Irvine Partner, Renee Gabbard, published an article entitled “Sow Estate Planning Ideas for Farmers and Ranch Owners” in the December 2013 issue of “Estate Planning”.
With wealth often concentrated in a low-basis illiquid asset, farmers may benefit from a contrarian analysis of certain common estate planning strategies. (more…)
To receive the award, an estate planning attorney must satisfy 10 objective eligibility and evaluation criteria that are associated with estate planning attorneys who provide quality services to their clients. Five Star Professional conducts market-specific research throughout the U.S. and Canada to identify reputable and trustworthy service professionals.
Congratulations to Renee Gabbard and Stephen Daiker!
Once again, the Internal Revenue Service reminds us in PLR 201330011 that a distribution from an IRA to a residuary beneficiary will not result in recognition of IRD (also known as income in respect of a decedent) to the estate or trust, as only the residuary beneficiary will recognize the IRD.
Here the Decedent’s Estate was the beneficiary of the Decedent’s IRA. Under the provisions of the Decedent’s Will, his Estate poured over to his Revocable Trust on his death. His Revocable Trust provided that each of two Charities were to receive a percentage of the residue of his Trust, and further provided that the Trustee could satisfy this percentage gift in cash or in kind and also could allocate different assets to different residuary beneficiaries in satisfaction of their percentage interest in the trust residue.
Of course, the IRA constitutes income in respect of a decedent (IRD), and pursuant to IRC § 691 (a)(2) and Reg. § 1.691(a)-4(b)(2), the transfer of an item of IRD by an estate, such as by satisfying an obligation of the estate, will cause the estate to recognize the IRD, but if the estate transmits the item of IRD to a specific legatee of the item of IRD or to a residuary beneficiary (emphasis added), only the legatee or the residuary beneficiary will recognize the IRD. (more…)
The IRS today announced that, in light of the Supreme Court’s decision in United States v. Windsor, all legal same-sex marriages will be recognized for federal tax purposes, regardless of whether the couple’s state of residence recognizes the marriage.
For the full announcement, click here.
Beginning this year, individuals, estates and trusts will be subject to a Medicare contribution tax equal to 3.8% of the trust’s undistributed net investment income for the tax year, complicating the administration of estates and trusts. (IRC § 1411) As a result of the enactment of the new tax, every trust that owns an interest in a trade or business must now determine whether or not the trust materially participates in that trade or business in order to determine whether the trust’s undistributed income may be subject to the tax.
Net investment income is income from passive activities. Whether an activity constitutes a passive activity is determined in accordance with IRC § 469, which sets forth the law with regard to passive activity losses and credits. A “passive activity” is a trade or business activity in which the taxpayer does not materially participate. A taxpayer is treated as materially participating in a trade or business activity only if the taxpayer is involved in the operations of the trade or business on a regular, continuous and substantial basis. One way a taxpayer may be deemed to materially participate in a trade or business activity is if the taxpayer participated in that trade or business for more than 500 hours during the tax year. (more…)
On July 22, 2013, the question everyone wanted answered, boy or girl, was answered when Catherine, Duchess of Cambridge, gave birth to the royal baby, a baby boy, who is now third in line to the throne, after his grandfather, Prince Charles, and his father, Prince William.
On July 24, the next question everyone wanted answered, what’s his name, was answered with the announcement that the baby prince’s name is George Alexander Louis, and that he will be known as Prince George of Cambridge.
Now, the question that we’re sure is burning in everyone’s mind is, are Will’s and Kate’s estate planning documents up-to-date so that Prince George will be properly taken care of in the event something happens to his parents? (more…)
The terms of James Gandolfini’s December 2012 Last Will and Testament were made public last week when it was filed in New York County Surrogate’s Court. There are a series of specific bequests to his teenage son by his first marriage and some friends and relatives, but the bulk of his probate assets is disposed of as his “residuary estate” and is divided among his sisters, his wife and his baby daughter.
