United States: 2015 Estate And Tax Planning

Blank Rome's annual estate planning newsletter discusses certain concepts and techniques that we hope may be of interest to our clients and friends.

  1. Transfer Tax Changes. The major changes made in 2010 in the law regarding gift, estate, and generation-skipping transfer ("GST") taxes (collectively, "transfer taxes") are now permanent.

    1. Gift Tax. The tax-free "annual exclusion" amount remains $14,000 in 2015. The cumulative lifetime exemption increased from $5,340,000 in 2014 to $5,430,000 in 2015 (inflation adjustment). The tax rate on gifts in excess of $5,430,000 remains at 40%.
    2. Estate Tax. The estate tax exemption (reduced by certain lifetime gifts) also increased from $ $5,340,000 in 2014 to $5,430,000 in 2015, and the tax rate on the excess value of an estate also remains at 40%. All of a decedent's assets (other than "income in respect of a decedent," such as IRAs and retirement plan benefits), as well as a surviving spouse's half of any community property assets, will have an income tax basis equal to the fair market value of those assets at the date of death ["stepped-up (or down) basis"]. In this regard, securities brokers still are required to retain basis records and report the income tax basis of securities to the IRS. Accordingly, be sure to advise your broker of your basis in securities received by gift or inheritance.
    3. GST Tax. For 2015, the GST tax rate also remains at 40% and the lifetime exemption also has increased (inflation adjustment) from $5,340,000 in 2014 to $5,430,000 in 2015. Paragraph 5 includes more information about the GST tax.
    4. Portability of Estate Tax Exemption. The "portability" rules provide for the transfer of a deceased spouse's unused estate tax exemption ("deceased spousal unused exclusion amount" or "DSUEA") to a surviving spouse (without inflation adjustments). Thus, if a 2015 decedent's taxable estate is not more than $5,430,000, the DSUEA can be used by the surviving spouse with respect to both gift taxes and estate taxes (but not GST taxes). Portability is not available if either spouse is a nonresident alien. Portability may allow some couples to forgo a more complex estate plan while still taking advantage of both spouses' transfer tax exemptions. Portability must be irrevocably elected on a timely filed (including extensions) estate tax return, even if a return is not otherwise required to be filed.

      A typical estate plan for a married couple generally has provided for the establishment of several trusts at the death of the first spouse, one of which is an "Exemption (or "Bypass" or "Credit Shelter") Trust." One of the reasons for the Exemption Trust is to use the deceased spouse's estate tax exemption to the fullest extent possible. Under the portability law, however, if one spouse dies and leaves assets to persons (other than the surviving spouse and charity) in an aggregate amount less than the basic exclusion amount ($5,430,000 in 2015), the surviving spouse may be able to use the DSUEA as well as the surviving spouse's own exemption.

      This portability provision may eliminate the need to create an "Exemption Trust" at the first spouse's death. For example, if this year the first spouse to die leaves all of his or her assets to the surviving spouse, no part of the deceased spouse's exemption is used because of the marital deduction available for assets passing to a surviving spouse at the first spouse's death. Unless the surviving spouse remarries and survives his or her new spouse, he or she will have an aggregate exemption of (i) $5,430,000 ("DSUEA") and (ii) his or her own inflation-adjusted $5,430,000 exemption ($10,860,000 total in 2015). Similarly, if in 2015 the first spouse to die leaves $1,000,000 to his or her children, the surviving spouse will have an aggregate exemption of $9,860,000 (use of the remaining $4,430,000 "DSUEA" in addition to his or her own inflation-adjusted $5,430,000 exemption).

      In many cases, however, we will advise our clients to continue to use an Exemption Trust as part of their estate plans for both tax and non-tax reasons.

