Recent developments in estate planning: Part 2

November 9, 2020

By Justin Ransome, CPA, J.D., Tax Insider

EXECUTIVE SUMMARY
  • The IRS issued taxpayer-friendly regulations on how to calculate the applicable exclusion amount when calculating estate and gift taxes once the higher exemption amounts sunset after 2025.
  • The Tax Court held that the value of a farm a decedent transferred to a family limited partnership was includible in the decedent's estate because the decedent retained the possession and enjoyment of the farm until his death and his transfer of part ownership to the FLP lacked a substantial nontax purpose.
  • The Ninth Circuit concluded that the decedent's annuity payment from a grantor retained annuity trust (GRAT) was a "substantial present economic benefit" and the value of the property she transferred to the GRAT was includible in her gross estate at the time of her death.
  • The IRS ruled privately that a trust modification would not cause the trust to lose its grandfathered status as exempt from generation-skipping transfer tax, even though the period of trust was extended beyond its original termination date.
  • In another letter ruling, the IRS ruled on the tax effects of a reformation of a trust by a state court that was undertaken to make the operation of the trust reflect the settlor's original intent for it.
  • The IRS issued inflation-adjusted amounts that are of interest to estate tax practitioners, including the unified credit against the estate tax for 2020.

This article is the second of two parts of an annual update on recent developments in trust, estate, and gift taxation. The first part covered trust and gift tax issues. This second part covers developments in estate and generation-skipping transfer (GST) taxation, as well as inflation adjustments.

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