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.

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Drafting Spousal Trusts to Reduce Estate Taxes

This article examines various strategies using a marital trust and bypass trust. It also looks at using a marital trust to preserve assets of the pre-deceasing spouse in a second marriage situation.

Technical Amendment to Deficit Reduction Act of 2005 Causes Immediate Annuities to Further Lose Their Luster for Medicaid Planning Purposes

This article examines technical corrections to the DRA. The article sets forth that while the technical corrections made annuities less attractive, they are still a viable option in Medicaid planning. It offers examples of how one might structure an annuity differently to avoid rule changes from the technical corrections to the DRA.

IRS Offers Favorable Rulings Regarding Transfers of Life Insurance Policies to an Irrevocable Life Insurance Trust

The article looks at two recent revenue rulings which confirm that transfers of life insurance policies to ILITS that are grantor trusts do not run afoul of the "transfer for value rule."

IRS Disappoints With Guidance for Rollovers of Inherited Company Plans

The article examines Notice 2007-7 which undermined the non-spousal rollover provisions of Retirement Protection Act of 2006.

Lame Duck Congress Passes Last Minute Tax Act

The Alert discusses the Tax Relief and Health Care Act of 2006. It lists the various provisions and highlights the most important one: the modification of the rules of Unrelated Business Taxable Income for a CRT. If a CRT had UBTI prior to the act, it lost tax exempt status. Beginning January 1, 2007, it does not lose tax exempt status, but faces an excise tax equal to 100% of the UBTI. This is often better and can make contributing business assets to a CRT more attractive.

IRS Finds Pecuniary Gift of IRA to Charity is Taxable

The Alert examines ILM 200644020 which involved an IRA payable to a trust. The trust used the assets to pay pecuniary bequests to charities. The Service held that, under the Kenan rule, there was a sale or exchange, and thus the trust recognized the income on the asset. Further, the trust did not get a charitable deduction. The Alert states that careful planning could have avoided this outcome.

IRS Curtails Use of Private Annuities for Income Tax Purposes

The article examines the IRS' recent issuance of proposed regulations cracking down on Private Annuity Trusts used for income tax avoidance. The article looks at why PATs are still a viable tool in estate planning.

Fifth Circuit Reverses Tax Court in McCord: Gifting Using Formula Clauses

The article examines the appeal of the McCord decision, in which the Fifth Circuit reversed the Tax Court decision and allowed formula value clauses. The decision allows you to tie the amount of the gift to the value of the underlying asset, such as an FLP interest. So, it could say, I give $1 million worth of my FLP to my children and the amount over that to charity.

Three Planning Gems Contained in The Pension Protection Act of 2006

The alert examines significant aspects of the Pension Protection Act of 2006 and briefly examines recent failed attempts at estate tax repeal.

Creating a Trust to Protect from Future Unknown Creditors is a Fraudulent Transfer in Washington

This month's alert reviews United States v. Townley, a case in which a District Court in Washington held that the creation and transfer of assets to an irrevocable trust was a fraudulent transfer with respect to future creditors. The IRS was not a foreseen future creditor at the time the trust was created, but the trustors testified that one of the primary reasons the trust was established was concerns about liability associated with a different identified potential future creditor.

Proper Drafting of Trust Protects Trust Assets from Creditors, Including the Internal Revenue Service

This article examines recent IRS guidance concerning the ability of the IRS to attach a beneficiary's interest in a trust. The article provides options for greater creditor protection by not using typical HEMS language.

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Estate Planning Alerts for Advisors

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Educational Alerts are written for advisors on topics that affect various aspects of estate planning and the laws that govern it. Read our latest Alert and request to be added to our email distribution list.
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These recent developments and case studies address any aspect of the law that touches on estate planning. They offer an interesting perspective and/or warning. View our latest FYI or request to be added to our email distribution list.

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