Educational Alerts

Educational Alerts are written on topics that effect various aspects of estate planning and the laws that govern it. They are usually published and posted to this site at the end of each month. Occasionally newsworthy events will initiate the release of additional alerts at the time the news breaks. The purpose of an Estate Planning Update is to bring important information to the financial advisors in the community. Our hope is that this information better equips you to assist your clients.

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President's Budget Proposal for 2014: Greater Estate Taxes, Income Taxes May Be in Your Future

This month’s Alert examines the tax aspects of the Administration’s proposed 2014 budget.

Planning for Retirement Assets Can be Difficult

This month’s Alert examines the rules regarding distributions from IRAs and retirement plans. In particular, it examines reasons to make a trust the beneficiary and rules regarding who is the measuring life for minimum required distribution purposes.

Guardianship Provisions Essential To a Comprehensive Estate Plan

This month’s Alert examines two high-profile cases which illustrate the importance of naming guardians for minor children.

More Reasons for Clients to Review Their Estate Plans

This month’s Alert examines how the “fiscal cliff” legislation could result in changes for estate plans. Depending on the couple, it might mean they could simplify their plan. However, there are many non-tax reasons that they may want to keep a more complex plan.

Millions in Tax Savings Available to Clients Who Act Quickly

This month’s alert examines the current, perhaps short-lived, opportunity for clients to give away millions of dollars during their lifetime without a gift tax. Unless the law changes, this narrow window will close at year-end.

Congress Passes New Estate Tax Law as Part of Compromise Package --- the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRA 2010)

This Alert discusses the new tax law – TRA 2010, and its impact on estate planning. The estate and gift tax exclusion is going up to $5 million. However, TRA 2010 applies for only 2 years. After that, we’re back to the $1 million exclusion.

Basics of Gift and Estate Tax Reduction

This Alert examines the three general categories of strategies to reduce the impact of estate and gift taxation. Since it looks like the estate tax is returning next year with only a $1 million applicable exclusion, this refresher in advanced planning is especially timely. In particular, the Alert examines the Stewart case and how the taxpayer in that case used fractional interest discounts to remove value from her estate.

Two Recent Cases Illustrate the Importance of Proper Asset Protection Planning as Part of an Estate Plan

This Alert examines two recent legal cases which highlight the importance of considering asset protection concerns when arriving at an estate plan. In both cases, an estate planning attorney knowledgeable with asset protection could have achieved their clients' goals. For example, in one case the integration of a fully discretionary trust for the beneficiary into the plan could have insulated the beneficiary from asset protection concerns.

House Passes Bill Affecting Advanced Strategy; Fate of the Estate Tax Remains Uncertain

Do not delay! This Alert examines recent legislation which would reform GRATs, an advanced estate planning strategy, making them less attractive. The legislation has passed the House but not the Senate. As the legislation would only apply to GRATs created after enactment, there is still time to act if your clients do not delay. The Alert also examines prospects for estate tax legislation in 2010.

Congress Passes a CLASS Act

This Alert examines the Community Living Assistance Services and Support ("CLASS") act, which was part of the large health care reform measure passed in March of 2010. The Alert examines how the program will work when it is implemented in 2012, though many questions remain.

Eighth Circuit Upholds IRS Victory in FLP Case

A recent decision by the Eighth Circuit affirmed an IRS victory in the Tax Court. This Alert examines the decision in Holman and why the taxpayer lost this case. This case is instructive in structuring FLPs.

Federal Court Denies Annual Exclusions Due to Restrictions in Entity

This Alert examines another case which held that a gift of part of an entity with stringent restrictions is really a gift of a future interest. This is significant since a gift of a future interest does not qualify for the $13,000 present interest annual gift tax exclusion. This case follows the precedent set in the Hackl case.

Defective Grantor Trusts for Beneficiaries?

Most of us have heard of intentionally defective grantor trusts which make the income of the trust taxed to the grantor. A PLR recently released by the IRS shows that it is possible to make a defective grantor trust as to the beneficiary. In other words, the income of the trust can be taxed to the beneficiary rather than to the trust. This Alert examines how this status is achieved and how it may be used to further your clients' goals.

Congress' Inaction Creates Need to Review Estate Plan

Congressional inaction on the estate tax has led to its temporary repeal. The bad news is that there is no step-up in basis. This unexpected scenario causes two potential problems: 1) the estate tax formula allocation clause in your clients' documents may have unintended consequences, and 2) your clients' documents may not be drafted to take advantage of the new "carryover" basis regime. Read the full Alert to find out more about these problems and their solutions.

Estate Tax Update and a Major Taxpayer Court Victory!

