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Biden 2023 Green Book Part 3: Trust and Estate Administration

On March 28, the Biden administration issued its second set of proposals to raise the desired revenue. General explanation of the administration’s revenue proposals for the financial year 2023, (Tea 2023 green book.) These proposals represent the administration’s first comprehensive tax proposals since Build Back Better failed to move forward in Congress late last year. For tax consultants, green book There are always interesting offers for both what’s included and what isn’t. While these proposals may not go ahead, especially given the current Congress, it is useful to see what topics are being considered and to be able to address customer concerns with regard to the proposals.

In the first two parts of this series, we look at the attention-grabbing billionaire tax and unpack some of the proposed changes to popular tax planning vehicles. In this final article, we’ll focus on some of the seemingly harmless trust and asset governance changes that could have had a massive impact.

Administrative changes with effect

Tea 2023 green book There are four proposals under a clause titled “Improving Tax Administration for Trusts and Deceased Estates”, which may sound innocuous, but is actually offensive. The most concerning proposal is the requirement of reporting the estimated value of the trust assets. The desire to receive information about trusts appeared last year, but all other proposals were not taken into account. In last year’s proposed Sensible Taxation and Equity (STEP) Act, while most of the focus was on making death and gifts income tax recognition events, there was a provision that required trusts with more than $1 million in assets or $20,000 in income. Will be Report a balance sheet, income statement, trustee, grantor, beneficiary and even a “complete and complete accounting of all trust activities and operations for the year.” This year’s Green Book claims the government needs information on domestic trusts because “there is currently so much assets in domestic trusts, a lack of this data hinders efforts to design tax policies aimed at To increase equity and progress of the tax system.” As a result, the proposal would require all trusts to report an estimated value of more than $300,000 at the end of a taxable year or $10,000 to report information about their grantor, the trustees, and “with respect to the nature and estimated net worth.” “General information in” the property of the trust as the Secretary may determine. This proposal will hold more trusts than the STEP Act given the lower thresholds and the information to be collected is not entirely clear enough to delegate to the Treasury Department as set out by regulations.

Of the other three proposals, two are as familiar as they were in earlier Obama administration proposals—expanding the application of the definition of “executor” under IRC Section 2203 and expanding estate and gift tax liens to property benefiting from the deferment of estate taxes. more than 10 years. With regard to the definition of the word “executor”, section 2203 provides that if there is no fiduciary appointed and acting in the United States, any person in actual or constructive possession of the property in the gross estate of the deceased shall be treated as an executor. Will go Wealth tax purposes only. In 2014, the Obama administration’s proposal identified two shortcomings of Section 2203. First, it applied only to estate taxes, meaning neither party had the right to represent property in respect of income tax, gift taxes and other filing obligations without a court-appointed fiduciary. Second, it was possible for many people to be executors under section 2203, because the decedent also had a nominal amount of property, and the statute had no precedence order as to which person would be the executor. Like Obama’s proposal, 2023 Green Book Proposes that the definition of “executor” apply to all tax matters and that the Treasury Department will grant regulatory authority to establish a priority order when multiple parties meet the definition.

The second repeat motion pertains to IRC Section 6324, which provides for a special estate tax lien to secure the payment of unpaid estate and gift taxes. Unless the tax liability is paid, the bond lasts for 10 years. The issue is that if there is a deferment of property taxes by more than 10 years, for example, when an IRC Section 6166 election is made for a closely held business, the lien expires before the full payment is made. 2023 green book Adds an offer to continue the link during any deferred or installment payment period.

Finally, and to end on a positive note, 2023 green book It is proposed to change the valuation reduction limit for special use property. For property tax purposes, the FMV of a property is generally determined at the highest and best use of the asset. There is an alternative valuation election that may be made under IRC Section 2032A when the value of qualified real property or personal property may be reduced to reflect the actual use. This choice has its limitations because it only applies to property used for farming or trade or business where the estate comprises a substantial portion of the estate and the decedent who died in 2022 has a reduction in value of $1.23 million. But it was limited. The proposal would increase that limit to $11.7 million effective for those who died on or after the date of the election.

customer advice

If last year’s advisors taught anything, the proposal is not guaranteed to become law. The proposals are interesting because they show that despite the fate of Build Back Better, those proposals are still being worked on and joined by even more progressive people that the Biden administration will publicly pursue. With the introduction of the billionaire tax and annual reporting on trust assets, the estate planner’s focus may need to shift even further away from transfer tax to income tax and information reporting.

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