News From Heckerling 2012

A Trusts & Estates board member shares his observations

Heckerling 2012 in Orlando, Fla. is underway and we had the opportunity to sit down with one of our esteemed editorial advisory board members, who will be presenting at the conference.

Christopher R. Hoyt is a professor at University of Missouri-Kansas City School of Law and the chair of the American Bar Association’s Committee on Lifetime and Testamentary Charitable Gift Planning. He is on the Trusts & Estates Retirement Benefits committee.

Christopher R. Hoyt

Hoyt spoke this year about individual retirement account distributions and rollovers and how to integrate estate and income tax planning. Following a review of the ground rules for required lifetime and testamentary distributions from retirement plans, he illustrated the impact that those rules have on different beneficiaries: elderly, younger and youngest. He addressed such questions as: In the case of an elderly surviving spouse, does portability provide the best of both worlds: estate tax benefits plus the income tax benefits of an IRA rollover to a surviving spouse? Is portability better than using an IRA to fund a credit shelter or qualified terminable interest property trust? And what about second marriages, particularly to significantly younger spouses?

When asked to reflect on the prominent retirement benefits issues of the past year, he noted: "With the stock market tumble, it was interesting to see people who did a Roth IRA conversion undo it with a 'recharacterization.' We always talk about this as an option that people could use if the Roth IRA conversion didn’t work well. It is interesting to actually see it in practice."

As far as predictions for the future, Hoyt offers: "We need stability in the tax laws. We need to get away from these temporary laws. The Bush tax cuts expire at the end of 2012, and income tax rates are scheduled to increase in 2013. In addition, we're supposed to have new health care taxes imposed on people with incomes over $200,000 ($250,000 joint) beginning 2013. The estate tax threshold is scheduled to plummet from $5 million in 2012 to $1 million in 2013. But will all of this really happen? I think people expect Congress will enact changes … probably at the last minute. Imagine if the legislature changed our traffic laws as often as it changes our tax laws. The nation would be in open revolt."

As a final prediction, he notes that most experts assume that some form of portability will become a permanent part of our federal estate tax law. However, significant legislation is required before this can come to pass.

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