Wednesday, August 12, 2026

WHAT YOU SHOULD KNOW ABOUT ESTATE PLANNING with a LIVING TRUST

INTRODUCTION

In recent years, living trusts have grown increasingly popular as substitutes for wills in estate planning. They are sometimes called revocable trusts or inter-vivos trusts. Living trusts can have several advantages over wills, including avoiding probate, avoiding guardianship, maintaining liquidity, and keeping privacy.

You can create a living trust with a simple trust document and change it at any time. You can transfer all of your assets to the trust but continue to use and manage them during your lifetime. After you die, your trustee will transfer ownership of the assets to the beneficiaries named in the trust.

An important benefit of a living trust is the speed with which your property can be transferred to your heirs after your death. In addition, a living trust is private. Only you, your trustee and your beneficiaries will know the value of the trust property, how it is to be distributed and the names of your beneficiaries.

This post reviews the basics of how to create and use a living trust. Your lawyer can help you decide whether a living trust is appropriate in your circumstances and prepare a trust document that meets your goals.

USING A LIVING TRUST

Most people understand the importance of a will, but many are not familiar with trusts, Both a will and a trust can be used to transfer your property when you die, but the similarity ends there. A will has no effect until you die, while a living trust becomes operative during your lifetime to manage your assets. While a will is part of the public record a trust is not, thus providing greater privacy. Trusts are usually easier to amend than wills and less likely to be contested by your heirs.

You can use a living trust to make decisions about your old age care. The trust can specify your preference for care by your family or in a nursing home. If you become disabled or incompetent, your trust will control who will care for you and how your money will be managed. Without a living trust, a court might need to appoint a guardian if you become incapacitated. As with probate, guardianship proceedings can be costly and time consuming. A living trust provides a way to avoid legal proceedings to appoint a guardian.

A living trust may also help you in a variety of other circumstances. For example, you can use a management feature of living trusts to appoint a professional trustee for the elderly, for inexperienced persons who have recently inherited wealth, and for minors. Living trusts are also useful for those lacking time to manage their property, such as entertainers, entrepreneurs, and busy professionals.

If you own real estate in more than one state a living trust can help avoid probate in each state. Probate in multiple states increases the cost and time to distribute your property to your heirs.

CREATING A LIVING TRUST

Your lawyer can prepare a living trust agreement that appoints a trustee to manage your property for your beneficiaries. To maintain control, you can be your own trustee. Commonly, the person creating the living trust is the first beneficiary while other provisions transfer the property to their heirs upon death. The trust agreement will provide details on your rights to change the trust, the duties of the trustee, how to distribute your property, how to provide for your family, and when an how to select a successor trustee.

You can cancel or change any of the provisions of your trust document, including the beneficiaries, the property they are to receive, and the trustee. You should review your trust every year to assure that it still meets your needs. Your lawyer can advise you about the legal and tax effects of your proposed changes and prepare a document that will accomplish those changes.

CHOOSING A TRUSTEE

As noted above, you can serve as your own trustee or you can appoint a professional trustee such as a bank or trust company. Most people appoint an individual such as their spouse, a relative, a friend, their lawyer or other advisor to serve as successor trustee. When deciding whom to select as trustees, you should consider whether they are worthy of your trust and are willing to accept the job.

A professional trustee may be the best choice if your property will be difficult to manage or distribute. The disadvantages of professional trustees are that they are impersonal and charge annual fees ranging up to two percent of the value of the trust assets. Furthermore, many professional trustees are unwilling to serve if the value of the trust assets is less than $100,000.

The trust document will describe the duties of the trustee to manage the trust property, keep records, prepare tax returns, and make distributions to the beneficiaries. The trust document can also designate a successor trustee or provide instructions on how to select the successor.

TRANSFERRING PROPERTY TO YOUR TRUST

After creating your trust, you must complete the formality of transferring your property to the trust. For example, instruct your broker to transfer your stocks and bonds into the name of the trust. Tell your insurance agent to assign your life insurance policies to the trust. Deeds transferring your real estate should be prepared and recorded in every county where you own real estate.

