Failure to tell the IRS enough on a Federal gift tax return (Form 709) can hamstring your clients’ efforts to minimize their taxes through FLP and FLLC transfers. How? First, let’s look at what has to be disclosed. The IRS Regulations governing reporting of gifts require a taxpayer to disclose enough to apprise the IRS of: The nature of the gift, and The basis of the value being reported At a minimum, the IRS needs to know the identities and relationship of the transferor and transferee, … [Read more...] about Disclosure Is Key To Discount Planning
Decisions, Decisions: Bypass Trust vs. Marital Share
When one spouse dies leaving significant assets, a primary goal is to pass those assets on to the surviving spouse in such a way as to minimize the survivor’s taxable estate when he or she eventually passes away. Competing with this goal are income tax goals. When the first spouse dies, their executor can allocate $1.3 million in additional basis to assets passing to any beneficiary, including a bypass trust. The executor can allocate another $3 million in additional basis to assets passing to … [Read more...] about Decisions, Decisions: Bypass Trust vs. Marital Share
State Law May Override Tax Benefits of Bypass Trusts
In any year, assets passing from a decedent to his or her surviving spouse do so tax-free because of the unlimited marital deduction. The potential tax consequences come into play when the survivor eventually dies. A common estate planning strategy is for the predeceasing spouse to leave the most assets possible in a bypass trust for the use of the surviving spouse and children, and avoid taxation at the surviving spouse’s death. Thus, in 2009, the typical plan would leave $3.5 million to the … [Read more...] about State Law May Override Tax Benefits of Bypass Trusts
What You May Not Know About EGTRRA
Every estate planning attorney is well aware that the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) will sunset on December 31, 2010. So far, the most-discussed provisions of the Act have been the estate tax provisions. However, there is much more to EGTRRA than the estate tax provisions. A number of income tax provisions are scheduled to return to their pre-2001 status, too. Tax Brackets EGTRRA created six tax brackets: 10%, 15%, 25%, 28%, 33%, and 33%. If the Act is … [Read more...] about What You May Not Know About EGTRRA
Pre-Validation of Wills and Trusts: Novelty, Fluke, or Trend?
Imagine how many Will contests would be eliminated if the testator were available to say that his Will accurately expressed his intentions. Now, in some states it’s possible to do just that – even without a séance! Earlier this summer, Alaska became one of just a few states to give testators the option of validating a Will prior to death. The law also allows for the pre-mortem validation of Trusts. Under Alaska’s pre-validation process, interested parties (including the intestate heirs) are … [Read more...] about Pre-Validation of Wills and Trusts: Novelty, Fluke, or Trend?
Dan Duncan’s Heirs Hit A Gusher
When Dan Duncan died in March, he became the first American billionaire since the inception of the estate tax in 1916 to die without a taxable estate. A true self-made man, Duncan was the owner of Enterprise Products Partners, L.P., a natural gas and crude oil pipeline company. He started out in 1968 with $10,000 and a couple of propane trucks, and was worth $9 billion at his death. Duncan’s heirs may have hit a real gusher -- Duncan passed in 2010, the year of the one-year repeal of the estate … [Read more...] about Dan Duncan’s Heirs Hit A Gusher
Steinbrenner Hits a Homerun–Even in Death
When New York Yankees owner George Steinbrenner died this month, he left an estate with an estimated value of $1.15 billion, primarily the Yankees major league baseball team. The fact that he died in 2010, during the one-year repeal of the federal estate tax and the Generation Skipping Transfer (GST) tax, was especially good timing for those he left behind. In baseball, timing is important to hitting the ball. Estate planning attorneys know that Steinbrenner’s timing was a homerun—and may have … [Read more...] about Steinbrenner Hits a Homerun–Even in Death
Judge Rules DOMA Unconstitutional: What It May Mean For Estate Planning
Last week, Judge Joseph Tauro of the Massachusetts federal district court ruled that the Defense of Marriage Act (DOMA) is unconstitutional on Tenth Amendment and Equal Protection grounds. DOMA is the 1996 federal law that defines marriage as the legal union exclusively between one man and one woman. It also prohibits the federal government and its agencies from extending the benefits of marriage, which are available to married heterosexual couples, to married same-sex couples. Examples of the … [Read more...] about Judge Rules DOMA Unconstitutional: What It May Mean For Estate Planning
The Incredible Shrinking Privity Doctrine
Strict privity of contract used to be the rule in estate planning cases. In other words, only the client could claim that the estate planning attorney had been negligent in planning their estate. Obviously, this severely limited malpractice actions against estate planning attorneys. Over the years, the number of states adhering to the doctrine of strict privity of contract has been on the decline. Now, an ever-shrinking minority of states, allows estate planning attorneys to be insulated … [Read more...] about The Incredible Shrinking Privity Doctrine
Gary Coleman Probate Clouded by Common Law Marriage
Gary Coleman’s dead? "What'choo talkin' 'bout, Willis?!" Gary Coleman played “Arnold,” the little brother on TV’s “Diff’rent Strokes,” for eight years beginning in 1978. Coleman appeared in dozens of television films and series over the years. Coleman is perhaps the stereotype of a childhood star with a troubled life. Coleman had a variety of legal and financial problems over the years. In 1993, a court awarded him over $1.2 million in his lawsuit against his parents and former advisors … [Read more...] about Gary Coleman Probate Clouded by Common Law Marriage
Avoid Attorney Discipline and Malpractice: Don’t Dabble
Attorneys routinely get themselves in trouble by dabbling in practice areas about which they know little. Estate Planning and Elder Law are complicated areas with much to stay on top of. 2010 is a great example of that. The rules have changed completely and there is much uncertainty. There is no estate tax. But, the basis “step-up,” long a mainstay of Estate Planning, has been replaced, temporarily, by a carryover basis regime. It’s enough to make even dedicated estate planners heads’ … [Read more...] about Avoid Attorney Discipline and Malpractice: Don’t Dabble
Estate Planning Attorneys and Their Clients in Limbo
As we know, January 1, 2010, brought the beginning of a temporary period without a current federal estate tax. However, it also brought a year of tremendous uncertainty. Even a year ago, most people thought allowing the estate tax to be repealed – even for a year – unthinkable. Now, there is uncertainty even as to whether there might be legislation that would reimpose an estate tax retroactive to the first of the year. There are increasingly strong arguments that doing so would be … [Read more...] about Estate Planning Attorneys and Their Clients in Limbo
