Highlights From the Notre Dame Tax & Estate Planning Institute

The 49th Annual Notre Dame Tax & Estate Planning Institute was held September 20 through September 22, 2023, at Century Center in South Bend, Indiana. The Notre Dame Tax & Estate Planning Institute presented a range of topics for estate planning professionals, including practical pointers that will assist practitioners whether their clients are high net worth individuals or more moderate net worth clients. This article offers some highlights from the Institute.

Basis of Assets in Trust. When a grantor transfers an asset to a grantor trust, the transaction is a non-recognition transaction. Some commentators have suggested that rules that apply result in allowing a step-up in basis for assets held in a grantor trust upon death of a grantor. The Internal Revenue Service issued Rev. Rul. 2023-2, which indicates that there is no basis adjustment under Section 1014 for property held in a grantor trust upon the death of a grantor.

Consider How to Protect Vulnerable Adults From Elder Abuse. When working with a vulnerable client, a practitioner must consider applicable ethical duties in determining the appropriate course of action. Some estate planning considerations for prevention include being proactive in suggesting co-trustees and co-attorneys-in-fact. Advise clients to have accounts monitored for fraud. Discuss incapacity planning in detail with clients when working with them on estate planning issues.

Crops as Charitable Contribution. In Furrer v. Commissioner, T.C. Memo. 2022-100. Taxpayer transferred crops to two CRATs. The crops were corn and soybeans. The taxpayers were worse off after they went to appeals court than before. The court noted that petitioners were engaged in the farming business, and the corn and soybeans grown on their farm constituted ordinary income property. Thus, any charitable contribution deduction would be limited to their cost or adjusted basis in the crops. That basis was zero.

GRAT Planning. GRATs are an excellent tool for reducing the value of an estate for estate tax purposes. Valuation of assets contributed to GRATs is an important aspect of successfully using GRATs. GRATS rely on beating the IRS assumptions on growth. Strategies for using GRATs include using extremely short terms for GRATs with high pay-outs. Consider a 99 year GRAT. Use re-GRATting strategies.

Valuation for GRATs. In CCA 201939002, the IRS took the position that when valuing a gift of publicly traded stock transferred to a GRAT at the time when the company was involved in merger discussions, the appraisal must consider the potential merger. In CCA 201252018, a GRAT was disqualified altogether because the taxpayer used an undervalued appraisal. When funding GRATs, review the rules regarding appraisals and be sure that the appraisal will hold up under IRS scrutiny.

Charitable Planning With Non-Charitable Trusts. Given the current structure of the income and estate tax regimes, using non-grantor trusts that were not designed for charitable gifting becomes a desirable tool for charitable gifting. Trusts reach the highest income tax bracket at $14,450. If the trust is in a high tax bracket and all beneficiaries are in a high bracket as well (or it simply isn’t desirable to make distributions to beneficiaries), strategies to distribute income to charities from a non-charitable trust can reduce income tax burdens. If the trust allows the trustee to make charitable distributions, using charitable strategies is fairly simple. If a trust does not contain provisions providing the ability to make charitable distributions, a Trust Protector might be able to add a charitable beneficiary. A distribution can be made to a beneficiary who can then make a charitable contribution. This is not always as tax efficient as making the charitable distribution from the trust to the charity directly, but it does work when there are no other options. When designing new trusts, consider allowing for distributions to charity, building in the ability to disclaim to charity, and using powers of appointment in a manner that allows charitable giving.

About the Author

portrait of Mary E. Vandenack

Mary E. Vandenack, J.D., ACTEC, CAP®, COLPM®, Accredited Estate Planner® (Distinguished) Nominee

Mary is CEO, founding and managing member of Vandenack Weaver LLC in Omaha, Nebraska. She is a highly regarded practitioner in the areas of tax, trusts and estates, private wealth planning, asset protection planning, executive compensation, business and business succession planning, tax dispute resolution, and tax-exempt entities. Mary also has expertise in mental health law and professional licensing. Her practice serves businesses and business owners, executives, real estate developers and investors, health care providers, companies in the financial industry, and tax-exempt organizations. Mary is a member of the American Bar Association Real Property Trust and Estate Section where she serves on the Planning Committee and Council. She is also a member of the American Bar Association Law Practice Division where she currently serves as Vice Chair. Mary has been named to ABA LTRC Distinguished Women of Legal Tech, received the James Keane Award for e-lawyering, and serves on ABA Standing Committee on Information and Technology Systems. Mary is a frequent writer and speaker on tax, benefits, asset protection planning, and estate planning topics as well as on practice management topics including improving the delivery of legal services, technology in the practice of law and process automation. At conferences, Mary will also often teach a yoga or mindfulness class. Mary hosts a podcast: Legal Visionaries.