Split-Dollar Agreements and Estate Inclusions: Application of Sections 2036 and 2038 to Certain Property Interests
Critical Takeaways From Recent Tax Court Rulings, Tax Treatment Under Regs. Sec. 1.61-22, Key Exceptions, Section 2703
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
- work Practice Area
Estate Planning
- event Date
Wednesday, April 22, 2020
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will provide trusts and estates counsel and advisers an-depth analysis of the use of split-dollar agreements and potential estate inclusions of property interests. The panel will discuss recent U.S. Tax Court cases on the application of Sections 2036, 2038, and 2703 to specific property interests, tax treatment under Regs. Sec. 1.61-22, the exception of the bona fide sale, and offer trusts and estate planning techniques for structuring split-dollar agreements and pitfalls to avoid.
Mr. Bridgers' practice encompasses all areas of private wealth and family business. In addition to estate planning and estate administration, he is experienced in mergers and acquisitions, taxation, business transactions, franchising, commercial contracts, asset protection, executive compensation, employee benefits, qualified and non-qualified retirement plans, and nonprofit organizations. He counsels closely-held and family businesses, and nonprofit organizations, with their planning, succession, and liquidity needs in a variety of industries including tech, restaurant and retail, healthcare, manufacturing, construction, real estate, financial services, consulting, and professional staffing.
Ms. Sawyer focuses her practice on tax-efficient planning with an emphasis on each client’s personal, non-tax objectives. She also advises on and implements complex charitable and non-charitable planning techniques for high net worth individuals; counsels private foundations and public charities in applying for tax-exempt status and navigating governance issues; and assists with probate administration, trust administration, tax compliance, and transactions involving investment and residential real estate.
Mr. Berselli is a partner in Holland & Knight's Portland office and is a member of the firm's Private Wealth Services Practice Group. He serves as general counsel to wealthy individuals, their families and their businesses throughout the United States to design and implement sophisticated strategies integral to family wealth planning. High-net-worth individuals, including principals of private equity, venture capital and hedge fund firms, private and public company executives, real estate developers, entrepreneurs and business owners, turn to Mr. Berselli for advice and counsel in all aspects of wealth transfer strategies, income and transfer tax planning, philanthropy and business succession.
In Estate of Cahill, the Tax Court found that the cash surrender value of a split-dollar life insurance arrangement was includible in the decedent's estate. This ruling has a substantial impact on the use of split-dollar agreements as an estate planning vehicle between family members and their trusts. Estates and trusts attorneys and advisers must identify and remedy challenges relating to these types of arrangements and specific property interests.
Split-dollar agreements were more common in the corporate setting until IRS Revenue Rulings 64-328 and 66-110 provided guidance on the use of these agreements in nonemployer situations. In a split-dollar arrangement, one party usually owns the insurance portion, and the other party owns the cash-value portion, with each party paying a portion when premiums are due. In an estate planning setting, an ILIT is often the policy owner, and the spouse of the insured is entitled to the cash value upon the insured's death.
Section 2036(a) can cause an estate inclusion of property interests held by a decedent at death for any right to possess or enjoy property or income it generates and also includes any right to designate another person to possess or enjoy the property or income from such property. In essence, any rights to property interests or income steeming from such interests do not have to be solely in the decedent's control and subject to estate inclusion.
Trusts and estates counsel and advisers must recognize the nuances of the application of crucial IRC provisions and regulations about the use of split-dollar agreements and potential estate inclusion.
Listen as our panel discusses critical takeaways from recent tax court decisions on estate inclusion and the application of Sections 2036, 2038, and 2703, the bona fide sales exception, and tax treatment under Regs. Sec. 1.61-22, as well as offers planning techniques for structuring split-dollar agreements.
- Use of split-dollar agreements in trust and estate planning
- Key pitfalls to avoid in structuring split-dollar agreements
- Application of Secs. 2036(a)(2) and 2038(a)(1)
- Section 2703 and valuing decedent's rights under an agreement
- Tax treatment under Regs. Sec. 1.61-22
- Other critical issues for trusts and estates counsel
The panel will review these and other key issues:
- What are the key considerations in structuring split-dollar agreements for trusts and estates?
- How do recent court rulings interpret the application of Sections 2036, 2038, and 2703 to certain property?
- What are the rules for the tax treatment of certain property under Regs. Sec. 1.61-22?
- What transactions fall under the exception of the bona fide sale?
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