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.
“Intergenerational Split Dollar Planning Can Still Work. While Estate of Morrissette may encourage practitioners to transition away from recommending economic benefit split dollar arrangements, it is important to consider the impact that certain bad facts specifically noted by the Court in this case had on the decision. The results in this case may not significantly affect IGSD planning under the economic benefit regime, provided that the plan is established for the right non-tax reasons, the facts substantiate the treatment of the IGSD plan as a bona fide sale, and conservative discounts are taken when valuing repayment rights.”
“Now that we have the Green Book, which covers all of the same ground as the STEP Act, it seems that we no longer need to be concerned with retroactive provisions and can advise clients to take certain proactive steps….Green Book = Green Light.”
“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.”
“As part of their comprehensive legacy plan, clients who are charitably inclined, hold significant highly appreciated assets, and wish to create a lifestyle “annuity” should consider a CRT, especially if they can benefit from an income tax charitable deduction. Selling an appreciated asset inside a CRT may provide an economically superior result compared to selling the same asset in a client’s own hands, especially when done in conjunction with purchasing additional life insurance through an irrevocable life insurance trust (“ILIT”).”
“Financial advisers say they have been flooded with calls from clients who are trying to predict which of President Biden’s tax proposals will become law….I don’t know where we’re going with any of these taxes,” said Bill Schwartz, managing director of Wealthspire Advisors, which advises clients with $5 million to $20 million in assets. “But I do know it’s really difficult right now to justify what people call a loophole or what I call using the tax code to your advantage. In fact, it’s really hard to justify any of these techniques for the affluent right now, not that I think they’re right or wrong.”
“When you’re planning to divide your estate unequally, explain the reasons to your heirs, and remember: They might be hurt anyway….For most older parents, it is simpler to leave each adult child the same inheritance. But is equal always equitable? For many, the answer is no. And as the pandemic drives people to draft or update their estate plans, more are confronting that question….While leaving equal inheritances is the norm, many parents appear open to bequeathing their adult children different amounts. Two-thirds of Americans 55 and older said a child who provided them care should get a bigger inheritance than children who did not….The survey also found that one in four parents said an adult son or daughter who has children should receive more than a child who does not.”
Tales from two sons whose fathers died without a succession plan.
“Financial advisors worth their fees will always discuss the need for succession plans with clients who own businesses. But that doesn’t mean business owners will listen….People just don’t want to do it.”
A very interesting article in today’s NY Times Business Section. Estate planners will be surprised at the issues discussed.
“The answer: help rich people pay less in taxes. In the case of Mr. Black, the chief executive of Apollo Global Management, his advice could have been worth as much as $2 billion in savings, according to a law firm’s review of Mr. Black’s business dealings with Mr. Epstein….Mr. Epstein’s specialty was suggesting ways for wealthy clients to use sophisticated trusts and other investment vehicles to reduce their tax liability while passing on assets to their children, according to documents reviewed by The New York Times and interviews with 11 people familiar with his work. In the process, he collected hefty fees — usually based on a cut of the anticipated tax savings….In Mr. Black’s case, according to the review by the law firm Dechert, the savings were enormous: about $1 billion for a single GRAT. Mr. Epstein’s detection of a problem in a trust set up in 2006 and his proposed solution were “the most valuable piece of work” that he performed, the report said. “Outside legal counsel described the solution as a ‘grand slam,’” according to the Dechert report, which was commissioned at Mr. Black’s request after The Times reported in October that he had paid Mr. Epstein at least $75 million in fees.”