In the midst of the most critical period for potential changes in taxation in many years, WhaleRock asked Atty. Mark Iacono to write a piece on taxes and planning for High Net Worth individuals and families. Mark has been known to our firm for many years, and we were confident he would have strategies in mind that our clients and visitors to our blog would find helpful. His essay provides action ideas for year end tax planning.
3. Create a lifetime creditor shelter trust for a spouse. The greatest emotional hurdle for clients is relinquishing control of assets during their lifetimes. This is especially true when the client relies on the economic benefit (i.e. the income) derived from the assets. To address this concern, a spouse can create a trust for the benefit of the other spouse that provides for mandatory distribution of income. The trust is irrevocable so the assets will be outside the settlor’s estate along with any future appreciation. The income generated by the trust is paid to beneficiary spouse to be used by the marital couple. The trust can also provide for the discretionary distribution of principal, but this would only occur as a last resort. It is important to note, however, that when the beneficiary spouse dies, the settlor spouse is not a beneficiary and will lose any benefit of payments that were previously made to the deceased spouse. It is possible for spouses to create such trusts for each other, but the documents should not be identical or the IRS may disregard the transaction under the “reciprocal trust” doctrine.
In the midst of the most critical period for potential changes in taxation in many years, WhaleRock asked Atty. Mark Iacono to write a piece on taxes and planning for High Net Worth individuals and families. Mark has been known to our firm for many years, and we were confident he would have strategies in mind that our clients and visitors to our blog would find helpful. His essay provides action ideas for implementation before year-end.
Congressional gridlock combined with a contentious presidential election has virtually guaranteed higher tax rates for the majority of Americans in 2013. Several pieces of income and estate tax legislation are set to expire on December 31st, but any legislative proposal to address the issue remains tied up in committee. In addition to the increased tax burden, the Obama Administration has sought to eliminate or significantly reduce the effectiveness of certain estate planning techniques utilized by practitioners for years. As a result, estate planning attorneys have been scrambling to help clients plan accordingly. Although we are in the last quarter of the year, there is still time to take action.
Amid this tax season, it is important to remember that Uncle Sam is paying close attention to foreign athletes competing on U.S. soil. Depending on the extent of the athlete’s endorsements and activities in this country, the additional tax burden can be several hundred thousand dollars.
Just ask professional golfer Retief Goosen after his battle with the IRS last year over the characterization and source of his endorsement income. His case, which is under appeal, illustrates the tax difficulties facing global athletes. Although the court did not provide strict guidelines for determining the tax treatment of endorsement income, the decision gives some indication as to how the IRS may treat these cases in the future. Read the full article at the Sports Business Journal
Courtesy of Wall Street Journal
Retired firefighters and police officers in Central Falls, R.I., agreed to cut their pensions and support a plan that would likely give bondholders everything they are owed by the struggling city.
The unusual arrangement is being watched closely by municipal-bond investors and government officials across the U.S. because it could be cloned in an effort to keep borrowing costs from spiraling higher in municipalities near financially shaky cities and counties.
The deal also could spare Central Falls from a costly legal battle with retirees, while giving bond investors more clarity about the security of their investments.
Central Falls, with a population of 19,300 and a severely underfunded pension plan, filed for bankruptcy protection in August. The city has about $20.5 million in bond debt and $47 million in pension liabilities, according to state officials.
As of Monday December 20, 2011, 82 of about 130 Central Falls workers had agreed to support the pension cuts, which will total 25% over the next five years for many recipients, said Matthew McGowan, a lawyer for about 100 police and fire retirees. A minimum of 75 retirees had to support the proposed agreement… Read Full Article at the Wall Street Journal
By MARY WILLIAMS WALSH
Published: December 19, 2011
Retired police and firefighters from Central Falls, R.I., have agreed to sharp pension cuts, a step thought to be unprecedented in municipal bankruptcy and one that could prompt similar attempts by other distressed governments.
If approved by the bankruptcy court, the agreement could be groundbreaking, said Matthew J. McGowan, the lawyer representing the retirees.
“This is the first time there’s been an agreement of the police and firefighters of any city or town to take the cut,” he said, referring to those already retired, who are typically spared when union contracts change. “I’ve told these guys they’re like the canary in the coal mine. I know that there are other places watching this.”… Read the full article at the NY Times