Donor-Advised Funds: IRS Proposes Rule Changes Through IRS Notice 2017-73

Donor-Advised Funds: IRS Proposes Rule Changes through IRS Notice 2017-73

Author: Morris N. Robinson of M. Robinson & Company

IRS Notice 2017-73 (the “Notice”) provides advance notice of U.S. Treasury and IRS’ proposed rule changes for Donor-Advised Funds (“DAF’s”). Comments are requested by March 5, 2018. The Notice represents a significant departure from the rules governing the use of DAF’s by donors, sponsoring organizations, charities and their tax advisors. The Notice addresses the following three questions:

  1. Charitable Pledges: May DAF distributions be used to pay a donors’ charitable pledges without triggering penalty taxes under Section 4967?
  2. Charity Event Tickets and Memberships: May DAF distributions be used to pay the charitable portion of tickets to attend charity-sponsored events, which are used by its donors, advisors and members of their extended families, without triggering penalty taxes under Section 4967?
  3. DAF Grants and Public Support Test: May a donee charity use DAF distributions to demonstrate that is has substantial public support and should not be classified as a private foundation? How will “anonymous contributions” be treated to determine if the donee charity has substantial public support?

Additional Comments Requested: In addition to requesting comments on the above issues, the Treasury Department and IRS would like comments on the following:

  1. How do private foundations use DAFs to support their purposes?
  2. Whether a time limit should be placed on a distribution from a DAF to a qualifying charity for grants made by a private foundation to a DAF to satisfy the private foundation’s qualifying distribution requirement?
  3. What other considerations should be taken into account for DAFs with multiple unrelated donors with regard to the public support proposal change?
  4. What methods could be used to streamline recordkeeping by DAFs and public charities for the public support proposal change?

The Notice is detailed and provides examples to explain the background and considerations of its proposed changes. To understand its full intent, the Notice should be read in its entirety. To view a more in-depth analysis by Mr. Robinson on this topic, click here.


Tax Cuts and Jobs Act of 2017

Tax Cuts and Jobs Act of 2017

Author: Morris N. Robinson of M. Robinson & Company

The Tax Cuts and Jobs Act of 2017, Public Law No. 115-97, was signed into law on December 22, 2017 by President Donald Trump. The final bill had tax implications for trusts and estates as well as for individuals and corporations:

Lifetime Exclusion: The lifetime exclusion amount from estate tax under Section 2010(c)(3) is increased from $5,000,000 to $10,000,000 per decedent. This increase is in effect for estates in which the decedent dies after December 31, 2017 and before January 1, 2026.

  • The lifetime exclusion amount for gift tax is also increased to $10,000,000 per donor from $5,000,000.
    • The amount of the exclusion for both amounts is adjusted for inflation using the Chained-CPI.

No “Clawback” on Exclusion Amount: Regulations will be forthcoming to deal with gifts made during the time this exclusion amount is in effect and whatever the basic exclusion amount under Section 201(c)(3) so that there will be no “clawback.”

  • A “clawback,” with regard to this section, might occur if, after the time period lapses, the exclusion amount reverts back to its previous amount prior to the enactment of this bill. Without modification language to avoid a “clawback,” amounts gifted under the increased exclusion levels during of the Tax Cuts and Jobs Act could become taxable.

Tax Rates for Estates and Trusts:

Taxable income is:                                          The tax is:

Not over $2,550 ………………………………………..         10% of taxable income.

Over $2,550 but not over $9,150 ………………..          $255, plus 24% of the excess over $2,550.

Over $9,150 but not over $12,500 ………………          $1,839, plus 35% of the excess over $9,150.

Over $12,500 ……………………………………………          $3,011.50, plus 37% of the excess over $12,500.

Personal Exemption Amount: Deductions for personal exemptions under Section 151(d) are suspended under the Act, but there is an exception for qualified disability trusts. Disability trusts permitted to take the personal exemption deduction under Section 642(b)(2)(C) will be allowed a deduction of $4,150, adjusted for inflation.


Miscellaneous Itemized Deductions: Deductions for miscellaneous itemized deductions subject to the 2% floor, such as tax and investment advice, are suspended for taxable years 2018 through 2025.

  • Note: The language of the provision under new Section 67(g) refers specifically to miscellaneous itemized deductions. However, the deduction for trust administration services under Section 67(e) does not fall under miscellaneous itemized deductions. The current view is that this deduction for trusts and estates will still be available, but further guidance is hoped for.

Qualified Business Deduction: The 20% Qualified Business Deduction for pass-through entities will impacts trusts and estates with qualified trades or businesses.

The new QBI deduction benefits all business owners, other than C corporations, irrespective of whether they operate their businesses as sole proprietorships, partnerships, S corporations, estates or trusts. The business deduction is claimed in the taxable year in which the related business income is reported by the taxpayer.

Case Summary: Ajemian v. Yahoo!, Inc.

