Monday, November 23, 2015

The 7520 rate for December has remained the same at 2.0%.

The December 2015 Applicable Federal Interest Rates can be found here.

Wednesday, November 11, 2015



Open up any newspaper or magazine across the county and likely you will read an article about the difficulties facing young adult looking for their first jobs.  More and more young adults are turning to their parents for financial assistance. How can parents help their children? And what are the gift tax implications of such assistance?

Each individual has the ability to gift $14,000 a year to each person without using up any of his or her lifetime exclusion. A married couple can then gift $28,000 to an adult child without any gift tax impact at all. However, you must keep in mind that this $14,000 amount is inclusive of all gifts. You cannot give $14,000 directly to your child and then give them additional withdrawal rights under a trust. (more…)

Thursday, November 5, 2015



With some minor exceptions, the facts are the same in PLR 201525002& PLR 201525003. In these PLRs, the Grantor transferred funds to an irrevocable trust for the Grantor’s own benefit and the benefit of several charities. In each case, the trust was created in a state other than the state of residence of the Grantor. In addition to the Trustee, each trust had an Investment Advisor, a Distribution Advisor, a Charity Distribution Advisor and a Trust Protector, none of whom were trust beneficiaries, except that the Charity Distribution Advisor was the Grantor’s spouse who was a potential appointee.

The Distribution Advisor had the power to direct the Trustee as to whether to make Quarterly Distributions, Support Distributions and Special Contingent Distributions to the Grantor, and also had the power to direct the Trustee as to whether to make Quarterly Distributions to the charities.

The Grantor had a limited testamentary power to appoint the trust among her spouse and charities.

The Investment Advisor had the power to direct the Trustee as to trust investments. (more…)

Friday, October 30, 2015


Even though you think you have done everything right, the statute of limitations may not have started to toll if your Form 709, Gift (and Generation-Skipping Transfer) Tax Return, contains errors. Once a properly completed (how much can we stress the words PROPERLY COMPLETED?) Form 709 is filed, the Service must assess the amount of any gift tax within three years of the filing date. Under the Regs, a transfer is adequately disclosed when the return provides the following:

(i) A description of the transferred property and any consideration received by the transferor; [and]

(iv) A detailed description of the method used to determine the fair market value of property transferred, . . . including any financial data . . . utilized in determining the value of the interest. (more…)

Thursday, October 29, 2015

They’re here—the 2016 IRS plan limitations-but they’re not new. Because the change in the cost-of-living index doesn’t trigger an adjustment, the qualified plan limits identified here do not change in 2016. See the chart below to see the 2016 limits as well as a summary of the limits over the preceding three years. Note that certain other limitations do change for 2016 (e.g. certain IRA limits), but not the qualified plan limits reported here.

Type of Limitation 2016 2015 2014 2013
Elective Deferrals (401(k), 403(b), 457(b)(2) and 457(c)(1)) $18,000 $18,000 $17,500 $17,500
Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (457(b)(3) and 402(g) provide separate catch-up rules to be considered as appropriate) $6,000 $6,000 $5,500 $5,500
SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals $3,000 $3,000 $2,500 $2,500
415 limit for Defined Benefit Plans $210,000 $210,000 $210,000 $205,000
415 limit for Defined Contribution Plans $53,000 $53,000 $52,000 $51,000
Annual Compensation Limit $265,000 $265,000 $260,000 $255,000
Annual Compensation Limit for Grandfathered Participants in Governmental Plans Which Followed 401(a)(17) Limits (With Indexing) on July 1, 1993 $395,000 $395,000 $385,000 $380,000
Highly Compensated Employee 414(q)(1)(B) $120,000 $120,000 $115,000 $115,000
Key employee in top heavy plan (officer) $170,000 $170,000 $170,000 $165,000
SIMPLE Salary Deferral $12,500 $12,500 $12,000 $12,000
Tax Credit ESOP Maximum balance $1,070,000 $1,070,000 $1,050,000 $1,035,000
Amount for Lengthening of 5-Year ESOP Period $210,000 $210,000 $210,000 $205,000
Taxable Wage Base $118,500 $118,500 $117,000 $113,700
FICA Tax for employees and employers 7.65% 7.65% 7.65% 7.65%
Social Security Tax for employees 6.2% 6.2% 6.2% 6.2%
Social Security Tax for employers 6.2% 6.2% 6.2% 6.2%
Medicare Tax for employers and employees 1.45% 1.45% 1.45% 1.45%
Additional Medicare Tax* .9% of comp
.9% of comp > $200,000 .9% of comp > $200,000 0.9% of comp > $200,000

