Monday October 2, 2023
Queen Elizabeth Had a Plan
The Queen served Great Britain from 1952 until she passed away in 2022. In February of 2022, the nation held a joyous celebration of her 70 years as the Sovereign. The Queen conducted a remarkable 21,000 engagements or meetings during her reign. She met weekly with the Prime Minister of Great Britain and was arguably the most recognized woman in the world. During her seven decades, Queen Elizabeth had meetings with U.S. Presidents and thousands of foreign leaders.
As was true of all of her meetings and events, there were detailed plans prepared under "Operation London Bridge." The plans as leaked last fall were set in motion upon her passing away, her private secretary would be the first to convey the news. The phrase "London Bridge is down" would be shared with the Prime Minister. Prime Minister Liz Truss would then communicate with the Privy Council and leaders of Parliament. The news would be shared with the 14 other countries that Queen Elizabeth served as leader. Media announcements then would proceed through the BBC News organization.
A footman would post a somber notice on the gate of Buckingham Palace. The Royal Family issued an official announcement that stated, "The Queen died peacefully at Balmoral this afternoon. The King and The Queen Consort will remain at Balmoral this evening and will return to London tomorrow."
The day after the Queen passes away, King Charles III will deliver a speech to the nation. The coffin will be taken by Royal Train to London and placed in the Throne Room at Buckingham Palace. Five days later, it will be moved to Westminster Hall and the Queen will lie in state.
Ten days after the Queen passes away, the Archbishop of Canterbury will hold a state funeral at Westminster Abbey. The Queen will then be buried in the King George VI Memorial Chapel at Windsor Castle.
The Queen leaves behind an estimated $500 million in personal assets. This is separate from the $28 billion in assets that are part of the Royal Firm. The assets produce a Sovereign Grant that was approximately $100 million in 2022. These funds are used for official expenses to operate and maintain the Sovereign's household and several palaces.
The Queen received an inheritance in 2002 from the Queen Mother, including paintings, a stamp collection, fine china, jewels, horses and other items, with an estimated value of $70 million. Queen Elizabeth holds approximately $500 million in personal assets, which include investments, art, jewelry and real estate. It is expected that most of these personal assets will be passed to King Charles III.
In 1993, Prime Minister John Major agreed to pass a bill that exempts the estate of Queen Elizabeth from paying the 40% inheritance tax. As a result, the full value of these personal assets of Queen Elizabeth is expected to be transferred to King Charles III and other family members.
Editor's Note: Queen Elizabeth received warm accolades from leaders throughout the world. She was acknowledged as a remarkable individual, superb diplomat, diligent and faithful mother and monarch. She fulfilled her duty to serve the British people and the Commonwealth for seven decades. She also offers everyone a good example of a thorough plan for transition of her property to the next generation.
Senators Promote Retirement Bill This Year
On September 8, 2022, Senate Finance Committee (SFC) Chair Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) released the text of the Enhancing American Retirement Now (EARN) Act.
This bill is similar to the retirement bill that passed the SFC unanimously in June. It has a counterpart that passed overwhelmingly in the House of Representatives. The House bill has the title "Securing a Strong Retirement Act of 2022."
The EARN Act would permit student loan payments to be treated as deferrals for employer-match retirement plans. It would allow penalty-free withdrawals if an individual is a victim of domestic abuse.
The Senators hoped to assist workers with modest retirement savings. There is a credit of 50% of contributions up to $2,000 for individuals. Individual taxpayers would have a phaseout of the benefit between $20,500 and $35,500. Taxpayers filing joint returns would have income phase outs between $41,000 and $71,000.
There are many changes that are designed to increase retirement savings. The catch-up contribution limit for individuals between age 60 and 63 is increased from $6,500 to $10,000 per year, indexed annually for inflation. Over a period of years, the age for required minimum distributions (RMDs) will increase from age 72 to 75.
Senator Wyden noted, "Americans deserve dignified retirements after decades of hard work, and our bill is an important step forward. In particular, I am proud that we are making significant progress for millions of low- and middle–income workers, who are far less likely to have adequate retirement savings. These workers frequently have physical, demanding jobs, and often depend solely on their Social Security income. Too often, they simply do not have resources to last through retirement. Under our reforms, many more workers would access resources for retirement and see meaningful federal retirement contributions year after year."
