We sat down with two of our Editorial Advisory Board Members, Michael J. Jones, Chair of our Retirement Benefits Committee, and Avi Z. Kestenbaum, Chair of our Modern Practice Committee, to discuss their impressions of Heckerling thus far.
Income vs. Estate Tax
Both members noted that the presentations focused on step-up basis in income tax. Mike and Avi felt that basis is, in a way, being overpromoted—which typically happens when a topic becomes hot. Income tax considerations are still critical, and we must always remember that each situation is unique. For example, we should consider whether there are low basis assets or negative capital assets. Mike and Avi pointed out that the capital gains tax is a voluntary tax, in that a client has to actively decide to sell something. The estate tax, on the other hand, is involuntary. The warning? Don’t forget to look before you leap: When you look at the numbers in detail, it’s not that uncommon to find something counter intuitive going on. So, run the numbers beforehand.
Is the Bypass Trust Dead?
To paraphrase Mark Twain, “The reports of the death of the bypass trust have been greatly exaggerated.” Both Avi and Mike noted that despite some of the buzz, in their view, the bypass trust isn’t dead; it still offers great flexibility, generation-skipping transfer tax benefits and asset protection. For example, a spouse can always be a co-trustee with certain permissible powers over the other co-trustee, and be a discretionary beneficiary—and still get the property distributed to her to obtain a later step-up. And, even when you consider basis, a bypass trust still offers a lot of value. There’s more flexibility than people are letting on.
What are your thoughts?