The Donald’s Impact on Estate Planning: Good or Bad?

Jonathan G. Blattmachr & Martin M. Shenkman, two major gurus in the estate planning field, seem to think a Trump administration will lead to the need for most of us to engage in some planning:

The election of Donald J. Trump as President, along with a Republican-controlled House and Senate, may lead to the most radical changes to the estate tax since it was first enacted.

I’ve only read a brief abstract from the article at this link. I’ll report back after I’ve read the actual piece. (I’m not a fan of the online viewing option for this story. Hard to read.)

And You Thought the IRS was out to Get You

Good news from the land of taxes. The IRS audit rate of individuals (.07%) and businesses (.05%) fell to a 10+ year low due to budget cuts.  Even high income taxpayers can feel the love:

Audits declined even for the high-income households that have been an enforcement priority for the IRS. In 2016, the agency audited 5.83% of returns with income over $1 million, down from 9.55% in 2015 and marking the lowest audit rate for that income group since 2008.

 

The 4th Circuit Takes on the 2nd Amendment

The 4th Circuit Court of Appeals, the circuit responsible for hearing appeals from Federal District Courts in the Virginias, the Carolinas, and Maryland, just ruled on a case involving the regulation of semi-automatic assault weapons. The Court sided with the state of Maryland, upholding its ban on such weapons, “reasoning”:

that the banned assault weapons and large-capacity magazines are not protected by the Second Amendment. That is, we are convinced that the banned assault weapons and large-capacity magazines are among those arms that are “like” “M-16 rifles” — “weapons that are most useful in military service” — which the Heller Court singled out as being beyond the Second Amendment’s reach. See 554 U.S. at 627 (rejecting the notion that the Second Amendment safeguards “M-16 rifles and the like”). Put simply, we have no power to extend Second Amendment protection to the weapons of war that the Heller decision explicitly excluded from such coverage.

As Charles W. Cooke, writing in National Review, argues,

As Judge Traxler’s dissent pointedly establishes, the majority achieved this transformation by contriving “a heretofore unknown ‘test,’ which is whether the firearm in question is ‘most useful in military service.’” In effect, this “test” is designed to permit judges to determine that any weapon they might dislike is unprotected by the Second Amendment and can therefore be prohibited with impunity. Forget that Heller contains its own explicit tests. Forget the “common use” standard. Forget “dangerous and unusual.” There’s a new kid in town, and he’s coming for your rifles.

What counts as “most useful in military service” under this rubric? Well . . . everything, theoretically. “Under the majority’s analysis,” the dissenters contend, “a settler’s musket, the only weapon he would likely own and bring to militia service, would be most useful in military service — undoubtedly a weapon of war — and therefore not protected by the Second Amendment.” Indeed, “the ‘most useful in military service’ rubric would remove nearly all firearms from Second Amendment protection as nearly all firearms can be useful in military service.” A standard semi-automatic handgun is plausibly “most useful in military service.” So, too, is a hunting rifle. So is a sword. Perhaps the Fourth Circuit would like to strip the constitutional protection from those weapons, too?

We’ll see if this opinion stands once Judge Gorsuch takes his seat on the Supreme Court. (One only has to remember Ted Kennedy haranguing Judge Bork to realize that, qualified as he is, Gorsuch’s path to that seat is fraught with more haranguing.)

To C or LLC? That’s Today’s Question

I just read an interesting post over at The Startup Law Blog, a post written six years ago. The writer lists “12 Reasons For A Startup Not To Be An LLC.” The key word in that post is “startup,” and key thing to understand is the author’s audience, largely captured in the following paragraph from the post:

For tech or growth companies planning to follow the traditional path of regular and ongoing equity grants to employees, multiple rounds of financing, and reinvestment of as much capital into the business as possible, with the goal of an ultimate sale to a big, maybe public, company in exchange for cash and/or stock, LLCs are typically not the way to go.

If that paragraph describes you, then maybe the C corporation should be the entity of choice for you.

As for the C corp, the author makes another important point. We’ve all heard that one reason–if not the major reason–to avoid the C corp is the possibility of double taxation. Well, maybe:

The bogeyman that you will hear about most frequently is the “double tax” bogeyman. You will be told—don’t form a C Corporation because you will be subject to a double tax.

What is meant by this is that if the C Corporation makes money, it will pay tax on that money. And if it pays dividends to its shareholders, they will pay tax on the dividends. This is true. And so if you anticipate your business being a cash cow, and immediately generating so much money that you will earn more than you can reasonably pay out in salary to the owner executives, then maybe an LLC is a good choice for you. But for most growth businesses, whose goal is to raise capital, reinvest capital, grow fast, grant equity incentives, and ultimately be acquired or go public, a C Corporation is the way to go.  For these businesses, the double tax bogeyman rarely appears, and most exits are structured as one layer of tax stock sales. (Emphasis supplied)

In the end, the real lesson, make that two lessons, from the blog post is that one size doesn’t fit all and that there are lots of questions to answer on the road to choosing an entity for your new business venture.

