Estate Tax Planning Research Articles

Integration of Income and Estate Tax Planning

The preservation and transfer of wealth to future generations are among the central financial goals for most high-net-worth families. Using a stylized theoretical model and Monte Carlo simulations, this article quantifies the benefits of income and estate tax planning for growing wealth over generations. The article shows that a family that invests with income and estate tax efficiency in mind can achieve substantially higher wealth levels than a family oblivious to taxes. More important, the article demonstrates that a significant value accrues from integrating income tax efficiency and estate tax planning: Becoming efficient with respect to one tax should make the family even more eager to become efficient with respect to the other. <b>TOPICS:</b>Wealth management, simulations, portfolio management/multi-asset allocation, performance measurement <b>Key Findings</b> ▪ Using a stylized theoretical model and Monte Carlo simulations, this article quantifies the benefits of income and estate tax planning for growing wealth over generations. The article shows that a family that invests with income and estate tax efficiency in mind can achieve substantially higher wealth levels than a family oblivious to taxes. ▪ The article demonstrates that a significant value accrues from integrating income tax efficiency and estate tax planning: Becoming efficient with respect to one tax should make the family even more eager to become efficient with respect to the other. ▪ Our conclusions are robust to moderate declines in pre-tax returns, which might occur in pursuit of tax-efficient investing, and to significant increases in statutory annuity rates involved in estate tax planning techniques.

Integration of Income and Estate Tax Planning

Preservation and transfer of wealth to future generations is one of the central financial goals for most high-net-worth families. In this study, using a stylized theoretical model and Monte-Carlo simulations, we quantify the benefits of income and estate tax planning for growing wealth over generations. We show that a family that invests with income and estate tax efficiency in mind can achieve substantially higher wealth levels than a family oblivious to taxes. More importantly, we show that there is a significant value in integrating income tax efficiency and estate tax planning: Becoming efficient with respect to one tax should make the family even more eager to become efficient with respect to the other.

Wealth Tax Design: Lessons from Estate Tax Avoidance

Presidential candidates Elizabeth Warren and Bernie Sanders have both proposed ambitious new annual wealth taxes based on academic work by Emmanuel Saez and Gabriel Zucman. They project these proposals to raise trillions of dollars over the next ten years. Some critics challenge the Saez-Zucman approach to measuring the aggregate wealth of those subject to a wealth tax. Other critics including Larry Summers and Natasha Sarin have used data from estate tax returns and the relatively small amount of revenue the estate tax currently raises to question the revenue projections of these proposals. This comparison can be useful only if one thinks carefully about specific estate tax strategies and how these strategies translate to an annual wealth tax. This article engages in that exercise. When one takes a closer look at estate tax avoidance and how it maps onto an annual wealth tax, a much more complex narrative emerges. That narrative has four major themes. First, there are some estate tax planning techniques (like valuation games and charitable contributions) which pose similar challenges to an annual wealth tax. These structures provide some support for critics like Summers and Sarin who argue that the annual wealth tax will struggle to raise the projected revenue. Second, other structures (such as grantor-retained annuity trusts ) work well to minimize estate taxes but are of limited use for structuring around an annual wealth tax. Projecting wealth tax revenue using estate tax revenue without considering the revenue consequences of these strategies will understate wealth tax revenue. Third, other techniques (including the use of lifetime estate/gift exemptions) highlight possible synergies between an estate and wealth tax. In many ways, a robust estate tax will make the wealth tax harder to avoid and vice-versa. The converse is also true: a poorly designed estate/gift tax will undermine an annual wealth tax. Adopting a wealth tax without strengthening the gift and estate makes little sense. Fourth, one of the major lessons of estate tax planning is that it is much easier to minimize estate taxes on future wealth than existing wealth. A myriad of techniques allow taxpayers to “freeze” the value of assets for estate tax purposes. Freezing techniques will also prove helpful in minimizing wealth taxes. It is possible that even a well-designed wealth tax will have a base that shrinks rather than grows over time.