Author:  Bradford N. VezinaMcLane Middleton

The Massachusetts Supreme Judicial Court, in the case of Ajemian v. Yahoo!, Inc., held that the Stored Communications Act (SCA), a 1986 federal law that regulates the disclosure of electronic communications, does not prohibit Yahoo!, Inc., from voluntarily disclosing the contents of a decedent’s email account to the administrators of a decedent’s estate.

The decision represents the continuation of an eight year legal dispute, initially commenced in 2009, that arose after the administrators of John Ajemian’s estate filed a complaint with the probate court requesting “unfettered” access to John’s Yahoo email account.  Yahoo refused to provide access to this account.

The Supreme Judicial Court agreed to hear the case on its own motion after the estate appealed the probate court’s award for summary judgment in favor of Yahoo.  The probate court awarded summary judgment to Yahoo on the basis that the SCA prohibited Yahoo from disclosing the contents of the account to the estate administrators.  The Supreme Judicial Court ultimately disagreed and vacated the probate court’s judgment.

The Supreme Judicial Court’s decision turned on whether the estate’s request for access to the email account fell within the “lawful consent exception” of the SCA thereby permitting Yahoo to voluntarily disclose the contents of the emails.  Rejecting the industry consensus that this lawful consent exception requires actual or express consent of a decedent, the Court held that the administrators could consent to such a disclosure on behalf of the decedent.  To interpret the SCA otherwise, the Court reasoned, would prevent personal representatives from accessing a decedent’s digital assets and thereby preempt state probate and common law.

This decision, however, has its limits.  First, the Court did not mandate Yahoo to divulge the contents of the email account; it merely permitted Yahoo to do so.  As the Court explained, the SCA “does not stand in the way” of such a disclosure.  Second, it remains to be seen whether this case will be challenged in federal court, as it is a state court’s interpretation of federal law.  Third, the case raises the question of whether online providers such as Yahoo can rely on their terms of service agreements as a basis in refusing access to (and perhaps deleting altogether) a decedent’s digital assets.  The Supreme Judicial Court did not take up this issue instead electing to remand the case to the probate court for further hearing on this issue.  Stay tuned.

TIGTA Report Recommends Improvements for Estate and Gift Tax Return Examination Process

TIGTA Report Recommends Improvements for Estate and Gift Tax Return Examination Process

Author: Patti Weisgerber, M. Robinson Tax Law


While much focus this fall has been on tax reform proposals and debates, it’s possible some may have missed the September 26, 2017 TIGTA[1] report proposing recommendations to tighten the estate and gift tax return examination process. The report described a very manual process for the classification, prioritization and assignment of estate and gift tax returns with a variety of problems, such as, but not limited to:

  • Minimal guidance from the Internal Revenue Manual (IRM) on the process, which translates into a lack of formal written procedures,
  • A subjective prioritization of returns by a “national gatekeeper,”
  • Illegible and incomplete classification sheets,
  • Missing documents from case files, and
  • Timeframes not followed in the examination process.

These issues raised the question of whether or not the most productive cases were being assigned for examination. Some of the issues also bring into question whether a taxpayer’s rights are at risk of being violated. For the most part, the IRS agreed with all recommendations for improvement, including an update to the IRM for more guidance on how returns are classified, prioritized and assigned for examination.

In addition to the recommendations made, the report shared some insightful statistical information about estate and gift tax examinations.

Estate and Gift Tax Examination Information: By the Numbers[2]

  • 254: The number of field examination employees assigned to the IRS Estate and Gift Tax Program (per the 2016 payroll).
  • 36,130: The number of estate tax returns, including IRS Forms 1041 and 1041-N, that were filed for calendar year 2015.
  • 238,324: The number of gift tax returns filed in that same year.
  • 3,187: For FY 2016, the number of examined estate tax returns that were closed.
    • $248,000: The average recommended additional tax per return.
    • $790,000,000: The total additional recommended estate tax for FY 2016.
  • 1,843: Also for FY 2016, the number of examined gift tax returns that were closed.
    • $164,000: The average recommended additional tax per return.
    • $303,000,000: The total additional recommended gift tax in FY 2016.
  • 289: The average number of days to complete an estate tax examination.
  • 81%: Approximately, the percent of estate and gift tax cases resulting in the IRS position being either fully or partially sustained.
  • 4.4%: Approximately, the percent of estate and gift tax cases which go to Appeals.

The full report, “Improvements Are Needed in the Estate and Gift Tax Return Examination Process,” can be found here.

[1] Treasury Inspector General for Tax Administration.

[2] All statistics are from the TIGTA analysis and/or the IRS.

CLE Program – You Can’t Take It With You: Issues With Real Estate In A Probate Estate

Please attend the BBA’s Trust & Estate’s Section’s first CLE program of the year on Thursday, November 9, from 3-5 PM. 

