Naming a trust as the designated beneficiary of an IRA creates considerable confusion since it triggers multiple factors and conditions set-forth in the Tax Code. This private letter ruling provides some insight and guidance into how beneficiary designations might be structured when a trust is named as the beneficiary of a decedent’s IRA. The questions ask and the scope and complexity of the IRS’s response, does suggest however that it would have been much easier for Irv to have set up the private foundation during his lifetime, and directly name the private foundation as the beneficiary one of Irv’s IRAs, and that Irv could have simply named the individuals directly as the beneficiaries of his remaining IRAs, all without incurring the expense of the need to ask for a private letter ruling.

Both versions of the House and Senate budget reconciliation bills include the new savings vehicles for minors, the Trump Account. Apparently Trump accounts are intended to introduce more Americans to wealth-building opportunities. But the Tax Code already has about 10 savings inducement provisions and adding yet another just is another layer of complexity While that may be so, these accounts seem to be very complicated, and highly unlikely to be used lower-income families. Perhaps it would have been easier to expand the scope of permissible tax-free distributions using a 529 account that many are familiar with than create yet another set of rules and restrictions. Better yet, Congress should explore creating a Universal Savings Account for all Americans, without so many conditions.

The IRS recently provided guidance on how to identify digital assets held by a broker when the digital assets are sold or exchanged for the purpose of determining tax basis and the holding period for the transferred digital assets. As more individuals decide to speculate and hold digital assets, the need to identify those digital assets sold or exchanged by their owner will become even more important for tax reporting purposes, along with the tax revenues that Congress expects to receive from this higher level of tracking and reporting.

If a parent/grandparent is asked to personally guarantee a loan to a family member, it would be wise to report that personal guarantee on a Form 709 Gift Tax Return each year that the guarantee is outstanding.

The 2017 Tax Act eliminated like-kind exchanges for property other than real estate. Under the Biden Administration, several proposals were offered to eliminate like-kind exchanges for real estate, but those proposals went nowhere. It’s probably that IRC 1031 will remain as part of the Tax Code. This PLR is an interesting example of how the distribution of tenant-in-common interests in real property to trust beneficiaries on the trust’s termination can also benefit from a like-kind exchange.

The best way to navigate these IRA rollover rules is to completely avoid them by using a custodian-to-custodian direct transfer and skip the many mistakes associated with the 60-day rollover deadline, including those which cause the entire distribution to be immediately taxed along with the 10% early distribution penalty.

Proceed with caution in pursuing trust modifications or a trust decanting since the IRS appears to be eager to find a taxable gift by the trust beneficiaries.

If you have read this far, you will now concluded that a hybrid trust is intended as a substitute for a DAPT, principally caused by some unfortunate Comments to the Uniform Voidable Transactions Act. A hybrid trust starts out as a conventional third-party trust, where the settlor retains no interest in or control over the trust, yet the settlor may be added back to the trust by a trust director as a discretionary trust beneficiary (just like a DAPT.) So, if you encounter the term hybrid trust hopefully you will have a better understanding what that label means.

Proving undue influence can be difficult due, in part, to the lack of direct evidence and the possible use of a presumption of undue influence in some situations.

Exploiting the Delaware Tax Trap to gain an income tax basis adjustment for assets that are subject to a power of appointment is fundamental to estate planning. How and when that ‘trap’ is ‘triggered’ thus becomes important. There are also several different considerations involved in working with, and/or around, the ‘trap’ that makes drafting the power of appointment particularly challenging. But if the goal is to increase basis in assets, becoming familiar with the Delaware Tax Trap is a first step.