This article describes what to do to protect the bank, your family and your investment. Originally published on BankDirector.com.
For a number of community banks, the management and ownership of the institution is truly a family affair. For banks that are primarily controlled by a single investor or family, these concentrated ownership structures can also bring about significant bank regulatory issues upon a transfer of shares to the next generation.
Unfortunately, these regulatory issues do not just apply to families or individuals that own more than 50 percent of a financial institution or its parent holding company. Due to certain presumptions under the Bank Holding Company Act and the Change in Bank Control Act, estate plans relating to the ownership of as little as 5 percent of the voting stock of a financial institution may be subject to regulatory scrutiny under certain circumstances. Under these statutes, “control” of a financial institution is deemed to occur if an individual or family group owns or votes 25 percent or more of the institution’s outstanding shares. These statutes also provide that a “presumption of control” may arise from the ownership of as little as 5 percent to 10 percent of the outstanding shares of a financial institution, which could also give rise to regulatory filings and approvals. (more…)
The 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
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…)
The 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
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…)
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…)
The 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
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…)
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…)
The 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 197 of the Green Book and is re-printed here for your convenience:
MODIFY TRANSFER TAX RULES FOR GRANTOR RETAINED ANNUITY TRUSTS (GRATS) AND OTHER GRANTOR TRUSTS
Section 2702 provides that, if an interest in a trust is transferred to a family member, any interest retained by the grantor is valued at zero for purposes of determining the transfer tax value of the gift to the family member(s). This rule does not apply if the retained interest is a “qualified interest.” A fixed annuity, such as the annuity interest retained by the grantor of a GRAT, is one form of qualified interest, so the value of the gift of the remainder interest in the GRAT is determined by deducting the present value of the retained annuity during the GRAT term from the fair market value of the property contributed to the trust.
Generally, a GRAT is an irrevocable trust funded with assets expected to appreciate in value, in which the grantor retains an annuity interest for a term of years that the grantor expects to survive. At the end of that term, the assets then remaining in the trust are transferred to (or held in further trust for) the beneficiaries. The value of the grantor’s retained annuity is based in part on the applicable Federal rate under section 7520 in effect for the month in which the GRAT is created. Therefore, to the extent the GRAT’s assets appreciate at a rate that exceeds that statutory interest rate, that appreciation will have been transferred, free of gift tax, to the remainder beneficiary or beneficiaries of the GRAT. (more…)
The 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 165 of the Green Book and is re-printed here for your convenience:
REQUIRE NON-SPOUSE BENEFICIARIES OF DECEASED IRA OWNERS AND RETIREMENT PLAN PARTICIPANTS TO TAKE INHERITED DISTRIBUTIONS OVER NO MORE THAN FIVE YEARS
Current Law Minimum distribution rules apply to employer sponsored tax-favored retirement plans and to IRAs. In general, under these rules, distributions must begin no later than the required beginning date and a minimum amount must be distributed each year. For traditional IRAs, the required beginning date is April 1 following the calendar year in which the IRA owner attains age 70½. For employer-sponsored tax-favored retirement plans, the required beginning date for a participant who is not a five-percent owner is April 1 after the later of the calendar year in which the participant attains age 70½ or retires. Under a defined contribution plan or IRA, the minimum amount required to be distributed is based on the joint life expectancy of the participant or employee and a designated beneficiary (who is generally assumed to be 10 years younger), calculated at the end of each year.
Minimum distribution rules also apply to balances remaining after a plan participant or IRA owner has died. The after-death rules vary depending on (1) whether a participant or IRA owner dies on or after the required beginning date or before the required beginning date, and (2) whether there is an individual designated as a beneficiary under the plan. The rules also vary depending on whether the participant’s or IRA owner’s spouse is the sole designated beneficiary. (more…)
It’s true. Even if you don’t have a will, your state has written one for you, and it serves as the default plan for individuals who die without a will (aka “intestate”). Your local Probate Code will have all the juicy details. For the most part, intestacy statutes try to mimic what the average person would have done with their assets if they had a will. For instance, if you’re single and without children, it generally reverts to your parents. If you’re married with minor children, it would generally go to the spouse with whom you had the children, and in some states (like Georgia), a spouse shares with the children. The people who receive your assets under such a statute are generally referred to as your “heirs at law”. (more…)
Since we originally published our post on planing for digital assets in 2011, Google and Facebook have now created Inactive Account Manager (Google) and Legacy Contact (Facebook) designations so you can name who has control of your digital assets upon your death. For more information, see the following articles:
Google’s “Inactive Account Manager”
Facebook’s “Legacy Contact”
What are digital assets? Generally speaking, “digital assets” are any type of data in which a person has some right or proprietary interest. A person’s digital assets may include (but are not limited to) information in his or her email accounts, information saved on his or her Smartphones, his or her computer files, picture files, video files, music files, social networking accounts, blogs, websites, word processing documents, and spreadsheets.
Do digital assets have value? Many digital assets have value. Like tangible assets, digital assets can have monetary value (for example, blogs that generate revenue, or intellectual property rights, which – in some cases – may be extremely valuable), or sentimental value (family photos or video files, for example). For this reason, it is important to establish a plan for what should happen to your digital assets in the event of your death or incapacity. It may be necessary to access the digital assets of an incapacitated or recently deceased person in order to preserve value in his or her business or estate, even though those digital assets may have no monetary value. For example, although a person’s email account does not have monetary value per se, many people conduct their day-to-day business primarily via email (by taking orders, making sales, arranging for deliveries, contacting suppliers, etc.) If such a person becomes incapacitated or passes away, his or her agents or fiduciaries will likely need to access that email account to avoid contract breaches, which could be costly to an incapacitated person’s business or may result in claims against a decedent’s estate. As discussed below, it may be impossible for your agents or fiduciaries to access your email account or other digital assets if you don’t plan ahead. (more…)