AVOIDING PROBATE

Although your living trust can help you to avoid probate for some of your property, you may still need a will. It may be inconvenient to transfer certain property, such as your car or your personal checking account to a trust. Such a transfer could make it difficult to insure your car; it might be harder to obtain credit if your checking account is not kept in your name.

A will may still be needed even if you transfer all of your property to a trust. A will is needed to appoint a guardian for your minor children. A will is also needed for assets that you acquire after the creation of the trust or may have neglected to transfer to your trust, such as furniture, clothing, and jewelry. The will can have a “pour- over” provision to transfer your property to the trust when you die. Such a “pour-over provision will cause your property to be distributed to the terms of your trust.

STATE LAW

You can use a living trust to choose the state for administering your estate. the state for your trust can be different from the state where you reside. This can enable you to select a state that has laws that are most favorable to you for income tax and inheritance tax purposes.

TAX PLANNING

For tax purposes, the trust property is treated as if you remained the owner. You will report income from the trust on your federal income tax return until your death. However, the creation and funding of a living trust does not have any federal gift tax consequences. A trust can be used to avoid estate taxes. Your lawyer can help you to design a trust that provides the most favorable tax treatment for you and your heirs.

CONCLUSION

Living trusts have many advantages in estate planning. Unlike wills, living trusts do not require lengthy and costly probate proceedings. Your property and heirs will not be listed in public records in a courthouse. And your property can be transferred to your heirs almost immediately after your death. The advantage of the living trust must be weighed against the expense and effort of creating and administering the trust.

Ask your lawyer whether a living trust is the right estate planning tool for you. Your lawyer can carefully draft a document to meet your needs and objectives and help you to reduce taxes for yourself and your heirs. Your lawyer can also help you prepare other estate planning documents, such as a will, a durable power of attorney, and a health care power of attorney.

LIVING TRUST CHECKLIST

1. Benefits of Living Trust

A. Avoiding probate

B. Preserving privacy

C. Professionally managing your property

D. Handling of out-of-state real estate

E. Avoiding guardianship when incapacitated

F. Avoiding will contests and family disputes

G. Designating trustees and their successors

2. Naming Your Beneficiaries

A. Yourself

B. Your spouse

C. Family

D. Friends

E. Charitable organizations

3. Keeping Trust Records

A. List of trust property

B. Record of income and expense

C. Tax returns

4. Transferring Assets To Your Trust

A. Real estate

B. Bank accounts

C. Stocks and bonds

D. Life insurance

E. Furniture, jewelry, etc.

5. Choosing A Trustee

A. Knowledge of your goals

B. Experience as a trustee

C. Trustworthiness

D. Understanding of beneficiary’s needs

E. Investment expertise

F. Affordability of fees

6. Changing Your Trust

A. Divorce or remarriage

B. Death of beneficiary or trustee

C. Acquiring or disposing of property

D. Change in value of property

E. Changes in status or circumstances of your beneficiaries

F. Increase (or decrease) in your net worth

7. Other Estate planning Documents

A. Will

B. Living Will

C. Durable power of attorney

D. Health care power of attorney

E. Marital trust

F. Minor trust

Need Estate Planning Advice?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

C:\ESTATE\Living Trust.doc

Wednesday, August 5, 2026

3M and the Blocked Income Debate Under Section 482

3M and the Blocked Income Issue

The long-running dispute in 3M Co. et al. v. Commissioner centered on whether the IRS could reallocate royalty income from 3M’s Brazilian subsidiary to its U.S. parent even though Brazilian law restricted the subsidiary from paying the full arm’s-length amount. The case involved 3M’s 2006 tax year and a section 482 adjustment of nearly $23.7 million in additional royalty income.

In February 2023, the U.S. Tax Court issued a sharply divided opinion that upheld the IRS’s position and validated the blocked-income regulation. The court’s reasoning focused on the idea that the regulation could be applied even where foreign law limited the actual payment of royalties.

