Trusts

iWill or iWon’t

By Allan Cutrow and Emily Evitt

digital safety concept padlock in electronic environment

Photo credit: iStock.com/the-lightwriter

Ever wondered what will happen to your Facebook page when you die? The California Legislature has recently weighed in. Effective as of January 1, 2017, California will have its first law to specifically address the handling of your “digital assets” after your death. The Revised Fiduciary Access to Digital Assets Act will determine who, if anyone, can access your digital assets, such as social media accounts, online gaming accounts and music accounts after your death. Under the new law, the custodian of digital assets – such as Facebook, Google, or Apple – must provide a fiduciary access to a deceased individual’s digital assets as the decedent previously directed. The Act sets up a three-tiered approach, which works as follows: (more…)

Proposed IRS Regulations Could End Most Valuation Discounts for Family Entities

By Allan Cutrow, Jeffrey Eisen and S. Eva Wolf

On August 2, 2016, the Treasury Department issued proposed regulations under Section 2704 of the Internal Revenue Code. The proposed regulations, if adopted in their current form, essentially will eliminate all minority discounts or lack of control discounts and lack of marketability discounts for transfers between family members of interests in family-controlled businesses.

The proposed regulations accomplish this result in complex ways. But here are some points to consider as you decide whether to act quickly.

  1. The regulations are “proposed.” This means that they are not currently in effect. The Internal Revenue Service has scheduled a public hearing on the regulations in Washington, DC on December 1, 2016. They take effect when the IRS announces that they are “final.” Thus, these regulations could take effect shortly after the hearing, sometime in 2017, years from now, or never (in theory). The IRS may change the regulations in meaningful ways before adopting them as final. (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…)

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…)

Lessons Learned from the Robin Williams Litigation

By Jeffrey K. Eisen

Robin Williams died on August 11, 2014, and it did not take long for litigation to be filed over his estate, or more specifically, his living trust. Mr. Williams last rewrote his trust in January 2012, not long after marrying his current wife. Mr. Williams had three children, none of which were from his current marriage. Published reports reveal a number of interesting issues, some of which are unique to “celebrity” estates, but most of which apply to all estate planning. (more…)

A Trust May Be Subject to California Income Taxation if the Trustee Resides in California

By S. Eva Wolf

California aggressively taxes non-grantor trusts. A non-grantor trust with a California resident trustee may be subject to California income taxation even if none of the assets of the trust are located in California, none of the beneficiaries reside in California and the trustor never lived in California. This often comes as a shock to trustors, trustees, and their respective accountants and estate planning attorneys. (more…)

California (Finally) Conforms to Federal Treatment of UBTI in Charitable Remainder Trusts

By David Wheeler Newman

One of the most important tax attributes of charitable remainder trusts is that they are exempt from income tax – except, that is, when it comes to unrelated business taxable income (UBTI) of these trusts. For decades the rule was that if a CRT had any UBTI at all, even an amount that was inconsequential compared to the overall net income of the trust, the trust would lose its tax exemption for the year, and become fully taxable just like any other complex trust. This rule could undo some of the best tax planning with CRTs, (more…)