Estate Planning Conference Discusses “For the 99.5% Act,” SECURE, and More

The Heckerling conference in Estate Planning is the country’s largest professional gathering in Estate Planning. The conference examines many areas of interest to Estate Planning and Elder Law professionals. It pays particular attention to items of current interest.

Last year’s conference was in January 2020, shortly before the beginning of the COVID-19 pandemic. What a difference a year makes. This year’s conference had been scheduled for January 2021 in Orlando. However, it was rescheduled to May 2021 and held virtually instead of in person, due to the pandemic. Also, there’s been a big change in the political landscape since then. Now Democrats control the White House, the House, and the Senate, although the latter two by very narrow margins.

This year’s conference discussed pending legislation, such as the “For the 99.5% Act” and the prospects for passage. Many of the speakers thought the legislation unlikely to pass in its current form. They seemed to think that proposals for increases in the income tax rates to 39.6% for top earners were more likely to pass. They also thought it was likely capital gains for those earning more than $1 million would be taxed at ordinary income rates.

While the speakers were monitoring developments closely, many times I heard them say “we’ve seen proposals like this in the past and they didn’t go anywhere, so we’ll just have to wait and see what happens.” Professor Donaldson said, “Discussion of proposed legislation is somewhat like navel-gazing.”

Professor Hoyt discussed using a CRT to stretch an inherited IRA. He concluded that doing this didn’t make sense when you had a taxable estate because of the loss of the income tax deduction for the IRD included in the taxable estate. He concluded the CRT stretch made sense only if 1) the taxpayer didn’t have a taxable estate, 2) the beneficiary had a life expectancy of 25 or 30 years, and 3) the CRT was a CRUT at 5%. For various reasons, typically, the 10% minimum going to charity would outweigh the value of the deferral gained by the use of the CRT. Of course, to the extent the client is charitably inclined, the use of the CRT may make sense anyway.

One of the speakers at Heckerling is one of the nation’s leading experts in retirement planning, Natalie Choate, who spoke for an entire morning at the American Academy of Estate Planning Attorney’s national conference in April 2020. Members of the Academy who attended her sessions learned all about retirement planning, how benefits can be made payable to a trust, and how the SECURE Act impacts planning.

At this year’s Heckerling, Natalie Choate discussed the SECURE Act for two hours on the closing day of the conference. The Act passed in late-December 2019. She gave a nice summary of the Act. While she detailed the Act in last year’s conference, this year she had more of a chance to digest and consider the legislation and planning ideas. Also, this year she discussed the recent Publication 590-B revision post-SECURE.

Perhaps the biggest surprise in the Publication was the example on page 12. It indicated that the beneficiary who was an adult child of the Participant would take annual distributions based on their life expectancy. When the Publication was released, this sent Estate Planners into a tailspin since the SECURE Act set up a “10-yr rule” for most beneficiaries similar to the “5-yr” rule in which no annual distributions were required but all the assets had to be out by the end of the term. The Publication seemed to be indicating that you’d also have to be taking interim annual distributions. Natalie Choate suggested the example is just wrong, as the statute clearly provides otherwise.

I’ll be giving a more in depth summary of my takeaways from the Heckerling conference for the Members of the Academy in my annual webinar titled “Heard at Heckerling.” If you’re a Member, I look forward to seeing you in the webinar.

Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com