Generation to Generation

Traditionally, families have relied on valuation discounts when transferring interests in closely-held family businesses to the next generations. Transfers of minority interests in a closely-held family entity were generally allowed a minority discount when valuing interests for estate and gift and tax purposes, primarily due to the inability of a minority shareholder to compel a liquidation of the entity. These discounts often proved to be a helpful way for the family to avoid the need to sell the family business to pay estate taxes, by reducing the gift and estate tax burden on such transfers. The proposed regulations effectively eliminate any minority discounts and largely any marketability discounts on the valuations for estate and gift tax purposes. If these regulations are finalized, they would impact transfers between family members of interests in family-controlled corporations, partnerships, LLCs and other business entities, regardless of whether the business is active or passive.

Senators John Thune (R-SD) and Ron Wyden (D-Ore) introduced the Charities Helping Americans Regularly Throughout the Year (CHARiTY) Act (S. 2750, summarized here) to “encourage charitable giving and make it easier for foundations and other tax-exempt organizations to conduct their charitable mission.” This legislation, among other things, streamlines operations by changing the private foundation excise tax to a flat one-percent tax, creates a limited exception to the private foundations’ excess business holdings rule, allows the Treasury Department to update the standard mileage rate applicable to personal vehicle use by volunteers (see here for current rate) and, most significantly, expands the IRA charitable rollover to include donations to donor-advised funds. This last measure is viewed as a logical next step that builds upon the Protecting Americans from Tax Hikes Act of 2015 (PATH), which President Obama signed into law last December and was regarded by many as only a partial victory for the charitable sector. While PATH provided certainty for philanthropic planning by making the IRA charitable rollover permanent, as explained here, it did not go as far as extending the reach of the rollover benefit to donor-advised funds.

Now that sunshine and blue skies are upon us, people are opening their summer homes for the season. Happy memories of family vacations and gatherings often motivate parents to seek out ways to preserve their second home for their children, grandchildren, and great-grandchildren. Whether you’ve got a compound on the Cape or a cabin on Winnipesaukee, it’s an appropriate time to think about how these properties currently fit into your estate plan. It’s also crucial to consider how such decisions will affect those who love and use these properties now and might want to continue doing so after you’ve passed away.

During the Perkins School for the Blind annual fundraising gala, Perkins Possibilities 2016, we witnessed the launch of the powerful social change campaign called BlindNewWorld. The campaign aims to help the sighted population break down barriers to blind inclusion like discomfort and fear and create a more blind-friendly world. This got us thinking: how can we do a better job of taking the needs of clients who are blind or visually impaired into account when designing our estate planning services? We came up with three ideas we want to share.

From April 9 to April 12, I had the good fortune to be part of the Council on Foundations 2016 Annual Conference. The Council welcomed nearly 1,400 leaders in the philanthropic sector to Washington, D.C., for plenary programs and concurrent sessions focused on "the Future of Community through the lenses of identity, purpose, and place." Here are four of my biggest takeaways from the Conference:

1. When you want to fill a room to capacity, talk about the Chan Zuckerberg Initiative. One concurrent session was so popular that attendees filled the seats, stood along the walls and sat on the floor. The topic that drew this crowd was "Philanthropy Outside the Tax-Exempt Model." The discussion covered the alternative vehicles for individual and corporate giving, such as public benefit corporations, L3Cs and B-Corp certified companies, which have been embraced by a new generation of philanthropists, most notably Mark Zuckerberg and his wife Dr. Priscilla Chan.

3 Things to Remember About Documenting Charitable Gifts of Property, Securities and Art.

Last month in this blog, we described five ways to be diligent about documenting charitable gifts of cash or out-of-pocket expenses to preserve your tax deduction. But what about gifts of property – does giving something other than cash change the taxpayer’s responsibilities? According to the tax regulations, the answer is no and yes.

How can you determine if you’re allowed to claim a charitable deduction for amounts you paid to support your favorite charities? And what paperwork do you need in hand before you can claim that charitable deduction? Here are five ways to observe the requirements for charitable gifts of cash.

Every Massachusetts homeowner should be aware of the opportunities that are available for protecting the equity in the family home. A recent bankruptcy case, In re: Nealon, reminds us of one such opportunity – the Massachusetts homestead exemption -- and its power to stave off creditors, especially when the homeowner takes the simple steps necessary to maximize the amount entitled to protection.

If you already understand what a typical estate plan looks like, you can skip to the next paragraph. Put simply, it is more than just a will. Instead, a typical estate plan contains four documents: a will, revocable trust, health care proxy and power of attorney. The health care proxy and power of attorney are designed to operate during your lifetime, while the will and revocable trust control how your property is dealt with after your death. The will tends to be a relatively simple document by which you give away your personal belongings and name the personal representatives who are to administer your estate. The trust, on the other hand, distributes the balance of your assets among the people (and charities) you care about and names the trustees who will administer the trust property according to your wishes. The trust is necessarily more complex than the will, because it is where the tax planning provisions are found.

Foundations are effective vehicles for families who want to make a collective philanthropic impact now and for generations to come. Traditionally, foundations have achieved this impact solely through strategic grantmaking. A growing number of foundations are looking for ways to go further, however. These foundations seek strategies that will allow them to deploy their investment portfolios – in addition to grantmaking – to advance their charitable missions without hurting the value of their endowments long-term. One such strategy, using “mission-related investments” or MRIs, is trending in the press and at sector conferences, but most foundation directors and trustees have yet to jump on its bandwagon. New guidance from the IRS may change that.