Blog - Page 7 of 23 - Taggart Law, LLC

IRA Rollover Gotcha Down?

October 11, 2016 by Gregory Leave a Comment

We all know the rule:

Sections 402(c)(3) and 408(d)(3) provide that any amount distributed from a qualified plan or IRA will be excluded from income if it is transferred to an eligible retirement plan no later than the 60th day following the day of receipt. A similar rule applies to § 403(a) annuity plans, § 403(b) tax sheltered annuities, and § 457 eligible governmental plans. See §§ 403(a)(4)(B), 403(b)(8)(B), and 457(e)(16)(B).

No, actually, we all know that rule stated this way:

You have 60 days to get your distribution from one IRA or retirement plan to another IRA or retirement plan, or you suffer the tax consequences. The “getting to one from another” is called a rollover–typically an IRA rollover.

If you fail to complete the rollover within 60 days, the penalties can be severe, including income and excise taxes, interest, and penalties.

get-out-of-jail-free People do rollovers for a variety of reasons. They retire. They change jobs. They become dissatisfied with their current IRA provider. In those cases and others, there’s a need to change move your retirement money from one plan to another. And typically the move goes smoothly–without a hitch.

Except when it doesn’t. What if the rollover takes more than 60 days? Then what?

Well, the IRS recently issued a new rule, Revenue Procedure 2016-47, that recognizes certain realities: Life happens.

Checks get misplaced
Houses burn down
The Post Office screws up
The fish were biting (just kidding)

Yup. If life hits you in the face, the IRS is going to wipe the tears away and tell you to go back outside and play–that is, they’re going to waive any penalties. There is a catch–of course:

What hit you in the face must be among the many excuses the IRS lists in the Revenue Procedure 2016-47 AND
You must complete the rollover “as soon as practicable” after the intervening reason no longer exists (there’s a 30 day safe harbor, though you can take longer) AND
You must self certify to your new plan administrator or IRA trustee that you meet the requirements of the Revenue Procedure AND
The IRS previously must not have denied a waiver.

The Revenue Procedure provides a handy self-certification letter, the wording of which you must follow almost to the T. You can find the sample letter here, in the appendix of the actual Revenue Procedure. Enjoy the read.

Filed Under: Estate Planning, IRA, Retirement Planning, Roth IRA, Taxes

Enforcing Charitable Pledges: Well, You Said You Would Give Them Money. What Did You Expect?

October 10, 2016 by Gregory Leave a Comment

An interesting piece at Wealthmanagement.com about how and why charities seek to enforce charitable pledges and what theories courts use to accommodate their claims. The first two paragraphs are key:

In August, it was widely reported in the media that Duke University had filed a claim against the estate of Aubrey McClendon, the former CEO of Chesapeake Energy Corp., for payment of nearly $10 million in outstanding charitable pledges, once again raising the question of whether and to what extent charitable pledges are legally enforceable.

States typically rely on one of three theories to find that a charitable pledge is enforceable. A pledge may be enforceable as a bilateral contract, as when a donor pledges a sum of money in exchange for the charity’s naming a building after the donor.¹A second theory treats a charitable pledge as a unilateral contract. A donor offers to make a gift in the future that’s accepted when the charity incurs a liability in reliance on the offer.²When the charity provides no consideration for a contract, a pledge may be enforceable under the doctrine of promissory estoppel, an equitable remedy applied when a charity would suffer damages if the pledge weren’t enforced.

The rest of the piece is worth a read, especially if you’re interested in how the law is developing or in why charities should care about those developments.

Filed Under: Charitable Giving, Contracts, Estate Planning, Gift Tax, Wealth Transfer

I’m a Fan, of Both Nino and Kagan

October 7, 2016 by Gregory Leave a Comment

Scalia was possibly the best writer on the Supreme Court–ever. Kagan, almost his political polar opposite, will likewise rank as one of its best writers. These are generous, kind thoughts and a worthy example to emulate when we speak of someone we may otherwise disagree with.

Filed Under: 2nd Amendment, Attorneys, Bill of Rights, Constitution, Quote for the Day, Supreme Court, What I've Been Reading Today Tagged With: Antonin Scalia, George Mason University

Retirement Dreams

October 7, 2016 by Gregory Leave a Comment

Bloomberg offers up the stories of three couples who retired early–as in at age 40. If that’s a path you’d like to follow, have a read.

Filed Under: Retirement Planning, What I've Been Reading Today

How to be Happily Ever After Even After

October 6, 2016 by Gregory Leave a Comment

Naomi Cahn, a law professor at George Washington University, has some good advice for those who’ve recently parted ways with their spouse. You can read her advice in her piece “Protect Those You Love in Divorce, and Remarriage,” posted at Slitopia. If you find yourself a member of the recently divorced, I recommend you read it.

Filed Under: Blended Families, Divorce, Estate Planning, Stepfamilies, Trusts, Wills

DAPTs: We’re #10 (Wyoming) or #12 (Utah)! Or Should Everyone Move to Nevada?

