California Estate Planning Blog by Kevin Staker

December 9, 2017

Differences Between Senate and House Tax Reform Bills by Kevin Staker

Filed under: estate tax,Kevin Staker,Uncategorized — Kevin Staker @ 6:22 am
Tags: , ,

Differences Between Senate and House Tax Reform Bills by Kevin Staker

 

The two houses of Congress have passed two separate tax bills:

Major Differences:

  • Medical Expense Deduction – House repeals and Senate actually expands.
  • Mortgage Interest Deduction – House reduces maximum loan amount to $500.000 and Senate keeps at $1,000,000.
  • Graduate Student Tuition Waiver – House treats as taxable income and Senate keeps tax free
  • Pass Through Income – House caps rate at 25 percent but excludes service businesses and Senate adopts a 23 percent income deduction for all businesses, including professionals.
  • Alternative Minimum Taxable Income – House repeals corporate and individual, and Senate retains corporate and retains individual but with higher exemption.
  • Estate Tax – House increases exemption to $10 million indexed for inflation since 2010 with repeal in 2023, and the Senate does the same but no repeal.

The two houses will next have a conference committee to hash out the differences.  I suspect the final bill will be closer to the Senate version because they can afford to lose only one more Republican senator.

We shall see.

By Kevin Staker

Advertisements

November 6, 2017

Estate Planning and the The Tax Cuts and Jobs Act, 2017 Tax Reform by Kevin Staker

Filed under: estate tax,estate tax news,Kevin Staker,Uncategorized — Kevin Staker @ 4:56 pm
Tags: ,

Estate Planning and 2017 Tax Reform

The Republicans in Congress have introduced the The Tax Cuts and Jobs Act, H.R. 1.  The is the 2017 attempt at tax reform by the Republicans in Congress.

The changes proposed include the following:

  • The exemptions from the Estate Tax and the Generation-Skipping Transfer Tax are doubled from $5 million (as of 2011) to $10 million, which is indexed for inflation. This provision would apply to tax years beginning in 2018.  Hence, with inflation the exemptions for 2018 will be $11.2 million.
  • Beginning in 2024, the estate and generation-skipping taxes are repealed.
  • The step up in income tax basis is maintained.
  • The gift tax is lowered to a top rate of 35 percent and retains a basic exclusion amount of $5.6 million for 2018, again indexed for inflation.
  • The annual exclusion of $14,000 increases to $15,000 in 2018 and is also indexed for inflation.

The stated reasons are:

• The estate and generation-skipping taxes impose additional levels on tax on income and
assets that have generally already been subject tax. By repealing the estate and
generation-skipping taxes, family businesses that would pass from one generation to the
next would no longer be subject to double or even triple taxation.
• By repealing the estate and generation-skipping taxes, a small business would no longer
be penalized for growing to the point of being taxed upon the death of its owner, thus
incentivizing the owner to continue to invest in more capital and hire more employees.

Current law provides property in an estate is generally subject to a top tax rate of 40
percent before it passes to the estate’s beneficiaries. When property is transferred during the life of a donor, it is subject to a top gift tax rate of 40 percent, with the first $14,000 being excluded from the gift tax on a per-donee, annual basis. Additionally, property that is transferred beyond one generation, whether by bequest or by gift, is subject to an additional generation-skipping tax
Transfers between spouses are excluded from these taxes, and when an individual dies
without his or her assets exhausting the basic exclusion amount, any unused basic exclusion amount passes to his or her surviving spouse, with a top basic exclusion amount of $10.98 million for 2017. When a beneficiary receives property from an estate, the beneficiary generally takes a basis in that property equal to its fair-market value at the time the decedent dies, which is known as taking a step-up in basis. However, when a donee receives a gift from a living donor, that donee generally takes the donor’s basis in that property, which is known as taking a carryover basis.

Please note: for the Act to pass, only two Republican senators can oppose it.  Otherwise, the Act will be defeated just as was Obamacare repeal.

