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2023 Heckerling Estate Planning Conference - Notes from Day Three and Four

As anyone who has attended Heckerling Estate Planning Conference will tell you, towards the end of the week the days start to blend and most of us are just looking for a nap and a salad! But we battle on as excellent speakers try valiantly to impart more information into our sugar muddled, sleep deprived brains.

Day three started with a session on special needs planning. There are new, improved ways to take advantage of the stretch IRA for a disabled beneficiary, particularly using trusts. As the speakers pointed out, the Secure Act and Secure 2.0 (regulations have been proposed but not yet finalized) have to get us rethinking planning for disabled family members, especially considering the use of IRAs. For those of us using Achieving a Better Life Experience Act (ABLE) accounts for disabled clients – the age prior to which the disability must be present has been raised to 46.

We also got a crash course in something else to consider while planning for our clients with businesses, especially non-U.S. businesses–unknowingly running afoul of the anti-money laundering statutes. We must make sure that we understand who is the beneficial owner of the reporting company.

The jurisdiction of trusts in addition to choosing and losing trustees was featured heavily on days three and four. Clients are not properly served when the attorney picks the jurisdiction for a dynasty trust based upon whomever they usually use and the state they prefer to or usually work in. Different states offer various benefits — it’s not a one size fits all approach. We would like to add the importance of discussing why a certain state would benefit your client and their trustees. Understanding this can go a long way towards your clients feeling comfortable with that decision for years to come.

Also discussed was that no matter how right a trustee might seem at the present moment, at some point they may no longer be and changing them could be as easy as a modification by consent (make sure you’re drafting for it) through court intervention. Draft wisely!

There were two presentations on charitable gifting on day four of the conference. The biggest takeaway is to be very careful when drafting gift agreements. Requirements and permissible restrictions/directions on gifting are constantly evolving and it is important to provide for societal and legal changes without having to head to court for interpretation or direction.

Some other insights include:

  • Wandry seems to be under attack by the IRS, when using one consider having the excess go to charity.
  • Be careful to re-examine any grantor trust or spousal lifetime access trusts (SLATs) during a divorce.
  • When a grantor trust owns a foreign bank account, the grantor and all of the trustees need to file a Foreign Bank Account Report (FBAR) — remember, it is “ownership or control” over a foreign bank account.
  • The deceased spousal unused exclusion (DSUE) election is available for green card holders.
  • When planning for clients who don’t need their required minimum distribution (RMD), consider having them invest in a qualified longevity annuity contract.
  • If your client is the surviving spouse under a credit shelter trust, and together with that credit shelter trust will ultimately have an estate under that exemption amount, confirm if it makes sense and is possible to make it includible in the surviving spouse’s estate to take advantage of the step-up.
  • Be careful about your U.S. clients with investments outside our borders and your non-resident alien clients investing in the U.S. It is so easy to get tripped up, accidently subjecting themselves to U.S. tax and/or reporting requirements especially when dealing with the situs of the property or any trust holding it.
  • Be very, very careful when putting a plan in place to avoid triggering, or appearing to trigger, the step transaction rules. The IRS is watching, and the area of step transactions is getting a lot of attention. There needs to be an actual, defendable reason for why you are doing something – tax avoidance can’t be it. Timing is critical here.

Heckerling is such an important conference, and there was so much information provided during the sessions that it’s going to take a few days just to absorb it. Please reach out to any of the authors of this piece. We’d love to talk more about what we heard at Heckerling.

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