IRS Provides Tax Relief for Victims of Hurricanes Harvey, Irma, and Maria

Posted in Insurance, IRS

The IRS has announced that “affected taxpayers” in areas of Florida, Georgia, Puerto Rico, Texas, and the U.S. Virgin Islands designated as “covered disaster areas” are eligible for the postponement of time to file returns, pay taxes, and perform other time-sensitive acts.

Taxpayers in the categories below constitute “affected taxpayers”:

  • Individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area;
  • Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed are in the covered disaster area; and
  • All relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Affected taxpayers will be given until Jan. 31, 2018 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns.) that have either an original or extended due date occurring on or after Aug. 23, 2017, and before Jan. 31, 2018. Certain fees, penalties, and other administrative costs associated with these filings may be waived so long as the time-sensitive actions are completed on or before Jan. 31, 2018.

Of particular note is information released from the IRS relating to retirement benefits and pension plans. The IRS announced 401(k)s and similar employer-sponsored retirement plans will allow taxpayers the opportunity to make loans and hardship distributions to affected victims and their family members. The IRS is relaxing many of its procedural and administrative rules to allow taxpayers to support those affected by the storms; however, certain employer-sponsored retirement plans will not be waiving the 10 percent early withdrawal penalty.

Lastly, there is additional relief for affected taxpayers who have sustained losses on certain property where insurance or other means of reimbursement are not provided to cover the damage. These losses, better known as casualty losses, include certain loss arising from fire, shipwreck, or in this case storm, in a federally declared disaster area. Taxpayers have the option to claim a casualty loss for this year or the immediate prior year, on their federal income tax return. In order to determine the amount of loss that is deductible under these provisions, taxpayers should look to the fair market value of their property before and after the storm damage. The cost of repairs to property damaged, and not covered by insurance or other means, is acceptable as evidence of the loss of value by the IRS if the taxpayer can show the repairs are necessary to restore the property to its condition immediately prior to the storm, and the amount spent is not excessive or for more than the damage done. Those taxpayers claiming losses should specify the related Hurricane when filing, so as to simplify and expedite the processing of these returns and any potential refunds. Publication 547 provides information on how to determine the amount of the casualty loss.

See IRS webpage “Help for Victims of Hurricanes Irma and Maria” for more information. See also:


*Not admitted to the practice of law.

State Law on After-born Children Leads to Revocation of a Will

Posted in Estate Planning, Intestate Succession, Revocable Trust

State statutes play an essential role in drafting estate planning documents, especially a will.  In some states, the birth of a child after the execution of a will may result in the revocation of the will, if not carefully drafted.  A recent Georgia case, Hobbs v. Winfield, 2017 WL 4017935 (Ga. 2017), emphasizes the importance of having competent counsel take state-specific laws into consideration when drafting a will.

In 1989, Alphonzo Paul Hobbs executed a will naming his mother as the sole and his grandmother as successor beneficiary.  Several years later, Alphonzo had three children out of wedlock.  Alphonzo passed away in 2007.  When a petition to probate his will was filed, the probate court determined that the validity of the will was in question and thus, appointed guardians ad litem for his three children and appointed a County Administrator to the estate.  The probate court determined that according to Georgia law, the will made “no provision in contemplation of future children,” and therefore, found that because of the birth of Alphonzo’s children years after the execution date of the will, the will was revoked, Alphonzo was deemed to have died intestate, and the three children are his legal heirs.  The beneficiaries named in Alphonzo’s will filed an appeal, arguing that the will was made in contemplation of future children because the future-born children were part of the definition of Alphonzo’s dependents who would be entitled as a matter of law to certain survivor benefits described in the will.  The Supreme Court of Georgia disagreed and found that this general reference to Alphonzo’s dependents in his will was insufficient to show that he contemplated future-born children, and thus, Georgia law invalidated the will due to the birth of Alphonzo’s children after its execution.

Several states have enacted statutes that automatically revoke a will, in whole or in part, if the testator’s family circumstances change in certain ways after the making of the will.  These laws vary greatly from state to state. As the Hobbs case reflects, it is important to consult with your estate planning advisor to understand how state laws may affect the validity your will and the distribution of your estate.

For more information on intestate succession, click here.

*Admitted to the practice of law in Florida.

Greenberg Traurig Recognized in 2017 Chambers High Net Worth Guide

Posted in Firm News

Global law firm Greenberg Traurig, LLP was recognized in the second annual Chambers High Net Worth (HNW) Guide for its impressive depth and national coverage in its Private Wealth Services team.

In the HNW Guide, attorneys and practice areas are ranked by placement in “bands,” with Band 1 being the highest placement. Attorneys can also be designated as a “Senior Statesman” or “Star Individual.” Greenberg Traurig received the Band 2 nationwide ranking for Private Wealth Law. Diana S.C. Zeydel, global chair of the Private Wealth Services Practice and shareholder ranked nationally in Band 1. Additionally, four other attorneys in the firm were ranked nationally in the guide: Linda B. Hirschson, Private Wealth Services Practice shareholder and New York Estate Planning Group chair; Lawrence H. Heller, Tax shareholder; Norman J. Benford, Private Wealth Services Practice National Chair Emeritus and shareholder; and Jonathan M. Forster, Tax & Business Group shareholder.

