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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2012 Budget Proposal Includes Permanent Estate and Gift Tax Reforms

This month’s Alert examines the Obama Administration’s 2012 budget proposal and how it might affect estate, gift, GST, and income taxes. Further, the Alert looks at how our tax system compares to other developed countries.

Doing It Yourself Can Sometimes Lead to Disaster

Nowadays, a growing number of consumers attempt to prepare estate planning and other documents of legal significance without professional assistance. These do-it-yourselfers are penny-wise and pound-foolish. This Alert examines several cases in which the decedent attempted to create or modify his own estate plan, with disastrous results.

Creditor Protection Extended to Inherited IRAs by More Courts

IRAs and Qualified Plans are an increasing portion of our clients’ wealth. The advantages of the income tax deferral are well-known. This month’s Alert looks at developments regarding the creditor protection such plans provide, not only for the contributor, but also for those who inherit them.

Elizabeth Taylor's Estate Could Exceed $1 Billion – Much of It Could Benefit AIDS Charities

Elizabeth Taylor died recently with a $1 billion estate. This month’s Alert focuses on her estate, her philanthropy, and various advanced estate planning techniques with a charitable component. Read this month’s Alert to find out how charitable giving can help you and your clients meet estate planning goals.

Annuity Maximization

This Alert examines how a tax-deferred annuity may not be the best solution for senior clients. It demonstrates how a single premium immediate annuity, or “SPIA” may be a better alternative for clients, especially if the client is in a lower tax bracket than the children who will inherit it.

TRA 2010 Creates Opportunity for New Planning Strategy - The FlexTrust

The question of whether to fund a credit shelter trust has long been a central question in estate planning. With the new tax law and it’s temporarily increased exemption, the question is all the more relevant. This month’s alert discusses a new method of adding flexibility to your clients’ trust. The FlexTrust allows an independent Trust Advisor to decide whether and to what extent the credit shelter trust should be funded.

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.

Unseen Perils Often Lurk in Estate Plan Changes

The Alert examines how care must be taken when an estate tax plan is modified. In the subject situation, the client wanted to change an irrevocable GRAT because of changed circumstances. The Alert examines the risks involved in the change and the prudence of advice from a qualified estate planning attorney prior to any such change.

IRS Issues Another Private Letter Ruling Regarding Retirement Assets Paid to Trusts

This month's Alert examines a private letter ruling concerning IRAs paid to a trust. In the facts of the PLR, the trust paid outright to the beneficiaries. There is much misinformation out there about using trusts as the beneficiary of IRAs and qualified plans. In this case, the beneficiaries were able to defer the income taxation of the assets by taking distributions over their life expectancies.

With Taxes on the Rise, Charitable Remainder Trusts May Again be an Important Tool

This month's alert examines the likely increase in estate taxes next year and the potential increase in income taxes. It examines one strategy which may be of great help if that is the case: the CRT or Charitable Remainder Trust. A CRT provides benefits to you during life and to the charity you designate when the trust ends.

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.

IRS Scores another FLP Victory with Jorgensen Case

The Alert examines a case involving a family limited partnership in which the IRS scored another victory. The Jorgensen case underscores the necessity of the proper management of the partnership if valuation discounts are to be obtained. Your FLPs should be reviewed by an experienced estate planning attorney in light of these cases.

Another Proposal for Estate Tax Reform is Introduced to Congress - Where Does It Appear We Are Heading?

This months Alert examines a yet another estate tax reform proposal and the prospects of its passage.

Tax Law Changes for 2009

This year (2009) brings several changes to tax laws. This Alert keeps you abreast of the most important of these changes and even gives you a sneak peak at some proposed legislative changes that may be in the works.

Congress Provides Relief for Required Minimum Distributions in 2009 and Proposes Estate Tax Reform

This alert examines two pieces of legislation. The first passed last year and provides that there are no Required Minimum Distributions for 2009. The second piece of legislation is a bill which has been introduced in the House which would provide for estate tax reform by freezing the applicable exclusion at $3.5 million and denying discounts for non-business assets in an entity like an FLP.

Turbulent Economic Times Can Lead to Estate Planning Opportunities

This article examines several ways to take advantage of the current economic conditions, from an estate planning perspective. Historically low interest rates combined with depressed asset values make many strategies more effective. The article explains how these challenging economic times can work to your client's benefit.

Recent Law Changes of Note to Financial Professionals

This Alert examines changes the recent expansion of FDIC insurance coverage and how it applies to accounts in revocable trusts. The Alert also examines how the extension of the allowance of the IRA "charitable rollover" can help your client achieve their philanthropic and tax goals.

IRS Rules That Tuition Paid for Special Needs Child is a Deductible Medical Expense

The Alert examines a recent private letter ruling which allowed the taxpayer to deduct school tuition for a special needs child as a medical expense.

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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