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Fulcrum Partners Shares AALU Estate Planning Report from Heckerling Institute

Fulcrum Partners Deferred Compensation News

On February 20, 2020, AALU released highlights from the 54th Annual Heckerling Institute on Estate Planning. The full AALU report is available as a PDF here: 54th Annual Heckerling Institute on Estate Planning.

Common Mistakes in Life Insurance Planning

The report explores notable legacy planning developments and strategies. Specifically addressed are:

  • Recent legal and regulatory developments, including generational split-dollar arrangement litigation under Estate of Morrissette v. Commissioner,[i] and a set of Private Letter Rulings (PLRs) regarding the reformation of an irrevocable life insurance trust (ILIT).
  • PLRs regarding reformation of ILIT; the report notes that grantor trusts can play a critical role in legacy planning with life insurance. Describing grantor trust rules as “arcane,” the report discusses modern uses of grantor trusts.
  • The choice between grantor and non-grantor trust status; including non-conventional uses of these familiar tools: Non-Grantor Trusts; Use of Trust Assets; and Charitable Deductions[ii].
  • Uses of beneficiary-owned trusts as grantor trusts, including Beneficiary Deemed Owner Trusts (BDOTs) and Beneficiary Defective Inheritor’s Trusts (BDITs)[iii].
  • Migratory clients and the impact of state residency, including state trust taxation; the Supreme Court’s decision in North Carolina Department of Revenue v. The Kimberly Rice Kaestner 1992 Family Trust[iv]; and Incomplete Gift Non-Grantor Trusts.
  • A special session focused on the SECURE Act and its effects on retirement planning.[v]
  • Planning for the GST tax.[vi] The GST tax presently applies at a flat 40 percent rate to “taxable terminations” and “taxable distributions” from certain trusts passing to grandchildren or more remote beneficiaries.

The report covers a variety of issues that can arise given the complexity of IRS rules and the everchanging legislative landscape. One fact, however, is constant: legacy plans continue to require creative design and diligent monitoring and review.

#estateplanning #secureact #irs #retirement

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[i] U.S. Tax Court Docket No. 004415-14, Order and Decision dated June 29, 2018.

[ii] For a more detailed discussion of the uses of grantor and non-grantor trusts, see materials prepared by Austin Bramwell, S. Stacy Eastland, Carlyn S. McCaffrey, and Edwin P. Morrow, III for “Creative Planning Techniques with Grantor and Non-Grantor Trusts” as presented by Austin Bramwell, S. Stacy Eastland, Carlyn S. McCaffrey, and Edwin P. Morrow, III on January 15, 2020 at the 54th Annual Heckerling Institute on Estate Planning; see also materials prepared by Austin Bramwell, S. Stacy Eastland, Carlyn S. McCaffrey, and Edwin P. Morrow, III for “Beyond the Binary: Choosing Between Grantor and Non-Grantor Status” as presented by Austin Bramwell and Carlyn S. McCaffrey on January 15, 2020 at the 54th Annual Heckerling Institute on Estate Planning.

[iii] See WRMarketplace No. 15-32 for a discussion the basics of BDITs.

[iv] 139 S. Ct. 2213 (2019).

[v] For additional details and discussion, see materials prepared by Natalie B. Choate for “Planning for Retirement Benefits After the SECURE Act” as presented by Natalie B. Choate on January 16, 2020 at the 54th Annual Heckerling Institute on Estate Planning.

[vi] See materials prepared by M. Read Moore, John P. Edgar, and Jeanette Suarez Hunter for “A Sequel Much Worse Than the Original: Planning for GST Tax on Nonexempt Trusts,” presented by M. Read Moore, John P. Edgar, and Jeanette Suarez Hunter on January 16, 2020 at the 54th Annual Heckerling Institute on Estate Planning.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through CapAcuity, LLC; Lion Street Advisors, LLC (LSF) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI, LSF and BDO Alliance USA are non-affiliated entities and separate entities from Fulcrum Partners and CapAcuity, LLC.