      Tax reasons include the following: (i) the DSUEA is not indexed for inflation; (ii) eliminating estate tax on any appreciation of Exemption Trust assets at the surviving spouse's death, regardless of the value of the surviving spouse's assets; (iii) allowing for an allocation of the deceased spouse's GST exemption to the Exemption Trust; (iv) the surviving spouse could remarry and be limited to using the unused exemption of his or her second predeceased spouse, if any (a DSUEA thus may inhibit remarriage); and (v) an estate tax return must be filed timely to qualify for portability. Note, however, that the GST exemption is not portable. Therefore, an allocation of a decedent's GST tax exemption to the Exemption Trust at death must be made to avoid GST taxes if assets are left to grandchildren, either directly or in a trust benefitting both children and grandchildren.

      Non-tax reasons include the following: (i) limiting (or eliminating) the ability of the surviving spouse to direct the disposition of the deceased spouse's assets on the surviving spouse's death; (ii) restricting the surviving spouse's right to use principal (perhaps only for health, support, and maintenance); (iii) providing creditor protection (creditors generally cannot reach the assets in an irrevocable trust established by another person); and (iv) providing professional management if desired.

      Exemption Trust disadvantages include the following: (i) annual costs for the preparation of Exemption Trust income tax returns and maintaining separate records for the Exemption Trust; (ii) the possible loss of a further stepped-up basis on the surviving spouse's death; (iii) lack of surviving spouse ability to change the estate plan to adapt to changed circumstances, unless as is often the case the surviving spouse has a limited power to change the Exemption Trust distribution provisions; (iv) lack of ability to offset capital gains and losses realized by the surviving spouse and the Exemption Trust; (v) Exemption Trust assets generally cannot be used to implement further estate planning techniques; (vi) the surviving spouse cannot use the $250,000 exclusion from capital gain upon the sale of a residence held in the Exemption Trust; and (vii) possible need to accelerate taxable distributions from retirement accounts.

      Two Planning Tips. If the reasons for establishing an Exemption Trust are not significant, but you nevertheless want to provide for the possible establishment of an Exemption Trust in case your spouse decides that it is advisable to do so, your estate plan can provide for distribution of your estate to your spouse, but include a provision that would allow your surviving spouse to "disclaim" all or a portion of his or her inheritance and arrange for the disclaimed assets to be allocated to an Exemption Trust ("Disclaimer Trust"). The surviving spouse could make his or her decision to disclaim during the nine-month period following the first spouse's death. The only difference between a Disclaimer Trust and an Exemption Trust established by the first spouse is that the surviving spouse could not have a power to provide for distribution of the assets of a Disclaimer Trust in a manner different from the first spouse's distribution plan.

      A qualified "Marital Trust" ("QTIP Trust") enables a deceased spouse to maintain control over the distribution of the trust assets upon the death of the surviving spouse, can preserve the deceased spouse's unused GST exemption through a "reverse QTIP election," and provides a greater degree of creditor protection than would be afforded by an outright bequest to a surviving spouse. Using a Marital Trust to accomplish these objectives (rather than an Exemption Trust) may allow the trust assets to receive a step-up in basis upon the death of the surviving spouse and, in some cases, may postpone payment of state level estate taxes until the death of the surviving spouse. In addition, the surviving spouse may wish to elect portability and subsequently use the deceased spouse's remaining estate and gift tax exemption (DSUEA) to make lifetime gifts tax-free. Uncertainty currently exists regarding the validity of a qualified "QTIP" election made solely to allow for the use of portability, which may prevent the surviving spouse from implementing this further planning strategy.
    5. Income Tax Changes. The following is a brief summary of the income tax changes made in 2014, taking into account 2015 inflation adjustments:

      1. the highest tax rate is increased from 35% to 39.6% for incomes in excess of $464,850 (was $457,600) (joint return), $439,000 (was $432,000) (head of household), and $413,200 (was $407,650) (single). These brackets will continue to be adjusted for inflation annually;
      2. the social security tax remains increased from 4.2% to 6.2%;
      3. the alternative minimum tax ("AMT") exemption amounts are increased to $83,400 (was $82,100) (joint return) and $53,600 (was $52,800) (single);
      4. the maximum tax rates for most long-term capital gains and dividends remain increased from 15% to 20%; and
      5. the itemized deduction and personal exemption "phase-outs" were reinstated with adjusted gross income thresholds of $309,900 (was $305,050) (joint return), $284,050 (was $279,650) (head of household), and $258,250 (was $254,200) (single), which thresholds will continue to be adjusted for inflation annually. These "stealth tax" provisions effectively increase marginal tax rates for those affected.
      In addition, a 3.8% "Medicare" tax is still imposed on investment income (including capital gains) of "high-earning" taxpayers, and a 0.9% Medicare tax is still imposed on employment income earned by those taxpayers.
  2. Revocable Trust. The revocable trust is a valuable estate planning technique for both single and married clients, used primarily to avoid the inconvenience and extra costs of a probate administration of an estate upon death (multiple probate administrations would be required if you own property in other states). In addition, administration of a trust can be private as opposed to a probate administration that is open to the public. The same estate tax savings techniques available by Will can be employed via the revocable living trust. Many of the post-death income tax advantages previously available to probate estates have been eliminated, thus making the revocable trust even more attractive for wealthier clients. Our California, Florida, Maryland, and Virginia clients often use revocable trusts rather than Wills as their primary estate planning vehicles.
  3. Gift Program. A lifetime gift-giving program could reduce overall transfer tax costs considerably. By receiving lifetime gifts, donees will benefit from all future appreciation of and income generated by the transferred property free of transfer taxes. This year, every individual may transfer cash or other property worth $14,000 (or $28,000 for married couples) to each of as many donees as the donor selects without incurring any gift or later estate tax. An inflation adjustment applies when that adjustment would increase the annual exclusion amount by $1,000 (e.g., to $14,000 in 2013). Donors may make these gifts (known as "annual exclusion" gifts) outright or via custodianships or trusts, although careful planning is needed if trusts are to be used. For example, it is very important to assure that any trust for a grandchild contains special provisions so that gifts made to that trust are exempt from the GST tax (discussed in paragraph 5). In addition, no gift taxes are imposed if you pay a donee's tuition or medical expenses (payments must be made directly to the school or health care provider), and you may prepay tuition under certain circumstances.