By Kevin Staker

October 20, 2017

IRS Announces Increased Estate and Gift Tax Exemptions and Increased Annual Gift Tax Exclusion for 2018 – By Kevin Staker

Filed under: estate tax,estate tax news,Kevin Staker — Kevin Staker @ 8:32 am
Tags: ,

The Internal Revenue Service has announced adjustments for inflation in the estate/gift tax exemption and the annual gift tax exclusion for 2018.  In IRS press release IR-2017-178, released on Oct. 19, 2017, announced a number of adjustments for inflation.  The press release can be found at https://www.irs.gov/newsroom/in-2018-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-unchanged.

Two of the adjustments are important for estate tax planning.

The figure for the estate tax exemption, the gift tax exemption, and the generation-skipping transfer tax exemption will be increased from $5,490,000 in 2017 to $5,600,000 in 2018.  Hence, a couple can pass along a total of $11,200,000 in assets to individuals without incurring any death tax.  A couple can do this using what is commonly called an “A-B Trust” or just relying on what is called estate tax portability.

By Kevin Staker

June 13, 2017

IRS Extends Missed Deadlines for Estate Tax Portability by Kevin Staker

To transfer the unused estate tax exemption of a deceased spouse, the transfer must be done in an estate tax return filed for the deceased spouse.  The deadline for such a return is nine months after the death of the deceased spouse.  That deadline cannot be extended by the typical extension for filing an estate tax return.

Many surviving spouses have missed that deadline.  Such a spouse up until June 9th had to apply for an expensive private letter ruling from the IRS to be allowed to file the estate tax return after the nine month deadline had been missed.  That entailed a filing fee of thousands of dollars and attorney’s fees of thousands and thousands of dollars to fill out the amazingly complex paperwork applying for a simple extension.

The IRS has come to its senses and on June 9th in Revenue Procedure 2017-34 (https://www.irs.gov/pub/irsdrop/rp-17-34.pdf) has ruled such a late return may now be filed by the later of January 2, 2018, or two years after the death of the decedent.

I personally had one client I called immediately.  I had recommended he go through the private ruling process because it would have saved tens of thousands of dollars in estate tax if he were to die in the near future.  Lucky for him he did not follow my advice.

See also http://www.journalofaccountancy.com/news/2017/jun/portability-election-extension-201716844.html

By Kevin Staker

 

January 14, 2017

Estate Tax is Irrelevant for Substantially All Americans but the Step Up in Basis Is Very Valuable for Them by Kevin Staker

Filed under: estate tax,Kevin Staker — Kevin Staker @ 10:33 am
Tags: ,

Estate Tax is Irrelevant for Substantially All Americans but the Step Up in Basis Is Very Valuable for Them

The federal estate tax exemption is 5 million, indexed for inflation since 2010. “Portability” allows a surviving spouse to use the unused federal estate tax exemption of their deceased spouse.  The exemption in 2017 is $5,490,000.  Thus, a couple can transfer nearly $11 million to their children or other beneficiaries at their deaths without any federal estate tax.

The basis of appreciated assets is “stepped-up” (or down) to fair market value at death.  This eliminates any built-in capital gain on these assets. This happens even if the estate is not subject to estate tax.  For example, the estate is less than the federal exemption or passes to a surviving spouse.

Even the few taxpayers is estate tax territory should think twice before giving assets to their beneficiaries during their.   Even though such transfers would remove the appreciation in the transferred assets from their estate for estate tax purposes, the basis of these assets given away during life is not stepped-up at their deaths. Thus, the donees are stuck with their likely low income tax basis, and so income tax may be paid if the donee sells the asset.

Therefore, the benefit of the estate tax savings achieved by transferring an asset during a taxpayer’s life will likely be outweighed by  the cost of subsequent capital gains taxes when the donees later sell the asset.

