Our annual trip to the Heckerling Institute on Estate Planning in Orlando, Florida was informative and educational. The Heckerling Institute is a nationally renowned educational conference for estate planning attorneys and other professionals from around the country. The following are some of the estate planning tips and advice we found most interesting this year.
- Plan for increased tax basis. The increased federal exemption has shifted much of the focus of estate planning toward income tax planning. For this reason, it is important to integrate estate planning strategies that maximize the tax basis of your assets. There are number of strategies that we use in our practice. For example, Trustees may distribute assets out of a trust to a beneficiary so those assets are includible in the beneficiary’s estate and eligible for a basis step-up. In addition, your trust may allow the Trustee to grant a beneficiary a general power of appointment so that assets may remain in trust but receive a basis step up at the beneficiary’s death.
- Make charitable contributions from IRAs. If you wish to make donations to charities, it may make sense to make those donations directly from your IRAs. Doing so may result in income tax savings for you or your estate. Charitable contributions can be made directly to public charities from IRAs during your lifetime if you are over the age of 70½. They can also be made directly from IRAs after your death by naming as the IRA beneficiary a charity, Donor Advised Fund, or a Trust that includes charitable distributions and allocates trust income (i.e., “income in respect of a decedent”) to the charitable distributions.
- Questions remain about state income taxation of trusts. Can a state impose tax on trust income of an out-of-state trust because the beneficiary is a state resident? As of now, there is a split of authority in courts’ answers to this question. Some courts have said “yes” – if a beneficiary is a state resident, that state can tax the trust’s income. Some courts have said “no”. The Supreme Court will soon answer the question in the case of North Carolina Department of Revenue v. Kaestner. It is an important case that will have significant implications for taxing trusts.
- Your estate plan should include proper planning for foreign assets. S. citizens and residents who own assets abroad need to plan properly for those assets. There are special income tax rules and reporting obligations to comply with during your lifetime. Because foreign laws affecting the disposition of assets after death are different from U.S. laws, you may need to include special provisions in your estate plan to be sure these assets pass properly. For assets in some countries, it may make sense to have a separate estate plan prepared by an attorney in that country.
- Plan for proper disposition of your cryptocurrency. Once considered the wave of the future, ownership of cryptocurrencies – like Bitcoin and Ethereum – is becoming more popular and more conventional. These non-traditional assets may require special income tax reporting and estate planning. It is important to discuss these assets with your advisors to be sure they can be identified, located and distributed properly after your death.
- Disclaimers after death can be used for effective post-mortem estate, tax, and charitable planning. A disclaimer is a renunciation of assets by a beneficiary of a Will or Trust. Disclaimers can be used during the process of estate administration to accomplish many goals, including redirecting assets to different beneficiaries or charities and minimizing taxes. Although we do not recommend relying on disclaimers for your estate planning, they are an important post-mortem estate planning tool that can help families.