    Even if a gift is not "tax-free" as described above, if your aggregate gifts do not exceed the $5,430,000 lifetime gift tax exemption amount (or $10,860,000 for married couples), no gift tax will be payable at the time of the gift. Taxable gifts in excess of the $5,430,000 lifetime exemption will accelerate transfer tax payment, but an overall tax savings may result because your gift tax dollars generally will not be subject to estate taxes at death. Paying gift taxes now, however, may result in an unnecessary tax payment if estate taxes would not be payable at death under new legislation; the possibility of estate tax repeal should be considered. Certain valuation advantages (such as "minority" discounts) that might be unavailable at death often are possible under current law in connection with lifetime gifts (e.g., see paragraph 13). Finally, the low interest rates currently in effect make this a very good time to loan funds to younger generations, and may make certain types of gifts via trust particularly attractive.
  4. Life Insurance. Life insurance proceeds are generally exempt from income tax. In addition, all estate tax on life insurance proceeds may be avoided on the death of the insured through proper planning: insurance proceeds can be available free of estate tax to the surviving spouse, but by designating other family members or a trust for their benefit as owners and beneficiaries, estate taxes can be avoided in both spouses' estates. "Joint life" (or "survivorship" or "second to die") policies make life insurance planning affordable for many more people. You should consider the ownership and beneficiary designations for any newly acquired life insurance carefully before the policy is purchased. You also should review the ownership and beneficiary designations of your existing policies; your revocable living trust or Will does not generally control distribution of life insurance proceeds. "Split-dollar" life insurance plans now are subject to much more stringent rules; we suggest that you review with an insurance professional or with us any "split-dollar" life insurance programs in which you currently participate or in which you contemplate participating. Finally, recent economic activity may have caused your life insurance policies to experience financial problems; you may wish to contact your insurance professional to discuss the current status of your policies.
  5. GST Tax. The GST tax generally imposes an additional transfer tax (at the 40% estate tax rate) on property transferred to grandchildren and other younger beneficiaries by lifetime gift or at death, and whether outright or via trust. Certain techniques are available to avoid or substantially reduce this GST tax. One technique involves making "tax-free" gifts as described in paragraph 3 via an "annual exclusion" gift program to grandchildren (either outright or via trust) and by paying a grandchild's tuition and medical expenses (remember, direct payments to the school or health care provider are required). Another technique involves use of your lifetime GST exemption to establish a "dynasty" trust (which can invest in life insurance policies or other property) to enable a substantial amount of property to pass to grandchildren, great-grandchildren, and later generations free of any estate or GST tax. The GST exemption for 2015 is the same as the unified $5,430,000 estate and gift tax exemptions. Whereas use of the gift and estate tax "exemptions" is automatic, use of the GST exemption is elective. In view of the voluntary GST exemption allocation rules, we generally recommend that clients who make gifts to trusts from which a grandchild or other younger beneficiary may receive distributions file gift tax returns (even if not required) in order to specifically elect whether to allocate or not allocate GST exemption to those trusts.
  6. Marital Deduction; Noncitizen Spouse. The vast majority of married couples combine the estate tax "exemption" granted to each person with the unlimited marital deduction to assure that no estate taxes are payable until the death of the surviving spouse. The unlimited marital deduction generally is available for gifts and bequests to spouses; those gifts and bequests can be outright transfers or can be made via trusts (although not all types of trusts will qualify for the marital deduction). Severe restrictions, however, are imposed on the ability to defer estate taxes if the surviving spouse is not a United States citizen (the surviving spouse's residence is not a factor). Under these rules, property passing to a noncitizen surviving spouse must be held in a special type of trust (a "qualified domestic trust") in order to qualify for the marital deduction. In addition, although gift taxes on gifts to noncitizen spouses generally cannot be deferred via the marital deduction, in 2015 you may make "annual exclusion" gifts (discussed in paragraph 3) of a maximum of $147,000 (rather than $14,000) to your noncitizen spouse (subject to annual inflation adjustments). As discussed in paragraph 1-D, portability is not available if either spouse is a nonresident alien. You should review your estate plan now if either spouse is not a U.S. citizen.
  7. Estate Planning for Nonresident Aliens. The estate of a nonresident alien ("NRA") (a noncitizen who is not a U.S. resident) has only a $60,000 (not $5,430,000) estate tax exemption available. U.S. donees of gifts from NRAs or foreign estates in excess of $100,000 [or $15,601 in 2015 (inflation adjusted) from a foreign corporation or partnership] must report these gifts to the IRS on Form 3520. Several interesting planning opportunities may exist for an NRA. An NRA may avoid transfer taxes completely by structuring his or her holdings so that no U.S. "situs" assets are owned directly (for example, U.S. "situs" assets may be held by a wholly-owned foreign corporation, although U.S. real estate presents special income tax issues). If your spouse is not a U.S. citizen, you may wish to defer estate taxes by use of a "qualified domestic trust" (discussed in paragraph 6 above). Lifetime gifts by an NRA of U.S. "situs" intangible personal property (such as stock or partnership interests) are not subject to U.S. gift taxes, even though these items might be subject to U.S. estate taxes if owned by the NRA at death. An NRA also may wish to establish a trust to hold property for U.S. resident children or other family members to provide them with tax-free income and arrange for the trust property to pass to other family members free of transfer taxes.

