Take-Away: Often trust instruments have as part of their ‘boilerplate’ provisions the trustee’s power to divide or consolidate trusts. Those provisions are usually included in anticipation that the trust has a generation skipping transfer tax implications which need to be navigated and assets segregated in order to preserve and best utilize the settlor’s generation skipping […]

Take-Away: Last week the U.S. Supreme Court issued its long awaited decision in North Carolina Department of Revenue v. The Kimberly Rice Kaestner 1991 Family Trust, 588 U.S. ___ (Issued June 21, 2019). The Court unanimously affirmed the decision of the North Carolina Supreme Court, which held unconstitutional North Carolina’s income tax statute that had […]

Take-Away: In order to avoid an implied taxable gift, an intra-family loan must use the applicable federal rate (AFR) of interest when the loan is made. The current AFR rates are historically low. AFR interest rates are going even lower next month. A low interest rate loan enables the lender to shift wealth to the […]

Take-Away: With the current reduction in federal income tax rates due to the 2017 Tax Act, especially for married couples, now might be the good time for them to convert a traditional IRA to a Roth IRA. A Roth conversion makes the most sense if there is a strong belief that the IRA owner will […]

I was asked yesterday after the U. S. Supreme Court’s decision in Kaestner last week how Michigan taxes a non-grantor irrevocable trust that accumulates income. Michigan imposes an income tax on the accumulated income of a Michigan irrevocable trust if the trust is a testamentary trust that is established by a Michigan resident, or the […]

Take-Away: There are no fixed rules when it comes to the decision to make, or to not make, a tax deductible contributions to an IRA or qualified plan to better position the contributor to claim the qualified business income (QBI) deduction under IRC 199A. As a very broad generalization, if the contributor is young(er) and […]

Take-Away: The U.S. Supreme Court denied  today the State of Minnesota’s appeal of its state’s Supreme Court’s decision that found Minnesota’s taxation of an irrevocable trust’s accumulated income, solely based on the residence of the settlor when the trust became irrevocable, in violation of due process. That refuse to hear the appeal may have implications […]

Take-Away: As a generalization, IRAs are exempt when the IRA owner files for bankruptcy. In the past, we have noted an exception when the IRA was acquired by the debtor through a divorce settlement, where it was the former spouse, not the debtor, who had made the contributions to the IRA. As indicated in a […]

Take-Away: Courts and trustees are often called upon to construe the terms of a trust instrument to carry out the settlor’s intent. Many of the rules of construction that generally apply to Wills are, after the adoption of the Michigan Trust Code, also applicable to interpret the terms of a trust instrument. Background: The Michigan […]

Take-Away: Gift tax traps lurk when trust instruments are modified, or trust assets are decanted, and the beneficiary’s waiver and/or consent is solicited to the proposed trust modification or administrative act. There could be occasions when the trustee should not ask for the beneficiary’s formal consent to a proposed modification or decanting. Background: A trust […]