Thursday, March 26, 2015

The 7520 rate for April has increased to 2.0%.

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

Tuesday, March 24, 2015

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 193 of the Green Book and is re-printed here for your convenience:

RESTORE THE ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER (GST) TAX PARAMETERS IN EFFECT IN 2009

Current Law

The current estate, GST, and gift tax rate is 40 percent, and each individual has a lifetime exclusion of $5 million for estate and gift tax and $5 million for GST (indexed after 2011 for inflation from 2010). The surviving spouse of a person who dies after December 31, 2010, may be eligible to increase the surviving spouse’s exclusion amount for estate and gift tax purposes by the portion of the predeceased spouse’s exclusion that remained unused at the predeceased spouse’s death (in other words, the exclusion is “portable”). (more…)

Friday, March 20, 2015

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 200 of the Green Book and is re-printed here for your convenience:

LIMIT DURATION OF GENERATION-SKIPPING TRANSFER (GST) TAX EXEMPTION

Current Law

GST tax is imposed on gifts and bequests to transferees who are two or more generations younger than the transferor. The GST tax was enacted to prevent the avoidance of estate and gift taxes through the use of a trust that gives successive life interests to multiple generations of beneficiaries. In such a trust, no estate tax would be incurred as beneficiaries died, because their respective life interests would die with them and thus would cause no inclusion of the trust assets in the deceased beneficiary’s gross estate. The GST tax is a flat tax on the value of a transfer at the highest estate tax bracket applicable in that year. Each person has a lifetime GST tax exemption ($5.43 million in 2015) that can be allocated to transfers made, whether directly or in trust, by that person to a grandchild or other “skip person.” The allocation of GST exemption to a transfer or to a trust excludes from the GST tax not only the amount of the transfer or trust assets equal to the amount of GST exemption allocated, but also all appreciation and income on that amount during the existence of the trust.

Reasons for Change

At the time of the enactment of the GST provisions, the law of most (all but about three) States included the common law Rule Against Perpetuities (RAP) or some statutory version of it. The RAP generally requires that every trust terminate no later than 21 years after the death of a person who was alive (a life in being) at the time of the creation of the trust. (more…)

Wednesday, March 18, 2015

155606531 (1)A family limited partnership (“FLP”) can be a useful estate planning tool. A FLP a limited partnership where family members own the limited partnership interests and under certain circumstances may be members or owners in the entity which acts as general partner of the FLP as well. Various family members will invest in the FLP and take back interests proportionate to the capital invested. The limited partners of the FLP are not responsible for making any decisions about underlying FLP assets. They receive distributions or make capital contributions based solely on the decision of the general partner. (more…)

Tuesday, March 17, 2015

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 206 of the Green Book and is re-printed here for your convenience:

EXPAND APPLICABILITY OF DEFINITION OF EXECUTOR

Current Law

The Code defines “executor” for purposes of the estate tax to be the person who is appointed, qualified, and acting within the United States as executor or administrator of the decedent’s estate or, if none, then “any person in actual or constructive possession of any property of the decedent.” This could include, for example, the trustee of the decedent’s revocable trust, an IRA or life insurance beneficiary, or a surviving joint tenant of jointly owned property. (more…)

Thursday, March 12, 2015

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 195 of the Green Book and is re-printed here for your convenience:

REQUIRE CONSISTENCY IN VALUE FOR TRANSFER AND INCOME TAX PURPOSES

Current Law

Section 1014 provides that the basis of property acquired from a decedent generally is the fair market value of the property on the decedent’s date of death. Similarly, property included in the decedent’s gross estate for estate tax purposes generally must be valued at its fair market value on the date of death. Although the same valuation standard applies to both provisions, current law does not explicitly require that the recipient’s basis in that property be the same as the value reported for estate tax purposes.

Section 1015 provides that the donee’s basis in property received by gift during the life of the donor generally is the donor’s adjusted basis in the property, increased by gift tax paid on the transfer. If, however, the donor’s basis exceeds the fair market value of the property on the date of the gift, the donee’s basis is limited to that fair market value for purposes of determining any subsequent loss. (more…)

Monday, March 9, 2015

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 202 of the Green Book and is re-printed here for your convenience:

EXTEND THE LIEN ON ESTATE TAX DEFERRALS WHERE ESTATE CONSISTS LARGELY OF INTEREST IN CLOSELY HELD BUSINESS

Current Law

Section 6166 allows the deferral of estate tax on certain closely held business interests for up to fourteen years from the (unextended) due date of the estate tax payment (up to fourteen years and nine months from date of death). This provision was enacted to reduce the possibility that the payment of the estate tax liability could force the sale or failure of the business. Section 6324(a)(1) imposes a lien on estate assets generally for the ten-year period immediately following the decedent’s death to secure the full payment of the estate tax. Thus, the estate tax lien under section 6324(a)(1) expires almost five years before the due date of the final payment of the deferred estate tax under section 6166.

Reasons for Change

In many cases, the IRS has had difficulty collecting the deferred estate tax, often because of business failures during that tax deferral period. The IRS sometimes requires either an additional lien or some form of security, but these security interests generally are prohibitively expensive and damaging to the day-to-day conduct and financing of the business. In addition, unless these other security measures are put in place toward the beginning of the deferral period, there is a risk that other creditors could have a higher priority interest than the Government. (more…)

Thursday, March 5, 2015

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 203 of the Green Book and is re-printed here for your convenience:

MODIFY GENERATION-SKIPPING TRANSFER (GST) TAX TREATMENT OF HEALTH AND EDUCATION EXCLUSION TRUSTS (HEETS)

Current Law

Payments made by a donor directly to the provider of medical care for another person or directly to a school for another person’s tuition are exempt from gift tax under section 2503(e). For purposes of the GST tax, section 2611(b)(1) excludes “any transfer which, if made during the donor’s life, would not be treated as a taxable gift by reason of section 2503(e).” Thus, direct payments made during life by an older generation donor for the payment of these qualifying expenses for a younger generation beneficiary are exempt from both gift and GST taxes. (more…)

Tuesday, March 3, 2015

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 204 of the Green Book and is re-printed here for your convenience:

SIMPLIFY GIFT TAX EXCLUSION FOR ANNUAL GIFTS

Current Law

The first $14,000 of gifts made to each donee in 2015 is excluded from the donor’s taxable gifts (and therefore does not use up any of the donor’s applicable exclusion amount for gift and estate tax purposes). This annual gift tax exclusion is indexed for inflation and there is no limit on the number of donees to whom such excluded gifts may be made by a donor in any one year. To qualify for this exclusion, each gift must be of a present interest rather than a future interest in the donated property. For these purposes, a present interest is an unrestricted right to the immediate use, possession, or enjoyment of property or the income from property (including life estates and term interests). Generally, a contribution to a trust for the donee is a future interest. (more…)

Wednesday, February 25, 2015

bitcoins182way   Over the last 20 years, the growth of digital assets has exploded. Almost everyone has a social media account of some kind, and photographs and music are almost all stored in digital form. Further, digital art is starting to be created, stored and sold online. While there are certain challenges to estate planning for these assets, one can take steps to make sure they are properly transferred to your desired beneficiaries upon your death.

A more difficult estate planning issue for digital assets lies in the form of cryptocurrency, which has also exploded in use in recent years. The most notable cryptocurrency is Bitcoin, which has a market capitalization of upwards of $3.5 billion. (For the sake of accuracy, “bitcoin” is the name of the payment system as well as the unit of currency involved.) (more…)