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The Wealth & Wisdom Blog

Information on Estate Planning, Estate and Trust Administration and Unique Asset Planning

Irrevocable Gift Trusts and Annual Exclusion Gifting

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The late comedian Bob Newhart was famous for his fictional one-sided telephone comedy routines. In the spirit of the Newhart one-sided telephone call, imagine the following one-sided call, heard from the perspective of a father calling his adult son.

Hi Son.  Yes, Dad here, how are you?

Great.  Good to hear.  Hey, listen, my attorney has told me that I need to send you a letter about this trust. 

Right, the trust I told you and your sister about at Christmas.   The letter will say that you can take out some of the cash from the trust. 

Except, yes, well, we don’t really want you to.

Yes, I know, but, well, we don’t really want you to actually take the money out.

Right, even though we are sending you a letter telling you that you can take it out.

Uh-uh. Uh-huh.  Yes. 

You said you want to know what other clear directions and wisdom I can impart to you today? 

In this month’s update, I explain the use of withdrawal rights within an irrevocable trust and provide factors to consider in deciding whether to use withdrawal rights in an irrevocable trust.

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Escape Hatches for Estate Taxes

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The Veritage Law Group recently enjoyed an “escape room” experience as part of our annual Christmas Party.  Our group “escaped” the room after successfully solving the various riddles.  While none of us are particularly adept at such riddle games, we regularly advise clients attempting to “escape” estate taxes on behalf of their children at death.

In this month’s advisory update, I provide a brief update on 2025 tax rules, and three useful strategies for escaping federal and Minnesota state estate taxes at death.

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Thanksgiving Dinner Conversation

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Broaching political topics at Thanksgiving with your family may not lead to great holiday cheer. In comparison, a discussion centered around your own death—that is, your estate plan—may be far more palatable.  In this month’s advisory update, I provide a few general recommendations about what information that you and your clients could share with your family about your estate plan.

Information To Share Now

If you were a client of our firm, we would likely encourage you to share the following information with your family:

Information To Withhold

In contrast, you might withhold information in certain circumstances.

  • If you have concerns about a child’s personal career progression, you might withhold disclosure of your personal finances. A future financial inheritance should not be an impediment towards a child’s goals of self-sufficiency.
  • If you have made disproportionate gifts among your children or their families, you might withhold disclosure, at least for now, of any such disproportionate gifts. We recommend that your estate plan expressly direct how any disproportionate lifetime gifts should be treated at your death.

Benefits of Communicating the Plan

At least three key benefits result from clearly communicating your plan during lifetime.

  • Legal Certainty: First, you would be certain that the estate plan will not be subject to a legal challenge.2 If you have adequately communicated your estate plan to your children at a time when you have no evidence of undue influence or diminished capacity, you will have a “bullet proof” legal plan.
  • Desired Asset Distribution Format Among Children: Second, adequate communication allows for easy and prompt changes to your estate plan when life changes. A plan for the division of the family cabin can easily be reconsidered when a son announces that he and his wife have bought their own family cabin, or a daughter takes a new job and moves from Minnesota to New York.
  • Clearance of Emotional Baggage: Third, adequate communication creates an opening for children to respond to you, now, over the Thanksgiving dinner table, and not respond with animus towards their siblings, later, after your death and over your coffin.

Unlike the drama that surrounds political candidates and elections, your estate plan should be free from unnecessary drama.

Wisconsin Estate Planning

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Minnesota Vikings fans know that no lead against the Green Bay Packers is safe. The Vikings nearly blew their 28-0 lead this past weekend, prevailing by a score of 31-29.  Bragging rights over the rival Packers will certainly be short-lived, as the Vikings and Packers will play again on December 29th.  As the holder of a Wisconsin law license, I have been honored to work with many Wisconsin residents, who agree to work with me even after my disclosure of my Vikings loyalties.

In honor of the Vikings-Packers rivalry, in this month’s update I share three unique elements of Wisconsin estate planning:

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Disclaiming Inherited Assets

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One benefit of being a volunteer coach on your teenager’s sports team is that you realize that it’s not just your teenage son or daughter who has the know-it-all attitude; it is ubiquitous among the teenage demographic.  Just as our teenage children, in their less-than-laudable, give-me-a-break dad, eye-rolled responses, seem to look right through us parents as if we are invisible, the use of a legal disclaimer allows a beneficiary to be legally ignored for estate or trust administration purposes.

In this month’s update, I summarize the use of legal disclaimers for inherited assets.