 We are thrilled to be hosting an expert panel consisting of Jennifer A. Maggiacomo (Norfolk Probate and Family Court), Evelyn Patsos (Probate and Family Court Administrative Office), and Elizabeth J. Young (Westcor Land Title Company), who will discuss issues that arise when an Estate owns real estate, how to navigate the Massachusetts Uniform Probate Code, and practice pointers to avoid title problems down the road. The program will include:

– How to clear title if the real estate passes to family (and is not sold right away, but may be sold at some point in the future);

– What to do if real estate is being sold from the probate estate;

– When a license to sell is required and/or desirable;

– When and how to use deeds of distribution; and

– How to convey clear title when the will devises real estate to a trust.

To sign up and for more detail, please go to the BBA’s website:



Republican House Tax Bill

Author:  Heather N. Harris, Day Pitney LLP

Yesterday, Republicans in the House of Representatives unveiled the “Tax Cuts and Jobs Act.” Notably, the tax reform bill:

  • Increases the basic exclusion amount for estate tax and generation-skipping transfer tax from $5,000,000 to $10,000,000 for decedent’s dying and generation-skipping transfers made after December 31, 2017 (adjusted for inflation after 2010).
  • Repeals the estate tax and generation-skipping transfer tax for decedent’s dying and generation-skipping transfers made after December 31, 2023.
  • Increases the basic exclusion amount for gift tax from $5,000,000 to $10,000,000 for gifts made after December 31, 2017 (adjusted for inflation after 2010).
  • Does not repeal the gift tax, but reduces the top rate for the gift tax to 35 percent from 40 percent for gifts made after December 31, 2023.
  • No change to the step-up in basis of an asset at death.
  • No change to treatment of retirement accounts.
  • Repeals the Alternative Minimum Tax.
  • Pass-through businesses pay a 25% tax rate, excluding some professional service partnerships such as lawyers and accountants.
  • Reduces the corporate tax rate to 20 percent from 35 percent

BBA Event Recap: How Parents Can Divorce-Proof Their Children’s Inheritance

Program Date:  Friday, September 8, 2017

Speakers: Joshua S. Miller of CIBC Atlantic Trust Private Wealth Management and Caroline Spillane Sacks of Ropes & Gray LLP

Program Chairs:  David L. Silvian of Day Pitney LLP and Heidi A. Seely of Rackemann, Sawyer & Brewster, co-Chairs of the Estate Planning Committee.

Materials:  To view the program materials, click here.

Summary of Program Topic:  The program provided an overview of considerations for an estate planner to protect a client’s assets in the event of a child’s divorce.  The panelists provided practice tips, discuss M.G.L. chapter 208 § 34 and Vaughan affidavits, and highlighted some considerations for practitioners in light of the recent SJC decisions Pfannenstiehl v. Pfannenstiehl and Ferri v. Powell-Ferri.

Probate & Family Court Pilot Program: Complex Probate Litigation

As you’ll see from the announcement below, the Probate & Family Court is soon commencing a pilot program- a dedicated session to hear complex probate litigation from the Norfolk, Middlesex, and Suffolk Divisions.


 The Probate & Family Court is piloting a Fiduciary Litigation Session (FLS), to be housed in the Norfolk Division, which will hear certain contested and complex probate matters. These matters include: will or PR appointment contests; contests over the actions of an estate or trust fiduciary (guardianships are not included); removals and successor appointments; instruction and declaratory judgment actions concerning trusts and estates; validity, reformation and construction of instruments; and partition actions. The session will accept cases from the Norfolk, Suffolk and Middlesex Divisions.

Justice Elaine M. Moriarty (ret) will be hearing all cases assigned to the FLS and the session will run 3 days weekly. Judge Moriarty will be hearing cases commencing November 1, 2017.

The Probate Court will soon be issuing a Standing Order detailing this pilot session and how matters may be assigned to it. In an effort to immediately assign cases for hearing in November, if you currently have a matter which meets the specifications above, the Court will accept for consideration an Assented to Motion to Schedule Status/Case Management Conference in the FLS. Such Motion may be emailed in .pdf format to Jennifer A. Maggiacomo, Esq. at [email protected] to be acted upon by the Justice currently assigned to the matter.

BBA Event Recap: Charitable Giving Basics for Estate Planners

Program Date:  Friday, May 19, 2017

Panelists:   John A. McBrine and Aimee Fukuchi Bryant, both of Nutter McClennen & Fish LLP

Program Chairs:  Sara Goldman Curley of Nutter McClennen & Fish LLP and David L. Silvian of Day Pitney LLP, co-Chairs of the Estate Planning Committee

Materials:  To view the program materials, click here.

Summary of Program Topic:  The panelists for this program discussed the basics of advising clients interested in making charitable gifts, including a discussion of considerations when making gifts of different types of assets, either during life or at death, evaluating the use of a private foundation or a donor advised fund.  The panelists also covered an overview of deferred giving vehicles, such as charitable remainder trusts and charitable gift annuities.