As a generalization, any distribution from a qualified plan (401(k) or an IRA is taxed as ordinary income to the recipient. However, there is the exception when a qualified plan holds stock in the company that sponsors the qualified plan, where the company stock will be taxed at long term capital gains rates if certain conditions are met.

The income tax consequences of a CRUT are more than just the tiered taxation regime under IRC 644. The exchange or termination of a CRUT has other unusual tax consequences that must be factored into the decision to exchange or terminate the CRUT.

The recent House Ways and Means budget proposal would expand some of the benefits associated with 529 accounts, ABLE accounts, and health savings accounts.

The new Code Y will be a helpful reminder to IRA owners and their tax advisors to make sure that the tax benefits of a QCD are claimed. However, traditional IRA owners who make their charitable donations using a QCD will need to make sure that their donation satisfies all the other QCD conditions and rules, e.g., age 70 ½, a direct distribution from the IRA custodian, etc. The receipt of a Form 1099-R with Code Y from the IRA custodian still will not guarantee that the donation qualifies for tax-free treatment.

Delaware’s new Beneficiary Well-Being Trust statute is admittedly novel, but it carries many difficult, and so far, unanswered questions, especially for a trustee.

The tax consequences of funding a 529 account, or distributions from a 529 account, or the change of beneficiaries of a 529 account are all interesting. Particularly so, when you consider that the creation and funding of a 529 account is essentially a revocable completed gift for tax reporting purposes.

An irrevocable trust that owns 529 accounts for some of its beneficiaries is an effective strategy to pay for a trust beneficiary’s higher education expenses, as well as provide effective income tax savings to the trust if it accumulates some of its income. The key will to assure the trustee possesses broad powers to own and manage the 529 accounts and that the trustee is relieved of its fiduciary duty of impartiality among the class of trust beneficiaries.

Married individuals might want to think twice before they adopt spousal lifetime access trusts to use their bonus applicable exemption amount before it expires at the end of 2025.

While Michigan may have a favorable provision in its Trust Code with respect to a beneficiary’s interest in a discretionary trust, i.e., that it is not a property interest subject to the claims of creditors, other states are apparently free to ignore that Trust Code classification when it better suits that state’s public policy.

In the past we have covered the ability of the IRS to ask the Secretary of State to deny, revoke or limit an individual’s passport, based upon a certification that the individual has a seriously delinquent tax debt. [IRC 7345.] Once the IRS has determined that an individual has a seriously delinquent tax debt, it notifies the Treasury Secretary, who shall transmit the certification to the Secretary of State “for action with respect to denial, revocation, or limitation’ of the individual’s passport. The individual then has the right to challenge that certification in federal court in a civil action as either erroneous or on the grounds that the IRS failed to reverse the certification when required. [IRC 7345(e)(1).] The forfeiture of an individual’s passport was unsuccessfully challenged in a recent federal court decision.