Monday, December 5, 2016

'Tis the Season


As we near the end of 2016 and Christmas approaches, our thoughts turn to those less fortunate.  Many of our clients express their desire to give to those in need and the various charitable institutions whose missions are to help those who cannot help themselves. However, some clients are unsure of how much to give, which charities to give to, and how they can make sure that the donation they make actually benefits those in need. 

A website designed to assist donors in choosing charities outlines four questions to ask of a charity before deciding whether to donate:
  • Does the charity match your passion?
  • Is the charity fiscally responsible, ethical and effective?
  • Do you trust it enough to give without strings attached?
  • Does the charity have strong leadership?

Even with that guidance, choosing a charity (or charities) to donate to, how much to give to each charity, or when to make a gift can be difficult. Why not make one donation to one fund (which allows for an immediate charitable income tax deduction and which can be added to over time), which can grow tax free, enable you to make charitable contributions or gifts to multiple charities over time, and utilize the experience of experts to help you determine what charities you would like to give to, and leave a philanthropic legacy for your loved ones?  All these things can be accomplished by using a popular charitable vehicle called a Donor Advised Fund, or “DAF.”

A DAF is basically an account set up at a financial institution or charity that allows donors to make a grant which qualifies for an immediate income tax deduction, but which can be distributed to multiple charities over a period of time.  The money contributed to a DAF can be invested and grow tax free, and multiple family members may be advisors to the fund to recommend different charitable contributions.  The experts at the institution which holds the DAF can help you and your family choose qualified charities and assist in the philanthropic process.

To discuss a DAF, and how a DAF might become part of your family’s philanthropic legacy, please contact an attorney at JEFFREY BURR, LTD. today.

-Attorney Rebecca J. Haines



Monday, November 21, 2016

AFR's for December

The Section 7520 rate is 1.8%
  Annual Semi-annual Quarterly Monthly
 
Short-term 0.74% 0.74% 0.74% 0.74%
Mid-term 1.47% 1.46% 1.46% 1.46%
Long-term 2.26% 2.25% 2.24% 2.24%

Tuesday, November 15, 2016

President-elect Trump and the End of the Death Tax – Not So Fast

Now that Trump won the Presidency, some are excited and some are frightened as to what this means for the United States of America. Interestingly for our law firm as an estate planning practice is that the repeal of the federal estate tax is found in President-elect Trump’s tax plan. With a Republican led Congress in both the House and Senate, some may assume that all of Trump’s tax proposals will easily be pushed through. However, it may not be that simple. Republicans have 51 seats in the Senate, which is not enough of a majority to invoke cloture. Cloture is the procedure by which the Senate can vote to set an end to a debate without rejecting the bill, amendment, or other matter that it has been debating. To invoke cloture, 60 votes in the Senate would be needed. Thus, it is possible that proposed legislation to repeal the estate tax might be “filibustered” in the Senate.

Historically, the last administration that pushed to repeal the estate tax was in 2006 under the Bush administration. The Republican-controlled Senate was not able to gather the 60 necessary votes. Thus it is reasonably foreseeable that the repeal of the estate tax is not in sight. In fact, many of the legislative proposals that President-elect Trump has been promoting may not be a sure thing without more than a simple majority of Congressional votes.


Wednesday, November 2, 2016

PROPOSED 2704 REGULATIONS (GIFT & ESTATE TAX DISCOUNTING)

Our office recently sent a letter to our clients who could potentially be affected by proposed changes to Section 2704 of the Internal Revenue Code, which may eliminate valuation discounting for gift and estate tax purposes. It is not too late to schedule an appointment to discuss the implications on your estate plan if this new regulation is implemented.

As a brief background, the US Treasury has recently issued Proposed Regulations that could have a dramatic impact on your estate planning by eliminating valuation discounts. For wealthy people looking to minimize their future certain estate tax, this is critical.  If you are concerned about protecting a family business, family investment assets, or real estate from having to be sold in order to pay the federal estate tax at your death, then it is worth investigating this. 


Act Now: Time is of the essence. Once the Proposed Regulations are effective, which could be as early as year-end, the ability to purposely structure discounts on assets of your estate might be substantially reduced or eliminated, thus curtailing your tax and asset protection planning flexibility.  Properly planning with this technique takes time to structure the various steps of the transaction.  It is important to start as soon as possible in order to complete the planning before the regulations are finalized.  

Please call our office today at 702-433-4455 to schedule an appointment to review your estate plan.

Thursday, October 20, 2016

Why Avoid Probate?

Typically, estate planning attorneys use trusts and other instruments to help their clients avoid probate court.  Clients often ask, why it is important to avoid probate court?  The two best reasons for avoiding probate court are (1) time and (2) cost. 

Probating a deceased person’s estate is a long process.  For a normal probate estate beneficiaries can expect to wait six months to a year before the process is completed and the assets are distributed.  The reason the process is sluggish is because probate requires several steps and a large amount of court involvement.  Several of the steps require mandatory time-waiting periods giving creditors and other parties time to become involved in the proceedings.  For example, before assets can be distributed to beneficiaries, a notice to creditors must be filed.  All creditors are given a 90-day time period in which they can file creditor claims against the estate.  Extra steps are also required if real property must be sold or interested parties object at any time during the probate proceedings.  The end result is that from start to finish probate takes a significant amount of time.

