Day 3 at the annual Heckerling Institute on Estate Planning, much like the two preceding days, was filled with important information and updates in the estate planning universe. It was the second day of breakout sessions and Citrin Cooperman’s Trust and Estate Practice team was well represented at all four afternoon sessions, which covered a wide variety of topics.
Here are some of the highlights from Day 3:
The morning session involved a very interesting discussion from Robert H. Sitkoff regarding ESG investing, an investment strategy that gives deference to the environmental and social impact of a company’s products and the practices or the governance structure of a firm. It is critical for fiduciaries to understand how the implementation of an ESG investment strategy coexists with the fiduciary’s duty of loyalty and duty of prudence. Any fiduciary implementing an ESG strategy should be sure to document the decision analysis as evidence of compliance with prudent investor rules and the duty of loyal administration.
A presentation given by Julie Miraglia Kwon regarding Generation Skipping Transfer (GST) Tax followed. She went into great detail in the area of gift splitting. As a general rule, when a spouse is the beneficiary of a trust, any gifts to that trust will be ineligible for gift splitting. A gift-splitting election can still be made on the 709, but it will not apply to any gifts to that trust. (There are exceptions). If you are disqualified from gift splitting, you cannot split for the purposes of allocating your GST exemption. In addition, beware of the Estate Tax Inclusion Periods (ETIPs) especially when trusts such as GRATs pour into GST trusts. Consideration should be given to electing to opt out of the automatic allocation of GST exemption at the start of the ETIP period in these situations. Also discussed were retroactive allocations of GST exemption when a non-skip beneficiary predeceases the transferor. Interesting fact: inclusion ratios should be rounded to the nearest thousandth (.001). Lack of consistency in this regard can cause problems with GST exemption allocations.
Bernard Krooks, Robert Fleming, and Tara Anne Pleat led a discussion regarding the representation of clients with diminished capacity. The largest generation in American history is moving into their 70’s and many Americans are living longer and well into their 80’s and 90’s. By 2050, the over-65 population is expected to increase to about 73 million (currently 55 million). Over six million Americans have been diagnosed with Alzheimer’s disease. Estate planners face numerous challenges in dealing with these clients and their families.
A lively question-and-answer session was held with Steve R. Akers, Samuel A. Donaldson, Sarah Moore Johnson, and Carlyn S. McCaffrey serving on the panel. It was mentioned that although there are some proposals to raise the capital gains rate for individuals, there has been no mention of this change for trusts. It seems unlikely that this would be overlooked in any final bill as it would create a huge incentive to transfer assets to trusts.
Michelle Graham and Michael Rosen-Prinz followed with a comprehensive discussion regarding hot topics in international tax and estate planning as well as considerations for non-U.S. citizen spouses. Generally speaking, bequests to a non-citizen surviving spouse are not entitled to a marital deduction. There are exceptions and the main exception is when a qualified domestic trust (QDOT) is utilized. The presenters discussed these in great detail, particularly the drafting requirements, and resulting estate tax ramifications. The presenters stressed (and this has been a major theme of the week) keeping flexibility in these estate plans.
A very relevant and interesting discussion on maintaining confidentiality and dealing with ethical challenges while working from anywhere was led by John F. Bergner, Jeff Chadwick, and Lauren J. Wolven. CPAs, while not bound by privilege the way attorneys are, must maintain ethical standards and confidentiality. CPAs must also be aware of potential conflicts of interest when dealing married couples or dealing with multiple family members when acting as trustees for beneficiaries with competing interests.
Check back in tomorrow for our recap of the 4th and final day...