Take-Away: A California appeals court held earlier this month that named parties in a trust dispute who refused to participate in court ordered mediation forfeited their claimed interest in the trust. This seems to be a departure from prior law which has held that a trust is not a contract voluntarily entered into by […]

Take-Away: In its most recent publication, the IRS made a subtle change in when an excess IRA contribution needs to be corrected, i.e. withdrawn, in order to avoid the 6% penalty for excess IRA contributions. Background: The IRS recently updated its Publication 590 that deals with distributions from IRAs, including how to ‘fix’ an excess […]

Take-Away: Fiduciary accountings are different from tax or financial statement accountings, the big difference being that fiduciary accountings must allocate between principal and income. Background: Professional fiduciaries are fully aware of their responsibilities to account to beneficiaries and courts following the Uniform Fiduciary Principal and Income Act, which has been adopted in Michigan. That is […]

Take-Away: The IRS just published its inflation adjusted amounts for Health Savings Accounts (HSA’s) for 2022. Source: Revenue Procedure 2021-25, 2021-21 IRB (May 10,2021) Summary: The inflation-adjusted annual limitation on deductions for Health Savings Accounts [IRC 223(b)(2)(A)] for 2022 follow: – Individual: The annual limitation on deductions for an individual with self-coverage under a high […]

Take-Away: In a recent Private Letter Ruling the IRS clarified that an irrevocable trust can hold an annuity and not run afoul of IRC 72(u)(1). Background: There is a lot of confusion surrounding if an irrevocable trust can hold a tax-sheltered annuity. That confusion stems from the provisions of the Tax Code that suggest that […]

Take-Away: If an individual is given a limited power of appointment over trust assets, the settlor of the trust should be expressly alerted to the fact that the exercise of that limited power of appointment could effectively disinherit the settlor’s heirs who are the trust’s remainder beneficiaries. Background: Adding limited powers of appointment to a […]

Take-Away: The IRS recently announced that it will be targeting solo 401(k) plans for audit, suggesting that the IRS believes that such qualified plans are being abused. Background: A solo 401(k) plan, or also called a one-participant plan, are growing in popularity as an alternative to a SEP or SIMPLE IRA for self-employed individuals. While […]

Take-Away: The IRS earlier this year provided some relief to the highly technical qualification rules for an Opportunity Fund investment, or business, which is intended to encourage more investments in Opportunity Zones to fulfill Congress’ objectives to support distressed economic areas. Background: Opportunity Zones and Qualified Opportunity Funds were created in the 2017 Tax Act. […]

  Take-Away: The key element in a lifetime gift is the donor’s intent to make the gift. Background: These days there is considerable discussion about making lifetime gifts to use the donor’s large applicable exemption amount to shelter the gift from gift taxation and generation skipping transfer tax (GST) taxation. Gifts to spousal lifetime access […]

Take-Away: The IRS treats a Roth IRA conversion as a distribution from the traditional IRA. As such, that means the pro-rata rule applies to distributions from the traditional IRA for purposes of determining how much of that year’s distribution(s) are taxable. Background: Many advisors now encourage their clients to convert their traditional IRA to a […]