The second reason to avoid probate is its cost.  Because probate requires court involvement, attorneys, executors and other parties are almost always involved.  The usual attorney fees are set out in the Nevada Revised Statutes Chapter 150.  Generally, attorney fees are calculated based on the size of the estate.  Executors and administrators are also entitled to a similar, but slightly smaller fee.  Beneficiaries will also be required to pay court filing and other fees.  Overall probate ends up being an expensive process.
As probate is both time-consuming and expensive, many people successfully avoid probate all together.  This can be done by setting up a proper estate plan.  If you have any questions about avoiding probate and setting up your estate plan, feel free to contact one of our attorneys.


Friday, October 14, 2016

Nevada Remains a Top-Ranked Dynasty Trust State

A local law firm recently published a chart which named Nevada as one of the top two jurisdictions that are best for establishing Dynasty Trusts.

A Dynasty Trust is a special trust created to last for multiple generations.  They use what is called the generation-skipping transfer tax exemption under the Internal Revenue Code (currently $5.45 million per person) to pass family wealth to multiple generations without being eroded by estate taxes at each generation, which is what happens without a Dynasty Trust.  In Nevada, a dynasty trust can last for one day less than 365 years.

Other advantages of a Dynasty Trust include:

  • ·         Protecting trust assets from potential creditor claims against beneficiaries;
  • ·         Reducing a grantor’s estate by the amount of the gift transferred to the trust, plus the appreciation from those assets; and
  • ·         Removing the value of the trust assets from a number of succeeding generations’ estates for estate tax purposes.
To discuss whether a Dynasty Trust is right for you, please contact the attorneys at Jeffrey Burr, LTD. today.

-Rebecca J. Haines, Esq. 

Tuesday, October 11, 2016

Proposed §2704 Regulations to Take Away Discounting

In an effort to keep you informed of developments in federal gift and estate tax laws, we are writing to tell you of a potential change in the law.  By way of background, when Congress passes provisions of the Internal Revenue Code, they authorize the United States Treasury to issue regulations as further interpretation and enforcement of the Code.   The regulations that are the subject of this post are of particular interest for single clients with an estate greater than or approaching $5.5 million or married clients with combined estates greater than or approaching $11 million.

Proposed Regulations Issued: The Treasury (IRS) has recently issued Proposed Regulations that could have a dramatic impact on your estate planning by eliminating valuation discounts. For wealthy people looking to minimize their future certain estate tax, this is critical.  If you are concerned about protecting a family business, family investment assets, or real estate from having to be sold in order to pay the federal estate tax at your death, then it is worth investigating this. 

Act Now: Time is of the essence. Once the Proposed Regulations are effective, which could be as early as year-end, the ability to purposely structure discounts on assets of your estate might be substantially reduced or eliminated, thus curtailing your tax and asset protection planning flexibility.  Properly planning with these types of techniques takes some time to structure the various steps of the plan.  It is important to start right away.

What are Discounts Anyway? Here’s a simple illustration of discounts and what the proposed regulations are attempting to take away: Andrew has a $20 million estate which includes a $10 million family business. He gifts 40% of the business to a special irrevocable trust to grow the asset out of his estate. The gross value of the 40% business interest is $4 million.  Since an owner of the business with a minority position cannot force a sale or redemption of its interest, the non-controlling interest in the business transferred to the trust is worth less than the pro-rata value of the underlying business. Thus, the value should be reduced to reflect the difficulty of marketing the non-controlling interest.  As a result, the value of the 40% business interest transferred to the trust might be appraised, net of discounts, at $2.4 million. The discount has reduced the estate by $1.6 million from this one simple transaction.  The proposed regulations will eliminate the ability to take the discounts for lack of control and lack of marketability, meaning that the IRS would require that the sale of 40% of Andrew’s business to a trust or family member must have a price tag of $4 million and no less.

Election Impact: If the Democrats win the White House and the Democratic estate tax proposals are enacted, the results will be devastating to wealth transfer planning.  Pundits have predicted that a Democratic White House could affect down-ballot races and flip the Senate to the Democrats. The current administration’s estate tax “wish list” includes the reduction of the estate tax exemption to $3.5 million, elimination of inflation adjustments to the exemption, a $1 million gift exemption and a 45% rate.  However, the current Democratic presidential candidate’s plan would impose a 50% tax rate on estates above $10 million, a 55% tax rate above $50 million, and a 65% tax rate on estates over $500 million.  The Democratic plan will most likely include the array of proposals included in the current administration’s Greenbook which seek to restrict or eliminate GRATs, note sale transactions to grantor trusts, and more.  Wealthy taxpayers who don’t seize what might be the last opportunity to capture discount planning, might lose much more than just the discounts. They might lose many of the most valuable estate tax planning options. 

What You Should Do: Contact your planning team. A collaborative effort is essential to effective planning at this level. Your estate planning attorney can review strategic wealth transfer options that will maximize your benefit from discounts while still meeting other planning objectives. Projections completed by your wealth manager could be essential to confirming how much planning should be done and how. Your CPA will have vital input on wealth transfer options, federal and state income tax implications, and more. Your insurance consultant can show you how to use life insurance to backstop some of the planning strategies, in coordination with the financial forecasting done by your wealth manager, to maximize both the tax benefits and your financial security. 

We are including a link to a recent New York Times® article which discusses the proposed regulations and the affected planning in more detail.


If you are interested in learning more about the planning that could be terminated by these proposed regulations, we invite you to contact our office to set up a consultation to discuss an example of this type of discounting planning and whether this type of planning fits your individual situation.  More information will be posted to the blog about that date when it has been determined.

Attorney Jason C. Walker