Take-Away: A 2020 Private Letter Ruling from the IRS is a helpful reminder that IRA custodians are treated differently from qualified plan administrators when it comes to their responsibilities to account owners. Private Letter Ruling 2020033008 (May 18, 2020): Facts: An IRA owner wanted to purchase a new home. He planned to use the proceeds […]

Take-Away: With all the discussion these days with regard to the tax benefits of making lifetime gifts, it is important to recognize the role of a restrictive buy-sell or shareholder agreement. However, it is difficult to distinguish between legitimate and artificial restrictions in a closely-held business’ buy-sell agreement to depress values. Legitimate restrictions will reduce […]

Take-Away: Spouses who decide to make large gifts at this time in order to use their large transfer tax exemptions need to think twice about electing gift-splitting. In addition, they need to be careful not to trigger the IRS’ step-transaction doctrine. Background: When filing a gift tax return [Form 709] that reports a completed gift, […]

Take-Away: A couple of recent Michigan Court of Appeals decisions suggest that a prenuptial agreement that seeks to protect one spouse’s separate property might still be a viable estate planning tool, despite some earlier questions raised by the Michigan Supreme Court in its Allard decision to the contrary. While a prenuptial agreement can protect separate […]

Take-Away: If many of President-elect Biden’s proposed tax law changes are implemented in the next few years, they will have a dramatic impact on how individuals engage in philanthropy. Some of the proposed changes will create more challenges to implement philanthropy, while other existing opportunities will still be available and might even be enhanced. Background: […]

Take-Away: Congress surprised us and reversed the IRS’s initial position that while PPP loans used to pay business expenses that are reimbursed under the CARES Act will be forgiven, those business expenses are not tax deductible. That all changed with the recent Consolidated Appropriations Act. Source: Revenue Ruling 2021-2 Background: In IRS Notice 2020-21 (May […]

Take-Away: With the Democrats now clearly in control of the federal government, we can expect a lot of discussion, and probably some action, with modifications to the federal income and transfer tax laws. President-elect Biden has promised more income taxes and a lower federal exemptions from transfer taxes. Exactly when they arrive, and in what […]

Take-Away: The IRS has yet to rule on whether the owner of an inherited IRA can transfer that IRA to a grantor trust established by the inheritor. Such a grantor trust might be a revocable grantor trust. Background: Under the grantor trust rules, the settlor of the trust, if he/she holds certain powers or interests, […]

The IRS released its interest rates for February, 2021. These rates will be used for intra-family loans, or perhaps the interest rate on a note given in an installment sale to a grantor trust. If the rate is used, then there will be no ‘deemed gift’ in the transaction. Short-term (0 to 3 years):           0.12% […]

Take-Away: Now would be a good time to fund existing irrevocable life insurance trusts due to the possible change in tax laws beginning in 2021 and to respond to the impact caused by the current low interest rate environment. Background: The need to increase federal revenues to address the growing federal deficit has been previously […]