“Critics had an immediate, and unsurprising, reaction, arguing that such taxes will push the wealthy to move to lower- or no-tax states. But is that true?
“While some wealthy people will move, proponents of these taxes argue, few will make good on the threat to move to Florida (with no state income tax) or, in New Jersey’s case, to Pennsylvania (where the state tax rate is one-third its neighbor’s rate). They argue that high earners and entrepreneurs have family and community ties that keep them from moving away.”
“As the 2020 presidential election approaches, uncertainty continues regarding the potential for tax legislation and changing market conditions, causing many to consider using current transfer tax exemptions with gifts before year-end. Individuals planning to transfer hard-to-value assets may wish to consider using a gift agreement with a defined value clause to shield against unwanted gift tax consequences.”
While traditional estate plans may cost less, the value added with a comprehensive legacy management approach generally exceeds its marginally higher expense. Proactive management supported by a cooperative multi-disciplinary team helps families see what is on the horizon and efficiently navigate changes. Professional services rendered to implement and maintain a plan also eliminate many costly issues that routinely emerge when clients use a less sophisticated or “DIY” approach.
“In business succession planning, a §6166 deferral election may provide a powerful post-mortem planning tool to help minimize the initial strain on the estate and prevent a forced sale of the estate’s business interest. However, the election’s complex administrative and compliance requirements and the potential for payment acceleration make it an insufficient substitute for lifetime succession planning.”
“Heckerling presenters emphasized that flexibility in planning will remain key for families and advisors through the on-going roll-out of the TCJA and related guidance. Given the TCJA’s temporary nature, the possibility for future tax law changes depending on future election outcomes, and the many moving parts of planning for the “modern” family, successful plans will require active management and on-going monitoring of both federal and state tax and legal developments.”
“Relatively small shifts in applicable interest rates can have a disproportionate effect on the performance of rate-sensitive legacy planning. Appreciating the potential economic impact of the rate changes and how other factors, such as payment structure, term selection, and asset valuation, also can complement overall performance, may help clients and advisors to better customize the planning to achieve the intended goals.”
“The IRS has issued long awaited guidance concerning the proper reporting of cash and noncash charitable contributions…Failure to comply strictly with these requirements can result in a denial for some or all of a claimed deduction.”
“As creators (“grantors”) of irrevocable grantor trusts must pay the trusts’ annual income taxes without receiving any trust benefits, advisors typically suggest incorporating a tax reimbursement power that gives the trust flexibility to reimburse the grantor for the tax payment. Despite their prevalence, however, tax reimbursement powers must be crafted and used with care, not simply exercised as a matter of course.”
“Despite positive opinions on GSD gift taxation, the Tax Court’s analysis of the potential estate taxation of economic benefit GSDs will require a long, hard look at these arrangements and their continued viability. For the first time, two very recent Tax Court opinions (Est. of Cahill v. Commissioner and Est. of Morrissette v. Commissioner) have discussed the court’s view of the estate taxation of economic benefit GSDs. Neither Cahill nor Morrissette is a final decision on the merits. Yet the court’s reasoning in Cahill strongly suggests that, at least in that case, the Tax Court may find that the parent’s estate includes the full value of the reimbursement right under the economic benefit GSD. This finding would eliminate the possibility of a significant valuation adjustment for the reimbursement and undercut one rationale for using economic benefit GSDs in estate tax planning.”
“Presenters at the 2018 Heckerling Institute on Estate Planning identified several enhanced areas of focus for legacy and life insurance planning post tax-reform, including (1) basis adjustment planning, (2) the potential benefits and pitfalls of portability, especially in light of the doubled federal transfer tax exemptions, and (3) the need to review and refresh existing life insurance planning.”