Jan 1, 2012 12:00 PM

Understanding and planning for a beneficiary's needs in the current economy is increasingly challenging

By Gail E. Cohen

The interplay among tax laws, investment performance and a beneficiary's wellbeing shapes a fiduciary's responsibilities. When a trustee distributes assets from a trust to meet a beneficiary's needs, the question of how to satisfy that distribution requires a deep understanding of the appropriate federal and state income and transfer tax laws, as well as the economic environment. While these crucial factors, which dictate a fiduciary's responsibility, have always been hard to forecast, they've become virtually impossible to predict in the current economy. Rumors and speculation drive tax planning; the markets have experienced unprecedented levels of volatility and understanding and planning for a beneficiary's needs have become increasingly challenging.

Since 2001, the transfer tax laws have been in a state of flux. The trusts and estates community watched each year pass knowing that on the stroke of midnight on Dec. 31, 2009, the estate tax would evaporate. Nevertheless, no one believed that we would actually see that result. We did — and then, unexpectedly, on Dec. 23, 2010, our government reinstated the estate tax. It passed a two-year law with exemptions and rates that were unprecedented in their generosity. Fast forward to November 2011, when a rumor circulated that these generous tax laws could be rescinded as early as Nov. 23, 2011 by a recommendation of the deficit reduction “Super Committee.” This rumor generated an avalanche of activity with clients rushing to give away enough assets to use what they perceived to be vanishing $5 million exemptions. The rumors proved to be unfounded. But, we still face the prospect of these exemptions vanishing at the end of 2012, with no clue of what will happen next. We continue to wonder how to best advise clients.

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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