    A U.S. taxpayer who expatriates can be subject to severe tax penalties unless that taxpayer has a net worth of less than $2,000,000 and average annual income of not more than $160,000 (subject to annual inflation adjustments). The tax penalties can be deferred on an asset-by-asset basis if an election is made (interest and security are required). In addition, transfer tax is imposed on the receipt by U.S. taxpayers of any amounts in excess of $14,000 (adjusted for inflation) from an expatriate described above.
  8. Community Property v. Joint Tenancy. For income tax purposes, both "halves" of appreciated community property receive a "step-up" in basis upon the death of either spouse. Because only one-half of the basis of property held in joint tenancy receives a basis "step-up" at the death of the first spouse, we generally recommend that legal title to appreciated assets owned jointly by spouses and not held in a revocable living trust be held as "community property" rather than as "joint tenants." California now recognizes "community property with right of survivorship" as a form of legal title for real estate.
  9. Charitable Tax Planning. There are several techniques available to transfer significant wealth to intended beneficiaries in a tax-favored manner and at the same time benefit charity. This is particularly true in connection with a sale of highly appreciated assets; a charitable remainder trust can be used to advantage in these circumstances. You also may be able to arrange to receive a lifetime annuity in exchange for cash or appreciated property, or even for agreeing to transfer your residence to a charity at your death (or at the death of the surviving spouse). You also may be able to transfer property to your descendants without (or with reduced) transfer taxes by establishing a charitable lead trust (these are particularly advantageous in a low interest rate environment as currently exists). The income tax benefits of donating partial interests in tangible personal property items (such as works of art) are currently restricted. The popular "Charitable IRA Rollover" rules that expired on December 31, 2013, were extended retroactively on December 22, 2014, for only one year (2014); these rules are discussed in paragraph 11 below. Wealthier taxpayers may be interested in a private foundation or a donor-advised fund established at a public charity, such as a community foundation. The IRS has developed two web pages that may be of interest to these taxpayers: "Life Cycle of a Private Foundation" deals with private foundations (http://www.irs.gov/Charities-&-Non-Profits/Private-Foundations/Life-Cycle-of-a-Private-Foundation); and "Life Cycle of a Public Charity" deals with public charities (http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Life-Cycle-of-a-Public-Charity).
  10. "Buy-Sell" Agreements/Options. A "Buy-Sell" or option agreement (whereby a family member or business associate has the obligation or option to acquire assets at an established price) can be used to advantage to restrict ownership of a business, to establish the value of an asset for estate tax purposes, and to provide a market for the asset to allow owners to plan for liquidity. This estate planning device is subject to restrictions, but some of these restrictions do not apply to agreements made before October 9, 1990. You therefore should be very careful if you wish to modify "Buy-Sell" or option agreements made prior to October 9, 1990. Employer-owned life insurance generally now is subjected to income taxation, although insurance used to fund a Buy-Sell Agreement is exempt from income taxation, provided that certain written notice and consent requirements are met in advance.
  11. Employee Benefit Plans and IRAs. Assets in pension and profit-sharing plans, IRAs, and other retirement plans (other than Roth plans) can be subject to severe taxes at death. You should review your plan benefits to determine whether you can avoid or postpone these taxes and whether your plan benefits are coordinated with your estate plan; your revocable living trust or Will generally does not control disposition of these benefits. Plan proceeds still can be the most advantageous to use for charitable gifts at death, including transfers to charitable remainder trusts and to establish charitable gift annuities. The "Charitable IRA Rollover" provisions expired on December 31, 2013, but were extended retroactively, so taxpayers who had attained age 70½ were able to direct a maximum of $100,000 in 2014 to charity from an IRA (only); the payment will not be included in the taxpayer's income for the year, but it nevertheless will count against the taxpayer's "minimum required distribution" for the year. No charitable contribution deduction will be allowed, but most taxpayers nevertheless would benefit by using this technique as opposed to withdrawing funds from an IRA (taxable) and contributing those funds to charity (deductible, but subject to certain limitations). Taxpayers hope that the "Charitable IRA Rollover" rules will be made permanent in 2015.
