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Avoiding the High Income Taxes on Accumulation Trusts Resulting from SECURE Act Distributions

Critical Drafting Provisions and Sample Forms, Sec. 678, Sec. 2514(e), New Designated Beneficiary and Applicable Multi-Beneficiary Trust Rules

Note: CPE credit is not offered on this program

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Tuesday, June 2, 2020

Recorded event now available

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This CLE course will be an in-depth analysis of critical techniques for avoiding high income taxes on accumulation trusts. Estate planning authority James G. Blase will provide a detailed discussion of drafting solutions for Section 678 withdrawal powers, trust income that exceeds Section 2514(e) limitations, income issues for designated beneficiaries, special adjustments for retirement assets not distributed consistently, and other vital matters. Professor Blase will also provide sample forms and guidance on tax planning in light of the SECURE Act, the new "Eligible Designated Beneficiary" rules, and the "Applicable Multi-Beneficiary Trust" rules".

Description

The disparate federal income tax treatment between trusts and individuals has grown even more pronounced than it was before the passage of the 2017 and 2019 year-end tax laws. Trusts and estates counsel must recognize the impact of both the 2017 and 2019 year-end tax law changes and properly structure trusts to minimize income taxes.

As a result of the 2017 year-end tax changes, structuring trusts for spouses, descendants, and other beneficiaries to minimize the aggregate federal income tax liability for the trust and its beneficiaries is more crucial than ever. Given that most income generated by trusts is passive income, estate planning attorneys and trustees must be aware of the significant disparity in the federal income taxation of the various types of passive income taxable to trusts versus individuals.

In addition, the recently enacted SECURE Act requires attorneys and advisers to take action to reduce tax burdens and avoid potential tax traps. Also, the 2019 year-end tax law changes regarding stretch IRA and other defined contribution plan benefits (including 401ks) have a substantial impact on trusts and estate planning strategies. Trusts and estates counsel must understand the nuances of these new tax rules and essential drafting techniques for optimum tax planning.

Listen as James G. Blase, CPA, JD, LLM, Principal at Blase & Associates, LLC, and adjunct professor in the Villanova University School of Law graduate tax program and at the St. Louis University School of Law, shares critical drafting solutions for income tax-sensitive trusts under the new tax laws and offers essential planning techniques for estate planners to avoid high income taxes on accumulation trusts associated with the SECURE Act distributions.

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Outline

  1. Impact of the 2017 year-end tax changes
  2. Impact of the 2019 year-end tax changes
  3. SECURE Act tax implications and pitfalls to avoid
  4. Critical trust drafting solutions and sample forms
  5. Best practices and additional considerations for estates and trusts counsel

Benefits

Professor Blase will review these and other relevant topics:

  • The use of Section 678 withdrawal powers over trust income and trustee suspension powers, in order to minimize income taxes and preserve the trust corpus from attack
  • Handling trust income which exceeds the Section 2514(e) limitation
  • Limiting income tax issues for a designated beneficiary under the new law
  • Special adjustments where retirement assets are not distributed consistently
  • Additional drafting considerations for payments of IRAs, etc. to trusts
  • Drafting trusts to achieve optimum income tax basis step-up at the beneficiary's death
  • The "current income taxation" vs. "income tax basis step-up" tradeoff
  • Reducing the tax burdens of the SECURE Act
  • Unscrambling the new "eligible designated beneficiary" and "applicable multi-beneficiary trust" rules
  • Essential drafting techniques and solutions for trusts and estates counsel

Faculty

Blase, James
James G. Blase, CPA, JD, LLM
Principal
Blase & Associates

Mr. Blase is the principal of the law firm Blase & Associates, LLC, in St. Louis, Missouri. He is also an adjunct...  |  Read More

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