Estate planning is the best way to build, protect, and preserve your legacy. By utilizing Wills, trusts, and powers of attorney, you can craft a plan tailored to your unique needs. At the Las Vegas Law Firm of Jeffrey Burr, we've been assisting individuals and families throughout the community for over 40 years, offering customized solutions to protect your family and assets.
Crafting Your Legacy with Precision
Crafting the perfect estate plan is more than just a legal process – it's a reflection of your life's work and your hopes for the future. Our dedicated team understands the importance of this journey. With our decades of experience and legal expertise, we're here to guide you through every step of the process, ensuring your legacy is preserved according to your wishes.
Guidance for Optimal Tax Efficiency
At the Law Firm of Jeffrey Burr, we recognize that minimizing tax consequences is a critical element of any comprehensive estate plan. That's why our estate planning attorneys are either CPAs or hold advanced degrees in taxation and are dedicated to ensuring your plan addresses tax concerns most efficiently and effectively possible. Whether it's structuring trusts or implementing strategic tax-saving measures, we work to protect your assets and maximize your benefits.
Your Trusted Partner in Estate Planning Excellence
We understand that estate planning can feel overwhelming, but you don't have to navigate it alone. Our team is here to provide the guidance and support you need to make informed decisions about your future. From creating Wills and trusts to advanced estate planning, we're committed to helping you build a secure legacy that withstands the test of time.
Don't overlook the hidden tax deductions within your estate plan. Schedule a consultation with us today and let's embark on a journey to maximize your legacy for generations to come.
It is hard to believe that we are already at the end of 2013. It has been an exciting year for estate planning. In the first week of 2013, congress passed new legislation making the estate laws tax permanent. In many cases, the new laws have allowed for many families to simplify their estate plan.
As the year comes to a close, it is a good time to complete a quick tune-up of your estate plan to make sure you are ready for the New Year. Here is a short tune-up list to cover some of the basics:
We hope that each of you have a happy New Year!
Corey J. Schmutz, Esq.
With portability, the estate tax concerns of most clients have been alleviated. However, in some cases, the generation skipping transfer tax (“GSTT”) problem remains unsolved, because the portability provisions of Internal Revenue Code (“IRC”) § 2010(c) do not port or transfer the GST exemption of the deceased spouse (“Decedent”) to the surviving spouse (“Survivor”).
Portability and its new developments have caused many estate planners to move away from drafting the previously oft used “A-B trust” or “two trusts.” Instead, estate planners have increasingly employed the disclaimer trust – a trust where all of the trust assets stay in one trust unless the Survivor decides for estate tax or non-tax reasons to disclaim assets to the equivalent of a bypass trust. Because of portability, the disclaimer trust will satisfy the estate tax objectives of many married clients without the necessity of creating an “A-B trust.” However, the disclaimer trust will not fully satisfy the needs of every client. This is particularly the case for those clients who may be subject to the GSTT.
For these clients instead of employing the pure disclaimer trust, they can either revert back to using the traditional “A-B” trust or consider creating a QTIP trust and making a reverse QTIP election. Depending on the nature of the client’s assets and the domiciliary of the client, however, it may be more advantageous from an income tax perspective to avoid the bypass trust in the traditional “A-B” trust regime. In these circumstances, use of a QTIP trust with a reverse QTIP election could be a fruitful solution.
By making a reverse QTIP election under IRC § 2652(a)(3) over a properly executed QTIP trust (with an inclusion ratio of zero), the Decedent is deemed to be the transferor of the assets passing under the QTIP trust for GSTT purposes. In other words, no QTIP election is deemed to have been made for purposes of GSTT. Therefore, the Decedent’s GSTT exemption can be allocated to the QTIP trust even though the trust is includable in the Survivor’s estate for estate tax purposes. Effectively, then, the Decedent is able to port his or her GSTT exemption to the Survivor (to the extent the QTIP trust is funded). In this way, married clients who may be subject to GSTT may avail themselves to the benefits of portability while also maximizing their GSTT exemption. This solution may result in greater usage of the reverse QTIP election.
