents) are really simple and straight forward. In fact, this assumption is probably the primary reason that some websites generate significant business selling legal documents prepared by non-lawyers. Such websites seek to create simple documents and offer to purportedly save consumers lots of money. (more…)

What Happens to Your Digital Life After Death? Planning for the Transfer Of Digital Assets

By Allan B. Cutrow

Most people do not think about the large digital footprint that they have created. More importantly, they do not think about how their digital assets might pass (or not) at death. Since these assets may have value, either financial or sentimental, planning for them may be more important than you think. (more…)