Why the Case Matters

This case is important because it goes to the heart of transfer pricing and the reach of section 482 in cross-border intangible transactions. For multinational groups, it raises a practical question: can the IRS impute income to a U.S. parent when local law makes payment impossible or legally constrained?

The case also became more significant after the Supreme Court’s Loper Bright decision, which changed the judicial approach to agency deference. The Eighth Circuit relied on that shift when it reversed the Tax Court, emphasizing statutory text over regulatory deference.

Tax Planning Takeaways

For taxpayers with foreign subsidiaries, the case underscores the need to evaluate both transfer-pricing positions and foreign-law constraints early in the planning process. Documentation should show not only arm’s-length analysis, but also the legal and commercial reasons why a payment structure is or is not feasible.

It is also a strong reminder that litigation risk can change over time. A position that appears vulnerable at the Tax Court level may later improve on appeal, especially in cases involving closely divided opinions and major administrative-law developments.

Practical Lessons

· Review intercompany royalty arrangements for both section 482 exposure and local-law restrictions.

· Preserve foreign legal materials, including statutes, decrees, and licensing limitations.

· Consider protective claims and appellate posture in any case involving blocked income.

· Monitor whether the governing circuit has addressed the issue, since appellate law may differ from Tax Court reasoning.

Have IRS Tax Problems?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1. https://academyoftaxlaw.com/document/3m-company-v-commissioner-of-internal-revenue-case-summary/

2. https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/tax-court-upholds-transfer-pricing-adjustments-against-3m/7fy84

3. https://www.pwc.com/gx/en/tax/newsletters/pricing-knowledge-network/assets/pwc-tp-3m-tax-court-upholds-validity-of-blocked-income-reg.pdf

4. https://www.ntu.org/library/doclib/2024/02/NTUF-Amicus-Brief-3M-v-CIR.pdf

5. https://tpguidelines.com/us-vs-3m-company-and-subsidiaries-february-2023-us-tax-court-160-t-c-no-3-docket-no-5816-13/

6. https://tpcases.com/us-vs-3m-company-and-subsidiaries-february-2023-us-tax-court-160-t-c-no-3-docket-no-5816-13/

7. https://www.millerchevalier.com/publication/3m-wins-blocked-income-transfer-pricing-dispute-eighth-circuit

8. https://www.dlapiper.com/en-us/insights/publications/2023/02/tax-court-sides-with-irs-in-long-running-dispute-over-blocked-income-regulation

9. https://www.pwc.com/gx/en/tax/newsletters/pricing-knowledge-network/assets/pwc-eighth-circuit-reverses-us-tax-court’s-ruling-in-3M-appeal.pdf

10. https://tpcases.com/us-vs-3m-company-and-subsidiaries-october-2025-u-s-court-of-appeal-opinion-no-23-3772/

11. https://news.bloombergtax.com/tax-management-international/eighth-circuit-challenges-irs-embraces-textual-statute-reading

12. https://legalblogs.wolterskluwer.com/international-tax-law-blog/the-3m-decision-did-treasury-or-congress-overturn-past-jurisprudence/

13. https://www.currentfederaltaxdevelopments.com/blog/2025/10/1/eighth-circuit-reverses-tax-court-in-3m-restricting-482-allocations-of-blocked-foreign-income

14. https://vlex.com/vid/the-case-irs-overrule-supreme-court-464483414

15. https://www.taxcontroversy360.com/tag/3m-co-v-commissioner/

16. https://www.uschamber.com/cases/tax/3mco.v.irs

17. https://ecf.ca8.uscourts.gov/opndir/25/10/233772P.pdf

18. https://www.youtube.com/watch?v=Au-6rIsbynM

College Athletes and NIL Income: The Hidden Tax Trap Many Families Miss

The explosion of name, image, and likeness (NIL) opportunities has created a new class of young earners, college and even high school athletes generating significant income before ever filing a traditional tax return. While the headlines focus on six-figure endorsement deals, far less attention is given to the tax consequences that follow. For many athletes and their families, those consequences arrive as an unwelcome surprise.

