Category: Trusts & Estates

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains significant changes to the 2020 required minimum distribution rules applicable to IRAs, 401(k)s, 403(b)s, and other similar Qualified Retirement Plans (collectively “QRPs”).

The CARES Act waives required minimum distributions from IRAs and QRPs for calendar year 2020. This change can result in income tax savings for owners of traditional IRAs and QRPs that are affected by this change.

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A common problem in many estates is the executor’s failure to promptly settle an estate or make distributions to the beneficiaries. Delays in settling an estate can have many causes, including inattention by an executor, failure to take action where required, and mismanagement. In some cases, the delays are a sign of more serious problems, such as self-dealing or an intent to deprive the beneficiaries of their inheritance.

If you are a beneficiary of an estate, you have a right to compel the executor to settle an estate and make distributions to you.

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Although there is near universal acceptance of the importance of gifting, the manner in which gifts are made can have a major impact for your beneficiaries. This is particularly true if the recipient is under 21 years of age, and it can be an acute issue if the recipient is a minor under the age of 18.

Outright gifts to children and grandchildren have their own drawbacks, including limited control over the gifts made, exposure to creditors, divorce, and other issues involving the beneficiary. For these reasons, trust options should be considered to afford greater protection and structure for your beneficiaries.

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The recent decline in asset values may make gifting a more attractive estate planning technique for many individuals, particularly if you are considering gifts of stock or other non-cash assets. Gifting of assets to a trust for your children and grandchildren can be an important part of an estate plan, and one that should not be overlooked. The reduced value of many non-cash assets allows more of these assets to be placed into a trust without exceeding the annual gift tax exclusion amount or the Federal Gift Tax Exemption. If these assets later appreciate in value, the subsequent increases will further enhance the value of the gift to the beneficiaries.

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On April 1, 2020, the Department of Treasury and the IRS announced that Social Security beneficiaries who are not typically required to file tax returns will not need to file an abbreviated tax return to receive a stimulus payment. Instead, the IRS will use the information of the Form SSA-1099 and Form RRB-1099 to generate stimulus payments to Social Security recipients who did not file tax returns in 2018 or 2019. Recipients will receive these payments as a direct deposit or by paper check, in whatever way they normally receive their benefits.

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On March 20, 2020, Treasury Secretary Steven Mnuchin announced that the due date for the filing of income tax returns will now be July 15 instead of the usual April 15. Secretary Mnuchin announced this on Twitter. As of 12:30 pm EDT, the Internal Revenue Service had not posted anything on their website.

At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.

— Steven Mnuchin (@stevenmnuchin1) March 20, 2020

Notice 2020-17, issued by the Internal Revenue Service earlier in the week, had extended the payment date to July 15, but not the filing deadline.

Secretary Mnuchin also encouraged those taxpayers who expect a refund to file quickly, so they can receive their refund once the return is processed.

Click here to read the prior update from March 19, 2020.

As part of the President’s emergency declaration, the Secretary of the Treasury was instructed “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency.” With that direction, the Internal Revenue Service has issued Notice 2020-17, which extends the due date for the payment of Federal income taxes from April 15, 2020, to July 15, 2020. This includes tax payments that would be due for the 2019 tax year, as well as quarterly estimated income tax payments that would be due April 15, 2020, for the 2020 tax year. The total tax amount that can be deferred is a maximum of $10 million for each Subchapter C corporation, and $1 million for all other taxpayers.

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A do-it-yourself estate plan can lead to a number of unintended consequences as demonstrated by a Florida Supreme Court case, Aldrich v. Basile. In this case, Ms. Ann Aldrich wrote her own Will on a pre-printed legal form. Ms. Aldrich specifically listed each item of her property in her Will, including the account numbers for her financial accounts. The Will left each item of property to Ms. Aldrich’s sister, Mary Jane Eaton; and, if Ms. Eaton did not survive, then Mr. James Aldrich (her brother) was designated as the alternate beneficiary.

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