The IRS issued final regulations for electing portability and use of a deceased spousal unused exclusion amount (DSUE) on June 12, 2015. Though the final regulations are fairly technical, they are worth understanding as applying them correctly can mean a $5,430,000 difference in the amount that passes through an estate tax free. The final regulations adopt the temporary regulations that were issued in 2012, with several changes and clarifications:
1. Upon request, the proposed regulations allowed for an extension of time to elect portability for those estates that did not meet the requirements for an automatic extension. It was unclear whether estates that exceed the basic exclusion amount (currently $5,430,000 indexed for inflation) could request such an extension because the filing deadline for such estates is prescribed by statute and thus cannot be modified by regulation. The final regulations clarify that (more…)
In light of the recent Supreme Court decision in Obergefell v. Hodges, we are re-posting this blog, which was originally posted on October 10, 2014.
We thought we’d share some of the information presented by our attorneys at the CLE presentation in our St. Louis office on Wednesday morning, “Same Sex, Different Day: Estate Planning for Same Sex Married Couples (Post Windsor decision), co-sponsored by the Bryan Cave LGBT Affinity Group. Presenters were Kimberly Civins, Stephen Daiker, and Douglas Stanley, along with Tony Rothert from the ACLU of Eastern Missouri.
Get income tax advice regarding amending returns and filing returns going forward
The sooner the better, as there is a 3 year statute of limitations for amending returns if filing as married achieves a better tax result! (more…)
In a landmark opinion, the Supreme Court rules today that states cannot ban same-sex marriage. The majority opinion in the 5-4 decision was written by Justice Anthony Kennedy. Today’s ruling overturned a decision from the Sixth Circuit Court of Appeals in Cincinnati, which said states had legitimate reasons for maintaining the traditional definition of marriage.
“No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice, and family. In forming a marital union, two people become something greater than once they were,” Kennedy wrote. “As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death.” (more…)
The trailers for the newest installment in the Mission: Impossible franchise, Mission: Impossible Rogue Nation, are being released and, as always when we see actors performing daredevil stunts, it makes us think about life insurance. Hazard (I use the term loosely, in light of what these guys do) of the job, I guess. So, once again, we thought we’d remind everyone about the use of life insurance trusts to reduce estate tax by re-posting the blog we wrote in after seeing his stunts for Ghost Protocol.
And, for your viewing pleasure, share another video of Mr. Cruise’s stunts. (I’m starting to think Tom Cruise or Mission: Impossible should start sponsoring our blog!)
It’s true, it is possible to transfer life insurance proceeds to your beneficiaries without having to pay estate tax on those proceeds. An insured can create an irrevocable trust that is designed to be the owner and beneficiary of a life insurance policy on the insured’s life. The only amount that the insured would end up paying transfer tax on (or allocating unified credit to) would be the amount the insured transfers to the insurance trust to pay the premiums on the policy. If the amount contributed to the trust does not exceed the annual exclusion amount allowable to each of the beneficiaries of the trust, and if the trust is designed to give the beneficiaries crummey withdrawal rights (the right to withdraw any such contributions to the trust over the period of 30-45 days after the transfer), the insured/grantor would not have to use any of his or her unified credit or pay any gift tax on these transfers, either. (more…)
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…)