Interesting article in November 2013 Nevada Business Magazine. http://www.nevadabusiness.com/2013/11/estate-tax-changes-require-immediate-attention/
In January and February of this year we blogged about the changes to the estate tax. We may have even used the term ”permanent” in our January post. Please forgive us. While it’s true that the estate tax laws that were passed on January 1, 2013, do not contain an expiration date or sunset provision, the changes in the law are permanent only as long as Congress and the President leave the law unchanged.
Last week the Obama administration unveiled its budget proposal, and once again the estate tax is in the crosshairs of uncertainty. President Obama’s proposed budget would decrease the estate tax exemption to $3.5 million starting in 2018 and would be indexed for inflation moving forward. Furthermore, the estate tax would be increased from today’s 40% rate to 45%.
In addition to the foregoing, there are other interesting proposals in the budget that would impact some of our estate planning techniques. Accordingly, we will be closely watching the proposed budget to see if any of the changes make their way into a legislative bill this coming year.
There has been a lot of discussion regarding the advantages of having a living trust, especially in terms of avoiding probate. Probate can be a long costly process involving delays in gaining access to funds to pay bills and expenses, as well as making distributions of money and property to the heirs. Another topic that has been a recent focal point of discussion is the impending reduction in the estate tax exemption amount, coupled with an increase in the estate tax rate. Beginning January 1, 2013, the estate tax exemption will be reduced from $5.12 million to $1 million, while the estate tax rate on the excess (over the exempt amount of $1 million) will increase from 35% to 55%. The result is going to be a very large estate tax unless the law is changed in the near future.
Among its other advantages, setting up a living trust can provide a variety of opportunities to minimize overall estate taxes. One technique available to married couples involves the use of a credit shelter or bypass trust. Since husband and wife are two individuals, each spouse is entitled to receive the benefit of the exemption amount in place at the time of his or her death. Under a living trust, the exemption amount of the first spouse to die may be directed into a credit shelter or bypass trust that will pass free of tax upon the death of the second spouse. When the second spouse dies, his or her estate can not only exclude from taxes the exemption amount in effect at such time, but also the entire value of the credit shelter or bypass trust that was funded with the first-to-die spouse’s exemption amount.
Another advantage worth mentioning is that the credit shelter or bypass trust can still be a financial resource for the support of the surviving spouse, yet it is not included in the surviving spouse’s estate. Additionally, the assets in the credit shelter or bypass trust can increase in value and all of the appreciation will likewise avoid inclusion in the estate of the surviving spouse. Thus, setting up a living trust in this manner might end up shielding more than just the exemption amount of the first spouse to die assuming those assets have appreciated in value by the time the second spouse passes away.
When faced with the potential of a large estate tax, the above approach may be preferable to simply leaving everything to the survivor at the death of the first spouse. This is true even though one spouse can leave everything to the other spouse free of estate taxes due to the unlimited marital deduction. The downside of relying entirely upon the marital deduction to avoid taxes is that the exemption of the first spouse is entirely wasted and all of the couple’s money and property is taxed at the death of second spouse when only one spouse’s estate tax exemption remains available for use. Thus, planning with a living trust allows the couple to shield the maximum amount of money and property from estate taxes based upon the respective exemption amounts available to each spouse in his or her year of death.
Attorney Kari L. Stephens
Many of our clients have residences in or spend a significant amount of time in both Nevada and California. Although the state of Nevada has no income tax, the state of California taxes non-residents on any California taxable income and California residents on all income. If individuals are not careful, they may be considered residents of California and therefore subject to California income tax on all of their income. Fortunately, the California Franchise Tax Board has issued some guidelines for determining resident status.
FTB publication 1031 sets out the test for determining residency as follows:
“A resident is any individual who meets any of the following:
The publication further explains, “the underlying theory of residency is that you are a resident of the place where you have the closest connections.” The Franchise Tax Board Publication also provides the following partial list of factors that the state may consider in determining whether a person is a resident or non-resident:
If a person is treated as a resident of California, it may subject them to potentially large income tax consequences. Aside from the tests and factors outline, there are many other things to consider when determining or evaluating residency. Should you have any questions regarding your residency status, please contact our office.
Every once in a while we hear rumors that lawmakers might make changes to our tax laws that would affect planning involving Legacy Trusts. We heard this about a year ago, and new rumors have been heard on the same subject very recently.
