April 24, 2020

Tax Notes Quotes Emily Plocki on Unwinding Tax Planning Structures to Grapple with the Effects of COVID-19

2 min

On April 24, 2020, Emily Plocki was quoted in Tax Notes on the unwinding of estate tax planning structures that have performed well in the past in grappling with the economic effects of COVID-19. According to the article, wealthy taxpayers might be looking at early terminations of charitable remainder trusts (CRTs) to generate cash.

Plocki explained that a client could decide that he no longer needs the income stream he had been receiving as the income beneficiary of a trust. Or the charity could have an immediate need for the funds and be unable to afford to wait until the end of the trust’s term or the death of the income beneficiary, which “really might be a relevant point right now during the current pandemic,” she said.

Similarly, the trust’s income beneficiary might have an immediate need for a lump sum share of the trust assets rather than the ability or desire to wait for a stream of payments spread out over years, Plocki said.

Taxpayers have a few options when it comes to unwinding a CRT, Plocki continued. For example, the income beneficiary can assign their income interest to the charity that is the remainder beneficiary. That would be deemed a gift of a capital asset and entitle the income beneficiary to an income tax deduction and gift tax charitable deduction, she said.

Click here to access the article.