October 6, 2016 by Gregory Leave a Comment

So attorney Steve Oshins publishes annual state rankings of virtually all things trusts. Want to know where your state’s decanting statute ranks? Go here. Interested in establishing a so-called dynasty trust? Look here to see what your state offers–if anything. How does your state treat non-grantor trusts for income tax purposes? Well, some states do better than others, let me tell you. Nevada and South Dakota, for example, are #1 or #2 for both decanting and dynasty trust statutes and have no state income tax.

Which brings me to the subject of this post: Domestic [as opposed to foreign] Asset Protection Trusts or DAPTs. Oshins ranks them as well. How do Utah and Wyoming–the two states I practice in–stack up? Well, the headline gives away the answer. As of April 2016, sixteen states offered some form of a DAPT, including Oklahoma, Virginia, and West Virginia–the three new kids on the block. Wyoming ranks 10th on that list, Utah 12th. Sounds better if you say 10th and 12th out of 50, doesn’t it, especially since 34 states have no DAPT statute on the books. For the record, Nevada and South Dakota rank #1 and #2 among DAPT states.

Which brings me to an important question: If you’re interested in protecting your assets from predators–slip and fall creditors, for example, with a court judgment in hand–should you set your domestic asset protection trust up using your own state’s DAPT statute, if it has one, or should you use another state’s possibly more debtor-friendly statute? No surprise here: The answer is not clear.

Without getting too far into the weeds, let’s take a look at few comments that indicate there may be a bump or two in the road ahead for those who may decide to establish a DAPT using another state’s trust laws. First off is the Utah Supreme Court in the recent Dahl v. Dahl case (2015). Mrs. Dahl sued Dr. Dahl to get access to marital assets in a supposedly irrevocable trust established under Nevada law (a DAPT trust we assume, though that’s not clear from the case)–remember, Nevada purportedly has the best DAPT statute on the books.

One question before the court was whether to interpret the trust according to Utah or Nevada law–something the law refers to as a conflicts or choice of law question. The court decided to go with Utah law, saying:

Under Utah choice-of-law rules, we will generally enforce a choice-of-law provision contained in a trust document, unless doing so would undermine a strong public policy of the State of Utah. (emphasis added)

The strong public policy in this case was protecting the divorced spouse. And Utah’s law did just that. As the court said,

. . . to the extent that the Trust corpus contains marital property, Utah has a strong interest in ensuring that such property is equitably divided in the parties’ divorce action.

Who knows what the outcome would have been had the person suing been a slip and fall judgment creditor rather than an aggrieved spouse? Would the court of have interpreted the trust according to Nevada law, in which case, the party suing might have lost? That’s the problem: who knows?

Next up is the Uniform Laws Commission, which adopted amendments to the Uniform Fraudulent Conveyances Act in 2014, changing the name of the act to the Uniform Voidable Transactions Act and adding “a new Section 10 that provides that the law of an individual’s residence is to be the governing law concerning whether such individual has made a voidable transfer,” according a report by Leimberg Information Services. How does that apply to DAPTs? Well, again according to Leimberg,

The revisions to the comments [to the proposed law] erroneously state further that a transfer to a self-settled spendthrift trust [a DAPT in other words] is a voidable transfer per se and, therefore, that an individual who lives in a state that does not recognize asset protection trusts (“APTs”) cannot protect assets by creating an APT in a state that does recognize APTs . . .

Did you get that? According to Leimberg, residents of non-DAPT states can’t use another state’s DAPT statutes to protect their assets. Now, the comment doesn’t have the force of law–it’s just a comment after all. But it does give us some idea of how at least some legal eagles are thinking about asset protection trusts. They don’t like ’em.

All this is not to say that persons wishing to set up a DAPT using the law of another state should not consider doing so. However, it bears repeating that those who choose to do so should be careful, crossing all the T’s and dotting those I’s. That Dahl case I referred to above, the one where the Utah ex-wife got her share from the Dr.-husband’s Nevada-based DAPT? Despite the fact that the trust had “Irrevocable” in its name, that the trust was established under Nevada law, and that it was clearly intended to be a DAPT, the court said the trust was revocable. Why? Because the court wanted to protect the spouse and because a scrivener’s error–an error by the attorney who drafted the trust–gave them an avenue do so. Here’s what the trust said:

Trust Irrevocable. The Trust hereby established is irrevocable. Settlor [the Dr. in this case] reserves any power whatsoever to alter or amend any of the terms or provisions hereof. (emphasis added by the court)

Of course the attorney meant to say “Settlor reserves no power whatsoever,” and the court knew that, else why would the trust say it was irrevocable both just a few words before and in the title and in other places in the document as well? But the court needed an excuse and because a T wasn’t crossed and an I wasn’t dotted, the trust failed to do its duty.

