Category: Alan Mittelman

Dear Friends,

The upcoming Pennsylvania primary will be one of the most important ballots you ever cast. Unfortunately many voters will be hesitant to go to their regular polling places to vote. The covid-19 corona virus has made everyone terrified to leave our homes and stand in line with lots of other people. There is a solution to this problem.

Pennsylvania now allows you to vote by mail. You always could obtain an absentee ballot if you were not going to be home for the primary or other election or had a health reason for not being able to go to your polling place. But now, registered Pennsylvania voters can vote by mail without having to provide a reason.

I encourage everyone to vote in the Primary, no matter what your party preference or preferred candidate. This is the most important election in our lifetime. To get a mail-in ballot, you can go to the following Pennsylvania government website (which you can copy and paste into your browser):

The website explains all about mail-in voting. You will have to download the application for a mail-in ballot (not the absentee ballot – that is a different link). To make it easier for you,I have included the form and instructions with this email.

I sure hope that you take advantage of the mail-in voting method. There are deadlines that you must follow, so don’t lose any time applying for your mail-in ballot. Please be safe and exercise your constitutional right to vote.

Thank you.

Alan Mittelman


This year brings new challenges for our federal income taxes.  Among the many changes wrought by Congress when it passed the new Tax Cuts and Jobs Act of 2018 was the change in rules for itemized deductions.  While federal income tax rates for individuals were lowered slightly, many of us have lost tax deductions which were very meaningful.  For example, one can deduct only up to $10,000 of state and local taxes in 2018.  Many of us pay real estate taxes that alone exceed $10,000 before even considering the PA or NJ state and city income taxes.  Plus one can no longer deduct investment advisory fees.

In lieu of these deductions, there is now a single standard deduction in 2018 of $24,000.  This change should lower income taxes for anyone who in the past did not have itemized deductions that amounted to $24,000.   But for those who had deductions that were greater than $24,000, they may now be limited to only a $24,000 standard deduction.  The amount of their deduction will depend upon how much they lose in state and local tax deductions in addition to how much is lost in investment advisory fees they have and which can no longer  be deducted.

For some of us there may be a solution to this problem.  To benefit from this solution, you must own an Individual Retirement Account (“IRA”), have reached age 70 ½ and should be charitably minded.  If you make significant charitable gifts each year but will no longer be able to take advantage of the full tax deduction because of the changes in the itemized tax deduction rules, there is a tool that can help.  It is referred to as a Qualified Charitable Distribution (“QCD”).  Here is how it works.

When one attains the age of 70 ½, the tax code requires participants in IRAs to start taking their Required Minimum Distribution (“RMD”).  The amount of the RMD will vary depending upon one’s age and the amount held in the IRA.  Distributions from IRAs are subject to federal income tax.  How much income tax you pay will depend upon your income tax bracket.  Here is the solution for saving.  If you choose to have some of your RMD paid to a public charity instead, you will not have to pay any income tax on the amount paid to the charity.  But you will lose the charitable deduction for the charitable gift.  You may be thinking “What is so good about that?  Well, let me explain.

Let’s suppose that your itemized deductions in 2018 will be $14,000 before making any charitable gifts.  If you make $10,000 of charitable gifts in 2018, then your total itemized deductions will be $24,000 – the same amount as the Standard Deduction.  You get no tax benefit from making any charitable gifts.

Now let’s suppose that your IRA RMD is $10,000.  You will have to pay federal income taxes on the $10,000 RMD.  If you are in a 30% income tax bracket, that means you will pay $3,000 of federal income taxes on the RMD.  However, if you ask the IRA plan administrator to send the $10,000 RMD directly to your favorite public charity, you still will have the $24,000 Standard Deduction but you will not have to pay any income taxes on the RMD.  This will save you $3,000 in federal income taxes just by making your charitable gift through your RMD instead of the traditional way of sending the charity your personal check.  Making the charitable gift directly from your IRA is a QCD.

How much a person can save using this technique will depend upon how much one donates to charity and how much one’s total itemized deductions will be under the new income tax rules.  However, unless one has lots of deductible mortgage interest, the likelihood of doing as well by using the itemized deduction method of taking your charitable deduction instead of by making a QCD is not very good.

Some important facts to keep in mind.  First, this technique only applies to IRAs.  Second you cannot wait until the very end of the year to ask the IRA plan administrator to make the QCD for you.  The check or wire must come directly from the IRA plan administrator and must arrive and be deposited before the end of the year.  Third, not all IRA plan administrators will let you do this.  It is our understanding that Schwab, Fidelity, T. Rowe Price and Vanguard have procedures to make QCDs, and your QCD does not have to go to only one charity.  Fourth, the maximum QCD is $100,000 per year and you can divide up your QCD among more than one charity.  Unfortunately, a QCD cannot be made from any other type of retirement plan.

But don’t wait!  Your tax saving is just waiting for you.  Take advantage now!

We will be happy to help you calculate the benefit you will receive by making a QCD.  Please let us know if we can help.  Thank you.

Spector Gadon & Rosen, P.C. Estate Planning Department
Alan Mittelman    215-241-8912
Miguel Pena   215-241-8810


Family Limited Partnerships (“FLP”) have been a great estate planning tool for many years. FLP’s can enable a family to shift significant assets and income to children or grandchildren at a very high discount. The discount can range from 25% to 50% depending upon the type of assets in the partnership. Therefore, it should come as no surprise that the IRS dislikes FLPs and sometimes examines very carefully the valuations used for gifts and in estates.

When the IRS finds an FLP that looks abusive, it will do its best to attack the tax planning used by the family. The IRS found such a partnership in Holliday V. Comm’r, a 2016 tax court case. In the Holliday case, the IRS was successful in bringing the entire partnership back into a parent’s taxable estate as if the FLP did not exist. In Holliday, this meant that the decedent’s 89.9% interest in the FLP was ignored and she was treated as owning 100% of the FLP at her death. Also, the 40% discount the estate took on the value of the FLP on her estate tax return was eliminated. Instead 100% of the value of the FLP’s assets were subject to federal estate tax.

Some of the mistakes this family made were (i) the formation of the FLP, funding of the FLP, the transfer of the general partner interests to the decedent’s children and the gifts of limited partnership interests were all made on the same day, (ii) the partners never held partners’ meetings, (iii) the general partner was not paid for managing the FLP, (iv) the FLP made only one distribution instead of regular annual distributions, (v) the court could find no “non -tax reason” for the FLP, (vi) the court was convinced there was a deal to hold the money in the FLP for the parent just in case she needed it during her lifetime and (vii) the FLP was formed by the son using a power of attorney after his mother (the decedent) went into a nursing home. This combination of bad facts resulted in a FLP being disregarded and brought back in the parent’s estate when she died.

What to do if you have a FLP and want to preserve the value for your family? The following is a partial list: (i) have annual meetings of the partners, (ii) pay some modest compensation to the general partner, (iii) make annual distributions to all of the partners, (iv) wait at least 6 months after formation of the FLP to transfer any portion of the parent’s interest to children or trusts and (v) don’t wait until the parent is in a nursing home. And just because you made gifts of FLP interests and filed a gift tax return, you still need to follow these guidelines. Otherwise there is a risk of the FLP being brought back into one’s taxable estate and the loss of substantial discounts on the assets. It is an excellent idea to have an annual checkup of your FLP to see how it complies with the tests that the IRS now is using to evaluate FLPs. Please give us a call to review your FLP or to help you take advantage of a fine estate planning tool when used right.

Please feel free to contact Alan Mittelman 215-241-8912 or if you have any questions.