This publication offers a timely roundup of estate and trust planning tips, information and news, courtesy of Gunster’s private wealth services attorneys; please contact any team member for more information.
In this latest issue, you’ll find information on the following topics:
Flying with an old driver’s license? Don’t miss your flight!
Beginning on October 1, 2020, boarding a flight in the United States will require a REAL ID-compliant driver’s license, a state-issued “enhanced” driver’s license or another acceptable form of identification (i.e., a passport). Many Americans currently do not have a REAL ID-compliant driver’s license or an enhanced driver’s license and the Department of Homeland Security is anticipating that many people will not have the requisite driver’s license by October 1, 2020.
IRS final regulations confirm no clawback of taxable gifts
In 2017, the gift tax and estate tax exemptions were doubled to $10 million per person, with inflationary adjustments ($11.4 million in 2019 with these inflationary adjustments and scheduled to increase to $11.58 million in 2020). Under the 2017 law, on January 1, 2026 the gift tax and estate tax exemptions are scheduled to revert to $5 million per person (with inflationary adjustments).
Low interest rates provide estate planning opportunities
A low interest rate environment is generally conducive to many estate planning techniques. The Internal Revenue Service (the “IRS”) promulgates on a monthly basis the minimum interest rate that must be used for various estate planning techniques. Currently, these interest rates are near the lowest they have been in years. Generally speaking, so long as the assets selected for a particular estate planning technique appreciate at a faster rate than the minimum prescribed IRS interest rate, the estate planning technique should be successful. Furthermore, if the assets are of a nature where a minority interest and lack of marketability discount can be applied (i.e., a limited partnership interest in a family limited partnership), further benefits can be obtained. In this current low interest rate environment, it may be time to consider some of the estate planning techniques discussed in this article.
Annual notice letters are a crummey (but necessary) requirement
Under current tax law, a donor may annually gift up to $15,000 to any donee without being subject to any gift tax (so called “annual exclusion” gifts). So long as the gift does not exceed $15,000, the donor does not have to allocate any portion of his or her lifetime gift tax exemption (currently $11,400,000) to the gift. The annual amount a donor is allowed to gift is indexed for inflation to the nearest one thousand dollars so, historically speaking, the annual amount increases by one thousand dollars every few years. For purposes of this article, the annual amount is assumed to be $15,000.
Charitable gifts from individual retirement accounts
Since 2006, some taxpayers have been able to use the funds in their Individual Retirement Accounts (“IRAs”) to satisfy charitable gifts. The provision had been renewed a few times over the years and, in 2015, the provision was made permanent.
Each year, an individual may direct up to $100,000 to be distributed directly from an IRA to charity. The amount distributed to charity counts towards the individual’s required minimum distribution from the IRA for that year. For tax reporting purposes, the individual does not report the amount distributed to the charity as income (distributions from an IRA to an individual are normally considered taxable income to the individual) and the individual does not report a charitable deduction on his or her income tax return as an itemized deduction. The ability to make the distribution directly from the IRA (rather than reporting the distribution as taxable income) normally results in income tax savings to the individual.