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.

A CLAT is infrequently used in estate planning because of the cost and complexity associated with administering an irrevocable trust. In addition, CLATs are normally only used by wealthy individuals who are very charitably inclined through annual gifts and donations. If the currently high applicable exemption amounts persist going forward, few individuals will be CLAT candidates, unless they have already fully used their available applicable amounts and they still wish to transfer more wealth to their heirs gift or estate tax-free, probably through testamentary CLATs.

Is a worker as a matter of economic reality in business for themselves? The answer can depend on which federal law, or federal agency, is looking at the worker’s relationship with the party who hires the worker.

RMDs have always had to be taken before any Roth IRA conversion. The Final Regulations clarify that all an individual’s entire (or aggregate) RMD for the calendar year must be fully withdrawn from their traditional IRA(s) prior to making any Roth IRA conversion, not just the RMD that is associated with the traditional IRA that is to be converted to a Roth IRA. Sequencing matters.

Now may be a good time to engage in a Roth IRA conversion when stock prices are down. For those who are thinking about a conversion, they might want to accelerate that decision while values are low. Balanced against an accelerated decision to convert a traditional IRA to a Roth IRA is the risk that market values will go even lower, and a Roth conversion now is permanent, and it can no longer be recharacterized using ‘hindsight.’

If an individual elected to take substantially equal periodic payments (SEPPs) to avoid the 10% early distribution penalty, he/she may want to consider making a one-time switch to a different method to calculate their annual SEPP distribution with the recent market turmoil.