Weeks in Review: July 4 - 19, 2024
SECURE Act Regs, Business Roundup, Office Hours, and Article Summaries
Updates on the SECURE Act
Over 2 years ago, Treasury opened public comment on proposed Regulations on the changes under the SECURE Act. Yesterday, the Regulations were published in final form. I will have a course on how the Regulations clarify the SECURE Act changes coming down the pike in late 2024, either as a stand-alone course or as part of a broader virtual symposium (in either case with CLE and possibly CPE credit). In the meantime, here is some light reading:
Business Roundup: The Reciprocal Referral Problem
Fair confession - I re-wrote this roundup before publication this morning, because someone was kind enough to call out my tendency to approach topics like this in a paternalistic manner. If you have felt that way, I apologize and I hope you will give me another chance.
The problem I am discussing today is the notion that estate planning attorneys are bad at reciprocating referrals from financial advisors. My original analysis listed reasons why I think this happens. But, the reasons themselves did not help anyone, and while I’m happy to share those privately if you are interested, my hope is that I can open a multidisciplinary discussion on ways to approach this divide. Instead, I believe there is room for a more positive and collaborative alternative to playing the referral game in order to create a rising tide that raises all ships.
I have several ideas about ways that financial advisors and estate planning attorneys can work together in order to create new business for both of you. Here are a handful of ideas for financial advisors in particular:
Have conference room capacity? Rent it out to estate planners in virtual firms who need a place to meet with clients.
Have a notary on staff, perhaps with one or more other staff members who can be disinterested witnesses? Partner with estate planning attorneys to do a document round-up, through which individuals or families with drafted-but-unsigned documents can come in and finish their documents.
Create video or marketing content between you and an estate planning attorney highlighting planning tips and tricks. In today’s digital world, this usually works better and is less costly than the traditional estate planning 101 seminar/webinar or dinner presentation.
For families with young children, create systems or workshops for basic planning such as appointing guardians for minors or creating temporary delegations of parental authority, supported by an estate planning attorney or network thereof.
For families with children heading to college, create systems or workshops for powers of attorney and living wills for adult children, again supported by an estate planning attorney or network thereof.
Partner with estate planning attorneys to facilitate family meetings.
If you have estate planning software, offer excess capacity to estate planning attorneys for the review and summary of existing plans.
Create Google ads or Facebook ads pitching complimentary (or suggested fee) reviews of estate plans, perhaps in collaboration with an estate planning attorney, that can be co-branded by the two of you.
Office Hours
I have taken most of the summer off from offering office hours (a bit of alliteration for your Friday afternoon), in part because of a busy schedule but also because of waning participation. That being said, I am working on a better way to schedule office hours to reduce the risk that I have to cancel on participants. In the meantime, if you are interested in office hours, have suggested times, or want to schedule a one-on-one with me, directly reply to this e-mail and we can coordinate. If not, no sweat. I am also exploring ways I can create and facilitate study groups through here, so please let me know if that interests you as well.
Article Summaries
Crummey Notifications: The Ultimate Guide to Form 709
The FY 2025 Green Book proposals recognize the burden of Crummey notifications, and have proposed abandoning the present interest rule for the annual exclusion and instead replacing it with a per-donor annual cap of $50,000 on annual exclusion gifts. Unless and until this happens (a tall order in our current political environment), we are still confronted with the question of whether notifications of Crummey withdrawal rights must be provided to beneficiaries in order to create a present interest gift.
In this article, I discuss some of the major sources of authority out there, while highlighting differences in approaches between the IRS and the Tax Court. While written notices are important, they are not the end-all-be-all - especially when they are backdated. Instead, the IRS generally looks to whether there is a prearranged understanding that Crummey rights will not be exercised. A failure to follow the terms of the trust itself mandating notices perhaps deserves more attention than the presence or absence of notices.
C and S Corporations for Estate Planners: The Electing Small Business Trust
As a follow-up to the discussion on the structural and election requirements of the qualified subchapter S trust (QSST), this article diverges from the usual essay format to list (by number) many of the fundamental ESBT requirements and outcomes under not just the Subchapter S Regulations, but also the Subchapter J Regulations.
A “Better” Guide to Estate Plan Funding, Part 3: Minors as Beneficiaries
In a planning environment that seems to encourage the use of individual beneficiary designations and POD/TOD designations, a common question is whether minors can or should be named as individual beneficiaries. This article discusses the problems of doing so, while outlining the generally-accepted solution of creating one or more trusts to serve as beneficiaries. The issue then becomes whether testamentary trusts under a will, or instead irrevocable subtrusts of a revocable trust, is the preferred path? In lieu of answering the question directly, this article highlights the benefits and shortcomings of both approaches.
The Intersection of Charitable Remainder Trusts and Estate Tax, Part III
Continuing the theme of estate tax reporting of a charitable remainder trust at the death of a grantor, where one or more noncharitable beneficiaries has a continuing income interest, this article discusses some of the nuances of calculating the estate tax charitable deduction. There is also a discussion of the marital deduction where a surviving spouse has a new or continuing income interest, with a new rabbit hole to be addressed in a later article – balancing QDOT requirements with the charitable remainder trust requirements.
A ”Better” Guide to Estate Plan Funding, Part 4: Intro to Revocable Trusts
Unfortunately, revocable trusts are divisive in the worlds of estate planning and financial planning. The choice of a revocable trust, versus a will, is often used for negative marketing to undermine one’s competitors or a client’s other advisor(s). In this article and video, I present some of the common myths about the benefits of revocable trusts and discuss some of the trade-offs for these benefits. I also look to some of the basic requirements of a revocable trust at the top of the bell curve, along with a major mistake I often see in identifying the revocable trust for purposes of funding or amendment.