Recent Cases

Supreme Court Rules IRAs Exempt from Bankruptcy Estate

Several years after petitioners deposited distributions from their pen­sion plans into Individual Retirement Accounts (IRAs), they filed a joint petition under Chapter 7 of the Bankruptcy Code.

They sought to shield portions of their IRAs from their creditors by claiming them as exempt from the bankruptcy estate under 11 U. S. C. §522(d)(10)(E), which provides, inter alia, that a debtor may with­draw from the estate his “right to receive . . . a payment under a stock bonus, pension, profit sharing, annuity, or similar plan or con­tract on account of . . . age.”

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Estate of H.A. True Jr. et al. v. Commissioner (December 2, 2004) Valuation Under Buy-Sell Agreements Didn't Control Estate, Gift Tax Values.

Tenth Circuit affirms Tax Court: Buy-sell agreements specifying formulas for valuing interests in privately held companies solely based on their tax book value failed to determine the companies' value for estate and gift tax purposes. Legitimate business reasons for the valuation approaches used did not negate the fact that they also amounted to testamentary substitutes that improperly devalued the businesses for estate tax reasons.

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Internal Revenue Rulings

IRS issues controversial changes to Circular 230 ostensibly aimed at reducing abusive tax avoidance practices, but which may also increase estate planners' exposure to violation.

Final regulations set forth best practices for tax advisors providing advice to taxpayers relating to Federal tax issues or submissions to the IRS. These final regulations also provide standards for covered opinions and other written advice.

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3. Service rules that Wife's last will and testament's directive did not constitute a waiver of the wife's estate's right to recover under § 2207A(a)(1).

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Service grants extension of time under § 301.9100-3 so taxpayer could make a qualified domestic trust (QDOT) election under § 2056A(d) of the Internal Revenue Code and assign assets to the QDOT.

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IRS approves discount calculation method used to value general and limited partnership interests owned by decedent focusing on minority interest and lack of marketability of under § 2032A.

Because the interested parties consented to personal liability if an additional tax was ever imposed under § 2032A(c), the value of the property for GST allocation purposes is the value determined under § 2032A.

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IRS issues final regulations amending the existing regulations for gift tax special valuation to confirm that a unit trust or annuity interest payable for a specified term of years to the grantor, or to the grantor's estate if the grantor dies prior to the expiration of the term, is a qualified interest for the specified term.

These amended regulations are intended to bring the regulations into conformity with Walton v. Commissioner (115 T.C.589).

In addition, the regulations clarify that the exception treating a spouse's revocable successor interest as a retained qualified interest applies only if the spouse's annuity or unitrust interest, standing alone, would constitute a qualified interest that meets the requirements of §25.2702-3(D)(3), but for the grantor's revocation power.

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From Holland & Knight Private Wealth Services Publications

Estate Planning When Clients Cross State Lines

The practice of law and estate planning in particular have changed greatly over the last four decades. Forty years ago, it was typical for estate planning lawyers to deal with issues that were confined to one state. There was less mobility in the population, and many clients lived in their home state most of their lives. They did not own property in other states or countries. This has changed. In 1990, the U. S. Census revealed that six million Americans relocated to another state each year. The most recent U. S. Census data available indicate that nearly eight million now move each year to a new state.

Today, clients will have lived in a number of states during their lifetimes. Some clients could have roots in a foreign country.

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