Inheritance tax laws
However, as banks and other institutions become aware of the new requirements, powers executed under the old statute may become more and more difficult to use. inheritance tax laws Federal-income-tax-forms. Therefore, you should consider executing new powers of attorney as part of your next estate planning review. Of course, if you wish to act sooner, we are ready to help. THE TOTAL RETURN TRUSTIn today''s investment environment, income yields are at historic lows while appreciation in stock values soars. inheritance tax laws State income tax. As a result, manytrust beneficiaries have seen the size of their trust funds grow while they receive less of a current return. However, the rules in Pennsylvania regulating the amounts that can be distributed from certain charitable trusts and endowments have changed. Previously, charitable trusts that directed that "income" (i. inheritance tax laws Income tax questions. e. , interest, dividends and rents) only be distributed to the charitable beneficiary faced the inherent conflict between the need for principal growth and the need to generate income. Endowments had some leeway in allocating capital gains in a particular year to income but still faced the same problem as charitable trusts although perhaps to a lesser degree. The Pennsylvania legislature changed this by providing that the trustee of a charitable trust, or the board of directors of an endowment, could "redefine" income to be a specified percentage (between 2 percent and 7 percent) of the average of the fair market value of the trust for the three preceding years. This allows the charity to share in the principal growth of the trust and allows the trustee to invest the trust portfolio without facing the income/principal conflict. These types of trust are commonly called "total return trusts. " While such trusts are common in the field of charitable giving and will no doubt become more common, the total return concept is spreading into the private area as well. These trusts provide that the income beneficiary receive an annual percentage of the value of the trust including capital appreciation as well as income earned in that year. This means that the trustee may focus the investments on growth (stocks) and less on fixed income (bonds). A variation on this pattern is to provide the beneficiary each year with the choice of withdrawing the percentage payment. Studies of historic market returns indicate that a payout of 4 percent or less over the long term have preserved principal. Should all new trusts be drafted this way? Perhaps, but there are still questions concerning the income taxation of such trusts and they must be carefully drafted if the trust is intended to qualify for the federal estate tax marital deduction. Furthermore, a total return trust may look good to an income beneficiary in today''s environment of strong capital growth. However, many may remember certificates of deposit that paid 15 percent. An income beneficiary who benefits from a 4 percent return today must realize that he or she may be foregoing a higher return in the future. That said, total return trusts present an interesting new technique for estate planning.
Inheritance tax laws
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