*For taxable years beginning after 12/31/12, an employer must withhold Additional Medicare Tax on wages or compensation paid to an employee in excess of $200,000 in a calendar year for single/head of household filing status ($250,000 for married filing jointly).


Tuesday, October 27, 2015


In Lubin v. AT&T Ret. Sav. Plan (2015 WL 4397703), an adoption was not given effect in determining who would receive the life insurance benefits at issue.

In this case, Austin Hardy participated in a Retirement Savings Plan (“Plan”), which included a life insurance benefit. At his death, he was survived by his sisters, Pauline Lubin and Frances Koryn (Plaintiffs), and his biological daughter, Jennifer Krokey. Although Krokey was Hardy’s biological child, she had been subsequently adopted by a step-father. Under Florida law, a child who is adopted is the child of the adopting parent and ceases to be a child of the biological parent for all purposes. (more…)

Friday, October 23, 2015


In a recent bankruptcy case, Richard Lewiston unsuccessfully attempted to shelter his assets in the Lois and Richard Lewiston Living Trust (the “Trust”) from inclusion in his bankruptcy estate based on the Trust’s spendthrift provision. Here, the bankruptcy court looked to Michigan state law in applying the provisions of the Bankruptcy Code and concluded the Trust property was part of Lewiston’s bankruptcy estate. (more…)

Friday, October 23, 2015

The 7520 rate for November has remained the same at 2.0%.

The November 2015 Applicable Federal Interest Rates can be found here.

Monday, October 19, 2015

With drafting assistance from our Washington University School of Law extern, Alexander Fersa.

ThinkstockPhotos-488003222PLR 201536002 is a reminder that the Treasury Regs (specifically Treas. Reg. § 301.9100-3) offer relief to correct certain failures to make regulatory elections. Here, the decedent’s trust created Trust A and Trust B. Trust B provided for all income to be paid to the surviving spouse, so that Trust B otherwise qualified for the qualified terminable interest property (QTIP) election (if you need a refresher on what type of trusts qualify for the gift and estate tax marital deduction, click here). However, the attorney who prepared and timely filed the estate tax return failed to make the QTIP election for Trust B.

A QTIP election is to be made on the estate tax return and once made, the election is irrevocable. The regulations state the election is to be made on the last return filed prior to the due date of the return, including extensions, or on the first return filed after the due date of the return. (more…)

Wednesday, October 14, 2015

With drafting assistance from our Washington University School of Law extern, Alexander Fersa.

It seems the California Supreme Court agrees with Cole Porter that “times have changed.”

Abrogating 50 years of binding case law, in In re estate of Duke, the California Supreme Court elected to treat wills the same as trusts are treated under the Uniform Trust Code by allowing courts to look to extrinsic evidence when determining the intent of the testator. The Court concluded that an unambiguous will may be reformed if clear and convincing evidence establishes (1) that the will contains a mistake in the expression of the testator’s intent at the time the will was drafted and (2) the testator’s actual specific intent at the time the will was drafted.

The Court determined that there is no justification for a categorical bar on reformation of unambiguous wills so long as the reformation is supported by clear and convincing evidence, which would provide adequate protection against evidentiary concerns that originally led to the bar on reformations of unambiguous wills.

In this case, Duke wrote a holographic (i.e. hand-written, unwitnessed) will in 1984, providing that all of his property was to be given to his wife, but if he and his wife died in a common disaster, his property was to go to named charities. Duke’s wife died in 1997, but Duke never revised his will after her death. (more…)