The charitable lead trust has always been a powerful vehicle to balance philanthropic and estate planning objectives. The recent convergence of two factors that are critically important in the planning dynamic for charitable lead annuity trusts (CLATs) create a planning environment that is so favorable for CLATs, it is no exaggeration to suggest that the current period may be the golden age of CLATs, presenting a very interesting planning opportunity for wealthy families. But that opportunity is temporary, since the convergence of these factors is unlikely to continue for very long. Continue reading “Is this the Golden Age of CLATs?”
Preparing and properly executing estate planning documents requires much care and consideration under “normal” circumstances. The COVID-19 pandemic, with its attendant shelter-at-home orders and social distancing guidelines, has made the estate planning process a logistically complicated necessity. Under the California Probate Code, the execution of estate planning documents requires a combination of notarization and witnessing. How can this be accomplished when non‑essential businesses are closed or working off‑site, and people are increasingly cautious of interactions outside of their homes? The Trusts & Estates department at MSK is prepared to assist you through the preparation and execution of your estate planning documents, allowing you peace of mind in these uncertain and difficult times. Continue reading “Estate Planning in the Time of COVID-19”
Written by Allan B. Cutrow
Unfortunately, the current health and economic crises have significantly and negatively affected asset values. However, these depressed asset values create significant planning opportunities to consider. One is the conversion of a traditional IRA into a Roth IRA.
Many investors often consider converting their traditional IRA into a Roth IRA as part of their overall retirement planning. Investments in a Roth IRA have the potential to not only grow tax-free (in the same manner as a traditional IRA), but also do not have required minimum distributions during the lifetime of the original owner and his or her spouse. Continue reading “COVID Conversion”
Estate Planning Opportunities in a Volatile, Low Interest Rate Environment
The recent dramatic decline in the value of the stock market, and overall economic volatility, has left us all worried about our financial health, not to mention the COVID-19 virus creating fears regarding our general health. In these uncertain times, there are steps to take for those who are in a position to transfer wealth to future generations now, as well as steps to take even if you do not wish to transfer wealth currently.
First, for everyone, if you are spending more time at home than ever, use some of it to review your basic estate plan to make sure it is up to date, and reflects your current desires.
Second, if you have been procrastinating in making lifetime gifts to your heirs while we have a temporarily generous estate, gift and generation-skipping transfer tax exemption now may be the time to pull the trigger.
Wealthy Californians, and more importantly, their children and grandchildren, can pop that champagne. The bill that would have imposed a California gift, estate, and generation skipping transfer tax appears to be dead – – at least for now. It will not get a floor vote in the California Legislature. Absent a floor vote, the California bill will not obtain the required approval of the California Legislature to put it on the November 2020 ballot. Continue reading “Wealthy Californians (and their Children) Can Breathe a Sigh of Relief”
California has no estate tax, but that could change in the near future. California State Senator Scott Wiener recently introduced a bill which would impose gift, estate, and generation-skipping transfer tax on transfers during life and at death after December 31, 2020.
California law requires that any law imposing transfer taxes must be approved by the voters. This means that, if the California Legislature approves the California bill, it will be put before the voters at the November 2020 election. Continue reading “California Estate Tax: Gone Today, Here Tomorrow?”
Just before Thanksgiving, IRS made two key pronouncements concerning the estate tax and gift tax.
1. In Revenue Procedure 2018-57, the IRS announced that for gifts made in 2019 or deaths occurring in 2019, the combined gift tax/estate tax exemption amount will be $11,400,000 per person (or $22,800,000 per couple with proper planning). This is up from $11,180,000 per person in 2018 (or $22,360,000 per couple). These exemption amounts also apply to the generation-skipping transfer tax. Continue reading “IRS Announces 2019 Exemption Amounts and Confirms Increased Exemption is “Use It or Lose It””
On April 30, 2018, the California Supreme Court issued its opinion in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County. It is likely that this case will drastically alter the landscape in California as to how workers are classified. From a tax perspective, the result could be significantly increased costs and administrative burdens for businesses operating in California.
For tax purposes, workers are divided into two categories- employees and independent contractors. The tax withholding and reporting obligations with respect to each category of worker are substantially different and significant dollars can turn on how a worker is classified. Continue reading “Is Everyone Now an Employee in California?”
The Tax Cuts and Jobs Act suspends miscellaneous itemized deductions (i.e., those deductions subject to a 2% floor) from 2018 through 2025, creating an incentive for taxpayers to try and characterize their expenses as giving rise to itemized deductions rather than miscellaneous itemized deductions. General discussion of the new tax law has overlooked this repeal’s impact on estates and non-grantor trusts (i.e., most irrevocable trusts), including a time-sensitive planning opportunity.
Prior to the new legislation, an individual could claim miscellaneous itemized deductions for certain types of expenses that were not specifically enumerated in Internal Revenue Code Section 67. These expenses were not deductible until they exceeded 2% of an individual’s adjusted gross income. Expenses specifically enumerated in Section 67 were itemized deductions not subject to the same 2% floor, making them more attractive to taxpayers than miscellaneous itemized deductions. The new legislation suspends miscellaneous itemized deductions but keeps itemized deductions (subject to certain other restrictions not relevant here). Continue reading “How Does the Suspension of Miscellaneous Itemized Deductions Impact Your Trust or Estate?”
General Rule- Deduction for Settlement Payments.
If an employer settles a claim made by an employee (or former employee), the employer may generally claim a deduction for the amount that is paid to the employee to resolve his/her claims. The expense is treated as an ordinary and necessary business expense and a deduction may be claimed pursuant to Section 162(a) of the Internal Revenue Code.
For example, if an employer pays an employee $25,000 to settle the employee’s claims for back wages, emotional distress, and age discrimination, the employer may deduct the $25,000 on its tax return (the employer’s tax reporting obligations with respect to the $25,000 payment and how the payment should be allocated among the claims made by the employee are topics for a different article). Continue reading “#MeToo Can Be #Costly”