Wealth Management News – Lexology

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The June Section 7520 rate for use with estate planning techniques such as CRTs, CLTs, QPRTs and GRATs is 3.6%, an increase from the May rate of 3.0%. The applicable federal rate (“AFR”) for June to be used in connection with a sale to a defective settlor trust or an intrafamily loan with a note with a term of:

The June Section 7520 rate for use with estate planning techniques such as CRTs, CLTs, QPRTs and GRATs is 3.6%, an increase from the May rate of 3.0%. The applicable federal rate (“AFR”) for June to be used in connection with a sale to a defective settlor trust or an intrafamily loan with a note with a term of:

  • 3 years or less (the short-term rate, compounded annually) is 2.21%, compared to 1.85% in May;
  • 3 to 9 years (the medium-term rate, capitalized annually) is 2.93%, compared to 2.51% in May; and
  • 9 years or more (the long-term rate, compounded annually) is 3.11%, compared to 2.66% in May.

IRS proposes limits on large gifts from future estates

What happens to donations over $5 million made between January 1, 2018, when the Tax Cuts and Jobs Act took effect that doubled the tax exemption on gifts of $5,000,000 to $10,000,000 plus inflation adjustments, and on January 1, 2026, when the higher federal estate and gift exemption is supposed to go back down to where it was? Prior to 2019, there was concern that gifts made with the highest exemption could be “reintroduced” into the taxpayer’s estate and become subject to estate tax upon death. In 2019, the IRS issued a final rule that created a special rule, called the “anti-clawback rule,” ensuring that the donor’s estate would not be taxed on completed gifts that were tax-exempt when they were facts because of the higher exemption. .

The Treasury Department recently released draft regulations limiting the anti-clawback rule. The proposed regulations attempt to determine whether and how the special rule would apply to certain transfers that are included, or treated as included, in the gross estate of a deceased under Section 2001(b) of the Internal Revenue Code. Transfers where the donor continues to have title, possession, or other retained rights to the property transferred while alive – treated as still belonging to the donor upon death, which occur under §§2035, 2036, 2037 , 2038 and 2042 of the Internal Tax Code — are not eligible for the anti-recovery rule. In contrast, a donor’s cash contribution to a trust in which they have no control or interest continues to benefit from the anti-clawback rule.

International estate planning and Brussels IV

Regulation (EU) No 650/2012 of the European Parliament and of the Council of the European Union (commonly referred to as “Brussels IV”) – a choice of law and administrative rules regulation relating to property located in the jurisdictions of the European Union – can be used by US nationals to choose whether US inheritance law applies to EU assets.

Brussels IV was enacted with the intention of addressing the substantial differences in inheritance laws that apply between different EU member states. The regulation provides a default mechanism for determining which laws will apply to the succession of a deceased’s property in the EU and allows the laws of an EU country to apply to the succession of all property Europeans of a deceased. (The default rule is that the law applicable to all of the deceased’s assets will be the country in which the deceased has his “habitual residence” at the time of death.) Brussels IV allows a national of any country, even a foreigner from the EU, to apply the inheritance law of his own nationality to assets located in the EU.


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