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Archive for Estate Planning Tax

Estate Tax Planning for Cross-Border Families and Foreign Nationals

Multi-national families have numerous issues associated with Nonresident Alien Parents who are considering transferring their wealth to their U.S.-resident children. The Nonresident Alien Parents’ goal is to pass the assets to the children when the surviving parent dies, and ensure that successive wealth transfers to future generations are made without U.S. estate tax, or generation-skipping transfer tax while minimizing U.S. income tax on investment income.

Residence of a Trust

A trust will be considered domestic if:

(i) a U.S. court can exercise primary supervision over trust administration (the “Court Read more

Non-Statutory Asset Protection Trusts

Introduction

In the United States, there has been a malpractice crisis for the medical profession for a number of years. It has at its roots the American Trial Lawyers who advocate a position that the medical profession is not adequately regulated for physicians whose practice causes harm to their clients. Its associations vigorously contend that victims of malpractice by physicians are inadequately compensated from injury and demand that no limits can be imposed as to the amounts mandated by the jury. The insurance underwriters of medical professionals assert that large verdicts have caused them to raise premiums where they depart from economic reality. When a physician factors in the cost of insurance in terms of doing business, the risk-reward analysis in specific Read more

Simplified Method for Estate Tax Portability Provided in Rev. Proc. 2014-18

The IRS has released a revenue procedure this week allowing taxpayers who fall below the threshold for having to file an estate tax return, but who want to claim the portability exclusion, a simplified method for getting an automatic extension of time to file.

Revenue Procedure 2014-18  provides an automatic extension of time for certain estates without a filing requirement to elect portability of the decedent’s unused exclusion amount for the benefit of the decedent’s surviving spouse. Those eligible must be decedents who were United States citizens, or residents who died after 2010 and before 2014, among other requirements.

The relief comes in response to many requests from taxpayers who may have been Read more

End Of Life Planning: Begin With The End In Mind

I borrowed part of my title today from Stephen R Covey’s best selling book, ” The 7 Habits Of Highly Effective People”. On his list of habits, habit #2 says, “Begin with the End in Mind”. By this he possibly means to discover yourself and set life goals whilst envisioning the ideal characteristics of various roles you play and your relationships in life.

He may only partly be referring to the end of life itself but in the context of planning for end of life, we have to consider this statistic, that more than half of all Americans dying do not have a will or estate planning at all. As we look closer there are even more who haven’t made any efforts to ease the burden left to their survivors. The burden in connection with burial, memorial, personal accounts and many other significant decisions which may cause divisions in family. Is that the legacy one would like to leave behind? Read more

Non-Statutory Asset Protection Trusts – Part I

Introduction

In the United States, there has been a malpractice crisis for the medical profession for a number of years. It has at its roots the American Trial Lawyers who advocate a position that the medical profession is not adequately regulated for physicians whose practice causes harm to their clients. Its associations vigorously contend that victims of malpractice by physicians are inadequately compensated from injury and demand that no limits can be imposed as to the amounts mandated by the jury. The insurance underwriters of medical professionals assert that large verdicts have caused them to raise premiums where they depart from economic reality. Read more

Estate Planning, Foreign Trusts, and Section 679

Estate Planning Purposes

A stand alone purpose for the use of a foreign trust would be as part of an estate plan. Unlike the taxation treatment of a Settor upon transfer of property to a foreign trust as required by Section 679 of the Code, (1) a Foreign Trust is exempt from the provisions. A transfer of assets by a United States decedent by virtue of the provisions of his or her testamentary disposition, Last Will and Testament or a Living Trust that is the receptacle of a Last Will and Testament (a pour-over Will) is except from this tax treatment. (2)

To illustrate the use of such a foreign trust, the following hypothetical can be a guide to understand its use: Read more

The Transfer Tax That Skips Generations: Otherwise Known As The GSTT!

For those of us navigating the treacherous seas of estate planning, we have to deal with the monstrous GSTT aka Generation Skipping Transfer Tax at some point or the other. Swimming through all the complications, we can many a time whittle it all down to a simple set of circumstances to watch for when your clients would be subject to GSTT. But before we can do that, we need to know the following:

What is GSTT?: If some or all of your estate bypasses your children and goes directly to a grandchild, there is another tax on your estate called the generation skipping transfer tax.

Although it wouldn’t serve to pay this tax intentionally, in some circumstances, this could be unintentional. If the inheritance is in a trust, the heir dies after the client but before Read more

Foreign Trusts – Legal Risks – Act of State Doctrine

Introduction –

The use of Foreign Trusts in financial planning can provide significant benefits to a client. As was discussed in Foreign Trusts and Legal Risks, (1) particularly important benefits can be derived utilizing Offshore Financial Centers whose laws are crafted to facilitate shelter from potential judgments and penal revenue assessments. But these benefits that can be so beneficial to a client also must be scrutinized for financial risks, be it credit, legal, or market risks. The ability to assert legal jurisdiction upon a Foreign Trust and the fiduciary (2) formulate an aspect of legal risk that is a part of that analysis. That legal risk embraces the implications of enforcement jurisdiction and the concept of the doctrine of comity among sovereign nations. Coupled with enforcement jurisdictional notions of one sovereign that Read more

Trustee of Foreign Trust And Enforcement Jurisdiction

Introduction

Enforcement jurisdiction principles can be of great significance to a foreign trust. As was set forth in a previous writing, (TaxConnections, Foreign Trusts and Legal Risks, December 24, 2013) some of the most sought benefits are dependent upon their ability to maintain their status in accordance with the laws of the sovereign. This writing will focus upon the foreign trustee that is essential to this demarcation.

Third party judgment creditors and revenue judgments of foreign governments utilize enforcement procedures that function from enforcement jurisdiction. Enforcement jurisdiction is a sovereign’s power to induce or compel or to punish noncompliance with its laws or Read more

Foreign Trusts and Legal Risks

TaxConnections Blogger Virginia La Torre Jeker writes about offshre trusts
Introduction –

The purpose of this section is to provide a cursory view of foreign trusts and financial planning, the emphasis of which is asset protection from judgments. The basic taxation regime of a foreign trust can be reviewed in a previous writing, Income Taxation of Foreign Trusts and Beneficiaries, TaxConnections, November 25, 2013.

The focus here is the treatment by the United States taxing authority upon a foreign trust pertaining to the tax consequences subsequent to transfer. The points of relevance are the income tax treatment to the Settlor, beneficiary, and trust and the consequential use of the Read more

New Jersey Estate & Inheritance Tax: Reducing the Size of the Estate Through Gifting

New Jersey is one of only a few states that impose both an inheritance tax and a state estate tax. The inheritance tax applies when someone who lived in New Jersey, or owned property there, leaves property to someone who is not a close relative. The tax rate depends on how closely the inheritors and deceased person were related.

(1) How are inheritors classified?

The transfer inheritance tax is imposed, at graduated rates, on property having a total value of $00 or more that passes from a decedent to a beneficiary. New Jersey classifies inheritors into different groups, based on their family relationship to the deceased person. Read more

New Jersey Estate Tax: The Uninvited Guest

New Jersey collects both an inheritance tax and its own estate tax, separate from the federal estate tax. Under current law, the estate of every New Jersey resident decedent dying after December 31, 2001 shall be taxed as if the death occurred under the federal laws in effect on December 31, 2001. Because the applicable federal exclusion amount was $675,000 in 2001, a New Jersey estate tax will be due for estates in excess of $675,000 passing to someone other than a surviving spouse — even though the current federal exclusion amount is significantly greater ($5.34 million for deaths in 2014).

While it might seem unfair that the New Jersey estate tax is calculated as if the applicable federal exclusion amount is $675,000 rather than the actual amount in effect at the time of Read more

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