This Alert examines the current estate tax uncertainty and prospects for the resolution of that uncertainty. Also, the Alert examines a taxpayer victory in a Court of Appeals case regarding a formula clause. In the event of a disclaimer, the clause gave the excess over a set amount to charity. Such formula clauses are a disincentive to the IRS to audit because it results in no additional tax, even if the value of the assets is increased on audit. This is a significant taxpayer victory as the IRS has consistently challenged these clauses.

IRS Allows Rollover of IRA Payable to a Trust

Maximizing the stretch of distributions from IRAs and qualified plans can provide significant income tax savings due to tax-deferral. This Alert examines a Private Letter Ruling in which the IRS allowed a surviving spouse to do an advantageous spousal rollover, even though the IRA was payable to an estate or trust. Ordinarily, if a trust or estate is the designated beneficiary of an IRA or qualified plan, no spousal rollover is allowed. Learn how they achieved a spousal rollover in this case.

Court of Appeals Affirms Recognition of Social Security Disability Income Assigned to a First Party Special Needs Trust for Purposes of Nursing Home Share of Cost Calculations

This Alert examines a case involving the use of a Special Needs Trust (SNT). SNTs can be very useful in allowing individuals to keep the benefit of some assets and yet still qualify for Medicaid or other resources. Unfortunately, the Court of Appeals in this case held that the SNT could not be used to shelter the individual's Social Security Disability Income (SSDI). The case illustrates the importance of seeking assistance from a qualified estate planning and elder law attorney when planning for clients with current or future special needs (of themselves or their beneficiaries).

No Estate Tax Reform in 2009 - Large Tax Bill Likely in 2010

Where are estate taxes headed from here? This Alert discusses the latest news regarding estate taxes. While nobody knows for sure what is going to happen, this Alert examines the diminished likelihood of permanent estate tax legislation in 2009 and the likelihood of a one-year extension of the current estate tax exemption. The Alert also discusses potential developments in 2010 and 2011.

New Jersey Court Upholds Asset Protection Trust

This Alert illustrates the importance of incorporating Asset Protection planning when doing Estate Planning. The client in the case prepared a fully discretionary trust for her son, thus keeping it from being attached by his creditors. Make sure your clients consider whether their estate plan will protect the assets they intend to leave to their family.

Estate Tax Reform Update

What's happening with estate tax reform? This Alert examines the various estate tax proposals pending in Congress. Many of the proposals under consideration would curtail the effectiveness of many popular estate planning strategies. It concludes that it is unlikely that there will be major estate tax changes this year, but, that changes could be forthcoming next year.

IRS Issues Two New Revenue Rulings Dealing with the Taxation of Proceeds on the Surrender or Sale of Life Insurance

This article examines two interesting rulings recently released by the IRS. The rulings examine the intricacies of the income taxation of the surrender or sale of a life insurance policy.

Legacy Wealth Planning for Blended Families

Blended families, where the parties have remarried or have children from other relationships, are increasingly common. This Alert examines the unique issues arising in the blended family context and ways to avoid the many pitfalls which may exist.

The Estate That Would Not Die

The recent litigation surrounding the publicity rights of the remainder beneficiary of the estate of Marilyn Monroe illustrates some of the problems with probate administrations and how a trust can help avoid some of these entanglements.

Three Planning Gems Contained in The Pension Protection Act of 2006

The alert examines significant aspects of the Pension Protection Act of 2006 and briefly examines recent failed attempts at estate tax repeal.

Recent IRS Ruling Spawns Retirement Planning Strategy

The article examines a PLR in which the taxpayer got approval to treat a (d)(4)(A) Special Needs Trust as a "conduit" trust rather than an "accumulation" trust for purposes of minimum required distributions. In other words, they were allowed to ignore remainder beneficiaries and use the primary beneficiary's life expectancy to calculate required distributions.

Proper Drafting of Trust Protects Trust Assets from Creditors, Including the Internal Revenue Service

This article examines recent IRS guidance concerning the ability of the IRS to attach a beneficiary's interest in a trust. The article provides options for greater creditor protection by not using typical HEMS language.

Care Must Be Taken When Disinheriting an Heir

It is not uncommon for a person to place provisions in his or her will or trust to exclude an heir from receiving an inheritance. Such was the desire of Mary Bartels, who wished to disinherit her daughter, Deborah Smith, and whose will was the subject of dispute in the case In the Matter of the Estate of Mary Alberta Bartels, Deceased, 184 Or. App. 448, 56 P.3d 501 (October 23, 2002).

Estate Planning Alerts for Advisors

Monthly Educational Alerts
Educational Alerts are written for advisors on topics that affect various aspects of estate planning and the laws that govern it. Read our latest Alert and request to be added to our email distribution list.
Educational FYIs
These recent developments and case studies address any aspect of the law that touches on estate planning. They offer an interesting perspective and/or warning. View our latest FYI or request to be added to our email distribution list.

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