Senator Crapo also supported the bill and claims it could be passed in 2022. He stated, "The EARN Act expands opportunities for Americans to increase their retirement savings and improves workers' long-term financial well-being. Every member of the Finance Committee had a hand in drafting this legislation, and the broad range of ideas incorporated into the final bill is a testament to the power of bipartisanship. "I worked closely with Chairman Wyden to get this bill to a place where it can be formally introduced today, and we will continue to work with our colleagues to push for its passage this year."
IRA to Charitable Gift Annuity Rollover
The draft language of the EARN Act includes a provision that would allow a one-time rollover of $50,000 from an IRA to a life income plan. Section 210 of the bill amends Internal Revenue Code Section 408(d)(8) and creates a limited one-time IRA rollover into qualified charitable life income plans.
The IRA charitable distribution to a charitable life income gift would be limited to $50,000 and must be distributed from an IRA. The qualified charitable plans would include a charitable remainder annuity trust, a standard payout charitable remainder unitrust and an immediate charitable gift annuity. A net income plus makeup unitrust or a deferred payment gift annuity are not qualified charitable entities.
The distribution must be to a charitable remainder trust, which the remainder interest is vested as a distribution to a tax exempt nonprofit. For a charitable gift annuity, it must be qualified under Section 501(m)(5)(B).
The charitable entity must either benefit the IRA owner or the IRA owner and spouse. All payments from a charitable remainder trust will be ordinary income. Because there is no investment in the contract under Section 72(c), all payouts from a gift annuity will be ordinary income.
The bill permits an inflation adjustment starting in 2024. The $100,000 limit for current IRA rollover gifts and the $50,000 one-time limit for gifts to a life income plan would be adjusted for inflation annually under that provision. The new numbers will be rounded to the nearest thousand dollars.
Editor's Note: The proposed IRA-to-gift annuity rollover will be effective in year 2023, provided that Senators Wyden and Crapo are correct in their belief that the EARN Act can be passed in 2022.
Proposed Syndicated Charitable Conservation Easement Limit
Senator Steve Daines (R-MT) has promoted bills that would limit charitable conservation easement deductions for syndicated partnerships. Senator Ron Wyden (D-OR) and Senator Chuck Grassley (R-IA) have questioned the use of charitable deductions by syndicated limited partnerships.
In numerous cases, the syndicated partnerships have purchased property, obtained appraisals based on highly aggressive assumptions that the property could be fully developed for residential or commercial purposes and provided investors with extremely large charitable deductions. Grassley has opined that many appraisers have greatly overvalued the conservation easement charitable deductions.
Consequently, there is support in the Senate for a limitation on these deductions. Senator Daines was able to have his provision to limit the charitable deductions of syndicated partnerships included in the EARN Act.
Section 1104 Charitable Conservation Easements creates a limit of 2.5 times a partner's relevant basis for the deduction under Section 170. There are specific and technical provisions designed to clarify the amount of the basis. The "modified basis" is the basis before the contribution without regard to Section 752 and taking into account additional provisions as promulgated by the Secretary of the Treasury.
The 2.5 limit applies to gifts made within three years of the contribution by the partner to the partnerships. There are various technical provisions designed to reduce the ability of partnerships to avoid the three-year rule.
There is an exception for family partnerships. A partnership owned by an individual and spouse or by other members of the family under Section 152(d)(2) is excluded from the limit. Generally, the family may include parents, siblings, children, grandchildren and their spouses.
The limits also apply to Subchapter S Corporations and similar entities. The accuracy-related penalties under Section 6662(b) are amended. There is no reasonable cause exception for gross valuation misstatements.
These provisions limiting charitable deductions for syndicated partnerships will apply to contributions made after the date of enactment of the EARN Act.
Applicable Federal Rate of 3.6% for September -- Rev. Rul. 2022-17; 2022-36 IRB 1 (15 August 2022)
The IRS has announced the Applicable Federal Rate (AFR) for September of 2022. The AFR under Section 7520 for the month of September is 3.6%. The rates for August of 3.8% or July of 3.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2022, pooled income funds in existence less than three tax years must use a 1.6% deemed rate of return.