Fraud detection experts are advising against abbreviating 2020 when dating documents. For example, "1/7/20" could be altered to read "1/7/2019" or "1/7/2021." The article at www.cnn.com/2020/01/04/us/dont-abbreviate-2020-date-fraud-trnd/index.html is helpful.
A common estate planning tool is to leave an IRA to a spouse and then grandchildren. This allows the payments to be made over the lifetime of a grandchildren after the death of a spouse. This is known as "stretch" IRA planning. A provision attached to the current federal appropriations bill would limit stretch IRA planning to 10 years. The bill is expected to be passed and signed this week. This will mean leaving retirement benefits to spouses and then children, rather to spouses and then grandchildren. The required beginning date for distributions will be increased to a age 72.
The 2017 tax law increased the federal combined estate and gift exclusion to $11,400,000. The means that a taxpayer may make lifetime gifts and have a taxable estate of up to $11,400,000 without paying federal gift or estate tax. Lifetime gifts reduce the estate tax exclusion dollar for dollar. For example, if a taxpayer makes lifetime taxable gifts of $10,000,000, he would have a remaining estate tax exclusion of $1,400,000. On January 1, 2016, the estate and gift tax exclusion is scheduled to decrease back to the pre-2017 level of approximately $5,600,000.
It was unclear if a taxpayer would be subject to estate tax if prior to 2026 the taxpayer made gifts that exceed $5,600,000 and the taxpayer died after January 1, 2026. On November 22 the IRS issued regulations that make clear that gifts made before 2026 that exceed $5,600,000 will not cause a taxpayer to be subject to estate tax if a taxpayer dies after January 1, 2026. For example, if a taxpayer makes lifetime taxable gifts of $10,000,000 and dies on February 1, 2026, he will not pay estate tax on $4,400,000 ($10,000,000 minus $5,600,000).
The bottom line is that the temporary increase in the federal combined estate and gift tax exclusion is truly "use it or lose it."
On November 6, the IRS issued a listing of inflation adjustments for 2020. These adjustments included (1) the estate and gift tax exemption for 2020 will be $11,580,000 and (2) the annual gift tax exclusion will remain at $15,000.
Current law requires taxpayers to take minimum distributions from their retirement accounts commencing at age 70 and 1/2. The minimum distribution is calculated using life expectancy tables. Currently, a person who takes his first minimum distribution would use a life expectancy of 27.4 years. The would result in the first minimum distribution being equal to 1/27.4 of the balance of the retirement account. The revised regulations would increase taxpayers' life expectancy. For example, the first minimum distribution would be based upon a life expectancy of 29.1 years. The result is that required minimum distributions would be reduced and taxpayers will retain larger amounts in their retirement plans to account for the possibility of living longer.
The U.S. Supreme Court refused to review New York's rules for taxing individuals who work in New York but only live there part time. Two cases were involved, each of which involved intangible income from the sale of a closely held business located in New York. The individuals in both cases had a residence in New York but lived primarily in Connecticut. The individuals paid taxes on the income to both Connecticut and New York. New York refused to allow the individuals to claim a New York income tax credit for the taxes paid to Connecticut because the income was from economic activities in New York. Thus, the individuals were double taxed on the income. The taxpayers argued unsuccessfully that New York was discriminating against interstate commerce.
The Internal Revenue Service and its Security Summit partners today warned taxpayers and tax professionals about a new IRS impersonation scam campaign spreading nationally on email. Remember: the IRS does not send unsolicited emails and never emails taxpayers about the status of refunds.
The IRS this week detected this new scam as taxpayers began notifying firstname.lastname@example.org about unsolicited emails from IRS imposters. The email subject line may vary, but recent examples use the phrase "Automatic Income Tax Reminder" or "Electronic Tax Return Reminder."
For more information go to https://www.irs.gov/newsroom/security-summit-warns-of-new-irs-impersonation-email-scam-reminds-taxpayers-the-irs-does-not-send-unsolicited-emails
New YOrk case may go to the supreme court; could have major impact on connecticut residents who work in New york
The article below has an interesting article on a potential US Supreme Court case. If the Court agrees to review the case, the decision could have a major impact on Connecticut residents who work in New York or otherwise derive income from New York.
The Connecticut legislature has passed a version of the Uniform Trust Code, which includes a variation of the Uniform Trust Code, the Uniform Directed Trust Act, the Qualified Dispositions in Trust Act, and an extension of the rule against perpetuities to 800 years. The Governor is expected to sign the bill
The Uniform Directed Trust Act outlines the powers and obligations of parties administering directed trusts, which are trusts in which a party other than a trustee has a power over the trust's administration.
The Qualified Dispositions in Trust Act sets up a framework for creating self-settled asset protection trusts.
The change to the rule against perpetuities will extend the time that a Connecticut trust can last from 90 years to 800 years.
The changes will be effective January 1, 2020.
These are very exciting changes to Connecticut law. Once the changes are effective, they will permit a number of planning opportunities for Connecticut residents that previously were unavailable.
Connecticut lawmakers have passed a budget that increases taxes on restaurant meals and reduces the pass-through business tax credit which was designed to protect Connecticut taxpayers from the elimination of the federal deduction for state and local taxes. In addition, the state sales tax of 6.35% would apply to digital downloads of movies, music, books and video games. There is also a 2.25% tax on homes that sell for more than $2,500,000.
Last year, the legislature passed a law that was designed to help Connecticut taxpayers offset the loss of the federal deduction for sale and local taxes. The law imposed a tax on pass through entities which was offset by a corresponding personal income tax credit. The tax imposed on the pass-through entity would be deductible on the taxpayers’ federal income tax returns. The budget reduces the personal income tax credit.
The increased tax on restaurant meals consists of a 1% sales tax surcharge.
The proposed 2% capital gains surtax on high income taxpayers is not in the budget.
Mr. Hendel has been practicing wealth preservation planning for over thirty years.