Saturday, November 26, 2016

Trump's Proposal to Repeal Estate Tax Will Not Effect More Than 99% of Americans Who Are Extempted From Estate Tax. Estate Tax Elimination Does Not Eliminate Need for Trust and Estate Planning.

If president-elect Donald Trump follows through on his campaign promises, the estate tax will be eliminated.  Currently, the rules are straightforward: A married couple is exempt for the first $10.9 million in their estate, and they pay a 40 percent tax on the amount above that. Mr. Trump’s campaign proposal seems straightforward: Repeal the estate tax — the "death tax" in his words. There is a second part to his plan which involves keeping taxes on capital gains over $10 million when family assets are sold.

Back in 2012, most tax experts considered the estate tax resolved when the Republican-majority Congress and President Obama reached a so-called grand bargain on taxes. As part of that deal, the current estate tax exemption was set, with annual increases indexed to inflation. With that agreement, more than 99 percent of Americans were exempted from the estate tax. Last year, for example, the IRS processed just 4,918 federal estate tax returns.  Few families have more than $10.9 million in their estate.

But Mr. Trump’s proposal is not a simple repeal. His plan also said, “Capital gains held until death and valued over $10 million will be subject to tax to exempt small businesses and family farms.”  In other words, the tax on capital gains above $10 million would have to paid only when, or if, the assets were sold.

Friday, November 25, 2016

Estate Planning Meets Retirement Planning - NYT Article on How to Give an I.R.A. to Beneficiaries Without Giving Up Control

Kate Thornton/New York Times
An interesting New York Times article "How to Give an I.R.A. to Children Without Giving Up Control" (11/18/16). Some may have never heard of a Trusteed I.R.A. which allows the funds to be distributed to beneficiaries and control how someone uses the money so it's not squandered or ill-spent. For clients who have large I.R.A. holdings (over $500,000), this may be a wise option or at least something to consider.

It also allows the assets in the I.R.A. account to be broken up into separate accounts for the beneficiaries. Each account can have different guidelines on when and for what distributions are made and take into account their age.

One advantage is that there is better asset protection for the beneficiaries. In 2014, the U.S. Supreme Court rule that funds held in traditional I.R.A.s that are inherited do not have the same protection as retirement assets. Another benefit is if the I.R.A. owner becomes incapacitated where the trustee can request the minimum distribution since without the owner reqeuest there can be a large penalty.

There is the option of creating a trust and putting the I.R.A. into it but that can cause issues with the I.R.A. especially where there is a spouse and can be more expensive. Trusteed I.R.A.s have management fees so that is one reason why they are usually recommended if the account is large.

Trusteed I.R.A.s have their limits and anyone thinking of a Trusteed I.R.A. should consult an experienced attorney to draft the documents, consider it in the context of retirement and estate planning.

Posted by Henry (Hank) Moravec III
Email: hm@moravecslaw.com
Office: 626-793-3210

Wednesday, November 23, 2016

L.A. Times / Don Bartletti ~ Reading Cinemas Movie Theatre
The Los Angeles Times is reporting on a family estate dispute and court drama thatis affecting the Los Angeles-based movie theater chain Reading InternationalInc. which has dozens of cinemas around the world, major real estate holdings, and a nearly 200-year history with roots in the railroad and coal business. The adult three children of Reading’s late chief executive, James J. Cotter Sr., are waging a battle for control of the company.

This case is more complicated than the typical estate dispute in that it involves a public company but it has some allegations that are common to many of them such as whether the father had capacity to amend the trust, breach of fiduciary duty and undue influence.

The Los Angeles Times reported that the issues began after James J. Cotter Sr., a Los Angeles businessman, resigned as CEO and chairman in August 2014 because of declining health, leaving son James Cotter Jr. in charge. Cotter Sr. died in September 2014 at age 76. Shortly thereafter, his two daughters went to court, alleging their brother improperly convinced their father to add him to a trust that would control the voting shares of the company.

The article notes that Ellen and Margaret Cotter’s court papers claimed that James Cotter Jr. unduly influenced their father while he was in the hospital after suffering a fall in his home. The daughters said their father lacked “the knowledge and understanding necessary” to make such financial decisions. The daughters contend that after their dad was admitted to the hospital, their brother convinced an estate attorney to draft an amendment to the trust that made him a co-trustee. They allege he lied to Margaret by saying the changes were made based on videos he took of their father expressing his wishes.