Feb. 2019 Roundup for Professional Advisors

Professional Advisers Roundup
Charitably minded individuals increasingly understand the value of gifting appreciated real estate to charity.

In our roundup for professional advisors, we explore irrevocable life insurance trusts, a gift of a remainder interest in a personal residence, gifts of real estate and more. Read below to stay in-the-know on industry news.

Roundup for Advisors

Personal Planner: Irrevocable Life Insurance Trust (ILIT)
A very beneficial estate planning strategy to protect any family, including a “less-than-perfect” family, is to create a trust that owns life insurance. Your advisor will usually call this an irrevocable life insurance trust (ILIT).

Washington News: IRS Phone Calls Peak on February 19
Millions of Americans and their tax advisors are preparing their tax returns. Many have questions and will call the IRS. The peak day for IRS phone calls typically falls on the Tuesday after President’s Day.

Given the high call volumes at this time of year, the IRS encourages people to first visit its many online resources available at www.IRS.gov. And when it comes time to file, the IRS encourages people to use E-File or Free File to get their refunds as quickly as possible.

Case of the Week: Living on the Edge, Part 3
Philanthropist Rhea Jones recently discovered the gift of a remainder interest in a personal residence. In particular, she liked the potential significant tax savings and the home’s avoidance of the probate process. Also, because the gift is irrevocable, the local charity would recognize and honor Rhea for her generous gift at the annual fundraising gala. Of course, Rhea would retain the right to live in her home for the rest of her life, which is an absolute requirement to any potential gift arrangement.

In order to compute the charitable income tax deduction, Rhea must apportion the $3 million home value between the land and building value. How does she do this? Are there some guidelines for this apportionment?

Article of the Month: Investor or Dealer? – Gifts of Real Estate and Donor Classification
Philanthropically motivated individuals increasingly understand the value of gifting appreciated real estate to charity. Donors are often able to claim a deduction for the property’s fair market value while also bypassing capital gains tax that would otherwise be due if the donor sold the property.

Part I of this article will shed light on this important distinction between real estate investors and dealers, provide factors that advisors should take into consideration when making this determination and offer case examples to illustrate each factor.