IRS Blesses 2nd Marriage Planning Technique for IRA

A common issue in planning for marriages with prior children is how to provide for the surviving spouse, while also making provision for children of a prior marriage or relationship. A regularly used planning arrangement is to designate as successor owner at death of the original owner a marital trust that provides for assets to be expended for the surviving spouse during his or her lifetime, with a remainder to the children and lineal descendants of the first spouse to die. This avoids the problem of leaving the assets outright to the surviving spouse, who then can leave the assets to other beneficiaries at his or her death.

If the asset at issue is an IRA or qualified plan interest, the owning spouse may have similar concerns. However, income tax issues complicate the planning. For income tax planning purposes, it is usually desirable. . .

Recent News

15 May 2023

Jenna Rubin presents at ABA National Symposium

On May 12, 2023, Jenna Rubin presented at the 35th Annual Real Property Trust and Estate Law Section of the American Bar Association’s National CLE Conference in Washington DC. She took part in a panel discussion on “Black Tie Optional: The Eroding Formalities to Creating a Valid Will.”

24 Feb 2022

Article by Charles and Jenna Rubin featured on cover of Florida Bar Journal

An article written by Charles Rubin and Jenna Rubin is featured on the cover of this month’s Florida Bar Journal and can be found here.

27 Dec 2021

Jenna Rubin appointed to ACTEC Fiduciary Litigation Committee

Gutter Chaves is pleased to announce that Jenna G. Rubin has been appointed to the Fiduciary Litigation Committee of the American College of Trust and Estate Counsel (ACTEC) for the 2022-2023 year.

14 Dec 2021

FBAR Case Reversed – Nonwillful Filing Penalties Based on Number of Accounts Not Reported

Back in 2000, I wrote here about a case where a taxpayer did not report multiple foreign accounts on an FBAR. The question for the court was whether the $10,000 penalty for a nonwillful failure to file meant $10,000 per return not filed, or $10,000 per account not reported on the return. For . . .

22 Nov 2021

Of Spousal Gifts and the Substance Over Form Doctrine

U.S. spouses each have a unified credit that allows for substantial gifting to third parties without requiring the payment of gift tax. What happens if one spouse has assets to be gifted away, but that spouse does not have sufficient remaining unified credit exemption to cover the gift and wants to use the exemption of the other spouse?

At times, the spouses can agree to split the gift for gift tax purposes, which treats 1/2 the gift as coming from each spouse. This allows the unified credit of the spouse not making the gift to be used to avoid gift tax on the 1/2 that such spouse is treated as making. However, it can be an imperfect solution if the spouse with the assets does not have enough unified credit to offset his or her 1/2 of the gift.

Oftentimes, the parties may contemplate having the party with the assets transfer them by gift to the other spouse (a tax-free gift under the gift tax marital deduction), and then the receiving spouse makes a gift to the third party applying his or her own unified credit. The question in these circumstances is whether the IRS will respect the transaction and allow the receiving spouse’s unified credit to be applied to the gift to the third party, or whether it would seek to apply the “substance over form” doctrine to treat the gift as coming from the spouse who transferred the assets to the other spouse and does not have enough unified credit to fully cover the gift.

This is not a black and white issue. On one end of the spectrum. . .

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