Week in Review - July 6-9, 2021
A Summary of Videos
This week’s Episodes of Ten Minutes with Griffin contained insights about estate planning for young families, completed gift trusts, and tax elections for non-cash compensation received in exchange for performing services.
Episode 214: One Estate Plan Does Not Fit All, Part I: Young Families
One of my passions is consumer protection, and one area of estate planning in which I have been able to deploy this passion is in planning for young families.
A couple of years ago, when talking about some career inflections with my wife, she asked me if estate planning will even be relevant long-term for people our age. Because, after all, nobody in the late Gen-X or millennial generations seem to be drafting estate plans.
My answer was that the shift in wealth in this country from the Baby Boomers and Gen X to millennials will mostly be in trust, and there will be a huge need for estate planners to help navigate this shift in wealth.
That being said, a number of attorneys specialize in estate planning for young families, but they often approach it in the wrong way. The emphasis is on selling a form-driven living trust plan, with the most important issues (guardianship and conservatorship planning for minor children) being used solely as a scare tactic to encourage the sale of this form-driven plan. Taking this kitchen sink approach is akin to asking a person with no fitness background to go run a marathon.
In this Episode 214, I discuss the planning approaches that I believe work best for young families, with a focus on milestones and momentum. The greatest momentum comes from naming guardians and conservators for children, and this often can be accomplished through a stand-alone document prepared solely for this purpose.
Episode 215: Common Estate Planning Trusts, Part V: Completed Gift Trusts
Irrevocable trusts in estate planning have two common goals - transfer tax savings and asset protection. Whether the trust is funded during life or at death by the trust’s settlor (i.e., creator), these goals are easily accomplished for the beneficiaries of the trust. However, if the settlor wants to accomplish these goals for themselves, the irrevocable trust must be funded during life.
Accomplishing transfer tax savings requires the use of a completed gift trust. This trust is irrevocable, meaning that transfers to the trust are permanent, but it must go a step further. The trust must be respected by the IRS as a separate owner of trust assets for gift and estate tax purposes (although it does not have to be respected as such for income tax purposes).
In this Episode, I dive into the two testing points for this type of trust.
Episode 216: 83(b) Election Revocation: PLR 202127038
Most Fridays, the IRS releases private letter rulings for the week, which contain valuable nuggets of tax education. This week’s chosen ruling is PLR 202127038, which deals with the revocation of the IRC Section 83(b) election.
This election may be made by an employee who receives property in exchange for services, and it is made for timing purposes. Typically, the employee would not be taxed on the receipt of this property until one of two things occurs. One, the employee has the ability to freely transfer the property. Two, the employee’s risk of losing (i.e., forfeiting) the property to the employer is lifted. Since these events may happen many years in the future, it means that the employee could end up with a hefty income tax bill. This is avoided with an 83(b) election which, if filed with the IRS by the employee, makes the property immediately taxable at its current value.
This PLR illustrated some basic principles of the timing of the 83(b) election and revoking the election. The election must be made within 30 days of the employee’s receipt of property, and may only be revoked with IRS consent if the employee discovers a mistake of fact and files a revocation within 60 days of this discovery.
However, the IRS has recognized that elections can be revoked before their filing deadline, and this was recognized for the 83(b) election in Rev. Proc. 2006-31. Typically, this would also mean that the employee only has 30 days from the receipt of property to revoke the election with IRS consent. But, in the case of PLR 202127038, the employee received IRS consent for the revocation due to coronavirus relief. IRS Notice 2020-23 extended a number of filing deadlines until July 15, 2020, and since the employee filed the request for revocation before this deadline, the revocation was honored.
Ten Minutes with Griffin is a video series on YouTube hosted by Griffin Bridgers. Such videos and this article are provided for educational purposes only, and are not intended to substitute for legal or tax advice. This content may be shared by you in its original form, but only if this disclaimer is also shared in its original form by you.