2019 Estate & Gift Tax Exemptions

Information for 2018 is here. Generally speaking, the Basic Exclusion Amount (BEA) is the aggregate amount a taxpayer may transfer, during life and/or at death, to persons other than spouse or charity without incurring estate or gift tax.  In certain cases, the BEA can be augmented by the Deceased Spouse Unused Exemption Amount (DSUEA); i.e., unused exemption the taxpayer “inherited” from a deceased spouse. For purposes of completing a federal estate tax return (Form 706) or gift tax return (Form 709) the BEA is converted into a tax credit amount known as the Applicable Credit Amount. The Generation-Skipping Transfer (GST) Tax is a tax separate from, but related to, the estate and gift taxes. It generally applies when property passes, […]

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7520 Rate for February 2019

Another Drop. The 7520 rate for February 2019 is 3.2%. This is an decrease from January, when the rate was 3.4%. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from declining rates. Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform better when interest rates are lower. On the other hand, Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs) do better when rates are higher. Source: Rev. Rul. 2019-04 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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Anti-Lapse and Trust Termination

Does Tennessee’s anti-lapse statute apply when the remainder beneficiary of a trust dies before the trust terminates? No.

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7520 Rate for January 2019

The rate drops. The 7520 rate for January 2019 is 3.4%. This is an decrease from November and December 2018, when the rate was 3.6%. This is also a return to the rate that applied for July through October 2018. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2019-03 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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7520 Rate for December 2018

Unchanged. The 7520 rate for December 2018 is 3.6%. This is the same as November. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source:  Rev. Rul. 2018-30 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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Are Capital Gains Subject to the 65-Day Rule?

No, but you would not know that from reading the statute. 

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What Happens When a Trust Terminates?

Termination of a trust is like dissolution of a business organization. In both cases, there is a winding up period before the entity legally ceases to exist.

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Are Gym Fees Subject to Sales Tax in Tennessee?

Yes.

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November 2018 7520 Rate

Moving up. The 7520 rate for November is 3.6%. This is an increase from previous months. The rate was 3.4% for the preceding 4 months. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2018-28 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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October 2018 7520 Rate

No change. For October 2018, the 7520 rate will again be 3.4%. This is the fourth month in a row at this rate. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2018-27 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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Lobbying by Public Charities

Can a public charity engage in efforts to influence legislation? Yes, but not as a “substantial part” of its activities. Under IRC 501(c)(3), an organization will not qualify (or remain qualified) as tax-exempt if it carries on propaganda, or otherwise attempts to influence legislation, as a “substantial part” of its activities. What constitutes a substantial part is unclear. Neither the Code nor the regulations elaborate on this phrase. Fortunately, Congress enacted IRC § 501(h) to inject some certainty into this area. It provides a safe harbor from the substantial part rule. An organization wanting to influence legislation may make a 501(h) election by filing Form 5768 with the IRS. Thereafter, it will not be treated as substantially engaging in lobbying […]

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September 2018 7520 Rate

Still flat. For September 2018, the 7520 rate will again be 3.4%. This is the fourth month in a row at this rate. A chart showing historical rates since 2008 is here.

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Tennessee’s Unitrust Conversion Statute is Broken

If you are considering converting an income-only trust to a unitrust, think again. 

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7520 Rate for August 2018

Again, no change. After steadily ticking up for the first four months of the year, the 7520 rate remains flat for the third month in a row. For August 2018, the 7520 rate will again be 3.4%. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2018-21 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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Gift-Splitting When Spouse is Trust Beneficiary

Wife transfers property to a trust for the benefit of Husband. The trust is intentionally structured so as not to qualify for the gift tax marital deduction. Wife files a gift tax return in connection with the gift, and Husband consents to split the gift. Husband is the primary beneficiary of the trust during his life. When Husband dies, will any part of the trust be includible in his estate for federal estate tax purposes?

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7520 Rate for July 2018

No change. The 7520 rate remains the same. For July 2018, the 7520 rate will be 3.4%. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2018-19 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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Backdoor Roth IRA Contributions after Tax Reform

It pays to read the footnotes.

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7520 Rate for June 2018

Another increase. The 7520 rate continues to tick up for inflation. For June 2018, the 7520 rate will be 3.4%. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2018-16 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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Holding the Agent under GPOA Accountable

A family member (the “principal”) has given power of attorney to a third party (the “agent”). The principal is now incapacitated, and you have concerns about the agent’s management of the principal’s assets. What do you do? Here are two options.

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Marriage + Birth = Revocation of Will?

Tennessee has a statute for that.

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7520 Rate for May 2018

Unchanged The 7520 rate is unchanged from April. For May 2018, the 7520 rate will be 3.2%. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2018-12 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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7520 Rate for April 2018

Another increase. The 7520 rate has increased again. For April 2018, the 7520 rate is 3.2%. A chart showing historical rates since 2008 is here. Some estate planning techniques benefit from rising rates. These include Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). On the other hand, Grantor Retained Annuity Trusts (GRATs), sales to grantor trusts, and Charitable Lead Annuity Trusts (CLATs) perform worse when interest rates are higher. Source: Rev. Rul. 2018-09 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS

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2018 Federal Income Tax Rates: Estates and Trusts

These numbers will be adjusted annually for inflation based on the chained consumer price index (C-CPI-U). For more on the Tax Cuts and Jobs Act, click here. Source: Joint Explanatory Statement of the Committee of Conference, p. 13 (pdf) Posted by Joel D. Roettger, JD, LLM, EPLS  

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SLATs: When the Beneficiary Spouse Dies Before the Grantor Spouse

Consider adding a testamentary limited power of appointment to make SLATs more effective.

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Effect of Last Will’s Revocation on Earlier Will

Under Tennessee law, does revocation of a last will and testament automatically reinstate the immediately preceding last will?

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