Estate Taxes

Lessons from Heiting v. the United States: Utilizing Claim-Of-Right Deductions

Published on: February 21, 2022 | by Ettinger Law Firm

In the recent case, Heiting v. the United States, an appellate court denied a claim-of-right deduction in accordance with Section 1341 of the Internal Revenue Code. The case originated from an effort by a taxpayer to receive a tax refund from the Internal Revenue Service. Following a denial of the refund by the Internal Revenue Service, the taxpayer initiated a lawsuit pursuing a tax refund of the taxes paid on an unauthorized stock sale made by the grantor trust.

Claim-of-Right Deductions

The claim of right deduction is a regulation that governs how income recognition is time. The law decides when income is taxed instead of whether it can be taxed. The regulation results from Congress’s implementation of an annual accounting period. If a person who pays taxes receives earnings under a claim of right and no restrictions exist regarding the disposition, the individual has received income to which he or she is required to return. This is true even though the person may claim that he or she has no entitlement to retain the funds.

Making the Most of Estate Planning in 2022

Published on: February 12, 2022 | by Ettinger Law Firm

While some people anticipated otherwise, 2022 started without any new federal regulation or tax changes addressing estate planning. As proposed legislation passed through the legislative process in 2021, major potential changes to federal estate and gift tax were dropped. These potential changes included a decrease in the estate and gift tax exemption as well as the elimination of a step-up basis.

Furthermore, no reports exist that any changes will be made any time soon. This is not a guarantee, though. Potential changes can emerge at any point in the future. While no changes are looming, it’s worth noting that one substantial change will occur in a few years when in 2025, the federal estate and gift exemption will be reduced to $5,000 per person.

Positive Changes to Estate Planning This Year

Taking the Time to Review or Create an Estate Plan

Published on: February 12, 2022 | by Ettinger Law Firm

Each year, it’s important for anyone interested in planning for the future of their assets to either create or revise their estate plan. Taking the time and including loved ones in estate planning discussions is the best thing that you can do to avoid conflict or estate planning disagreements.

Estate planning involves planning for the use of your assets after you become incapacitated or pass away. While many people think that estate plans are written in stone, this is not the truth. In actuality, various life events including births and divorce should lead people to review and ultimately revise the terms of their estate plan.

Acknowledge What You Own

Understanding the Role of Federal Taxes in 2022

Published on: February 1, 2022 | by Ettinger Law Firm

As we begin our way through 2022, understanding various federal tax issues can help make the most of your estate planning this year. Because the federal legislature might pass regulations that alter these laws sometime during 2022, it’s important to understand critical federal tax laws you might want to utilize now. Before acting on any of these regulations, however, it’s often wise to speak with an attorney who is up to date with these changes and can make sure that you engage in actions that best benefit your situation.

# 1 – Lifetime Exclusion Amounts

Starting January 1, 2022, the amount of federal estate and gift tax exclusion in addition to the generation-skipping transfer tax has increased to $12,060,000 from $11,700,000. Remember, this amount is doubled for married couples. These threshold amounts are poised to decrease substantially at the beginning of 2026, though.

The Advantage of Utilizing SPA Trusts in Your Estate Plan

Published on: February 1, 2022 | by Ettinger Law Firm

In times of economic uncertainty, estate plans can benefit substantially from flexibility. As the country both continues to recover from the COVID-19 pandemic as well as face the challenges brought on by new strains of COVID-19, it’s a good idea to consider how to make your estate plan flexible. Not to mention, looming changes brought on by changes to tax law also make it a good idea to consider flexibility while creating an estate plan.

What SPA Trusts Do

Special power of appointment (SPA) trusts (or as they are sometimes called SPAT trusts) is a type of irrevocable trust in which either the creator or settlor of the trust grants appointment power to another person. The person who receives these powers functions in a non-fiduciary role to direct the trustee to make distributions to anyone except for the person who made the appointment of powers.

