49th Annual Heckerling Institute on Estate Planning (Jan 14th)

The following are summaries of the presentations from the 49th Annual Heckerling Institute on Estate Planning. For the official brochure and list of events, see  http://www.law.miami.edu/heckerling/pdf/2014/heckerling-brochure.pdf. For the Heckerling reports, see http://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling_reports.html.

M. Read Moore on Tax Administration and Procedural Rules for Estate Planners

Moore’s presentation focused on the important technicalities concerning tax returns and tax controversies that are commonly raised with estate planning clients. He began with a discussion on the necessary requirements when filing IRS returns for clients. Next, Moore elaborated on adequate disclosure rules, emphasizing that they are a “safe harbor”.

Other topics covered included the gift tax statutes of limitation as well as the importance of reporting foreign assets and income.

David Johnston on a New Honest Tax System (Lloyd Leva Plaine Distinguished Lecture Series)

Mr. Johnston began his presentation by stating that the current tax system, while appropriate for the 20th century, was outdated and did not reflect the changes and needs of the 21st century economy. His proposal for a new tax system is based on the classic principles of progressive taxation that traces back to ancient Greece, and have been subsequently supported by thinkers from Adam Smith to John Keynes.

The Modern Optimal Savings Tax (MOST) Mr. Johnston proposes is a tax system that he describes as “honest tax”. The underlying idea of the system is to encourage investment in productive, not unproductive assets, which will be held in an account called a Lifetime Investment Account (LIA). In return for only holding productive assets within a LIA, one is allowed complete freedom in moving economic assets without being taxed. Neither personal use property nor collectibles could be owned in a LIA. Moreover, the LIA would be liquidated and any gain subject to tax upon the owner’s death, unless there was a surviving spouse.

Mr. Johnston claims that one of the advantages of the system is elimination of the lock-in effect. However, he admits that it would also be a significant tax break for the rich. After his presentation, Mr. Johnston discussed his proposal with Mr. Ronald Aucutt, clearly stating that it is a work in progress and welcomes any and all feedback from the audience.

Q&A panel with Dennis Belcher, Samuel Donaldson and Carlyn McCaffrey

During the Q&A session, the board of panelists answered questions from the conference attendees. They provided a list of reliable sources for young practitioners to stay updated on current developments and also a checklist of considerations to refer to when creating a FLP to be funded with marketable securities with a QTIP trust with marketable securities.

Other topics the panel discussed included the allocation of a trustee’s fees in a QSST, filing obligations and charitable purpose.


Fundamentals Program #2: Robert Keebler and Jeremiah Doyle on the Income Taxation of Trusts and Estates

The second Fundamentals Program of the conference focused on the main concepts of income taxation regarding estates and trusts. The presentation started by covering the general rules of the income taxation of trusts and estates, the three different types of trusts for income tax purposes (simple, complex and grantor), and the three definitions of income (trust accounting income, taxable income, distributable net income). Next Keebler and Doyle explained concepts such as the 65-Day Rule, special bequests, charitable deductions and the § 645 Election.

The Fundamentals Program concluded with a “Dirty (Baker’s) Dozen” list of drafting and planning ideas for estate planners. These included using specific bequests to avoid DNI carryout and including boilerplate language to allow non-pro-rata distributions.

Posted by Elizabeth Cheung, Associate Editor, Wealth Strategies Journal. 


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