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At Least as Rapidly: Inherited IRA Assets to Children

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Our family has been amazed by the athleticism currently on display in the 2024 Summer Olympic Games.  While the precise movements differ between events, one attribute common among them is that their legs or arms (or both) move much quicker than mine.  To win a medal, an athlete must move at least as rapidly as their Olympic competitors.

On July 19th of this year, the IRS released final regulations on the taxation of inherited individual retirement accounts and employer plans (“Inherited IRA Accounts.”)  These regulations were intended to clarify the taxation of Inherited IRA Accounts following the 2019 Secure Act. In these regulations, the IRS applies a principle analogous to Olympic competition—Inherited IRA Accounts must be withdrawn and taxed following death at least as rapidly as if the original account owner were still alive.

In this month’s update, I apply the “at least as rapidly” principle to three hypotheticals involving the receipt of Inherited IRAs.1

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Coordinating Life Insurance Policies with Your Estate Plan

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Not often does the United States Supreme Court, our nation’s highest court, rule on estate planning matters.   Last month, however, the Supreme Court ruled on a case, Connelly v. United States, involving the proper calculation of the estate tax liability when life insurance is paid to a business.  In a unanimous decision befitting the recent July 4th national holiday, the Supreme Court ruled that the company’s receipt of life insurance increased the value of the company ownership interest, and therefore increased the estate tax liability.  God Bless America.

By reason of the U.S. Supreme Court’s treatment of the estate tax issue, in this month’s update I offer a reminder of the importance of coordinating the ownership and beneficiary designations on life insurance as part of a comprehensive estate plan.  While life insurance should always be coordinated with estate planning documents, this coordination is particularly important in the following three situations:

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Follow On Family Gifting

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“A boat is a hole in the water into which one pours money.” 1 One of my sons recently celebrated his 14th birthday.  To celebrate his own day of birth, my son cut himself a piece of birthday cake, the size of which could have fed a small village, and consumed the entire piece in one sitting.  We have adjusted our grocery budget accordingly.

In the estate planning and gift planning space, certain gifts made to a charity or a family member are sometimes called “gifts that eat.”  Once a child becomes the owner of a gifted asset, the gift will “eat into” the child’s personal expense budget.  In this month’s update, I briefly summarize the legal and tax issues of “follow-on” family gifting—that is, gifts made to support previous gifts given.

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The Five Vehicles for the Transfer of Assets

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My family recently purchased a new vehicle.  To organize all the variables factoring into our decision, my wife Heather created a spreadsheet.  The variables included fuel efficiency, trunk size, headroom, and cost.  While my two sons lobbied extensively for a larger, sportier vehicle, Heather and I were not quite ready to “Die With Zero,” and so we opted for a medium-sized SUV instead.

In this month’s update, I briefly summarize the five separate legal means (“legal vehicles”) for the transfer of an asset at death, and the importance of categorizing one’s assets in one of these legal vehicles.  An asset is transferred by the first of the following five legal vehicles:

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Corporate Transparency Act

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In a few weeks, many of us will complete online NCAA Basketball Tournament brackets for office or family pools.  My team selections are generally not based on any knowledge of a team’s merits, but instead on their geographic location, conference membership or, if my daughter is looking over my shoulder at the time of my selections, her appreciation for a team’s mascot or colors.  All told, it will take me no less than 5-10 minutes to complete the NCAA bracket.  Of course, I don’t anticipate winning prizes based on my “mascot and colors” approach.

A few weeks ago, I completed a Beneficial Interest Ownership Report.  As an owner of a “Registered Company,” I am required to report my interest in accordance with the Corporate Transparency Act.1  In my case, I gathered the necessary information to report on the federal website (“Fin Cin”) ahead of time.  It took me about 10 minutes to complete the online Beneficial Ownership Report on the Fin Cen website, about as long as the completion of my NCAA Basketball bracket. 2

In this month’s update, I briefly describe who is required to file a Beneficial Interest Ownership Report and what information needs to be gathered to complete the Beneficial Ownership Report.

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This blog is intended to provide the reader with assistance in understanding various estate planning and trust estate planning concepts. In an effort to keep things as digestible as possible, I have tried to keep each blog post as short as possible.  As a result, an astute reader would see that I often fail to address various exceptions to rules or principals, or how various principles relate to one another.  There are a number of moving parts associated with various planning structures summarized on this blog.  In order to achieve your estate planning objectives, it is important that you receive the assistance of an experienced estate planning attorney.  Otherwise, your family may be in a worse position for your having attempted these strategies on your own.  Until we form an attorney-client relationship, you should be aware that your visiting this blog has not formed an attorney-client relationship, and none of this information can be taken as legal advice.  To contact my office about scheduling an appointment, contact us at 612-465-0080.