The tax clause of his Will directs that all estate taxes are to be paid from his residuary estate. What does that mean to his beneficiaries? And what does that mean to the IRS and to the NYS Department of Taxation and Finance? Only the 20% of the estate that passes to James Gandolfini’s widow will qualify for the Federal and NYS estate tax marital deduction. (For a more detailed discussion of the federal marital deduction, see our prior post in anticipation of a ruling in the recently decided Windsor case, Will SCOTUS Eviscerate DOMA? What Effects Could That Have on Tax Planning?) As a result, his estate could be subject to taxes at a combined rate of about 50% over his unused lifetime exemption, which is $1M for NYS and $5.25M for the IRS.
It is rumored that Mr. Gandolfini’s estate is worth approximately $70M. The total estate tax due is likely be over $25M and will be due a mere nine months after Mr. Gandolfini’s untimely death. In all likelihood, assets will need to be sold to generate liquidity to meet this estate tax bill. (more…)
This morning, in a landmark ruling for gay rights, the Supreme Court of the United States struck down the Defense of Marriage Act (DOMA), on Fifth Amendment Equal Protection grounds, in the case of U.S. v. Windsor (570 U.S. ______ (2013)). DOMA is the 1996 federal statute preventing federal recognition of same-sex marriages.
Under DOMA, marriage is defined for federal purposes as a union between one man and one woman. Such definition determined who was covered by more than 1,100 federal laws, programs and benefits, including Social Security survivor benefits, immigration rights and family leave, as well as federal tax benefits, including, as was the issue in Windsor, the unlimited federal estate tax marital deduction. Under the law, gay couples who are legally married in a state (or foreign country) that allows same-sex marriage, were not considered married in the eyes of the federal government and were ineligible for the federal benefits that come with marriage.
The Supreme Court issued a 5-4 ruling written by Justice Anthony Kennedy.
For our prior blog posts regarding the history of this case, see When a Woman Loves a Woman: Another Federal Judge Strikes Down DOMA.
We will provide you with a more in-depth look at the Supreme Court’s holding after we have a chance to review and analyze the entire opinion.
When is a modification or reformation of an irrevocable trust given effect for Federal tax purposes? In each of two recent private letter rulings, the government addressed the impact of a reformation and of a modification on Federal taxation of the trusts in question. Here, we will look at a ruling favorable to the IRS. Come back next week when we discuss a ruling in favor of the taxpayer.
In PLR 201243001, on advice of his own attorney, the Decedent’s son requested that Decedent amend her trust to eliminate the outright distribution of his inheritance, and instead to have that portion of her trust fund a continuing trust for the benefit of the son and his descendants during his lifetime, and, upon his death, to be distributed outright to his descendants upon reaching age 45. The purpose of this trust amendment was to avoid having the property that would fund the continuing trust be includible in the son’s taxable estate at his death.
Instead of amending the trust as requested, Decedent’s attorney prepared the trust amendment to provide as follows: the son’s share would be distributed outright to him, unless he disclaimed the gift, in which case, it would pass into a continuing trust having the terms requested by Decedent’s son. Decedent signed this trust amendment. Decedent’s attorney did not realize, until after Decedent’s death, that a person who was not a spouse could not disclaim in this fashion without gift tax consequences. (more…)
Almost invariably, settlors give their trustees broad powers regarding trust property. Often these broad powers include the power to convey and encumber trust property and the power to loan trust property. But, sometimes, the settlor also gives the trustee specific instructions with respect to specific trust property. In Hamel v. Hamel, the Kansas Supreme Court interpreted a trust instrument that gave the trustee broad general powers, but also specific directions regarding a specific piece of real property, and examined the interplay between the two provisions.
Arthur L. Hamel’s trust instrument gave the trustee broad authorization to control and administer trust property, including “the power to do all acts that might legally be done by an individual in absolute ownership and control of the property” and provided the trustee with “the power to lend money to . . . any beneficiary under [the] Trust . . . as may be agreed upon between my Trustee and such parties, provided, however, that any such loan shall be adequately secured and shall bear a reasonable rate of interest.” The trust also granted to the trustee “any power my Trustee needs to administer my Trust Estate, which is not hereinafter listed.” This same paragraph provided the trustee with “the power respecting property in [the] Trust Estate that an absolute owner of such property would have.”