NIL Income Turns Athletes into Business Owners

Most NIL arrangements are structured so that athletes are treated as independent contractors rather than employees. That distinction carries significant tax implications. Instead of receiving a Form W-2 with taxes withheld, athletes typically receive a Form 1099 and are treated as self-employed individuals.

This means:

· Income is reported on Schedule C.

· Athletes are subject to self-employment tax under IRC §1401.

· No federal or state withholding is automatically applied.

26 U.S.C. § 1401 - U.S. Code Title 26. Internal Revenue ...

For first-time earners, many of whom have never filed a tax return, this shift can be jarring. A $100,000 NIL deal does not translate into $100,000 of spendable cash. After federal income tax and self-employment tax, the liability can easily approach 30% or more, depending on the athlete’s overall tax profile.

Non-Cash Compensation Is Still Taxable

A particularly overlooked issue is the taxation of non-cash benefits. NIL deals often include merchandise, equipment, travel, or other perks. These items are not tax-free simply because no cash changes hands.

Under general tax principles, athletes must include the fair market value of these items in gross income under IRC §61. An 18-year-old athlete receiving high-end gear or sponsored products may not realize that these benefits create immediate taxable income—without providing liquidity to pay the resulting tax.

Revenue Sharing May Shift Classification

Recent developments in collegiate athletics—particularly revenue-sharing arrangements between universities and athletes—introduce additional uncertainty. While many schools initially issued Forms 1099 for 2025 payments, there is growing expectation that these arrangements may ultimately be treated as wages.

If classified as W-2 income:

· Income tax and FICA withholding would apply.

· Compliance burdens may decrease for athletes.

· Universities would assume payroll reporting obligations.

However, endorsement deals with third-party brands will likely remain independent contractor income, preserving the complexity of dual income streams with different tax treatments.

Timing and Estimated Taxes Create Risk

One of the most common pitfalls is timing. NIL payments are often irregular—paid upfront, in installments, or tied to performance milestones—while estimated tax deadlines remain fixed.

Athletes who fail to plan may face:

· Underpayment penalties under IRC §6654.

· Cash flow issues when large tax bills come due.

· Difficulty applying safe harbor rules or annualizing income.

For example, a $200,000 NIL deal received early in the year could generate a $60,000 tax liability. Without proper planning, those funds are often spent before the first estimated payment is due.

Multi-State Tax Exposure Is Coming

State taxation is another emerging concern. While current enforcement is inconsistent, states are expected to apply “duty day” or similar allocation methods—long used for professional athletes—to NIL income.

This creates potential exposure to:

· Multi-state filing obligations.

· Allocation of income based on games, appearances, or promotional activities.

· Additional compliance costs and audit risk.

Athletes playing in no-income-tax states may have a temporary advantage, but that benefit can be diluted quickly when income is sourced to other jurisdictions.

Planning Must Start Before the First Deal

The most successful athletes in this new environment are not necessarily those earning the most—but those with the right advisory structure in place early.

Best practices include:

· Setting aside 30–40% of all NIL income for taxes.

· Engaging a tax advisor before signing agreements.

· Tracking expenses to maximize Schedule C deductions.

· Evaluating entity structuring where appropriate.

· Planning for quarterly estimated payments.

Importantly, this education must begin at the high school level. Families are now evaluating NIL opportunities alongside scholarship offers, and tax implications are increasingly part of that decision-making process.

The Role of Advisors and Institutions

Universities, collectives, and advisors all play a role in bridging the knowledge gap. Without guidance, young athletes are left navigating complex tax rules that many seasoned professionals find challenging.

Tax professionals, in particular, have an opportunity and arguably an obligatio to provide proactive education. Early intervention can prevent compliance failures, reduce penalties, and preserve wealth that might otherwise be lost to poor planning.

The NIL era has created unprecedented financial opportunities for student-athletes, but it has also introduced a level of tax complexity that demands careful attention. Without proper planning, today’s endorsement deal can become tomorrow’s tax problem.

Need IRS Tax Advice?

Contact the Tax Lawyers at