Significant tax reform is likely on the horizon. Given the proposals from President-elect Trump and the Republicans in Congress, we may see legislation repealing the current estate tax passed in 2017, and potentially changes to the gift and generation skipping transfer (GST) tax rules. There is a global precedent for the removal of an estate tax, and Canada serves as one example of what the proposed tax reform may look like in the U.S., which could mean the implementation of a new capital gains tax at death. The uncertainty regarding the future of tax law in the U.S.
Trust and Estate Planning
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IRS regulations’ restricting taxpayer’s ability to structure leveraged partnerships were drafted with the intent to eliminate leveraged partnerships through the use of what the IRS perceived as abuses of the debt allocation rules. As of January 3, 2017, when a taxpayer contributes property to a partnership, the Temporary Regulations treat all partnership liabilities (with limited exceptions) as non-recourse, even if the taxpayer is personally liable on some or all of the debt.
For the investors who like the tax benefits of Section 1031 (aka “Like-Kind”) Exchanges, they should consider a new option for sheltering real estate capital gains: Qualified Opportunity Zone Funds (QOZF). These funds have arisen as a result of the Tax Cuts and Jobs Act of 2017, which designated Qualified Opportunity Zones to promote investment in economically distressed areas. While 1031s remain a useful tool, QOZFs have many tax and other advantages compared with 1031s.
Families with complex assets, such as family businesses, as well as those who have portfolios managed by multiple advisors, may find trustees reluctant to administer their trusts. This is because, in many states, the trustees remain liable for the actions of delegated third-parties or even named advisors. Delaware directed trusts can alleviate this issue, and when drafted properly, can offer the settlor more opportunity for control, flexibility, and customization to accomplish the family’s financial and estate planning goals.
A new U.S. Supreme Court ruling in the Kaestner case means that more out-of-state residents will be able to fully realize the benefits of Tennessee's progressive trust laws and zero income tax on non-residents. Previously, many states relied on the residence of a trust beneficiary as one of the criteria for taxing a trust. In essence, the new ruling makes that criteria alone unconstitutional.
Over the years, many families and their advisers have come to find that the State of Delaware is a trust-friendly jurisdiction that promotes modern laws and attractive income tax advantages. This paper highlights the most significant legal and tax benefits for nonresidents, and their professional advisers, who may be considering whether to establish a trust in Delaware.
Given the uncertainty after the 2016 presidential election, it is critical to implement the best strategies to minimize taxes come April 15, 2017 (and beyond). While it is unclear which tax reforms will be pursued and what order, there are considerations and informational points—broken down by tax areas in a summary of planned changes—that will provide some education relevant to higher-income taxpayers.
Private family trust companies have increased in popularity in recent years, and several states have adopted statutes specific to them. This compiled information compares state trust law requirements for Virtual Representation, Nonjudicial Settlement Agreements and Nonjudicial Modification Agreements in selected states that have PFTC statutes, including Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.
A much anticipated and, perhaps, over-hyped news conference rolling out the Trump Administration’s tax reform plan generated very little “new news.” Treasury Secretary Steven Mnuchin and National Economic Director Gary Cohn presented an outline of a plan that is very similar to the talking points the President promoted on the campaign trail. Perhaps the most interesting tidbit of information from the 23-minute briefing was a change in the Administration’s proposal for the treatment of itemized deductions for individual taxpayers.
When a loved one dies, there isn’t a checklist of tasks to complete to expedite the grieving process. When you have been named the Executor (or “Personal Representative”) of the estate, you have an administrative process to navigate in addition to the emotional one. Thankfully, in that role, there are a finite number of actions that are involved, and plenty of places to turn for guidance.