Thoughts & Commentary

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By Timothy J. Belber, JD on December 22, 2011

A common theme from 2011 is “fewer people are taking advantage of the increased exemption than expected”. This despite, as Blanche Lark Christerson of Deutsche Bank says in SmartMoney (13 December 2011):

“Considering that the gift tax exclusion had been frozen at $1 million for many years this increase represents a remarkable opportunity to pass property to heirs free of gift tax.”

by Timothy J. Belber, JD on November 2, 2011

In a recent tax court case, The Estate of Turner v. Commissioner (August 30, 2011 reported in AALU Bulletin 11-84), the use of two planning strategies came under scrutiny. First, the transfer of assets to a Family Limited Partnership was ignored for estate tax purposes. The issue was again, that even though there was a transfer, the decedent continued to treat the assets as if they were his personally. He (and his family) failed to respect the entity. The court found that Clyde, Sr. retained the “possession and enjoyment” of the transferred property, pointing to the partnership’s payment of personal expenses, the disproportionate distributions, and the testamentary nature of the arrangement.

by Timothy J. Belber, JD on September 26, 2011

It is projected that as much as 90% of affluent family assets will be “trust owned” in two generations. While this may indicate a prevalence of great tax and financial planning, what does it mean for the development of financial skills in the coming generations? In an earlier post (The Dis-Incentive Effect of Incentive Trusts), we talked about the idea of financial skills language in a trust. The second part of financial skills is the growing and managing a personal balance sheet..

by Timothy J. Belber, JD on August 16, 2011

As the political rhetoric heats up, the conversation includes the idea of our society being a “zero sum game”. More for you means less for me. There is only a finite amount. Unfortunately, this thinking can easily enter into the family wealth transfer plan discussion. It can be most problematic when the asset base of the family necessitates shared ownership.

by Timothy J. Belber, JD on July 12, 2011

Why life insurance reviews shouldn't just be about the policy...

by Timothy J. Belber, JD on June 30, 2011

As 2011 rolls by, along with the increased ability to “gift”, the hesitations are becoming clearer. I hear two major themes in most of my conversations around using the increased exemption amount:

1. “What happens if I need access to those assets later on?”, and
2. “Am I doing too much for my children?” –or, “How much is enough?”

by Timothy J. Belber, JD on May 24, 2011

Even though we’re over one-third of the way through 2011 there is still a lot of uncertainty about what to do with the generous “gift” we planners received in December of 2010...

by Timothy J. Belber, JD on May 16, 2011

In the April 2011 Due Care Bulletin M Financial takes a look at both the how to and the importance of assessing the overall strength of life insurance carriers.

by Timothy J. Belber, JD on April 20, 2011

With all the litigation around trusts, beneficiaries and trustees, the question of why bother with one in the first place surfaces loudly. Certainly, there are very smart tax and asset protection reasons for trusts. The unhappiness (read: litigation) is generally not about those things. It goes to a much deeper issue -- the human component...

by Timothy J. Belber, JD on April 13, 2011

While it is an old saying, two recent tax decisions, one a Federal Appeals Court case, reported in AALU Bulletin No:11-29, highlight the importance of paying attention.

by Timothy J. Belber, JD on March 23, 2011

David Starbuck, a partner at Baker Hostetler in Denver, recently presented his work, Mechanics of the Clawback: is a $5,000,000 gift really a $5,000,000 gift? , to a group of industry professionals hosted by The Madison Group.

by Timothy J. Belber, JD on March 10, 2011

Our Director of Case Design, Shawn Tidwell, has been following the federal budget proposals and recently wrote The Proposed 2012 Budget: A Call to Action for Estate Planning . It highlights the possibility that the enormous planning opportunities we received in December 2010 may go away after 2011..

by Timothy J. Belber, JD on March 4, 2011

In a fascinating case, Paradee v. Paradee, the importance of both respecting the irrevocability of an irrevocable trust and the fiduciary responsibility of the trustee are highlighted.  The case is reported in AALU Bulletin No: 11-02 .

by Timothy J. Belber, JD on February 3, 2011

At the 2011 Heckerling Institute, well-known estate planning attorney Jon Gallo presented The Use and Abuse of Incentive Trusts . He collaborated with his wife, Dr. Eileen Gallo (an expert on the psychological impact of sudden wealth), and Dr. James Grubman, (a family wealth consultant), on the idea of a "Financial Skills Trust" rather than the traditional "Incentive Trust".

by Timothy J. Belber, JD on January 20, 2010

We have been given a gift by the Obama Administration that we cannot overlook. The reunification of estate and gift tax exemptions has effectively “re-loaded” many families with $8,000,000 of wealth transition planning power. This has been overlooked or, at best, written about with a bit of ho-hum attitude by the popular press. In addition, many advisor newsletters talk about the technicalities but the not the potential impact.

by Timothy J. Belber, JD on November 24, 2010

For most of us, a decision made several, probably four or five generations ago, is part of why we are where we are today. Some ancestor in a little village (or large city) on the other side of a large body of water decided that he or she wanted a better life for themselves and their family. They decided to embark on a difficult journey to a place where they didn’t speak the language, knew very few people, if any, and weren’t sure what the outcome would be. They were going to the “land of opportunity”. They made a decision that we, generations later, can honor.

by Timothy J. Belber, JD on November 9, 2010

At the Family Office Exchange (FOX) Fall Forum, one of the most talked about issues is the potential requirement for some family offices to have to register with the SEC as investment advisors. This could change the entire landscape for some single family offices and many, if not all, multi-family offices. Many of the latter relied on the "fewer than 15 clients" exemption which has now been repealed effective July 11, 2011.

by Timothy J. Belber, JD on October 29, 2010

One of the most complicated issues with the current estate tax situation is the idea of carryover basis for assets in the estates of decedents who die during 2010. This same concept was introduced in the Tax Reform Act of 1976 and found so unworkable that it was repealed before it even became effective. Treasury is trying to come up with guidance but even that is incredibly complicated.

by Timothy J. Belber, JD on October 7, 2010

While no one knows what lies ahead for Estate taxes, the individual states have been very busy. As this Washington Report illustrates, there may be state taxes due even when there is a ‘Zero Tax’ Federal Estate. In fact, in some jurisdictions the state is not allowing for a QTIP deduction.

by Timothy J. Belber, JD on September 9, 2010

Since 1986 the Generation Skipping Transfer (GST) Tax has been a major factor in planning for affluent families and for many states seeking revenue from trust fund business. A study in the Yale Law Journal (Vol. 115, pg 356. 2005) reported there were twenty one “Perpetual Trust” states with nearly $100 Billion in assets.

by Timothy J. Belber, JD on July 12, 2010

As this recent AALU Washington Report illustrates, attention to how life insurance is owned is of critical importance. In this case a $1,000,000 policy was transferred from entity to entity to the insured. As you can imagine, the full amount was subject to taxation in the insured’s estate. Soon thereafter came the lawsuit blaming the law firm for not providing thorough advice.

by Timothy J. Belber, JD on July 30, 2010

In an upcoming column for The Journal of Practical Estate Planning To be or Not to be - Some Thoughts on the Life of Family Foundations. John A. Warnick points out some interesting statistics from a study by the Council of Foundations (Perpetuity or Limited Lifespan: How do Family Foundations Decide?)

by Timothy J. Belber, JD on July 12, 2010

If you think about it, most of the comments (read jokes) surrounding life insurance are about the salesman, not the product itself. This is in contrast to many other industries where the product is questioned as cheaply made, inferior quality or just downright silly (Pet Rock, anyone?).