Category Archives: Tax Planning

What You Know and What You Might Not Know – Increases in Lifetime Exemptions

Many ultra-high net worth clients used all of their available gift/estate and GST exemptions in 2020 or 2021.  For an individual, the exemption increased by $120,000 in 2021, $360,000 in 2022 and is estimated to increase by $860,000 in in 2023.  We can make assumptions for the increases in 2024 and 2025.  What would it look like if we used the increases to fund additional life insurance.
Click here to find out.

 

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Finseca (AALU): “Time to revisit grantor trust transactions?”

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“Rising interest rates, degrading asset valuations, and future legislative uncertainty coupled with high wealth transfer tax exemptions mean it’s a great time to revisit installment sales and similar  transactions using grantor trusts.”

To read the full report, click here.

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Finseca: Private Split-Dollar – Applying the Tax Courts Lessons in Levine

“The IRS, clearly interested in intergenerational private split-dollar, attempted to secure a third victory. After Morrissette and Cahill, it looked like intergenerational split-dollar was trending the way of the dinosaurs. Then in Estate of Marion Levine, the Tax Court not only resurrected intergenerational split-dollar life insurance planning, but it also offered a roadmap for successfully structuring traditional private split-dollar plans as well.”

Click here to see the full report.

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Finseca (AALU): “Lessons from Smaldino v. Commissioner: The consequences of rushed planning”

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“The “step transaction” doctrine is alive and well. In the foot-race to beat potential tax law changes, families often miss the forest from the trees. The economic realities and entity formalities must be respected in the execution of a gift transaction….On November 10, 2021, the Tax Court rendered its decision in the case of Smaldino v. Commissioner, which involved a purported gift of LLC interests by Mr. Smaldino to his wife, followed by a purported gift of the same LLC interests, the very next day, from Mrs. Smaldino to a dynasty trust for the sole benefit of Mr. Smaldino’s children from a prior marriage. The Court found a series of ignored formalities, and that as a practical matter there was never a time when Mrs. Smaldino would have been able to effectively exercise any ownership rights with respect to the LLC interests “given” to her. The Court held that Mr. Smaldino never effectively transferred any LLC interest to Mrs. Smaldino, and consequently the dynasty trust received its entire LLC interest from Mr. Smaldino, creating a taxable event.”

To read the full report, click here.

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Finseca (AALU) – First, do no harm – Estate planning for an unknown future

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There is an adage in the medical field that applies to planning for insurance trusts right now, namely: “First do no harm”.  What is particularly difficult for estate and tax practitioners today is they are being asked to plan for previously proposed legislation that, while currently out of the legislative debate, might resurface and pass in the future. Given this situation, what can we do to position our clients so that we are helping them in the event that the now shelved legislation reenters the debate and is passed, while simultaneously not hurting them if the laws do not change?

To read the full report, click here.

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What You Know and What You May Not Know

What You Know:  We Just Dodged the Defective Grantor Trust Bullet (or did we?)

What You May Not Know:  It Is Still Important to Consider Hedging Re-Introduction of DGT Provisions

Please click here to see three planning/drafting scenarios to consider.

 

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Finseca (AALU) 🔴 President Biden Releases Framework on Spending Package

BREAKING NEWS from Finseca:

This morning, President Biden delayed his trip to see the Pope to meet with Congressional Democrats about moving forward on the Bipartisan Infrastructure bill (BIF) and on the reconciliation bill (Build Back Better plan, or BBB). In concert with that meeting, the White House released two documents (below) explaining the current state of play on the reconciliation package.

We view this as an offer, not a conclusion. These documents are focused on the big picture items. They leave out many important details. There are other items not covered here that key Democrats have said must be addressed in a final deal (i.e. SALT).

Here are the things we are watching closely:

  • Grantor Trusts. We do not read their absence from this document as a guarantee that they are off the table.
  • Millionaires Surtax. To what definition of income is this being applied?
  • 199A. While this document is silent on 199A adjustments, it does reference expansion of the Net Investment Income Tax. The House bill expanded that to cover active passthrough income, a small business tax increase.
  • Estate Tax Exemptions Expiration. Not addressed in the announced framework.

Again, this is a very fluid situation. Please don’t hesitate to reach out with questions.

Armstrong Robinson
Chief Advocacy Officer, Finseca

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Finseca (AALU) – Grantor Trust Developments

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“Contained in the House Ways & Means version of the reconciliation package was a significant change that would materially impact the usage of grantor trusts for estate planning. Since its release, Finseca has been advocating to preserve the tax treatment of life insurance death benefits and to protect the clients who utilize your services to meet the anticipated liquidity needs at death inclusive of the taxes to be paid. Your Finseca team has had several constructive conversations with policymakers in Congress about correcting the unintended impact on life insurance. As always, nothing is final until the President signs the bill, and we do expect changes. We anticipate an updated draft of the bill in a few weeks when it moves to the House Rules Committee. Notably, the crafters of the provision have changed effective date for Section 1062 that would disregard ownership for any sales/transfers/swaps between the grantor and the trust and subject them to a tax realization event.”

To see the current update, click here.

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Finseca (AALU) – 🔴 BREAKING: Tax Increase Details

September 13, 2021— Yesterday, Finseca got hold of a list of tax increases planned to pay for the $3.5 trillion dollar ‘soft’ infrastructure package. This is an early document, and we expect changes before the bill reaches President Biden’s desk – candidly, it could change as soon as tomorrow.

To see the current details, click here.

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Forbes – “‘Mathing Out’ Estate Tax Planning Strategies” by Alan Gassman

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“Well-meaning advisors and their studious clients are not always running the numbers to help ensure that the strategies and techniques they are using will provide the best-expected results….We have found from years of experience that there is no substitute for taking out a calculator or spreadsheet and reviewing the most probable scenarios (as well as possible or unexpected situations) to determine the expected and non-expected outcome of any given technique in order to produce the most accurate map possible of the estate planning territory.”

To see the full article, click here.

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