Long Term Care not a priority among candidates

According to a recent article published by Forbes contributing author, Howard Gleckman, long tem care issues are not high priority items for discussion. This despite the fact that the fastest growing segment of our population are the octogenarians, those 80 and over, who are likely to place a heavy demand on long term care services.

Most presidential candidates don’t care enough about long-term care services to bother to describe their views on issue. Of the five candidates surveyed by 15 national advocacy groups only two–President Obama and former House Speaker Newt Gingrich–responded to five questions on long-term care. Neither of the two GOP frontrunners, Mitt Romney and Rick Santorum, answered the survey. Nor has Ron Paul.

See Long-Term Care Services: Forgotten By Most Presidential Candidates. Forbes 2/22/2012

New budget proposal targets Defective Grantor Trusts

The Journal of Accountancy reports that one of the features of the Obama Administration’s newly released 2013 revenue proposals “is a new plan that could alter estate planning techniques and benefits with intentionally defective grantor trusts (IDGTs).”

The proposal is being considered to coordinate certain income and transfer tax rules applicable to grantor trusts. Under the proposal, when a transfer is made to a grantor trust, the gift tax would be applicable when there is a distribution from the grantor trust or when the trust ceases to be a grantor trust. To the extent not yet distributed, any amount in the grantor trust at the date of the grantor’s death would be subject to estate tax. This would eliminate the transfer tax benefits of sales to IDGTs.

See Eileen Reichenberg Sherr, Budget Proposal Includes Change to Treatment of Intentionally Defective Trusts, Journal of Accountancy, Feb. 21, 2012.

Hat tip to Wills, Trusts & Estates Prof Blog.

The Federal Arbitration Act and Testamentary Instruments

My wife and I just finished watching the BBC production of Charles Dickens’ novel, Bleak House, which I highly recommend. The plot centers around the estate of  Jarndyce and Jarndyce which had “become so complicated that no man alive knows what it means”.

 

H.R. 1249: Tax Patent Ban

On September 8, the Senate passed H.R. 1249, the America Invents Act, which would prohibit the patenting of tax strategies.  Section 14 of the 152 page Bill addresses tax patents, treating any strategy for reducing, avoiding, or deferring tax liability as deemed “insufficient to differentiate a claimed invention from the prior art.”  The legislation would be effective upon enactment and would apply to any patent application pending, and any patent issued, on or after enactment.  It is reported that the patent office has issued over 150 tax strategy patents and that more than 160 such patents are pending. 

Are Bypass Trusts still worth it?

With the portability provision in the new tax law, a bypass trust for the sole purpose of preserving the federal estate tax exemption amount is unnecessary in most cases. However, there are other reasons for using bypass trusts, including:

1. You want to protect the inheritance from creditors. By leaving assets to heirs in a family trust rather than outright, you can protect against disgruntled spouses, creditors, and others who may sue your heirs.
2. Your spouse might remarry after your death. By keeping the assets in a bypass trust, you can prevent the evil stepmother or stepfather from cutting your children out. Another issue that arises upon remarriage is the forfeiture of the deceased spouse’s exemption. If Harry dies and his widow Sally remarries Joe, Sally cannot use Harry’s exemption amount if she also survives Joe.
3. Your spouse might strike it rich. By leaving assets in trust, you prevent the assets and any appreciation on the assets from being included in your spouse’s estate. You can reduce the likelihood that your spouse will own more than the exemption amount at death.
4. You may have grandchildren. Portability does not apply to the GST tax. You can apply your GST exemption to the bypass trust and include grandchildren as beneficiaries.
5. Your plan already includes a bypass trust. Don’t ditch your bypass trust just because of this new law. They still offer many benefits.
6. You live in a state that has an estate tax. Thirteen states and the District of Columbia currently have state estate taxes, and none have portability provisions.
7. You want to avoid administrative pitfalls. In order to use your deceased spouse’s exemption amount, the executor must file an estate tax return within 9 months of death, even if no estate tax is due.
8. You don’t trust Congress. Portability is set to expire on December 31, 2012. If Congress doesn’t act before then, we will no longer have portability, and the exemption amount will drop to $1 million with a 55% rate.

See Deborah L. Jacobs, Planning for a Disappearing Estate Tax Break, Forbes, Jan. 3, 2011

Is Portability a Good Thing?

According to Lauren Y. Detzel, chairman of the estate and succession-planning department at Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, the question for some: Is portability a good reason to undo estate plans already in place? The answer to that is a definitive “no,” Detzel says. “Educating clients about the ‘pitfalls’ of portability is a top priority,” she adds.

Some of the pitfalls of portability include loss of sheltered appreciation within the standard bypass trust as well as lost creditor protection – often a major reason for establishing a bypass trust. Not to mention the fact that portability could end in another two years.

A general rule of thumb is that the very wealthy—that is, people with considerably more than $10 million—should probably continue with more traditional and sophisticated planning, despite the new portability rules, according to Samuel V. Petrucci, director of Private Banking USA at Credit Suisse Securities (USA) LLC in New York.

What do you think? Will you be changing your standard estate plans for your clients to incorporate portability?

For the full article, see Pitfalls Of New Estate Tax Portability, Private Wealth, Jan. 20, 2011.

NFL vs IRS: A Super Bowl of Epic Proportions.

As you stock up this weekend with your favorite super bowl finger food; and whether you don the cheddar hat for the Packers, or black and gold for the Steelers, keep in mind that for years, an even larger grid-iron battle has been waged between the National Football League, and the U.S. Government. Will recent court battles “sack” the NFL’s anti-trust exemption and tax-exempt status?

It’s a tough sale to convince me that the activities of the NFL don’t give rise to monopolistic characteristics. It also seems the NFL’s tax exempt status is stretching it. But, much like this year’s Super Bowl, I don’t know that I care too much about this issue. Furthermore, what’s this got to do with Fiduciary Law in Mississippi? Nothing. But it is Super Bowl week and the Saints are not playing. And while I might not be willing to bet on the outcome of the game, I’ll bet this subject is not top of mind on anyone at your Super Bowl party. So, if the game lacks interest, now you’ve got something to talk about.