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ESTATE PLANNING DURING AND AFTER DIVORCE

 

Divorce decree, gavel and folder shot on warm wooden surface

 

At a minimum, we recommend that our clients review their existing estate planning documents every few years, and also when big life changes are happening.  Going through a divorce is one of those times.  Here are some things to consider when you are considering divorce or separation, and after your divorce is final:

ALL ASSETS ARE NOT CREATED EQUAL WHEN IT COMES TO IRA ROLLOVERS (PLR 201547010)

When the taxpayer in PLR 201547010 decided to invest his IRA assets in a partnership, he forgot to check whether his IRA provider was able to hold an interest in a partnership as an investment in the IRAs for which it served as custodian.  While all IRA accounts are able to hold investments in publicly traded securities, i.e. stocks, bonds and mutual funds, not all IRA custodians are set up to handle alternative investments, such as direct ownership of a business, real estate, partnership interests and LLC member interests, in their IRA accounts managed pursuant to their IRA account agreements.  In fact, some IRA account agreements specifically preclude ownership of such alternative assets in the IRA accounts covered by the IRA custodian’s account agreement.

In this PLR, Taxpayer A instructed the IRA Custodian to invest his IRA assets in a percentage partnership interest of Partnership C.  The IRA Custodian issued

Prince: Is His Legacy Really Untold?

34997441Update: According to media sources, a lawyer for Bremer Bank and Trust, the corporate fiduciary appointed to administerPrince’s estate,  said the bank is continuing to search for a will and the judge in the Court, Judge Kevin W. Eidge, stated “We are not finding that there’s no will, but that no will has yet been found.”

The following was originally published on April 28, 2016.

As we’ve all seen in the news, musician Prince passed away on April 21, 2016 at the age of 57.  According to news sources, on April 26, just five days later, one of Prince’s six siblings, his sister Tyka Nelson, filed documents with the Carver County probate court stating “I do not know of the existence of a Will and have no reason to believe that the Decedent

Prince: The Lost Legacy of an Estate Plan Untold

You may not have produced over 30 albums, accrued over $300 million and an equivalent amount of fans as Prince, but, like the recent pop star, you too have a legacy that could impact many individuals around you.

Treasury Green Book Proposals — Private Foundations

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 240 of the Green Book and is re-printed here for your convenience:

REFORM EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE FOUNDATIONS

Current Law

Private foundations that are exempt from Federal income tax generally are subject to a two percent excise tax on their net investment income. The excise tax rate is reduced to one percent in any year in which the foundation’s distributions for charitable purposes exceed the average level of the foundation’s charitable distributions over the five preceding taxable years (with certain adjustments). Private foundations that are not exempt from Federal income tax, including certain charitable trusts, must

Treasury Green Book Proposals — Inheriting IRAs

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 164 of the Green Book and is re-printed here for your convenience:

REQUIRE NON-SPOUSE BENEFICIARIES OF DECEASED IRA OWNERS AND RETIREMENT PLAN PARTICIPANTS TO TAKE INHERITED DISTRIBUTIONS OVER NO MORE THAN FIVE YEARS

Current Law

Minimum distribution rules apply to employer sponsored tax-favored retirement plans and to IRAs. In general, under these rules, distributions must begin no later than the required beginning date and a minimum amount must be distributed each year. For traditional IRAs, the required beginning date is April 1 following the calendar year in which the IRA owner attains age 70½. For employer-sponsored tax-favored retirement plans, the

Treasury Green Book Proposals — Definition of Executor

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 189 of the Green Book and is re-printed here for your convenience:

EXPAND APPLICABILITY OF DEFINITION OF EXECUTOR

Current Law

The Code defines “executor” for purposes of the estate tax to be the person who is appointed, qualified, and acting within the United States as executor or administrator of the decedent’s estate or, if none, then “any person in actual or constructive possession of any property of the decedent.” This could include, for example, the trustee of the decedent’s revocable trust, an IRA or life insurance beneficiary, or a surviving joint tenant of jointly owned property.

Treasury Green Book Proposals — Annual Gifting

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 187 of the Green Book and is re-printed here for your convenience:

SIMPLIFY GIFT TAX EXCLUSION FOR ANNUAL GIFTS

Current Law

The first $14,000 of gifts made to each donee in 2016 is excluded from the donor’s taxable gifts (and therefore does not use up any of the donor’s applicable exclusion amount for gift and estate tax purposes). This annual gift tax exclusion is indexed for inflation and there is no limit on the number of donees to whom such excluded gifts may be made by a donor in any one year. To qualify for this exclusion, each gift must

Treasury Green Book Proposals — Health and Education Exclusion Trusts

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 186 of the Green Book and is re-printed here for your convenience:

MODIFY GENERATION-SKIPPING TRANSFER (GST) TAX TREATMENT OF HEALTH AND EDUCATION EXCLUSION TRUSTS (HEETS)

Current Law

Payments made by a donor directly to the provider of medical care for another person or directly to a school for another person’s tuition are exempt from gift tax under section 2503(e). For purposes of the GST tax, section 2611(b)(1) excludes “any transfer which, if made during the donor’s life, would not be treated as a taxable gift by reason of section 2503(e).” Thus, direct payments made during life by an older generation donor

Treasury Green Book Proposal — 6166 Extensions

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 185 of the Green Book and is re-printed here for your convenience:

EXTEND THE LIEN ON ESTATE TAX DEFERRALS WHERE ESTATE CONSISTS LARGELY OF INTEREST IN CLOSELY HELD BUSINESS

Current Law

Section 6166 allows the deferral of estate tax on certain closely held business interests for up to fourteen years from the (unextended) due date of the estate tax payment (up to fourteen years and nine months from date of death). This provision was enacted to reduce the possibility that the payment of the estate tax liability could force the sale or failure of the business. Section 6324(a)(1) imposes a

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