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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Estate Planning

Date & Time
  • event Date

    Tuesday, April 29, 2025

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00
CLE
ALL

This CLE/CPE course will provide trust, estates, and tax counsel an in-depth analysis of the rules and practices covering the inclusion of capital gains in distributable net income (DNI) for trusts and estates. The panelist will review the requirements within trust documents to allow treating capital gains as DNI. The program will explore state and local requirements for including capital gains in fiduciary accounting income (FAI) where the trust's governing document does not contain such a provision. The presentation will also discuss the use of IRC Section 678 to have capital gains includable in a beneficiary's income.

Faculty

Gregory V. Gadarian
Partner
Gadarian & Cacy, PLLC

Mr. Gadarian's practice focuses on tax strategy, estate planning and asset protection law. Previously, he was a Legislation Attorney on the staff of the Joint Committee on Taxation, U.S. Congress. Before that, he was an Attorney-Advisor to Judge Cynthia H. Hall of the U.S. Tax Court. He is the former Arizona State Chair of the American College of Trust and Estate Council, and is an Adjunct Professor at the University of Arizona College of Law.

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Description

The treatment of capital gains held within a non-trust or estate involves complex tax rules and effective planning for fiduciary accounting and estate planning. Trusts, estates, and tax counsel must understand essential planning methods and potential pitfalls in treating capital gains as DNI.

Where the executor of the estate or administrator of the trust has the discretion, the general practice is to distribute income whenever possible. However, trust accounting rules and IRC 643 generally treat capital gains as part of trust corpus.

The current tax treatment of non-trusts provides a significant incentive for getting capital gains out of a trust. Currently, non-trusts are taxed at the 20% rate on any capital gains above $15,450.

Additionally, these amounts are subject to the 3.8 percent NIIT, which results in a much higher tax rate on non-trusts than on individuals. Achieving lower overall taxes can be as simple as including capital gains in DNI rather than added to the corpus.

Getting the most beneficial treatment of capital gains income involves careful planning and drafting by estate planners and tax counsel. If capital gains are included in DNI, lower overall taxes are generally achieved. Counsel must pay close attention to ensure the trust document and the trust return permit distribution of capital gains to beneficiaries as income.

Listen as Gregory V. Gadarian, Partner at Gadarian & Cacy, discusses trust document provisions to allow treating capital gains as DNI, state and local requirements and issues, and best practices for making the most tax-advantaged treatment of trust capital gains.

Outline

  1. IRC Section 643 and FAI rules
  2. Including capital gains in DNI; Treas. Reg. Section 643(a)-3(b)
  3. State unitrust rules
  4. Withdrawal powers over trust taxable income
  5. Non-tax considerations and best practices for estate planners and tax counsel

Benefits

The panelist will review these and other key issues:

  • The requirements of IRC §643 on the treatment of capital gains and FAI
  • Structuring trust documents to allow the inclusion of capital gains in DNI
  • Distribution of assets and the total-return-investing under the UPAIA
  • Local and state provisions that may allow capital gains inclusion in DNI