Advising Donors During Periods of Possible Legislative Changes: Best Practices in 2021
L. Paul Hood, Jr., J.D., LL.M., FCEP
October 6, 2021
The 2020 national elections left us with a Democrat trifecta: control of the House (by five seats), Senate (50-50 but having the tie-breaker in Vice President Harris) and the White House. Quite predictably, the Democrats are exercising their newly found control and legislative muscle and have put forth several pieces of proposed legislation on a wide agenda, including some significant tax changes if enacted. This puts estate and charitable planners in a tough spot in deciding how and what to advise clients to do if (or before!) the proposed legislation is ultimately enacted.
Estate and charitable planners have seen this issue before, back in 2012. But remember that despite lots of anticipatory irrevocable estate planning back in 2012, the politicians threw us a buckling curveball: the applicable exclusion amount, which just about everyone (save Paul and a few others in the small minority) believed was going down significantly beginning in 2013 actually went up. Lots of clients were unhappy, having contracted cases of donor’s remorse, due to having done significant planning in anticipation of a law change that didn’t happen. Could 2012 repeat itself in 2021?
In this webinar, Paul will discuss the following topics pertaining to navigating the uncertain and oft-choppy waters of potential legislative changes in 2021 and how to adapt to the many possible scenarios:
- What’s at issue? What’s at stake? 2025-26 “cliff.” Brief Overview of proposed Sanders/Whitehouse bill, Van Hollern bill and the “Accelerating Charitable Efforts Act” affecting donor advised funds.
- The problem with possible law changes and how to advise clients in their wake; looking back at 2012 and at the current political landscape in 2021-chances of enactment and the backdrop of the December 31, 2025 sunset of exclusion amounts if nothing passed before then.
- Evaluating clients for risk tolerance for both need to plan and potential for being second guessed; importance of financial projections to protect the donor/client (and yourself);
- Red (and yellow) flags: clients who are uncomfortable paying the income tax for a grantor trust or who plan to turn off grantor trust status; debt in excess of basis gifts (which was involved in the Lowenstein case where clients became disgruntled and sued)!
- Introduction of donor’s remorse and ways to minimize or eliminate its possibility
- Always acknowledge and adhere to the second habit of Dr. Stephen Covey’s Seven Habits of Highly Effective People: Plan with the end in mind. The importance of building in exit strategies at the beginning, in light of legislation that either changes or doesn’t get enacted as well as other contingencies. Examples, including grantor trust tax reimbursement clause; turning off grantor trust status; floating spouse provisions; expanded trust protector or decanting powers; lifetime limited powers of appointment; potential perils in giving swap power to a third party; requiring adverse party consent for payments to a donee spouse in the event of divorce if it’s a SLAT.
- Undoing gifts with minimal tax consequences; qualified disclaimers, etc.
- Conclusions and best practices.
Don’t miss this thought-provoking webinar that could save your reputation with your donors and clients as their most trusted advisor. Register today!!!
Paul Hood obtained his undergraduate and law degrees from Louisiana State University and an LL.M. in taxation from Georgetown University Law Center. Paul has taught at the University of New Orleans, Northeastern University, The University of Toledo College of Law and Ohio Northern University Pettit College of Law. Paul has authored or co-authored seven books and over 500 professional articles on estate and tax planning and business valuation. A frequent contributor to Leimberg Information Services since its inception, Paul is a highly sought-after speaker and consultant because of his innate ability to see through the complexity and explain difficult and even boring subjects in understandable and entertaining language and mince no words in doing so. Along the way, Paul has been a father, husband, Godfather, lawyer, trustee, director, president, partner, trust protector, director of planned giving, expert witness, agent, professor, judge, juror and a defendant, and he uses his experience in these myriad roles to guide others.
This program is approved for 1.5 CFRE credits.