Looking Beyond the COVID-19 Crisis

Key Points:

First and foremost, we hope you and your families are well and managing as best as possible during these unprecedented times. Although this crisis presents innumerable unforeseen challenges in the short run, it also presents certain opportunities to consider taking advantage of in the long run, if appropriate, in a timely fashion. These include:

  • Making changes to or creating an estate plan, which can be prepared remotely through the use of virtual notarizations, virtual witnessing or alternatives to witnessing.
  • Making estate planning transfers of assets at a time of advantageous values, including depressed valuations and low interest rates. Crafting win-win structured settlements to previously unsettleable cases and novel settlement opportunities for those who think outside the box.
  • Preparing to implement steps before the year-end in anticipation of higher tax rates, new taxes, and lower exemptions that may take effect some time in 2021.

Estate Planning Changes. The current health crisis is reminding people for whom planning has been on the back burner that it is important to make the changes necessary to keep one's estate plans current (and put an estate plan in place in the case of those who do not have one). All changes to existing documents, as well as the creation of new documents, can be prepared remotely. Execution of documents has its challenges during these times of shelter in place, but there are many potential solutions. The governors of many states have permitted virtual notarizations under many circumstances, and some states permit virtual witnessing as well. Where witnessing is required, such as for wills, and where virtual witnessing is not permitted, one can consider declarations of trust instead, which generally do not require witnessing. One can also consider holographic (i.e., handwritten) wills, which also do not require witnessing and which are options in most states — in some states, under limited circumstances, that may or may not apply, but it may apply in other states under much broader circumstances or even all circumstances.

Depressed Valuations. Depressed valuations present a good opportunity to make estate planning transfers of assets at advantageous values. The transfers can be simple outright transfers or leveraged transfers using one or more traditional estate planning devices. Without further Congressional action, the $10 million applicable exclusion from gift, estate and generation-skipping transfer taxes, indexed for inflation (this year $11.58 million per person), is due to sunset on December 31, 2025. Of course, it could be repealed sooner. But even if it is extended past 2025, it always makes sense to use one's transfer tax exemption sooner rather than later (to remove future income from, and appreciation to, transferred assets, as well as the underlying assets themselves). What better time than when valuations are depressed?

Low Interest Rates. Low interest rates present an unparalleled opportunity to create grantor retained annuity trusts and to make tax free sales to grantor trusts (both a means to transfer future appreciation to assets) when the hurdle rates (i.e. the rate of return that must be retained by the transferor or seller) are unprecedentedly low, and they are so likely to work well ― and when there is no downside, if they don't for some reason beat these historically low hurdle rates. The exceptionally low interest rate environment presents a rare opportunity to move appreciation out of one's estate, in many cases without having to use any of one's lifetime transfer tax exclusion. Low interest rates also work well for private annuities, which might be advantageous for individuals of compromised health, for self-canceling installment notes and for charitable lead trusts. One might consider refinancing existing notes at these new lower rates, and, in the case of estate litigation, if funds need to be borrowed or assets purchased over time to effect a settlement, the cost of borrowing (or paying over time) to effectuate a settlement may never be lower.

Internal Revenue Service Notice 2020-18. The Notice provides that federal income tax returns (and respective tax payments) are not due until July 15 in the case of individuals, estates, partnerships, S Corporations and C Corporations, where the returns were originally due on April 15. It is unclear whether gift tax returns and payments may have been extended. Estate tax returns and payments have NOT been extended, nor have fiduciary income tax returns for estates not on a calendar year. Some states automatically follow federal filing and payment procedures, but others do not and will have to issue guidance before one can delay filing and payment at the state level.

Estates and Trusts Administration Deadlines. While statutes of limitations have generally been suspended and some federal income tax returns and payments have been delayed, the remaining myriad of routine local, state and federal tax and non-tax filing and reporting deadlines in the routine administration of estates and trusts generally have NOT been suspended. While one would hope that missed deadlines will be treated leniently, care should be taken to make sure that all deadlines continue to be met and estates and trusts continue to be administered pursuant to existing rules and regulations.

Estate, Trust and Fiduciary Litigations. With statutes of limitations being suspended by many states, and with most state and federal courts suspending the discovery process and motion calendars for most pending proceedings and the ability to file most new proceedings, operating on a triage-only basis, this may be the "wake up" call that litigants need to recognize that they cannot depend upon the courts to solve their problems, at least not for many years (and perhaps not in their lifetimes, creating litigation havoc for the beneficiaries of their estates). There now may be a premium on crafting win-win structured settlement to previously unsettleable cases. The new planning opportunities created by the current crisis may well provide novel settlement opportunities for those who think outside the box.

Day Counts. For foreign individuals who may be in trouble with their day counts in avoiding US or other taxation, with proper planning, the inability to travel may create an opportunity to avoid what would otherwise be tripping a tax trap.

Donative Transfers Across Borders. Well intentioned donors assisting family members in need in other countries, whether US donors to non-US family members or non-US donors to US family members, should be careful to avoid triggering adverse tax or other consequences, either to themselves or to the recipients, in connection with these well-intentioned transfers.

Possible Change of Administrations and Legislative Changes. Year-end this year will likely require more planning changes than usual, particularly if there is a change in administration. Even without a change in administration, however, one can expect the possibility of unforeseen changes in response to the cost of dealing with the current crisis. Thought should be given now to prepare for what steps, if any, one might want to implement before year-end in anticipation of higher tax rates, new taxes, lower exemptions, etc. that may take effect some time in 2021.

We will continue to use our collective knowledge and experience to help everyone both meet the challenges that lie ahead and brainstorm how to take advantage of the opportunities they present. We will send out additional bulletins toward that end as there are relevant developments.

Written by:

Katten Muchin Rosenman LLP
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JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

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Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

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We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

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How is your information shared?

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How We Protect Your Information

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Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

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You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

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  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

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How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

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There are different types of cookies and other technologies used our Website, notably:

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Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

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If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

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Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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