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Heard at Heckerling 2021 - Day 1

By Catherine Taylor, ESQ .


The first day of the Annual Heckerling Conference was, as expected, different as this year’s entire conference was virtual. There were no flights to deal with but once the program started it all felt very much the same.

Today there were two panel discussions consisting of experts in our field most of whom have been speakers at previous conferences. They gave the audience their observations, suggestions, and opinions. The overriding theme of the day was “proceed with caution.”

The first day is always a taste of what’s ahead, and while there are some things we will miss (meeting up with colleagues we see once a year, grabbing swag from the vendor hall) and some things we definitely won’t (freezing in the conference hall!) it’s clear that the educational heart of Heckerling is alive and well. Looks like its going to be another incredible conference.

Here are some of the highlights from Day 1:

  • Paul S. Lee, Turney P. Berry, and Melissa J. Wilms started us off with some of the current and anticipated income tax issues surrounding estate planning. The biggest takeaway was that now, more than in recent history, plans need to have built in flexibility. There is a lot of conversation in Washington D.C., even proposed legislation, that may impact traditional estate and income tax planning. There are some threats to the lifetime estate tax exemption, a potential repeal of the step-up in basis rules and changes to the lifetime and annual gift tax exclusions. Some of these changes could possibly be retroactive to January 1, 2021! The panelists discussed planning techniques using potential QTIPs, disclaimers, or other ways to alter a 2021 gift in the case of a retroactive effective date.

  • There was a lot of talk around basis and what certain proposals could mean to the recognition of capital gains at the time of certain events, whether it be gifting, modifying a grantor trust, decanting, or death. With the potential for a significant rise in the long-term capital gains rate and potential loss of a step-up in basis, some professionals may be tempted to discuss triggering gains now to take advantage of what might be a lower rate. The panelists encouraged caution saying any such planning might be premature except in very specific cases.

  • 2020 seemed to be the year when the IRS and the Tax Court finally got around to settling some issues regarding when capital gains recognition may be triggered, and when it may not, and that guidance has our experts offering some interesting planning tools for avoiding that recognition, particularly by using partnership structures.

  • Ms. Wilms gave a quick presentation of planning considerations when choosing whether to make a 645 election to treat a revocable trust as part of the estate for fiduciary income tax purposes. It’s important to remember that this is a potentially powerful election, but not right for all circumstances.

  • In their “Recent Developments” section, Steve R. AkersSarah Moore Johnson, and the always entertaining and informative Samuel A. Donaldson spoke about what happened in 2020, and what proposals will be considered by or talked about before Congress.

  • One of the more concerning proposals is from Senator Bernie Sanders. Senator Sanders is proposing, among other things, lowering the Estate and Gift tax exemptions, increasing the Estate/Gift tax rate, doing away with short term GRATS, limiting GST exclusion to a term of 50 years, after which a trust would automatically have an inclusion ratio of 1, and taking away the valuation discounts for transfers of interests in entities to family members.

  • Speaking of discounts, 2020 was apparently also a big year for IRS guidance on valuation discounts. There was case law on multiple layers of discounts, discounts on gifts, and bequests to charitable foundations. Now more than ever, it is important to have a qualified appraisal.

  • Towards the end of the afternoon session there was a discussion about two areas of the marital deduction we might not normally consider: common law marriages and state taxation of QTIP Trusts. There are 14 states that will or may recognize common law marriages. If your clients resided in one of those states during their time together, they may have established a common law marriage that is recognized in the state in which they currently reside, even if that state does not recognize common law marriages for its citizens. Also, a state may tax the QTIP trust of the surviving spouse decedent of their state, even if the estate creating the QTIP was not domiciled in that state. The panelists (and most commentators) believe this is unconstitutional but the U.S. Supreme Court has so far refused to hear the argument.  

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