Qualified Charitable Distributions from an IRA:
The prior, expired tax law allowing for qualified charitable distributions from IRA’s has been revived. This law allows individuals over 70 ½ to exclude from gross income up to $100,000 in Qualified Charitable Distributions from an IRA. This requires a distribution from an IRA directly to a public charity. If done correctly, the individual can exclude the IRA withdrawal from gross income, although no further charitable deduction is allowed. This is a better tax result than claiming the withdrawal as ordinary income and then taking the charitable deduction, as given some other tax limitations the deduction never completely offsets the amount claimed in income even though the whole amount was donated to charity. This change is beneficial for those individuals who would like to donate their required minimum distributions for instance.
We have been reporting in the past few years of changes in the estate tax law and the increase in the estate tax exemption amount to $5,000,000 as of 2011, which is indexed for inflation, and stands now at $5,430,000. For many clients, this larger exemption amount has lessened the concern for estate taxes and often can allow for a less complex trust. One tax planning option is the use of Portability, which is the ability of the surviving spouse to utilize the unused estate tax exclusion amount of the deceased spouse. The IRS has now issued final regulations which apply to decedents dying after June 12, 2015. The regulations confirm that to claim the deceased spouse’s unused exclusion amount (DSUE amount) an executor (not necessarily the surviving spouse) must timely file an estate tax return. As an estate tax return would typically not otherwise be required, this can place a burden on families and the executor to prepare and file a rather complex return. Unfortunately the IRS has not opted to issue a more simplified estate tax return form to claim the election. Whether to file the estate tax return and claim the DSUE amount is a complex discussion that should be part of the trust administration process at the death of the first spouse. Please feel free to contact Sugai & Sudweeks if you have questions about estate taxes or the impact of portability options on your estate planning.
Same Sex Couples – Right to Marry and Tax Implications:
With the Supreme Court ruling that the Fourteenth Amendment requires a state to issue marriage licenses and recognize marriages performed in other states for same-sex individuals, these couples now have tax planning options to consider that were not previously available. All provisions in the code that previously only applied to husband, wife or heterosexual spouses, will now apply to all individuals lawfully married under state law to someone of the same sex. This may necessitate the filing of amended income tax, estate tax and gift tax returns depending on the year of marriage. Property taxes should also be examined to determine if refunds are applicable.
* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.