Will you know the answers? Better yet, do you know the questions?

Just Leave It Alone?

As many will recall, then candidate Trump promised to eliminate the estate tax. That was then. This is now–he’s the President. What will he actually do? Will he also eliminate the estate tax’s two siblings: the gift tax and the generation skipping tax? No one knows, though many people care, especially those who preach tax fairness.

Given that married couples currently have to be worth almost $11 million dollars before  the estate tax kicks in–it’s more complicated than that, but still–eliminating the estate tax is going to help only the very, very wealthy. And maybe that’s a bad (or a good) thing.

I’m here to argue for the advisor. Estate planning attorneys, life insurance and investment advisors, CPAs and financial planners. I’m betting that each and every one of them agree with the following:

Because the estate tax generates a meager 0.005 percent of annual tax collections, according to I.R.S. figures, it generates far more political debate than federal revenue. And among many tax planners, the calls aren’t so much for reform as for stability, or at least a period of benign neglect.

“Just leave it alone so we can plan,” Mr. Jenney said. “But every administration seems to want to put their own twist on the estate tax.”

When We Last Looked in on Prince

As readers of this blog will remember, I posted a short piece about the news that Prince died without a will. To quote from that very brief article:

Something tells me this will neither go smoothly nor end well.

Well, look who’s a genius: Lawyers battle for control of late pop star Prince’s estate.

Veteran entertainment attorney L. Londell McMillan and CNN political commentator Van Jones were close advisers to Prince at different times in his life. Following the reclusive artist’s drug-overdose death in April, the two have ignited a family feud among his six known heirs—a sister and five half-siblings—over issues including the singer’s legacy, a memorial concert and the lawyers’ own conflicts of interest.

. . .

The development comes nearly a year after Prince’s death and offers a window into McMillan’s vision for how best to manage the estate—a view that differs in some respects from that of Jones. (emphasis supplied)

Actually, it doesn’t take much of a genius to see problems in the future when money is at issue–lots of it, in this case. I learned that years ago when I worked as a bank teller for a short time in a management training program I was in. I made a small mistake–25 cents if I recall correctly–when I entered the current balance in the customer’s passbook savings book. You would have thought that I’d just robbed Fort Knox.

Lesson? Be a real prince and have an attorney draft you a will–at least a will. And if you don’t want people peering into your estate through a “window,” have your attorney draft a revocable living trust as well. Unlike with a will (or an estate like Prince’s with no will), what goes on inside a trust is private.

Estate Planning Seminar at Pleasant Grove Library

I’ll be presenting a seminar on DIY — Do It Yourself — Estate Planning at the Pleasant Grove Library on Wednesday, March 8, 2017 at 7 PM. Come an enjoy the discussion. The address is 30 E Center St, Pleasant Grove.

If you have a question about wills, trusts, and other aspects of estate planning, maybe I can answer it.

Farm and Ranch Transition Conference–University of Wyoming College of Law

The Rural Law Center at the University of Wyoming College of Law is sponsoring the Farm and Ranch Transition Conference on March 3, 2017, a Friday, in Laramie. It’s free. The conference is open to the public. Those interested may attend either in person or via live streaming video. The  program sounds interesting.

Quote for the Day: Lincoln has Something to Say about Today

From Lincoln’s Address before the Young Men’s Lyceum of Springfield, Illinois, a speech well worth reading in full:

At what point shall we expect the approach of danger? By what means shall we fortify against it? Shall we expect some transatlantic military giant to step the ocean and crush us at a blow? Never! All the armies of Europe, Asia, and Africa combined, with all the treasure of the earth (our own excepted) in their military chest, with a Bonaparte for a commander, could not by force take a drink from the Ohio or make a track on the Blue Ridge in a trial of a thousand years.

At what point, then, is the approach of danger to be expected? I answer, If it ever reach us it must spring up amongst us; it cannot come from abroad. If destruction be our lot we must ourselves be its author and finisher. As a nation of freemen we must live through all time, or die by suicide.

 

24 Blogs to Read Beside Mine

I just stumbled upon this list of 24 [supposedly] Must-Read Blogs for Entrepreneurs I can’t vouch for them because I haven’t read them all, but many of the names behind the blogs are  recognizable: Mark Cuban, Penelope Trunk, Scott Adams, Guy Kawasaki, and others, so go take a look. If you’re thinking of or are in the middle of starting a business, you should be reading a lot about how to make things work.

Two that I’m going to be reading from now on are Duct Tape Marketing and Seth Godin’s blog (that’s Seth in the photo to the left). I need to become a better marketer of my own business, and  well, Seth Godin’s a genius.

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