To read full press release, click here.

IRS Announces October 2017 Applicable Federal Rates and 7520 Rates

Posted in Applicable Federal Rates (AFRs), Income Tax, Internal Revenue Code, IRS

The Internal Revenue Service (IRS) publishes a monthly update to the applicable federal rates (AFRs) and 7520 rates.

Planning professionals and their clients should take note of fluctuations in these rates and be mindful of planning opportunities that come with rate changes.

The AFR is calculated by the IRS under Section 1274(d) of the Internal Revenue Code (the Code) and is used for many purposes. One of its most common applications is to establish the minimum interest rate that can be charged on an intra-family loan without income or gift tax consequences. These “safe harbor rates” are dependent upon two factors: (i) the term of the loan and (ii) the frequency of compounding of interest.

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Greenberg Traurig’s Northern Virginia Office Hosts The Washington Women’s Leadership Initiative September Luncheon

Posted in Event, Firm News

GT’s Northern Virginia Women’s Initiative was proud to sponsor and host the Washington Women’s Leadership Initiative September Luncheon! Highlighting The National Women’s History Museum President and CEO Joan Bradley Wages, the event featured some great discussions.

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Change is on the Horizon for State Estate Tax Laws

Posted in Estate, State Tax

In 2017 there are 18 states, plus the District of Columbia that impose an estate or inheritance tax on decedent residents.  And although state estate and inheritance taxes may provide significant revenue to states that impose them, certain states such as Delaware have decided that the estate tax revenue fails to compare to the loss of revenue caused by wealthy residents moving to more tax-friendly states.  As a result, a number of states are acting to repeal state estate and inheritance tax laws (or weaken them by increasing individual estate tax exemption amounts).

Estate Tax Repeal.

  • Delaware will repeal its estate tax after Dec. 31, 2017.
  • New Jersey will repeal its estate tax after Dec. 31, 2017, but will retain its inheritance tax.
  • Indiana repealed its estate and inheritance tax as of July 1, 2017.

Increased Estate Tax Exemption

  • The District of Columbia will increase its estate tax exemption amount for decedents who pass after Dec. 31, 2017, to conform with the federal estate tax exemption ($5.49 million in 2017)
  • The Maryland estate tax exemption will increase to $4 million in on Jan. 1, 2018, and will equal the federal exemption amount on Jan. 1, 2019, at which time the Maryland estate tax exemption also will become portable between spouses.
  • New York’s estate tax exemption of $5.25 million will increase to equal the federal exemption on Jan. 1, 2019.
  • The estate tax exemptions in Hawaii and Maine already match the federal estate tax exemption and other states such as Minnesota, Rhode Island, and Washington State also are gradually increasing their individual estate tax exemption amounts.

For a resident of a state that is ushering in new estate tax laws, it is important that existing estate planning documents be reviewed by an attorney, as updates to tax-planning provisions may be necessary.

Millennials Need Estate Plans Too

Posted in Estate Planning

Life has changed.  The millennial generation is marrying older and having children later, often due to an increased focus on education, career success, and life experiences before settling down.  As a result, many of the milestones that prompt individuals to engage in estate planning – a spouse, children, accumulation of wealth, poor health – are not occurring until much later in life.  Without an obligation to support a spouse and children, or identify a guardian, there may not appear to be a need for a will, life insurance, or any other estate planning; however, “unattached” millennials may have more of a need than they realize.  Consider a cohabitating partner who would be without any inheritance rights in the absence of a will, parents who would have no access to an incapacitated adult son’s medical information without a written HIPAA authorization or advance medical directive; and what about beloved pets – who will care for them?  The reality is that everyone, even millenials, needs to think about estate planning. 

Incapacity.  An estate plan involves planning for both death and disability. Anyone, regardless of age, should consider that incapacity could occur at anytime and, without the appropriate documents, loved ones would be without access to medical records or control over medical treatment. An advance medical directive (or a similar state-specific document) may designate your wishes in the event of a terminal condition or permanent vegetative state, as well as appoint an individual who will make health care decisions for you if you cannot make them yourself.  Also, without an advance medical directive in place, a non-spouse partner or, if none, a parent or other family member may not be informed, let alone have the ability to make decisions for you, in the event of a medical emergency.

Digital Assets.  In the age of social media, smartphones, cloud storage, and a general push toward paper reduction, digital assets (e.g., email, photos, social media accounts, text messages, and cloud files) are central to millennial life.  Accordingly, special attention needs to be paid to access and management of these assets in the event of death or incapacity.  A growing number of states have passed statutes that pertain to a fiduciary’s ability to access digital assets, which provide for the designation of a person under a durable power attorney or will who may have access to and control of digital assets.  Even without these documents, many account carriers allow you to name a survivor or other individual who may have control over or limited access to your account in the event of death or incapacity.

