Take-Away: When an IRA owner dies without naming a beneficiary, the  assets held in the IRA pass to the default beneficiary under the IRA custodial agreement, which is usually the deceased IRA owner’s estate. The IRS has issued several favorable private letter rulings this year that show how the decedent’s  IRA can be directly transferred […]

Take-Away: A self-settled special needs trust which preserves the beneficiary’s eligibility for Supplemental Security Income (SSI) generally cannot be terminated ‘early’ without jeopardizing the beneficiary’s SSI benefits and triggering a repayment of the previously received Medicaid benefits. A decanting of that special needs trust is viewed by the Social Security Administration (SSA) as a termination […]

Applicable Federal Interest Rates for March, 2021 Follow: Short-term rate (0 up to 3 years):                   0.11% Mid-term rate   (3 up to 9 years):                    0.62% Long-term rate  (9 years and longer)              1.60% if interest is paid monthly;  1.61% if interest is paid quarterly;  and 1.62% if interest is paid annually The IRC 7520 rate that is […]

Take-Away: In January, the Tax Court held that the ten percent (10%) obligation that is assessed when a distribution is taken from a retirement account by the owner under the age 59 ½ is not a penalty, nor an addition to tax, nor an additional amount. Background: For that last 25 or so years I […]

Take-Away: Amounts received in settlement of litigation can be subject to income tax if not clearly identified as paid on account of physical injuries or physical sickness. Just saying the amount received was attributable to the recipient’s physical injury or sickness will not cut it. Background: Gross income includes all income from whatever source derived […]

Take-Away: A week or so ago I wrote about the historical basis in the federal courts for retroactive changes in tax laws. There is also support for retroactivity in the Tax Code itself. This should concern many donors with regard to making a large gift now, intending to use the donor’s very high federal gift […]

Take-Away: One of the benefits of a grantor trust for income tax reporting purposes is the trustee’s ability to reimburse the settlor (grantor) for the payment of the trust’s income tax liability. The reimbursement of those income taxes, however, might expose the trust’s assets to inclusion in the grantor’s taxable estate, while also raising questions […]

Take-Away: A deceased IRA owner’s minor children are eligible designated beneficiaries under the SECURE Act. That means that if the minor child is named as beneficiary of their deceased parent’s IRA, the minor child can take required minimum distributions (RMD) using their own life expectancy but only so long as they are minors. The problem […]

Take-Away: There is a lot of angst these days with regard to the possible reduction in an individual’s lifetime federal transfer tax credit. It is also possible that the utility of an irrevocable life insurance trust, or ILIT, may also be in jeopardy if many of the advantages of a grantor trust are eliminated. Background: […]

Take-Away: While a wholly discretionary trust in Michigan provides excellent creditor protection, much of that protection can be lost in how the trust is administered. Setting the discretionary trust on ‘cruise-control’ is an invitation to a court to find that the beneficiary possesses certain rights in the trust. Background: We have covered at length in […]