Simple drafting errors aren’t the only thing that can get a DAPT into trouble, but the fact that something so minor can have such huge consequences, should be warning enough to take care of the big issues as well. We’ll discuss those larger issues in another post.

Filed Under: Asset Protection, DAPT, Trusts

Gift and Estate Planning Coupons May Worth Less After This Election

September 8, 2016 by Gregory Leave a Comment

When you give money or property to someone while you’re alive, you make a gift. If that gift is beyond a certain size, you will also have to pay a gift tax on it. When die, your money or property will go to those whom you name as your beneficiaries in your will or trust. But yet again, if your estate is beyond a certain size, your estate will have to pay a tax on it, this time an estate tax.

Now Uncle Sam has, of late, been pretty generous**. He’s given each of us coupons* to pay that tax–up to a certain amount. Currently, each of us has a lifetime coupon worth $5,450,000; that is, each of us can give away (or devise or bequeath upon our death) $5,450,000 without having to pay any gift or estate tax. And if we’re married, we can combine these “applicable exclusion amounts” so that as a couple we can give away twice that amount, or $10,900,00 without any gift or estate tax being assessed.

It gets better. In addition to the amounts I just mentioned, each of us can make annual gifts of $14,000–an annual coupon, if you will–to as many people as we want, family, non family, friends, and enemies. Every year! And if we’re married, we can combine our gifts. That’s $28,000. Gift tax free.

And if you finally do have to pay an estate or gift tax? The top rate is 40%.

All that was to tell you this: If Hillary Clinton is elected, she’s promised to reduce the applicable exclusion amount–the large lifetime coupon–to just $3,500,00 for an individual, $7,000,000 for a married couple. That’s almost a $4 million drop from present levels. I’m unsure at this time if she had any plans to reduce the annual gift coupon.

Donald Trump wants to repeal the estate tax.

FWIW, this is not a political post, or at least I don’t intend it to be. Just the facts. And that’s that.

*In addition to the two “coupons” discussed in this post, there’s a third, the unlimited marital deduction, which allows spouses to pass property between one another without tax consequences. Ultimately, the last to die may have an estate tax bill to pay.

**Generous is being generous. We’re talking about money that is not Uncle Sam’s to begin with, but humor me here.

Filed Under: Estate Tax, Gift Tax, Taxes

One Word: Neat – Silencer Shop’s Kiosks for NFA Trust Paperwork

September 7, 2016 by Gregory Leave a Comment

I wrote about Silencer Shop’s kiosks a few months ago. Here’s a video that demonstrates how they work. The title of the video is a bit misleading. You don’t set up or buy an NFA firearms trust on the Kiosk, rather you initiate the government-required paperwork–your Form 4, for example– so you can use your trust to purchase an NFA item.

Filed Under: 2nd Amendment, 41F, Firearms, Gun Trusts, NFA Firearms, NFA Trusts

Want Your 2nd Amendment Rights Restored? There’s Hope.

September 7, 2016 by Gregory Leave a Comment

Professor Eugene Volokh posted today about a decision handed down today by the 3rd Circuit Court of Appeals that answered the question on at least a few people’s minds: If I was convicted of a felony and if I’ve served my sentence, cleaned up my life, and stayed out of trouble, might I have my 2nd Amendment rights restored?

The short answer is no. The longer answer involves more than a few maybes. But if you’ve been a good boy or girl and if your felony conviction didn’t involve violence, your chances are better than zero.

The decision itself is quite long and Volokh’s discussion of it is rather complicated, so I won’t try to summarize either beyond what I’ve written above. But if you’re really interested, here’s a link to the case. If you’re just kind of interested, here’s a link to Volokh’s post. Enjoy.

Filed Under: 2nd Amendment, Expungement, Gun Trusts

Oh! Not Again! The Need for Ancillary Probate

August 17, 2016 by Gregory Leave a Comment

As we’ve discussed elsewhere, in an almost knee jerk way, people want to avoid probate. And for some good reasons. But what if I told you there were a possibility your heirs might have to go through two or even three probates? It’s true. If you own titled property, especially real estate, in another state than the one you live and die in, your personal representative is probably going to have to file probate papers in all the states where that property is located. And with that comes the added expense of additional attorneys and such.

It’s called ancillary probate, ancillary because its subsidiary or supplementary to the larger probate, the one in your state of residence where presumably most of your property is located. You can avoid ancillary probate a variety of ways. If the out-of-state property is real estate, you could simply make sure that another person is on the deed with you with rights of survivorship. That way, when you die, the property passes automatically to that person, without probate. Or you could title the property using a so-called transfer on death deed, which are allowed in a number of states. Or you could hold the property in a revocable or living trust.

The trust approach is my preferred method because, unlike the other methods, this one makes it easier to direct the property to where you want it to go once the property is held in the name of the trust.

Filed Under: Ancillary Probate, Estate Planning, Probate, Trusts, Wealth Transfer