Legal Issues, Judicial Analysis, And Domicile Planning To Avoid State Inheritance Tax Using Tennessee

This paper examines the pitfalls and planning opportunities for taxpayers attempting to change domicile from our case study state, Tennessee, to avoid Tennessee inheritance tax to a state that doesnt have such taxes. Various court cases and state tax authority will be examined in order to synthesize the issues and formulate some general guidelines to assist taxpayers and their advisors in successfully using a change of domicile as a tool in state estate tax planning. A leading New Jersey case will be examined as an example of the consequences of unsuccessful state domicile planning causing the taxpayer to be subject to state inheritance tax in multiple states.

Estate Tax Planning And Marketing Oppor-tunities Of The Economic Growth And Tax Relief Reconciliation Act Of 2001

The best advice tax practitioners can give clients after the 2001 Tax Relief Act, is that the optimal time to die in the next decade will be 2010! What has been touted as a repeal of the Federal estate tax, has actually resulted in increasing the importance of estate tax planning. This is due to several factors. First, the rate reduction is phased in so slowly that in 2009, the top estate rate will still be 45% and the exemption amount only $3.5 million. In 2010, repeal is actually achieved, but for one year only. The repeal sunsets in 2011 when the estate tax comes back in full, using a maximum 55% rate and a $1 million exemption. Basis of inherited property may prove to be a nightmare. Some property will get a stepped up basis, other property will not. Further complicating the picture is that the gift tax has not been repealed.The estate tax planner will be faced with a host of issues to consider. Which estate planning strategies are still valid? What new planning tools will be developed? Many wills will include obsolete provisions and will need to be redrafted. Health of the client will become more important in the planning process. Marketing issues of planning under such uncertainty abound. This paper examines the new estate and gift tax provisions; offers strategies for navigating the sea of complexity and uncertainty; and explores the marketing opportunities for financial planners created by the new law.

A Better Yoga Block: Shanti Creek Yoga Products

This case examines the creative strategies that the Lauder family used to monetize their position in Estee Lauder Companies, Inc. in the 1990s while deferring their tax liability on the appreciated position. The strategies include the use of the company's initial public offering to engage in a short-against-the-box transaction and the issuance of hybrid securities known as TRACES. The case allows the students to consider a variety of monetization strategies and the tax and non-tax consequences to those strategies. Students are also exposed to estate tax planning, taxation of derivatives and tax risk issues.

After-Tax Performance Evaluation

Focusing on after-tax returns is a great way to add value and gain competitive advantage in the investment management business. Managers need to understand the factors that affect tax efficiency, to realize that a one size fits all performance measure and tax strategy will not work, and to integrate portfolio management with income tax and estate tax planning. Algorithms, such as the accrual equivalent tax rate, can help managers educate clients about the various implications of taxes for their portfolios.

Foreign Investment in the United States: Law, Taxation, Finance. Edited by Marc M. Levey. New York, Chichester, Brisbane, Toronto, Singapore: John Wiley and Sons, 1989. Pp. xlix, 766. Index. $95.

Identifying and Exploiting Value in the U.S. Economy. Foreign Tax Considerations for Direct Foreign Investment. Structural Issues for Foreign Direct Investment. Tax Consequences of U.S. Acquisitions by Foreign Investor. Taxation of Earnings of U.S. Branches. Taxation of Earnings of U.S. Subsidiaries. Taxation of Joint Ventures and Partnership. Securities Law Considerations. Transfer Pricing. Financing for U.S. Business or Real Estate Transactions. Taxation of Foreign Investment in U.S. Real Estate. Legal Aspects of U.S. Real Estate Development and Construction. Managing U.S. Real Estate. State and Local Tax Considerations. Pre-Immigration Income and Estate Tax Planning. Reporting and Disclosure Requirements and Restrictions. U.S. Employment Practices and Executive Compensation. Index.

Life Insurance and Estate Tax Planning

Life Insurance and Estate Tax Planning