Congress Waives Required Minimum Distribution Rules

The changes are coming fast and furious. The CARES Act ( the “Act”) waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals otherwise required to withdraw funds from such retirement accounts.  If an individual has taken their RMD, they can redeposit it if sixty days have not elapsed since the date of the distribution. Hardship IRA/401(k) Withdrawals for Younger Participants The Act will allow coronavirus related withdrawals from their 401(k) and IRA accounts up to $100,000 during 2020 and avoid the normal 10% penalty for those not of the required minimum age of 59.5. Reasons for Coronavirus related withdrawals include (1)    An account owner diagnosed with COVID-19, or (2)    A spouse […]

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Tax Planning for Wealth Transfers

The game has changed, and we do expect estate taxes to be repealed next year by the new administration and congress. Some things are unclear: we may see a phase-out of the federal estate tax over a five or six year period, instead of all at once in 2017.  The effective date could be in January, or perhaps at the end of the year.  We anticipate that federal gift taxes could also be repealed.  We further expect that “step up in basis” will be repealed, replaced by a capital gains tax on inherited property, similar to the Canadian system.  Accordingly, planning is continuing to focus on the income tax ramifications of property transfers, but as the prior post on this blog will show, capital gains […]

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Trump Tax Proposals

Courtesy of Wall Street Journal: “Income-tax rates: Both Messrs. Trump’s and Ryan’s plans would consolidate the current rates on “ordinary” income such as wages and interest from seven brackets to just three—12%, 25% and 33%. It would also make changes to the calculation of “taxable income.” The top rate of 33% would take effect at about $225,000 of taxable income for married couples; currently the top rate of 39.6% kicks in at $467,000 for couples. The top rate for singles under Mr. Trump’s plan would take effect at about $113,000, compared with $415,000 now, according to the Tax Policy Center in Washington. In 2016 the 33% rate takes effect at about $231,000 of taxable income for married couples and $190,000 for singles.   The upshot is […]

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Obama’s Final Budget Proposal Continues to Address Estate Planning Issues

The Administration included in its 2017 budget proposals two new proposals regarding the reporting of cost basis for persons receiving inherited property, and to require donees to report their basis consistently with that of the donor with respect to lifetime gifts reported on gift tax returns. It also repeats several former estate planning-related proposals, including: (a) simplifying the income tax limitations on charitable deductions for gifts to private foundations; (b) requiring that GRATs have a minimum length of 10 years and a minimum remainder of 25 percent of the value of the transferred assets (or $500,000, if greater); (c) requiring a person who buys an interest in an existing life insurance contract with a death benefit of $500,000 or more to report the purchase and report […]

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New York Attempts Statutory Solution to Problem of Posthumously Conceived Children

On Nov. 21, 2014, Governor Cuomo signed into law EPTL §4­1.3 and amendments to EPTL §11­1.5 to provide a statutory solution to inheritance rights of a posthumously conceived child in New York.  New EPTL §4­1.3 introduces four requirements for a posthumous child, referred to in the statute as a “genetic child,” to inherit from the genetic parent in intestacy or under a will or trust. First, the genetic parent storing the sperm or ova (a/k/a an egg cell) must expressly consent to the use of the genetic material for posthumous conception and authorize a person to make decisions about the use of the genetic material after his or her death.   Such consent and authorization must be in a written instrument, which is executed not more […]

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House Kills the Death Tax

On April 16, the House passed, by a vote of 240-179, the “Death Tax Repeal Act of 2015,” which would repeal the estate tax and the generation-skipping transfer tax. The Obama Administration previously indicated that if the President were presented with H.R. 1105, which would add $269 billion to the deficit (over ten years). The Will Doctor notes the wildly gyrating revenue losses attributable to the repeal of the Estate tax, thrown about from time to time by all the parties.  The amount of revenue to be raised, on the other hand, by the taxation of capital gains on gifts, or at death, will likely more than offset the revenue lost from estate tax repeal.  This presents the politicians with an opportunity to do a […]

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Boehner Calls for Repeal of Estate Tax

House Speaker John Boehner, R-Ohio, said on April 14 that the House will move to pass legislation to abolish the federal estate tax. “Estate tax repeal is long overdue,” Boehner said at a news conference in Washington, D.C. The Death Tax Repeal Bill of 2015 was approved by the House Ways and Means Committee on March 26. The bill is expected to come shortly to the House floor. On April 13, a White House official said that estate tax repeal legislation would cost $270 billion over 10 years. “The bill would only benefit households that have, or couples that have, more than $11 million of assets, because everyone else is fully exempt from the estate tax,“ Jason Furman, director of the Council of Economic Advisers, said […]

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Death Tax Repeal Act of 2015

The House Committee on Ways and Means reported on a straight party-line vote H.R. 1105, 114th Cong., 1st Sess. (March 6, 2015), introduced by Rep. Kevin Brady (R-Tx) and referred to as the Death Tax Repeal Act of 2015. The bill would reduce the top gift tax rate to 35 percent, and keep the gift tax lifetime exemption at $5 million, adjusted for inflation after 2011. The bill would retain the present basis adjustments for property received from a decedent, and provide that a transfer in trust will be treated as a completed taxable gift, “unless the trust is treated as wholly owned by the donor or the donor’s spouse under [the grantor trust rules]”, except as provided by regulation. The bill seems likely to […]

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More Press on new Pressure to Repeal Estate Tax”

Josh Hoxie at the Institute for Policy Studies, has reported the following on The Hil: “Anti-tax Republicans are trotting out the old canard that the estate tax destroys family farms and small businesses. Rep.David Reichert (R-Wash.), chairman of the Subcommittee on Select Revenue Measures in the House of Representatives plans to hold a hearing Wednesday on the impact of the federal estate tax on family farms and small businesses.  The hearing is a red herring, a distraction from a substantive conversation about the concentration of wealth and the real needs of farmers and small businesses. We’ve been here before.  In the late 1980s, anti-estate tax campaigners complained that the estate tax was the “death of the family farm.”  Americans for a Fair Estate Tax, a […]

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