  12. Subchapter "S" Corporations. The use of Subchapter "S" corporations has become somewhat less popular because of the increased use of limited liability companies ("LLCs"). Care must be taken, however, with respect to existing Subchapter "S" corporations. For example, upon the death of a Subchapter "S" corporation shareholder, Subchapter "S" corporation status can be lost unless the decedent's shares pass to a qualified shareholder in a timely manner. All Subchapter "S" corporation shareholders therefore should assure that their estate plans allow for the continuation of Subchapter "S" corporation status. Subchapter S corporations also might be used to reduce payroll taxes imposed on their owner-employees.
  13. Family Limited Partnerships and Limited Liability Companies. A "family limited partnership" ("flp") or "family limited liability company" ("fllc") can be an excellent estate planning vehicle for clients who own valuable assets. A flp or fllc can be advantageous if a family member encounters creditor problems in the future. Gifts of flp or fllc membership interests to your beneficiaries or to trusts for their benefit can qualify for the gift tax "annual exclusion" (discussed in paragraph 3) if properly drafted, and the value of those gifts can reflect the "discounts" available for minority and nonmarketable interests. "Discounted" values also can be used in connection with sales to desired limited partners or LLC members, including family members or trusts for their benefit. Some recent IRS challenges to these entities have been successful, however, so all administrative and operational details must be respected; some recent court decisions have focused on the actual organizational and operational aspects of the family entities. The tax benefits anticipated at the time of the formation of the entity should be available at the donor's death if the entity is organized for a significant non-tax business purpose and operated strictly in accordance with the provisions of the governing instrument and applicable state law, the donor has retained enough assets outside the entity to satisfy the donor's personal financial needs, and the donor is not a general partner or LLC manager. We continue to urge all clients who have implemented flps or fllcs to review those entities now.
  14. Durable Powers. It has become more important to plan for the risk of lifetime incapacity. A Durable Power of Attorney can provide for lifetime asset management, especially if your estate plan does not include a revocable living trust. An Advance Health Care Directive permits you to designate someone to make health care decisions on your behalf if you become unable to do so, and also can be used to make known your desires that artificial life-prolonging measures be or not be employed on your behalf. Appropriate health care documents for your children (both minors and adults) also should be completed. In addition, you should consider executing an appropriate Authorization for use and disclosure of health information that otherwise would be protected and thus unavailable under the federal Health Insurance Portability and Accountability Act ("HIPAA").
  15. Same-sex Marriages. On June 27, 2013, in United States v. Windsor, the United States Supreme Court held that Section 3 of the Defense of Marriage Act ("DOMA") is unconstitutional. The case arose in connection with a New York statute that recognized same-sex marriages. The IRS denied the deceased Ms. Windsor's estate the right to claim a marital deduction on the basis that under DOMA the surviving Ms. Windsor did not qualify as a surviving spouse. Section 3 of DOMA provides that for purposes of determining the meaning of any act of Congress "marriage" means only a legal union between one man and one woman as husband and wife, and "spouse" refers only to a person of the opposite sex who is a husband or a wife. The import of this provision was that even if a state permitted same-sex marriage, the federal government nevertheless would not recognize it for purposes of any of its laws. The U.S. Supreme Court held that the definition of marriage in Section 3 of DOMA violated the Due Process Clause of the Fifth Amendment to the United States Constitution as a deprivation of an essential part of the liberty protected under that amendment.

