On December 3, 2024, a Federal District Court in Texas delivered an opinion finding that the Corporate Transparency Act (CTA) and its implementing regulations are unconstitutional and issued a preliminary injunction with nationwide effect against enforcement of the beneficial ownership information reporting requirements of the Act and regulations.
The injunction is preliminary – the Court would not have issued it unless it thought the plaintiffs were likely to prevail in the end – but for now, compliance with the CTA is suspended. The question for clients who have already filed, are in the process of preparing filings or who have not yet begun is “What do we do now?” Here is what we think. What follows are general thoughts:
It is possible that if the injunction is lifted, the Court may require some remediation of some of the more burdensome requirements of the regulations and this would take time. In addition, Congress is under pressure to legislate a delay and possibly some substantive changes to the law. The new administration may also want to have its say when it comes into power on January 20. At this stage, neither we nor anyone else can predict if any of these developments will occur or how they may play out.
We will and you should watch for judicial developments in the case, which may come quickly. For example, we think that the Justice Department may move quite soon, even by the end of this week, to ask a higher court to lift the injunction.
The statements and opinions contained in this alert are for the general purpose of informing our clients about this important development and should not be relied on without discussing your particular facts and circumstances with us. For further information, please contact Kara Koerner or the partner with whom you regularly deal.
Jennifer Campbell was recently featured in MarketWatch, answering a reader question in ‘The Moneyist’ column about what degree of estate planning is needed at various levels of wealth and how to approach planning in the wake of a terminal diagnosis.
Jennifer suggests the letter writer consider a bypass trust, an estate planning vehicle that can help high-net-worth families avoid estate and probate taxes. "The terms of the bypass trust can vary considerably," Jennifer tells MarketWatch. "However, most commonly, the bypass trust is structured so that it can qualify as a marital deduction trust, which allows the survivor to claim the decedent's estate and gift exemption as the survivor's own and allows the assets in the bypass trust to receive a new basis at the survivor's death."
Jennifer explains trusts can be flexible and can be outlined to include distributions to pay for post-graduate education, weddings, and other life milestones. "These trusts can be held for life or can be directed to pay out at various ages [and] the flexibility to plan for the generation-skipping transfer tax, currently equal to the estate and gift tax exemption."
Read the full article without a subscription in Morningstar:
Maria-Soledad Otero will be presenting “Pre-Immigration Planning For Foreign Individuals Moving to the US” at NYU’s 83rd Institute on Federal Taxation in New York City on October 21, 2024, alongside Thomas Giordano-Lascari of Greenberg Glusker. The presentation will discuss:
Click below to learn more and register.
We are pleased to share that Cynthia D. Brittain has recently been appointed as a member of the California Lawyers Association’s Trusts and Estates Section Executive Committee, for a six-year term commencing on September 8, 2024.
The Trusts and Estates Section of CLA is where practitioners keep up to date on trusts and estates law in California while interacting with the larger community of trusts and estates lawyers across the state. The Executive Committee plays a vital role in bringing ongoing education, resources, and events to CLA’s nearly 6,000 Trusts & Estates section members, in addition to handling behind-the-scenes responsibilities such as strategic planning.
Please join us in congratulating Cindy on this achievement and on her future contributions to the profession in California!
Michael Karlin has been invited to speak at the 61st Annual Hawaii Tax Institute, the nation’s premier tax and wealth transfer conference. His session, “Dealing with Inbound and Outbound Cross Border Estate Planning Issues and How to Solve Them” will take place on November 5, 2024. The presentation will focus on common situations that wealth transfer advisors encounter in practice, including how to deal with foreign estate plans that suddenly have a US beneficiary, and offer practical solutions from both an inbound and outbound perspective.
Additional presenters include Sangna Chauhan of Charles Russell Speechlys and Brent Nelson of Rimon PC.
Click below to learn more or register.
On November 12, 2024, Cynthia Brittain and Maria-Soledad Otero will present “Treaty Arrangements for Dual Citizenship” at the STEP Asia Conference 2024 in Singapore. This in-depth presentation will cover topics including:
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On October 7, 2024, Cynthia Brittain will be a featured speaker at the STEP Canada-USA 2024 Cross-Border Conference taking place in Chicago, IL. Her session, entitled “Cross-Border Philanthropy – Does it Pay to be Charitable?” will discuss:
The presentation will also feature Greg Custer of Whittier Trust and Richard Niedermayer of Stewart McKelvey.
Click below to learn more or register.
On, September 18, 2024, Maria-Soledad Otero will be a featured speaker in the “Planning for cross-border real estate” workshop taking place at the IBA Annual Conference Mexico City 2024. The session will discuss planning considerations for those holding real estate in an international environment. The workshop will also feature Aidan Grant of Collyer Bristow LLP, Álvaro Checa Rodríguez of Kinship Law Partners, Vittoria Di Gioacchino of BLP, and Raul-Angelo Papotti of Chiomenti Studio Legale.
