By Carey J. Messina and Kevin C. Curry

On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act (the “TCJA”). The TCJA enacts a number of important tax changes, including some significant changes to the federal gift tax and the federal estate tax that take effect in 2018. Specifically, the TCJA doubles

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By Kyle McInnis and Kevin Curry

On August 2, 2016, the Treasury Department issued new proposed tax regulations that would substantially eliminate many of the valuation discounts used for transfer tax purposes by family-owned businesses.  The regulations disregard restrictions on the redemption and liquidation of a family-owned business for valuation purposes.  In effect, this would

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By Kyle C. McInnis

The recent downturn in energy prices has given consumers a welcomed break at the gasoline pump. The people producing the energy, however, from landowners, to oil companies, to oil field service providers, have felt the full negative effects of the steep price decline. Those producers are seeing price pressure at every

By Kyle C. McInnis

New parents have to make a number of adjustments to their lives. From dealing with diaper rash to sleep deprivation, they have a lot to deal with. But parenting duties are not limited to physical care of a child. There are numerous financial parenting tips that every new parent must consider. This article is intended to hit the high points on the list of financial and estate planning tasks that every new parent should consider.

1) Adjust Income Tax Withholdings.

The easiest and quickest way to get extra cash into a new parent’s hands is to adjust their income tax withholdings as soon as possible. A new child should allow a new dependency withholding exemption, assuming the child qualifies as a dependent of the parent. A taxpayer qualifies for a dependency exemption in the year of the dependant’s birth and for so long as the dependent continues to satisfy the definition of a “dependant” under Internal Revenue Code (“IRC”) § 152. The additional dependency exemption should work to reduce a parent’s required tax withholdings from his or her paycheck.

The parent should adjust his or her withholding certificate as soon as possible to take advantage of the new withholding exemption. The IRC allows for almost immediate adjustment to an employee’s withholding certificate. The IRC even allows prospective adjustments to withholding calculations if furnished before December 1 of the prior year under IRC § 3402(f)(2)(C). The sooner a parent’s withholding certificate is adjusted, the sooner his or her take home pay gets a much needed bump.

2) Identify Applicable Tax Breaks.

The IRS grants taxpayers several child related tax breaks, in addition to the dependency exemption under IRC § 151. Every parent should examine these tax benefits in calculating their income tax liability.

First, parents are granted a child tax credit of $1,000 under IRC § 24. The child must be a qualifying child under IRC § 152(c), but this definition should cover almost all children living with the parent and less than seventeen years old. The credit is allowable against the alternative minimum tax, but begins to phase out for joint return filers making more than $110,000. For single parents, the phase out starts at $75,000. The phase out is complete at $130,000 for joint filers and $95,000 for individuals. In limited cases, the credit can be refundable under IRC § 24(d).

Parents with less than $15,000 in adjusted gross income are entitled to a tax credit for amounts paid to care for children, if such expenses allow the parent(s) to continue gainful employment. This credit is equal to thirty-five percent of the expenses incurred in caring for a child, up to a maximum amount of $3,000 for one child or $6,000 for two or more children.

Adoptive parents of special needs children also have a special tax break designed solely for them. Under IRC § 23, adoptive parents of children who are less than eighteen years old and physically or mentally incapable of caring for themselves are entitled to a tax credit for adoption expenses of up to $10,000. This credit is subject to a phase out for high earners.

3) Review or Create an Estate Plan.

Most new parents don’t have an estate plan because they’ve never thought they needed one. In a sense they are right. Louisiana law generally provides a spouse substantial rights in the community property of a decedent during the surviving spouse’s lifetime if the couple has no children. For single people, property usually stays within their family at death. But, when children arrive, a will is a must.


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By Kevin C. Curry

Act Number 323 of the 2011 Regular Session of the Louisiana Legislature modified the rules on small successions in Louisiana. In addition to some other changes, the law allows the use of the small succession procedure, which generally involves filing an affidavit rather than opening judicial proceedings, to transfer title to

By Carey J. Messina and Kevin C. Curry

After a long delay, Congress has passed and President Obama has signed into law the new federal estate and gift tax legislation. It has been very difficult for some individuals to prepare an appropriate estate plan not knowing what the potential federal estate and gift taxes will be. For the next two years, 2011 and 2012, there is some certainty. Parts of the new legislation may not impact everyone, but questions always abound concerning "death taxes". Now is an excellent time to review your estate planning documents to determine whether or not they continue to carry out your intentions.

