Educational Alerts
Educational Alerts are written on topics that effect various aspects of estate planning and the laws that govern it. They are usually published and posted to this site at the end of each month. Occasionally newsworthy events will initiate the release of additional alerts at the time the news breaks. The purpose of an Estate Planning Update is to bring important information to the financial advisors in the community. Our hope is that this information better equips you to assist your clients.
Defective Grantor Trusts for Beneficiaries?
Most of us have heard of intentionally defective grantor trusts which make the income of the trust taxed to the grantor. A PLR recently released by the IRS shows that it is possible to make a defective grantor trust as to the beneficiary. In other words, the income of the trust can be taxed to the beneficiary rather than to the trust. This Alert examines how this status is achieved and how it may be used to further your clients' goals.
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Congress' Inaction Creates Need to Review Estate Plan
Congressional inaction on the estate tax has led to its temporary repeal. The bad news is that there is no step-up in basis. This unexpected scenario causes two potential problems: 1) the estate tax formula allocation clause in your clients' documents may have unintended consequences, and 2) your clients' documents may not be drafted to take advantage of the new "carryover" basis regime. Read the full Alert to find out more about these problems and their solutions.
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Estate Tax Update and a Major Taxpayer Court Victory!
This Alert examines the current estate tax uncertainty and prospects for the resolution of that uncertainty. Also, the Alert examines a taxpayer victory in a Court of Appeals case regarding a formula clause. In the event of a disclaimer, the clause gave the excess over a set amount to charity. Such formula clauses are a disincentive to the IRS to audit because it results in no additional tax, even if the value of the assets is increased on audit. This is a significant taxpayer victory as the IRS has consistently challenged these clauses.
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