Click below to learn more or register.
Cynthia Brittain recently spoke to GoBankingRates for the article, “I’m an Estate Planner: 4 Things You Should Never Put in a Living Trust,” where she offered insights on the process of creating a living trust and the benefits this type of trust can provide.
“A trust document can be drafted to incorporate U.S. income and estate tax provisions that are highly beneficial” Cindy tells GoBankingRates. “The trust can be drafted such that the trust will shield assets from U.S. estate tax going forward.” She notes that because of the tax and asset protection benefits of a living trust, “It’s important to seek counsel who understands concepts such as the U.S. generation-skipping tax and other more sophisticated tools used to minimize estate tax.”
Cindy also explains that living trusts are not one-size-fits-all, and may not be right for everyone. “If you have a very small estate, or if your assets are very simple and can pass by pay-on-death accounts, such as a bank account with a beneficiary designation, you may not need a living trust.”
I’m an Estate Planner: 4 Things You Should Never Put in a Living Trust
Michael Karlin recently spoke with Wealth Management about the IRS penalties that three Americans who were held hostage in Russia could be facing upon their return to the United States. Following a prisoner swap orchestrated by President Biden in August 2024, Evan Gershkovich, Paul Whelan, and Alsu Kurmasheva were freed from Russian prison. Their imprisonments prevented them from filing their taxes, leading to penalties from the IRS.
Michael tells Wealth Management, “most of these penalties are subject to reasonable cause defenses, and I would think that being wrongfully (or even rightfully) imprisoned in a foreign country would qualify.”
He continues on to note that people who pay tax through employee withholding don’t have to pay estimated taxes, and in cases like these, there’s an exception under IRC Section 6664(2) that may fit the circumstances. “To the extent the [IRS] determines that by reason of casualty, disaster, or other unusual circumstances the imposition of such addition to tax would be against equity and good conscience.”
Michael concludes by adding that “if any of these people had foreign bank accounts that were required to be reported to FinCEN on a Report of Foreign Bank and Financial Accounts” (FBAR), there’s also a reasonable cause defense for penalties related to failures to file FBARs.”
Read the full story below:
Wrongfully Detained Americans Welcomed Back with IRS Penalties
Jennifer Campbell recently spoke to Wealth Management about the upcoming legal battle surrounding the Murdoch family trust. Media mogul Rupert Murdoch is reportedly fighting to make his son Lachlan Murdoch the sole inheritor of the voting rights to News Corp and Fox Corp, a move that could be based upon worry that his other children won't retain his conservative values for the media properties. Since 1999, the family trust has stated voting rights would pass down to four of his six children; Lachlan, James, Elisabeth, and Prudence. Changes to the trust can only be made if deemed to be in good faith to benefit the heirs.
“To demonstrate good faith, Murdoch will need to convince the court that he sincerely thinks the amendment is in the best interest of all the trust beneficiaries,” Jennifer tells Wealth Management. “Unless there’s evidence of a lack of good faith, it’s likely that the court will find that the good faith element is satisfied.”
“Proving a lack of good faith is challenging, but it’s possible,” Jennifer shares. She explains that beneficiaries who oppose the amendment may be able to undermine the change if they can prove Rupert will personally benefit if the change is amended, if the motivation is to pit his children against each other, or if there was an undisclosed arrangement between Lachlan and Rupert.
“Murdoch likely will argue that the value of unified, unquestionable, and uncontestable management will offset the diminished value caused by the loss of voting rights,” she continues. “However, it’s uncertain how the court will view that argument.”
Read the full article in Wealth Management:
Murdoch Offspring Set to Battle for Control of Family Empire
Karlin & Peebles has been selected to Chambers and Partners’ 2024 High Net Worth (HNW) Guide in the practice area of Private Wealth Law for Southern California for the third consecutive year. The Guide is a prestigious and highly regarded publication that offers rankings and insights into the world’s leading professional high-net-worth advisors. Karlin & Peebles is described in this year’s Guide as, “excellent with complex and sophisticated planning and transactional work.”
As one interviewee commented to Chambers, “The attorneys at Karlin & Peebles are creative and thoughtful in designing plans. They quickly work through complex issues and communicate regularly with clients.”
In addition to the firm’s ranking, Michael Karlin, Jane Peebles, Maria-Soledad Otero, and Cynthia Brittain achieved individual rankings in the category of Private Wealth Law. Michael is described as a “brilliant lawyer,” while Jane is described as an “international guru for this work.”
Interviewees went on to characterize Cindy as “an outstanding lawyer - extremely well informed and practical,” and another described Maria: "Maria is truly cosmopolitan. She's been admitted to the California bar but is from Switzerland and she understands international clients. She has added value from that perspective."
Access the Chambers and Partners 2024 High Net Worth Guide here.