    The Windsor case and similar cases from other states may significantly impact an estate plan and may have important income tax consequences. All states, excluding Texas, in which we practice allow same-sex marriages. Below is a list of some of the consequences of these cases, many of which may be retroactive (same-sex married couples may amend previously filed income tax returns for tax years for which the statute of limitations has not run).

    1. The availability of the marital deduction for both gift and estate taxes, including the ability to transmute separate property of one spouse to community property (or vice versa) without negative gift tax consequences.
    2. The treatment of retirement benefits and the availability of the spousal rollover IRA.
    3. The obligation to file one joint income tax return or two returns as married filing separately.
    4. Both spouses may use the gift, estate, and GST tax exemptions, tax advantages of "split gifts" for gift tax purposes, and the ability to use portability.
    5. Increased health care access and rights.
    6. Increased opportunities for international estate planning and citizenship.
    7. A federal judge has ruled that key parts of Utah's bigamy law that make polygamous cohabitation a crime are unconstitutional.
  16. Digital Assets. This is an often overlooked category of assets that you should consider when creating an estate plan. Many people have many digital accounts, and those accounts may be inaccessible when the person becomes incapacitated or dies. Automatic payments from bank accounts would continue until the bank is notified.

    In some cases, digital assets can be left to a decedent's beneficiaries; in other cases, a person has only a license to use assets, and the license ends at death so that no other person can use them.

    Treasured family photos might be kept only in digital format. A service provider often will not disclose a deceased person's passwords to his or her Personal Representative; and there are very few laws to help in this situation. The providers' "terms of service" agreements often include provisions about what will happen in the event of death.

    The digital asset owner should consider whether to leave important information about digital accounts with a trusted person or in a location in which the information may be found. An estate plan can designate a "digital fiduciary" who would be given the right to access digital information, such as login names and passwords, but this designation may not be honored by all websites. Login names and passwords can be kept in a digital password vault: this information should be revised regularly so that it remains current.
  17. Deposit Insurance. The FDIC bank deposit insurance limit is $250,000 per account. Generally, all retirement accounts of a single "participant" at a particular bank are insured up to $250,000. All accounts held by a revocable trust are insured on a "per settlor per beneficiary" basis. For example, a single revocable trust established by a married couple that provides that, on the death of the first spouse, the assets will remain in the trust for the benefit of the surviving spouse for life, and that on the death of the surviving spouse, the assets will be divided into equal shares for their three children, will be insured while both spouses are living for $1,500,000 at each bank in which the trust maintains accounts (husband is treated as having three $250,000 beneficiaries, and wife is treated as having three $250,000 beneficiaries). This rule will apply regardless of the relationship between the trust creators and the beneficiaries; previous law provided for this protection only to certain close family members. For more information about FDIC insurance for revocable trusts, see https://www.fdic.gov/deposit/covered/trust.html.
  18. Foreign Bank Account Reporting. The Treasury Department is actively pursuing taxpayers who fail to report their foreign bank and securities accounts (including foreign fund accounts maintained outside the U.S.) on IRS Form 8938 (revised on January 5) as required by the Foreign Account Tax Compliance Act ("FATCA"). Filing this Form 8938 does not relieve U.S. taxpayers (including non-resident U.S. citizens and dual citizenship individuals) from the separate obligation to file a Report of Foreign and Financial Accounts ("FBAR") (FinCEN Form 114, replacing Form TD F 90-22.1) that must be received by the Treasury Department by June 30 each year (no extensions) to report an interest in, or a signature authority over, any financial account in a foreign country if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year. The FBAR must be filed electronically. These two forms must be filed even if the accounts earned no income. IRS Form 8938 must be filed with a U.S. resident's income tax return if total foreign financial assets aggregate $50,000 at year-end or $75,000 at any time during the year (single or married filing separately) or $100,000 at year-end or $150,000 at any time during the year (joint return). Severe penalties are imposed for failure to comply with either of these filing requirements. On June 18, 2014, the IRS announced a modified offshore voluntary disclosure program, effective July 1, 2014, that includes significant changes providing new options for U.S. taxpayers who have not yet complied with the reporting requirements. The IRS announced modifications to its "Streamlined Compliance Procedures," a program designed for taxpayers whose failures to report their foreign accounts were negligent or not willful. Finally, FATCA became effective on July 1, 2014, and foreign banks will begin reporting the identities of their U.S. depositors to the IRS in March 2015.
  19. Regulatory Notices. We are providing this letter and the enclosure as a commentary on current legal issues as a service to our clients and friends; neither should be considered legal advice, which depends on the unique facts of each situation. Receipt of this letter and the enclosure does not establish an attorney-client relationship.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
McLane Middleton, Professional Association
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McLane Middleton, Professional Association
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions