Below are 19 estate planning highlights from 2021:
- Secure act: The panel made the discussion with a little summary of the secure act, which was passed in December. Among the changes, the Act affects the ability to delay payments for retirement plans.
- GST Tax/ Bluebook: The wordings of the effective date provision in the 2017 Tax Act gave rise to technical issues as to whether a person could allocate increased GST exemptions to transfers that were initiated prior 2018.
- Sanders “For the 99.8 percent Act.” The panel discussed that while this is far from law, they have gotten several calls from their clients and contacts on the proposed tax plans of presidential candidates like Sanders and Warren. Sander’s plans is more specific and would change the tax transfer system for good.
- Qualified business income: The ultimate regulations on Section 199A provide definitional, computational, including anti-avoidance helpful in determining the 20% deduction for qualified business income.
- Qualified opportunity Zone: The internal revenue service issued final regulations on Section 1400Z to provide transparency to investors and practitioners. Of note, while gifts are generally inclusion events, a gift is not considered as an inclusion event for gift by a taxpayer.
- Anti-Clawback: The ultimate regulations on “Clawback” related to the increased exemption were issued in November. The panel stressed that they had a window of opportunity to use the raised exemption.
- LRs on inclusion in the Gross Estate: private letter ruling 201845006 ruled that changing a trust document to fill a vacancy in the role of an independent trustee with the authority to create or modify a general power of appointment will not lead to gift or estate taxes.
- Valuation of business interests. The panel discussed two cases on “tax affecting” on valuation of closely held entities, which is to change for certain differences between pass-through entities and C corporations.
- Defined Value Clauses. In Coal Property Holdings, LLC v. Commissioner, a savings clause was rejected by the court in a conservation easement case and deemed a condition subsequent clause. Though the case was not directly important to formula valuation clauses, it is interesting in its discussion of saving clauses generally and the IRS’ and court’s rejection of clauses that change results after the fact.
- PLR on GST Private Letter Ruling 201936001 ruled that white the taxpayer failed to add a notice of allocation, the taxpayer substantially compiled with the requirements for allocating GST exemption to an indirect skip trust.
- PRLs on Extension of Time: A lot of rulings discussed 9100 relief with respect to GST allocation. Private Letter Rulings 201927014, 201927015, AND 201929006 ruled that the taxpayers are granted an extension of time to opt out of automatic allocation of GST exemption
- PLRs on Portability. There were a number of PLRs discussing portability (Private Letter Rulings 201850015, 201852016, 201852018, 201902027, 201921008, 201923001, 201923014, and 201929013). Generally, in each of these rulings, decedent died and was survived by spouse, and the estate did not file a timely return to make the portability election. The estate found out its failure to elect portability after the due date for making the election.
- INGs. Current rulings provide and reiterate the “cookbook” on establishing an incomplete non-grantor trust. (Private Letter Rulings 201848002, 201848009, 201850001 through 201850006, 201852009, 201852014, 201908002 through 201908007, and 201925005 through 201925010).
- Value affected by subsequent action: In estate of Dieringer v. Commissioner, the court of appeal upheld the tax court’s holdings of a deficiency and penalty against all estate.
- Conservation easements: The panel noted that there may be a chilling effect on implementing conservation easements.
Other Federal Tax Developments of Interests
- Inflation modified amounts for 2020: Some of the essential 2020 figures include: basic exclusion amount of $11.58 million, yearly exclusion gifts to non-citizen spouse of $157,000, including standard deductions of $24,800 for married couples, etc.
State Tax Developments
- State income taxation of trusts: Kaestner. The US supreme court held unanimously in North Carolina Dept. of revenue v. Kimberly Rice Kaestner 1992 family trust that it is unconstitutional for income taxation of an out-of-state trust based on just beneficiary’s residence.
Notable Non-Tax State Law Developments
- Spendthrift Provision Respected: Cameron. In re Cameron Gift Trust is a case where a spendthrift clause trumped a child support clause, peculiar to South Dakota law. But, this is not a self-settled spendthrift trust case.
- Electronic wills: The uniform electronic wills acts was signed off at the uniform law commission 2019 annual meeting.
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