patterson's blog

Distributions from Entities under CA UPAIA Sec. 350 Amended to Increase Clarity (8/13/13)

The California Legislature has amended Sec. 350 of the Uniform Principal and Income Act (UPAIA) to give greater clarity to the allocation between principal and income of distributions from entities. Whether the characterization of distributed funds is characterized as principal or income determines who will get the benefit of the distribution - the income beneficiary or the remainder beneficiary.

Clark v. Rameker - Not a Surprise

A unanimous Supreme Court has held that inherited IRAs don't qualify for an exemption from the bankruptcy estate and are not protected from bankruptcy creditors. In Clark v Rameker (2014 S.Ct.), the Supreme Court finalized a finding by the bankruptcy court that was reversed and reaffirmed several times on its journey to the highest court. A daughter inherited her mother's IRA and later, with her husband, filed for bankruptcy.

PLR 201422007 GST Annual Exclusion for Separate Share Trusts

PLR 201422007 (5/30/2014) reminds us that an irrevocable trust with multiple beneficiaries who hold separate shares can qualify for the annual exclusion from GST on gifts below the current limit ($14,000 in 2014). IRC Sec. 2654(b)(2) of the GST rules holds that for purposes of Chapter 13, substantially separate and independent shares (definition of separate share treatment) of different beneficiaries in a trust are treated as separate trusts. See Reg. 26.2654-1(a)(5) for a helpful example.

Paradigm Shift in Wealth Planning

The focus over the past few years has changed in positioning clients for wealth and business succession. Because of the large amounts that be gifted without the threat of transfer taxes (gift, estate & GST taxes), other aspects of wealth planning have become more important. This includes income taxes, cost basis, succession issues, retirement cash management and disability planning.

This is an excellent time to go back to basics and rethink some of the strategies we have used for many years and to come up with new planning concepts and ideas.

Grantor's Intent Affirmed in Court Case

The court in In Re the LET Revocable Trust affirmed the general rule that the grantor's intent is the primary authority when determining unclear or ambiguous provisions in estate planning documents. In this case, the distribution provisions on the death of the first spouse referred to a funding formula that referenced the estate tax and distributed assets to the children to the extent of the applicable exclusion amount and the excess to a marital trust. The first spouse died in April, 2010 when the estate and GST tax had been repealed.

Basic Exclusion Increases in 2013

As of January 1, 2013, an additional $250,000 in basic exclusion is now available to all taxpayers. For those taxpayers who have utlized their entire available exclusion, this increase provides new opportunities for transfer tax strategies that include GRATS, QPRTs and Installment Sales to IDGTs.

Need More Time to comply with last years estate tax law changes? IRS agrees.

Today, the IRS announced three changes to provide relief to large estates of people who died in 2010.

According to the site:

FTB Says - Pay California source income to nonresidents of California? Save some for us!

The California Franchise Tax Board has released an online form to request a reduction of the withholding amount by itemizing expenses against the California source income.

IRS Announces Due Date For IRS Form 8939

Today, the IRS has announced a November 15 due date for IRS Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent.

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