April Office Hours and Week(s) in Review: March 30-April 11, 2024
Business Roundup, Office Hours, and Article Summaries
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Helpful Hints
Here are some quick planning tips that came up this week, that don’t warrant a stand-alone article:
As we approach the April 15th payment deadline for the first 2023 quarterly installment, remember that these payments generally should not be paid directly by grantor trusts. Why? Check out Rev. Rul. 2004-64.
Speaking of grantor trusts, if you are drafting a substitution power, consider whether it should extend beyond the named grantors of the trust to also include anyone who becomes a grantor by making a gratuitous transfer to the trust.
Business Roundup: The CLE Industrial Complex
This article does a great job of summarizing many of my thoughts about the problems with mandatory continuing education requirements, especially continuing legal education (CLE).
There is one issue not covered in this article, however. The backbone of legal education in particular, whether or not approved for CLE credit, is the engine of self-promotion. For decades, the privilege of actually teaching CLE was a central cornerstone of business development. By speaking to an audience of professionals and establishing yourself as an expert, the hope was that they would send you business.
Then the internet came along.
While I now find myself in that privileged position of teaching you, we do have one thing in common. Each morning, our e-mail inboxes are stuffed with solicitations for continuing education programs. If you are a subscriber, I know that the e-mail with this article is just one of several you have received this morning, so if you are reading I want to thank you for giving me your attention.
As noted by the author, Casey Flaherty, in the article cited above:
Attention is an essential condition, and only a few are in a position to command it.
Simon Sinek famously spoke about articulating your “why,” and this quote captures mine. At the end of the day, this newsletter is all about capturing your attention long enough to give you unique and actionable ideas. My “why” is adding value to your practice – not with a gimmick of offering continuing education credit, but instead by actually educating you. And, while perfectionism tells me I am falling short, my secondary goal is to provide value that nobody else in your e-mail inbox is providing.
Soon, I hope to provide continuing education credit. In fact, I have a GST tax course in the works that will be submitted for credit. But, getting there requires a certain amount of trial and error, coupled with the irony pointed out in the cited article – that the mandatory nature of CLE means we often do not pay attention to, or learn from, CLE.
In the broader landscape of teaching CLE in particular, this self-promotional privilege to command attention has eroded. As I work on the vision and mission for this newsletter, one core realization stands out – that I have subconsciously created all of the content on this newsletter and my YouTube channel in a way that is not designed to be self-promotional. The only thing I am hoping for in exchange is your attention – not on me, but on the content. Your attention may be driven by a broader appreciation for the content of this newsletter, or it may instead be driven by a specific question which originally brought you here through an internet search or otherwise.
Which brings me to a second realization. Outside of this newsletter, I have taught close to 100 CLE and CPE programs. In each of these programs, I discovered that most attendees often attended because they had a key question they were hoping to have answered.
So, I am encouraging you to share your key questions. Office hours, below, are a wonderful opportunity to do so. And, if you don’t want to attend office hours, feel free to reach out by e-mail. My only condition is that this opportunity to have questions answered is limited solely to wealth transfer professionals. It is not a forum to seek personal legal or tax advice, and as a matter of principle I do not (and cannot) respond to these types of inquiries.
Article Summaries
Typically, distributions from parents to children (or grandchildren) occur at the death of the surviving parent. But, the complexion of these transfers have changed as tax laws and creditor protection laws/precedents have evolved.
Planning at the top of the bell curve now uses a lifetime trust structure, at least for children. This trust structure often uses a combination of beneficiary controls – one being the right to select a trustee or even become a trustee at a certain age of maturity, the other being at least a testamentary power of appointment.
Anyone with aspirations to assist the next generation needs to become familiar with this structure. Why? Because the majority of inherited or gifted wealth transferred in the coming decades will be transferred into this type of structure. Understanding how to review a beneficiary’s rights, obligations and limitations – especially when compared to outright ownership of wealth – will be paramount. This article covers some of the common review and structure points, while also continuing the broader discussion around multiple descendants’ trusts (sometimes with different terms and perpetuities periods) discussed in a prior article.
In an older YouTube video, I discussed some of the broader implications of using POD/TOD transfers in place of the preparation of actual estate planning documents. This article introduces some of the issues that often fly under the radar – mainly by focusing on post-mortem actions, and the powers that a personal representative/executor or an adversely affected beneficiary may have.
While this article is more Socratic in structure, I do have some key considerations – especially for personal representatives. And, I highlight a growing trend of attorney and advisor liability when it comes to advice, suggestions, and client instructions with regard to beneficiary designations in general.
The intent is not to be comprehensive, but to tease out some tangents to be covered in subsequent articles. Such “tangents” include the standards for contesting a beneficiary designation for lack of capacity, fraud, or undue influence (as contrasted with standards for wills and trusts), along with a comparison of states that have actually imposed duties to a client’s intended estate planning beneficiaries on financial advisors.
This article is part of my subscription offering. While tangentially related to the broader series on C and S corporations in estate planning, this article bookends an issue with tax partnerships. Previously, I discussed the risk of gain recognition when securities are added to a tax partnership in a way that diversifies the holdings of a contributing partner. This article looks at the opposite outcome – the risk of gain recognition when securities are distributed from a tax partnership, and what can be done to avoid such gain recognition.
It is easy to discount pass-through entity tax principles, but these principles apply in more situations than estate and gift taxes might. Wherever LLCs or limited partnerships are used to hold investment securities, these issues can pop up. And, when they do, clients often receive incomplete advice around potential gain recognition both on contribution and distribution.
C and S Corporations for Estate Planners: Income-Shifting and Grantor Trusts
This article is part of my subscription offering. Shifting gears from the analysis of redemptions and dividends, this article explores the broader issues of a mismatch between cash needs within a C or S corporation and the cash needs of shareholders. These issues become exasperated for an S corporation, especially due to the phantom income that is shifted to new shareholders when shares are transferred or gifted as part of the estate planning and wealth transfer process.
But, there are some issues that are taken for granted. For example, income shifting is a concern for S corporations generating service income, especially S corporations that keep salaries low for purposes of limiting self-employment tax. And, where S corporation (or even C corporation) stock is involved, the use of grantor trusts can introduce some estate and income tax issues that often fly under the radar. This article covers many of these concerns, especially where voting stock is involved.
Office Hours
Whether you are a long-time reader, or a new reader/subscriber, one of the key features of this newsletter is my offer to personally connect by Zoom for office hours. Sessions are usually date-specific, but next month I plan to experiment with scheduling out at the beginning of the month if you are interested. So, if the sessions linked below don’t work for you, stay tuned for broader availability in May.
(Note that due to scheduling, I may occasionally have to move our booked sessions.)
If you are interested in attending an upcoming group office hour, click here for upcoming sessions in April. (I apologize that, due to tax time, sessions are a bit more limited this month).
For paid subscribers, the link to one-on-one office hours is below the paywall. If I don’t get enough interest, I will open these up to LinkedIn followers in about 10 days:
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