“While intergenerational split-dollar is a very advanced technique used by sophisticated practitioners for their clients, this is the first decision rendered in a number of cases pending in the Tax Court that deals directly with these arrangements.”
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“The current trends emphasize a new paradigm in legacy and life insurance planning, which requires a more customized, multi-faceted approach to balancing a client’s needs and dictates active, on-going legacy management rather than passive, static planning. The most successful plans will involve the collaboration of all client advisors – insurance, legal, tax and financial – who can not only help implement the plan, but also monitor performance and provide on-going support.”
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The Treasury Department and IRS have issued proposed regulations that help clarify the application of the basis consistency and corresponding information reporting requirements. These new proposed regulations also (1) include surprising new stiff rules regarding the basis of after-discovered or omitted assets not reported on an estate tax return and (2) impose additional reporting requirements when inherited assets are subsequently transferred by gift to a related party. Although the regulations have not been finalized, compliance will be required: any estate that filed a required estate tax return after July 31, 2015 and for which information returns are due will be required to comply with the information reporting requirements by March 31, 2016.
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“Estate and life insurance planning are critical for all individuals to ensure adequate support for their families, to name guardians for minor children, to facilitate the distribution of their assets as desired, to minimize administrative hassles, to address tax planning, if needed, and, critically, to appoint agents to handle financial and medical decisions in the event of incapacity.”
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“Institutional premium financing loans to ILITs—requiring collateral from the grantor to protect any shortfall between the amounts loaned and the policy cash value—are very complicated propositions. Generally, this kind of premium financing should be considered only when….”
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“The increased complexity and sophistication of life insurance products emphasize the importance of the advisor’s role in explaining the fundamental differences between life insurance products to the client.”
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“If clients are going to spend the time and expense to plan, then they should also try to protect their efforts. Adequate disclosure is a proactive tool for clients to ensure some finality in the valuation and potential taxation of their lifetime legacy planning. Clients should plan to provide full and detailed disclosure, which will require extensive cooperation and coordination among all the client’s advisors (insurance, financial, accounting, legal) to avoid mistakes that could otherwise result in costly amendments of returns and additional audit and tax exposure to the client.”
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“The Priority Guidance Plan indicates that 2016 could be an eventful year for estate and life insurance planning. The potential uncertainty of the scope, content and timing of the planned guidance emphasizes the importance of having access to not only updated technical information but also to practical analyses of these tax developments, their real world application, and how advisors and clients should respond.”
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“Given the ease of using life insurance, charitable giving can be a popular year-end topic for clients looking to satisfy both philanthropic and tax planning goals.”
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“While conventional estate plans focus on a “traditional” family notion of one husband, one wife, and their children, families today often involve far more complex relationships. Thus, modern-day families often present unique planning issues, such as the need to satisfy obligations under marital agreements, the goal to provide simultaneously for both the surviving spouse and children from prior relationships, and the desire to ensure “fair” treatment of children from prior relationships, all while minimizing potential conflicts between the spouse and those same children. The acquisition of life insurance, as well as other “tweaks” to the conventional core plan, can address these objectives.”
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