By Kevin Staker

December 1, 2016

Federal Estate Tax Exemption for 2017 by Kevin Staker

Filed under: estate tax,estate tax news,Kevin Staker — Kevin Staker @ 8:34 am
Tags: ,

Federal Estate Tax Exemption for 2017

The Internal Revenue Service has announced in IRS Revenue Procedure 2016-55 that the federal estate tax exemption for 2017 will be $5,490,000.  The IRS also announced the gift tax exclusion will remain at $14,000.

The IRS never makes these things easy.  It would have been nice if the exemption had gone to $5,500,000 to make the math easier for us.  But alas the IRS was bound to the strict inflation adjusting formula of the Internal Revenue Code.  This formula adjusts for inflation applied to the $5,000,000 exemption since 2010.

The Rev Proc is found at https://www.irs.gov/pub/irs-drop/rp-16-55.pdf.  This technically is not official because it has not yet been published in a formal Internal Revenue Bulletin.  The full IRS announcement released on October 25, 2016, is found at https://www.irs.gov/uac/newsroom/in-2017-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-are-unchanged.  This announcement lists the slight increase in a number of inflation adjusted figures under the federal tax law.

By Kevin Staker

February 13, 2016

The Federal Estate Tax Exemption for 2016 is $5,450,000

Filed under: estate tax,Fiscal Cliff,Kevin Staker,Uncategorized — Kevin Staker @ 9:35 am
Tags:

The Federal estate tax exemption has been increased for inflation since 2010 at $5,000,000. This occurred because President Obama was such a terrible negotiator with the Republicans during “Fiscal Cliff” in late December 2012.

The exemption is now $5,450,000 for decedents dying in 2016. See https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-Tax

This exemption allows a couple to escape estate taxes on at least $10,900,000 if they do proper estate planning.

Of course, I would be honored to assist them.

By Kevin Staker

December 3, 2013

The Lawyers.com Site on Kevin Staker

Filed under: estate tax,Kevin Staker — Kevin Staker @ 4:39 am
Tags: ,

The lawyers.com site of Kevin Staker is located at http://www.lawyers.com/camarillo/california/Kevin-G-Staker-82942-a/.   The site needs an updated profile but is fairly highly visible.  Some additional clients could be requested to provide reviews.

Kevin Staker also had added some other websites that will be referenced later.    He is a certified specialist in estate planning, probate and trust law.  He somewhat ironically has particular expertise in estate tax planning for two ends of the financial spectrum.  Kevin Staker on the one hand has given seminars to other attorneys on estate planning for high net worth individuals.  On the other hand, he is expert on planning to get the countable net worth of individuals down so they can qualify to Medi-Cal to pay for long term care or for the Veterans Administration to pay an “improved pension”.

Kevin Staker can be reached at 805-482-2282.

By Kevin Staker

January 13, 2013

It is Official: Exemptions Will Be $5,250,000

The IRS in Revenue Procedure 2013-15 announced the estate and related tax exemptions will be $5,250,000 in 2013. See http://www.irs.gov/pub/irs-drop/rp-13-15.pdf

Thanks to Brian Bergman at MacLean & Ema for passing along to me the citation.

We shall see.

Kevin Staker
Estate Tax News Blog

January 11, 2013

Bloomberg Claims the IRS Has Announced a $5,250,000 Exemption But I Cannot Find Proof

Bloomberg claims the IRS has announced a $5,250,000 exemption for the estate and related taxes.  See http://www.bloomberg.com/news/2013-01-11/irs-increases-exemption-from-estate-tax-to-5-25-million.html

However, I cannot find any proof.  They do not cite any IRS announcement.  The following is the link to where new IRS announcements are listed:  http://apps.irs.gov/app/picklist/list/formsPublications.html;jsessionid=Sr5t6S1uXbmUFGq86OUCcA__?sortColumn=postedDate&indexOfFirstRow=0&value=&criteria=&resultsPerPage=25&isDescending=true

We shall see.

Kevin Staker

Estate Tax News Blog

Next Page »