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Heard at Heckerling 2022 - Day 4

We think the best way to describe day four of the Heckerling Institute on Estate Planning conference would be technically dense. It was exhausting! But another day of fantastic speakers and interesting topics.

  • Martin Hall discussed a topic dear to many of our clients which is how to get a federal tax deduction for charitable giving to non-US charities. He highlighted the use of “American Friends of” Organizations (AFOO) being a great vehicle to achieve that goal and still fall squarely into the US guidelines, provided care is taken to make sure that the AFOO qualifies. It’s more than just a name! He rounded out his session by discussing US charitable gift treaties with Canada, Denmark, France, Germany, and Sweden.

  • There were two sessions on business succession planning which is an area that our firm gets involved with very often. The first session, presented by Joshua E. Husbands, focused on the non-technical parts of succession planning. Joshua talked about the family business, it’s construction and transition, leading into the common elements to all family business succession plans but how each situation is unique. A fascinating topic as it often involves family members who are in the business and others who are not. Joshua made the comment, “is equal always fair? Is fair always equal?” He expressed a sentiment that we very much agree with, business and family are NOT the same thing however they are often intertwined. Finally, when handling a business succession matter make sure there is collaboration of the advisors; a lawyer who understands both business and trust and estate law, an equally skilled CPA familiar with business, estate and income taxes, the insurance provider, and possibly others.

  • The second session was a panel discussion and was very technical in nature. 682 pages of materials which the panel was given 90 minutes to cover. The panel discussed how the tax rules are impacted by the type of entity used (partnerships/LLC’s; Sub S corporations; and C Corporations), and how one can successfully convert from one to another while being aware of the tax, legal, and business issues. They discussed how to structure a sale of a business and the differences between selling the assets or selling equity. Some other areas mentioned in either the discussion, or the materials, included the death of a partner or shareholder; how to structure buy-sell agreements (use the cross-purchase method); how life insurance should be handled; deferred compensation plans (they are a liability to the entity and that could impact loan covenants); and how all of it impacts estate and gift planning.

  • Charles Reed discussed the area of concern when doing trust modifications and decantings of irrevocable trusts. With 35 states having adopted all or parts of the Uniform Trust Code, there is now a substantial amount of statutory law to go with a great deal of common law. For most states, we know how to effectuate the modification or decanting, but real care must be taken to make sure that the fiduciary has the authority and more importantly, that the potential tax ramifications are fully understood before doing anything.

  • A panel of Richard Nenno, Matt Brown, Toni Ann Kruse, Karin Prangley, and Vincent Thomas covered state income taxation of trusts, an area filled with peril because certain states (particularly CA) try to pull non-resident trusts into their tax regimes based upon the residence of a fiduciary or beneficiary. When planning trusts and preparing income tax returns, the residence of all fiduciaries, beneficiaries, and contingent fiduciaries and beneficiaries must be considered.

  • The final session, “How to Marry a Millionaire,” included no tips, much to the chagrin of the attendees. Instead, Jonathan Lasley, Suzanne Tucker Plybon, and Alex Tanouye discussed the interplay between right of election, community property, and modified community property states and the use of pre-nups, post-nups, and waivers to overcome such laws. You may also be able to use named beneficiaries and trusts to overcome such laws, in certain jurisdictions. Finally, consider domicile carefully whenever planning for a client and explain that a change in domicile requires a fresh look at any existing plans.

Tomorrow is a short day featuring the inimitable Natalie Choate covering the new proposed regulations under the SECURE Act. Be sure to check back to hear what we heard at Heckerling.

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