A Legacy Trust (also known as a Dynasty Trust or Generation Skipping Trust or GST Trust) is a trust set up in a state that has repealed the “rule against perpetuities” so that the trust can remain in place for multiple generations. In Nevada, a Legacy Trust can exist for up to 365 years. These trusts are typically designed so that the assets held by the trust are not included in the estate of any beneficiary of the trust and therefore the trust is not subject to the federal estate tax during the duration of the trust. For example, if $5 Million were funded into a Legacy Trust today and if those funds could appreciate consistently at 6% and not be subject to multigenerational transfer taxes (estate tax), then the trust would be worth $92 Million in 50 years.
Now for the scare tactics: We strongly suspect that we have a limited opportunity to take advantage of the $5 Million gift tax exclusion that is set to expire at the end of 2012. If lawmakers also somehow remove the advantages of a Legacy Trust in the coming years, then today is the perfect opportunity to engage in some estate planning that will utilize a Legacy Trust for your children and grandchildren. A trust that is established and that is funded with assets would be almost certainly “grandfathered” in the event of a change in the laws. We feel that now is the best possible time to engage in this type of planning.
Last week, I prepared and gave a presentation to the Financial Planning Association of Nevada on some of the details of the 2010 Tax Act and its impact on estate planning. One interesting thing that I came across in preparing my presentation was a comparison of an estate relying on the new portability provisions versus utilizing an “A-B”, “Bypass”, or “Credit Shelter trust. “
The assumptions are as follows:
• Married Couple with a $10 Million estate
• Husband dies in 2011
• Wife dies in 2019
• 2% rate of inflation
• 5% return on assets
The original source of the chart and calculations may be found here on page 40-42.
This example shows the power of capturing the appreciation of the assets in the credit shelter trust. Of course, various factors could affect the calculations, including inflation rate, changes in the Capital Gains rate, and an assumption that the Estate Tax rate will remain at 35%.
Owners of large IRAs prior to the 2010 Tax Act generally had to decide between the income tax benefits of leaving the IRA to his or her spouse and the potential estate tax benefits of leaving some or all of the IRA to a credit shelter trust or a trust for children or grandchildren. Now, portability may allow owners of large IRAs to name the spouse as the beneficiary of the IRA while still preserving the owner’s unused estate tax exempt amount to be transferred to the surviving spouse.
Rules for IRAs with the Surviving Spouse as Beneficiary
When an inpidual with an IRA dies, leaving the surviving spouse as the beneficiary, the survivor has three options, all of which could have positive income tax results:
The problem with these options is that, if the survivor is the named beneficiary of the IRA, and the deceased spouse does not have sufficient assets to maximize his or her estate tax exemption, the exemption of the first spouse to die could be wasted.
Maximizing the exemption before the 2010 Tax Act
In order to avoid wasting the exemption, many couples were either naming another inpidual as a beneficiary of their IRAs, or they were leaving all or a portion of their IRAs to a credit-shelter trust in order to preserve the exemption of the first spouse to die.
A number of disadvantages and complexities arise when leaving an IRA to a trust, such as:
Another option would be to name the family trust as the primary beneficiary, allowing the survivor to disclaim the proceeds to a disclaimer trust at the first spouse’s death. However, the spouse would have to decide whether to give up the potential estate tax benefits of fully funding the credit shelter trust and disclaiming the IRA and giving up the income tax benefits of the spousal rollover. Additionally, the spouse would not be able to have any power of appointment over the disclaimer trust.
After the 2010 Tax Act
Now, with the 2010 Tax Act allowing for a $5 million exemption per person, the unused portion of which can be transferred to the surviving spouse, the problems set forth above may be largely solved. The IRA owner can name the spouse as the beneficiary, with all the income tax benefits which come with that option. Any amount of unused estate tax exemption will be transferred to the survivor to use upon his or her own death. Not only will this preserve the estate tax benefits which were only previously preserved by the methods outlined above, but the planning will also be simplified for owners of large IRAs who do not have sufficient other assets to fully fund a credit shelter trust.
As we know, portability is only in effect for 2011 and 2012. In the event that portability is not extended or made permanent, the other methods to preserve the first spouse’s exemption will have to be revisited. For the next two years, however, IRA owners without sufficient non retirement assets to fully utilize their estate tax exempt amounts should consider whether it would be desirable to name the spouse as beneficiary in light of the availability of portability.
"*" indicates required fields