Federal Estate Tax Exemption Amount and Federal Gift Tax Exemption Amount

Beginning January 1, 2011 and continuing through 2012, the federal estate tax exemption amount will be $5 million and the federal gift tax exemption will also be $5 million. This essentially means that a married couple can pass $10 million in assets to their children without any federal estate or gift tax, with proper estate planning. The top tax rate for the federal estate and gift taxes for 2011 and 2012 will be thirty-five percent (35%). The new exemption and rate provisions are applicable only for deaths or gifts in 2011 or 2012.

Effectively, the exemption for the federal estate and gift taxes are unified again. The gift tax exemption and the estate tax exemption will be the same $5 million amount. Also, the Generation Skipping Tax (GST) Exemption is now $5 million, making it easier to transfer wealth to grandchildren.


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By Carey J. Messina and Kevin C. Curry

As estate planning attorneys, we receive calls from clients concerning the use of revocable living trusts in estate planning. The general public is invited to seminars on the subject, they receive literature in the mail, and, in some cases, receive in-home visits from parties, who are usually not attorneys, who advocate the use of the revocable living trust. Over the years, we have responded to clients to answer their questions concerning what the living trust will do and what it will not do. What follows is a discussion of what we call the “Six Myths” of the revocable living trust. 

Myth No. 1: A living trust saves taxes.

A blanket statement that a living trust saves taxes is subject to examination. First of all, what types of taxes are being discussed? One should know that the Louisiana inheritance taxes disappeared in 2004. Accordingly, State of Louisiana inheritance taxes do not come into play with respect to a trust or a will. The Federal Estate Tax may be applicable whether there is a will or a trust. Some parties advocating the revocable living trust indicate that the trust is necessary in order to obtain the benefit of the $5 million Federal Estate Tax exemption. This is not true. The $5 million Federal Estate Tax exemption can be obtained without the use of a will or a trust. The exemption is not utilized when bequests are made through a trust or a will to a surviving spouse; however, federal law for the years 2011 and 2012 provides for “portability” of the exemption of the spouse whose Federal Estate Tax exemption has not been used. This portability applies to the estate of that deceased spouse’s surviving spouse, at least for 2011 and 2012.

Many assets in an estate are referred to as “non-probate assets,” such as annuities, IRAs, and 401k plans. In the event that a trust is made the beneficiary of such accounts, there could be potentially higher federal income taxes. This is clearly a trap for the unwary. Income tax consequences will turn on the design of the trust and, in particular, the design for distribution of income from the trust assets.


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by Dean P. Cazenave

The federal First Circuit Court of Appeals recently rejected a taxpayer’s claim for a refund based on recharacterization of a payment for a non-competition agreement. Muskat v. United States, 2009 WL 211067 (1st Cir. 2009).

In connection with the sale of a business structured as an asset sale, the Buyer and the CEO (who was also the largest shareholder of the Seller) agreed in definitive documents that $1.0 million of the retained CEO’s new compensation package would be allocated to his non-compete covenants. Although the CEO initially recorded that payout as ordinary income for his 1998 taxes, in 2002 he filed an amended return for 1998, recharacterizing the $1 million payment as consideration of his personal goodwill, which he argued entitled him to capital gain treatment (which would have entitled him to a refund of over $200,000). The IRS denied Muskat’s request so he brought an enforcement action against the IRS. The district court, too, denied his request, finding that Muskat lacked “strong proof” that the non-competition payment was intended as payment for personal “goodwill” rather than as a covenant not to compete.
 


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By Kevin C. Curry

On December 23, 2008, President Bush signed the Worker, Retiree, and Employer Recovery Act of 2008 (the Act) into law.  Section 201 of the Act waives any required minimum distributions (RMDs) for 2009 from retirement plans that hold each participant’s benefit in an individual account, such as § 401(k) plans and § 403(b) plans, and certain § 457(b) plans.  The Act also waives any RMD for 2009 from an Individual Retirement Arrangement (IRA).


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