Pets.  While naming a guardian for a child is a common incentive for many parents to execute an estate plan, it may be less likely for pet owners to consider that an estate plan may designate what happens to a pet when they pass.  With millennials having children later in life, pet ownership among the generation is fairly commonplace, thus plans for care of beloved pets is an important reason to consider an estate plan.  At a minimum, a pet owner should consider designating who will care for or adopt the pet and, depending on state law, funds also may be set aside for care of the pet.

Access to and Distribution of Assets.  For unmarried couples, in the absence of a durable financial power of attorney, a long-term partner may not have any rights to access property of a disabled partner and, in the absence of a will, state intestacy statutes will not protect property rights of partners as they do spouses.  Under a durable financial power of attorney, a designated agent may have access to and control over individually owned assets during the owner’s incapacity which, among other powers, may enable an individual to continue to pay a mortgage or rent on behalf of an incapacitated partner.  By executing a will, a partner, regardless of marital status may be the designated beneficiary of assets, whereas state intestacy status may only give survivorship rights to a spouse by marriage. 

Asset Titling and Beneficiary Designations.  Appropriate asset titling and beneficiary designations also may ensure that unmarried partners have continued rights over property of an incapacitated or deceased partner.  With respect to bank accounts, if titled as joint accounts with rights of survivorship, a partner will have continued access to the account, which also will pass to the survivor by operation of law.  Alternatively, a pay-on-death form or transfer-on-death form (for bank accounts), or beneficiary designation form (for retirement accounts or life insurance) also may be signed which designates how an asset will be paid when the account holder or owner passes.  Some states also permit real property to pass at an owner’s death according to a transfer on death deed recorded during the owner’s lifetime.

A millennial’s lifestyle may not appear to necessitate an estate plan, yet when considering the absence of statutory protection for unmarried couples and the types of assets that millennials often hold, an estate plan is just as (if not more) important than for previous generations.

IRS Announces September 2017 Applicable Federal Rates and 7520 Rates

Posted in Internal Revenue Code, IRS

The Internal Revenue Service (IRS) publishes a monthly update to the applicable federal rates (AFRs) and 7520 rates.

Planning professionals and their clients should take note of fluctuations in these rates and be mindful of planning opportunities that come with rate changes.

The AFR is calculated by the IRS under Section 1274(d) of the Internal Revenue Code (the Code) and is used for many purposes. One of its most common applications is to establish the minimum interest rate that can be charged on an intra-family loan without income or gift tax consequences.  These “safe harbor rates” are dependent upon two factors: (i) the term of the loan and (ii) the frequency of compounding of interest.

For these purposes:

  • Demand notes and notes with a term of three years or less are considered short-term obligations,
  • Notes with a term of more than three years but less than nine years are considered mid-term obligations, and
  • Notes with a term of more than nine years are considered long-term obligations.

The 2017 AFR rates are as follows:

The 7520 rates are used to calculate the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest. They are calculated by the IRS under Code Section 7520 (hence, the name 7520 rates) and are always 120% of the AFR for mid-term obligations with semi-annual compounding.  The 7520 rates for 2017 are as follows:

Rates are typically published by the 20th day of each month and provide planning opportunities for certain estate planning vehicles which are interest rate sensitive.  For example:

  • Lower rates are generally preferable for intra-family loans, grantor retained annuity trusts (GRATs), installment sales to grantor trusts and charitable lead annuity trusts (CLATs).
  • Higher rates are generally preferable for qualified personal residence trusts (QPRTs) and charitable remainder annuity trusts (CRATs).

As rates continue to change, advisors and clients should maintain an open dialogue so that clients can take advantage of any planning opportunities tied to increasing or decreasing rates.

Greenberg Traurig’s Seth Entin Quoted in Accounting Today on Recent IRS Ruling

Posted in Firm News, IRS

Greenberg Traurig Shareholder Seth Entin was recently quoted in Accounting Today for an article on a recent IRS Ruling in the U.S. Tax Court. In July, the U.S. Tax Court rejected a long-standing Internal Revenue Service ruling and held that when a non-U.S. person sells an interest in a partnership or is completely redeemed from a partnership that is engaged in a trade or business in the United States, the non-U.S. seller is, in general, not subject to U.S. federal income tax on the gain from the sale (Grecian Magnesite Mining, Industrial and Shipping Co., SA v. Commissioner, 149 T.C. No. 3). To read the full article, click here.

For more information on this case, please read the GT Alert, “Welcome News for Non-U.S. Persons Investing into U.S. Businesses: U.S. Tax Court Rejects Long-Standing IRS Ruling.”

Greenberg Traurig’s Diana Zeydel Quoted In Forbes

Posted in Estate, Firm News, Government

Greenberg Traurig Shareholder Diana Zeydel, was recently quoted in Forbes where she discusses estate tax valuation rules. The article is in response to President Donald Trump’s executive order to reduce tax regulatory burdens. The U.S. Treasury identified the valuation rules as significant and ripe for review in an interim report and is accepting comments through Thursday, August 7, on whether the rules should be rescinded or modified. A final report to the president is promised by Sunday, Sept. 17. Zeydel provides insights on the proposed rules and what she sees in the market today. To read the full article, click here.