The Status of Estate and Gift Taxes in 2022

Published on: February 1, 2022 | by Ettinger Law Firm

The Status of Estate and Gift Taxes in 2022

In 2021, Congress, as well as the Executive branch, proposed revisions to the tax code that if passed would have substantially changed estate planning. If these changes had been made, some proposals would have been put on the side, while the frequency of use for other estate planning strategies would have increased.

Some estate planning proposals would have lowered the amount of estate and gift tax exemptions from the current level of $12.06 million a taxpayer to around half the amount. While no guarantee exists that such changes will be made at any time in the future, those interested in making the most of their estate plan should still understand how the law is written as well as what steps they can take to anticipate these looming changes.

Business Succession Planning

Published on: September 30, 2020 | by Ettinger Law Firm

While ninety percent of American businesses are family owned, only about thirty percent of them continue to the next generation. Half of those again make it to the third generation. The most common reason: lack of a business succession plan.

There are many reasons owners fail to plan. In addition to confronting the issues of age and mortality, the business owner also faces potentially giving up his or her life’s work – often a venture started, nurtured and grown by him or her over many years.

Business succession planning should start while the entrepreneur is young enough to spend time monitoring the next generation, be it family or otherwise. Around the age of sixty should allow enough time, say five to ten years, for the process to begin and develop.

The Role of a Trust Protector

Published on: March 17, 2018 | by Ettinger Law Firm

Comprehensive estate planning is a long-term process. It is not complete simply because the many pieces of your estate plan have been considered and put into place. Your estate plan must be reviewed periodically, and with so much at stake it must also be protected. In addition to taking important basic precautions to protect your estate plan, you may also benefit from an additional form of protection by enlisting a trust protector.

What is a trust protector?

For estate plans that have a trust in place, and especially for those with several different trusts in place, it is important to ensure that trusts are administered in a legal way that meets your goals for establishing the trust. When you establish a trust, you must also designate a trustee. Trustees are entrusted with administering a trust according to the terms of the trust and the goals you have established for that trust.

Benefits of an Irrevocable Trust

Published on: September 26, 2017 | by Ettinger Law Firm

There are two main types of trusts: revocable and irrevocable. Basically, each trust is self-explanatory on the surface. For the most part, you have unfettered ability to revoke or amend a revocable trust. In contrast, it is extremely difficult and sometimes impossible to revoke or even amend an irrevocable trust. On the surface, it appears – and is true – that a revocable trust provides the creator of such trust with greater flexibility in modifying that trust to meet their comprehensive estate planning goals. However, irrevocable trusts still play an important role in estate planning and it is important to understand their benefits to make an informed choice about the type of trust that might be right for you.

Avoiding Probate

While most trusts will avoid probate, irrevocable trusts established during your lifetime will definitely be able to avoid probate. This will ultimately save you and your loved ones time and money by allowing a trust to take effect immediately as it has been designed to do. Your loved ones will be able to access an irrevocable trust according to its structure without having to wait for the courts to approve a Will or other documents related to probate of the deceased person’s estate.

New York Voluntary Administration

Published on: August 3, 2017 | by Ettinger Law Firm

It is important to remember that whether your estate is subject to probate or not, you should make sure that you have designed a comprehensive estate planning strategy that effectively distributes all of your assets so that your family is not forced to rely on the state to make important decisions regarding the distribution of your estate. At the same time, smaller estate may be eligible for a process known as voluntary administration in New York. This process is also called disposition without administration or small estate proceeding, but regardless of what it is called it is important to understand the process especially if it may be applicable to you.

Basics of Voluntary Administration

Voluntary administration can take place whether or not the deceased person has left a Last Will & Testament. Typically, only personal property is eligible for distribution through voluntary administration. This means that if a deceased person solely owned real property such as a home that you plan to sell, then such property would not be eligible for voluntary administration and would presumably exceed the value of the small estate threshold. Currently, the New York small estate threshold is set at $30,000 which means that any estate valued over that amount will still be required to go through probate. Generally, any interested party may file to become the voluntary administrator of a deceased person’s estate that qualifies for voluntary administration.