Estate Planning Conference Discusses “The 99.5% Law,”


The Heckerling Conference on Estate Planning is the nation’s largest professional gathering in the field of estate planning. The conference examines many areas of interest to estate planning and senior law professionals. He pays special attention to items of current importance.

Last year’s conference was in January 2020, shortly before the start of the COVID-19 pandemic. What a difference the year makes. This year’s conference was scheduled for January 2021 in Orlando. However, it was rescheduled to May 2021 and actually held instead of in-person, due to the pandemic. Also, there has been a significant change in the political landscape since then. Now the Democrats control the White House, the House of Representatives, and the Senate, although the latter two are by very narrow margins.

This year’s conference discussed pending legislation, such as the “99.5% Act” and the prospects for its passage. Many speakers believe that the legislation is unlikely to pass in its current form. They seemed to believe that proposals to increase income tax rates to 39.6% for those with higher incomes were more likely to be approved. They also believed that those who earn more than $1 million at normal income rates would likely be taxed on capital gains.

While the speakers were watching developments closely, I heard them many times say “we’ve seen proposals like this in the past and they haven’t gone anywhere, so we just have to wait and see what happens.” Professor Donaldson said, “Discussing the proposed legislation is a bit like staring at a navel.”

Professor Hoyt discussed the use of CRT to extend an inherited IRA. He concluded that doing so does not make sense when you have taxable property due to the IRD deduction loss listed on the taxable property. He concluded that the extension of the CRT only made sense if 1) the taxpayer had no taxable property, 2) the recipient had a life expectancy of 25 or 30 years, and 3) the CRT was a 5% CRT. For various reasons, usually, the minimum 10% allocated to charity will outweigh the value of deferment gained through the use of a CRT. Of course, to the extent that the client tends to do charity work, using a CRT might make sense anyway.

One of the speakers at Heckerling is one of the nation’s leading experts in retirement planning, Natalie Choate, who spoke about good morning At the National Conference of the American Academy of Estate Planning in April 2020. Academy members who attended its sessions learned all about retirement planning, how benefits can be paid into a fund, and how the SECURE Act affects planning.

At this year’s Heckerling, Natalie Choate discussed the SECURE Act for two hours on the closing day of the conference. The law came out in late December 2019. She gave a nice summary of the law. While she detailed the law at last year’s conference, this year she has had more opportunity to absorb and consider legislation and planning ideas. Also, this year I discussed the last revision of Publication 590-B after SECURE.

Perhaps the biggest surprise in the post was the example on page 12. It indicated that a beneficiary who was a participant’s adult child would take annual distributions based on life expectancy. When the publication was released, this sent property planners into a tailspin since the Security Act instituted a “10-year rule” for most beneficiaries similar to the “5-year rule” in which no annual distributions are required but all assets have to be outside the end of the term. The post seems to indicate that you will also have to get temporary annual distributions. Natalie Chute suggested that the example is completely wrong, as the law clearly states otherwise.

I will provide a more in-depth summary of fast food from the Heckerling Academy Members Conference in my annual educational webinar titled “I heard in Heckerling. If you are a member, I look forward to seeing you at the webinar.

Stephen C. Hartnett, JD, LLM
Education Manager
American Academy of Estate Planning Lawyers, Inc.
9444 Balboa Street, Suite 300
San Diego, CA 92123
Phone: (858) 453-2128
www.aaepa.com

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