Take-Away: Many qualified plans, like 401(k) plans, permit a participant to borrow against his/her account balance. The rules are pretty straight-forward on how to document the loan and how it is paid back. But when those rules are not followed, a deemed distribution from the qualified plan account to the participant occurs, which results in […]

In a report published by the Center on Budget and Policy Priorities on May 5, 2017, the following facts were of note: Only 0.2 per cent of estates are federally taxable; While the top federal estate tax rate is 40%, the average effective estate tax rate is about 17 per cent, after taking into account […]

Take-Away: Naming a charitable remainder trust (CRT) as the designated beneficiary of a decedent’s IRA or 401(k) account is a great way to avoid the technical complications of either a conduit trust or an accumulation trust, or even a QTIP Trust,  but it should be used only so long as the retirement account owner actually […]

Take-Away: One of the bigger surprises in the Senate’s tax reform proposal is that a taxpayer must use a ‘first in, first out’ [FIFO] method when selling or gifting ‘lots’ of publically traded stock. This rule, if passed, results in a major change in the stock basis ordering rules, and would prevent the ‘cherry-picking’ that […]

Take-Away: With the continued increase in the applicable exclusion amount resulting in fewer and fewer taxable estates [it’s $5.6 million per taxpayer beginning in 2018] income tax basis planning has become increasingly important, especially when there is an opportunity to avoid federal estate taxes and still obtain a ‘step-up’ in the income tax basis of […]

Take-Away: Just because a trust instrument expressly names the trust’s governing law, that choice of law may not be binding on future courts. There needs to be more than just a choice or preference expressed for a court to apply the laws of another state to the trust. Background: We live in an era when […]

Take-Away: The IRS just announced an increase in the federal transfer tax exemptions that will begin in 2018. Source:  Revenue Ruling 2017-58. Lifetime Exclusion Amount: This amount per taxpayer will increase from $5.49 million to $5.6 million (a $110,000 increase.) That means that a married couple could leave at death $11.2 million federal estate tax-free. […]

Take-Away: A little used type of irrevocable trust in dissolving a marriage is an alimony trust which is expressly authorized under the Tax Code. The income tax implications for distributions from an alimony trust are sometimes much different from a direct payment of spousal support from one former spouse to the other. These trusts may […]

Take-Away: A Bill will soon be introduced in Michigan’s legislature (if not already) to permit spouses to classify the assets held in their joint trust as community property. The advantage to spouses who own community property is that there will be a full (100%) income tax basis adjustment (a hoped for ‘stepped-up’ basis) on the […]

Take-Away: Trademarks, copyrights and other intellectual property right interest may become more prevalent assets held in an estate  as we fast-forward into the digital age. A surprise to many is that this is an area where Congress has created specific property rights that preempt state property and probate rules when it comes to the transfer […]