The second day at the Annual Heckerling Institute on Estate Planning was another busy day filled with informative discussions. It was the first day of breakout sessions which allowed participants to attend focused discussions on several different topics.
Here are a few highlights from Day 2:
The day started with a discussion from Christopher Hoyt on a very interesting topic: ways to stretch an inherited IRA using a Charitable Remainder Trust (“CRT”). Christopher discussed naming a CRT as an IRA beneficiary to avoid the ten-year liquidation rule under the SECURE Act, while benefitting both charity and family. Caution - this planning strategy is not a great opportunity in situations where you have a taxable estate or beneficiaries under the age of 30. Since this is not the best option for everyone, Christopher also discussed non-charitable options for inherited IRAs. Two additional points to note - lifetime Roth IRA conversions may make sense, and spousal IRAs offer better creditor protection than an inherited IRA.
Next up was Carol Harrington, who discussed the risks and rewards of retroactive revisions to trust agreements. Other topics discussed included mistakes made by clients and advisors, a change in circumstances, and tax mistakes. A discussion about remedies and tax consequences followed. This session focused on the theme for this year’s conference - “proceed with caution.”
Gideon Rothchild, Melissa Langa, and Daniel Rubin led a powerful discussion on asset protection. While asset protection planning is considered to be a relatively new concept, asset protection has always been the traditional objective of the estate planner. Here is an interesting fact: 19 states have enacted legislation providing spendthrift protection (essentially, creditor protection) with respect to trusts. Asset protection trusts can be established in foreign countries or domestically. Additional topics discussed included hybrid asset protection and special power of appointment trusts (SPATs). Expect to see a rise in asset protection trusts as an integral part of estate planning going forward.
Diana Zeydel and Todd Angkatavanich did not disappoint with their discussion on strategic estate planning in a year of uncertainty. They discussed how to move planning forward and how to unwind estate planning already in place if tax proposals were enacted. This session started with a detailed review of the tax proposals from Sanders, Pascrell, and Van Hollen. Caution: what works under one proposal may not work under another. Some of the suggested planning ideas discussed were a sale for an installment note, formula clause gifts, zeroed –out GRATs, QTIP eligible trusts, preferred partnerships, general power of appointment marital trusts, SLATs, up–generation planning, down-generation planning, Alaska trusts, and SPACs. One recommendation - if you anticipate making gifts this year, put entities in place now just in case you need to move assets around quickly if tax rules change later in the year.
During a fascinating recap of fiduciary litigations from the past year, in response to a question, speaker Dana Fitzsimons commented that he has seen a steady rise in fiduciary litigation over the past 15 years. Part of this may be because Baby Boomers are holding the greatest accumulation of wealth in history, and there has been a steady increase in reported elder abuse. Of concern are situations where previous distributions have left beneficiaries without financial recourse against the trusts. These beneficiaries are more frequently looking to the trust’s professionals for compensation, through malpractice claims. While these claims are rarely successful, it’s enough to keep a T&E practitioner up at night!
Moving forward to Day 3...
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