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DEAR TRUST OFFICER:
I saw this headline: “White House Reviews DOL’s Alternate ESG Rule.” What does it mean?—NOVICE INVESTOR
DEAR NOVICE:
Some investors hope to use their investments for more than making money, they want to promote their social values at the same time. Years ago, that might have meant deliberately not investing in tobacco or liquor companies, but now there is a more complex and nuanced approach: ESG investing. Three categories are involved: environment, social, and governance (that’s where ESG comes from). An environmental focus may look at carbon emissions, water stress, renewable energy, or pollution. Social factors might be diversity, inclusion, labor, employee welfare, or data security. Governance issues might touch upon independent directors, audit standards, women in leadership, and executive compensation.
Companies may be scored for their ESG performance. They may self-report, or data may be gathered by third parties who then sell the data. These scores may be combined with traditional financial analysis tools in determining which companies are likely to have the desired impact while still providing strong returns to shareholders. Those who promote ESG investing believe that it will provide superior long-term returns, but that has not been demonstrated.
The promoters of ESG funds wanted as wide an audience as possible for their product, and they hoped to be able to offer such funds to retirement funds, such as 401(k)s and pension funds. They suffered a major setback when the Department of Labor (DOL) in the first Trump administration ruled that fiduciary rules governing the investment of ERISA plan assets precluded consideration of such non-financial factors. The trustees of such plans must invest for prudent financial returns.
Although the law did not change, the DOL had a change of heart after President Biden took office, and gave the green light to ESG investing by retirement plans. Now another reversal is in the works, and the new rules are expected to be similar to those of the first Trump administration.
ESG investing has become somewhat controversial, as some believe that it has become a means to inject political factors into investment decisions, as well as a mechanism for bringing political pressure to bear on company management. Several states have explicitly disavowed ESG investing and removed their pension funds from firms that promote that strategy.
ESG may be a fine idea for some individual investors, perhaps not so much for others. Generalizations are not appropriate, and more information is needed to determine whether ESG factors should be a part of your investment planning. ESG factors may be taken into consideration in managing trust assets, but evaluating financial risk and reward must remain paramount in the fulfillment of fiduciary duties, unless the trust creator or trust beneficiaries stipulate otherwise.
If you would like a professional review of your portfolio strategies, we would be pleased to meet with you at your convenience.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
A Trump Account is a new version of an Individual Retirement Account (IRA) specifically for children, one that does not require earned income for contributions. Up to $5,000 may be contributed each year through age 17, and at age 18 the account becomes a traditional IRA, subject to traditional IRA limits on withdrawals. As such, the account is of limited utility in meeting college education costs, it is primarily oriented toward retirement. Contributions to such accounts have been allowed since July 4 of this year.
When Congress established Trump Accounts in the One Big, Beautiful Bill Act last year, the legislators did not give any apparent thought to the gift tax implications of contributions to these accounts. One might naturally assume that the federal gift tax annual exclusion ($19,000 this year per done) would apply, but strictly speaking the annual exclusion is only available for a gift of a “present interest,” that is, a gift over which the donee acquires immediate control. The severe restrictions on Trump Account distributions before the beneficiary is 18 mean that the account beneficiary does not have the required control over it, which in turn implies that a gift tax return will be required for every account contribution (though no gift tax would be due, in most cases).
The IRS has come to the rescue, after a fashion. In Revenue Procedure 2026-25, the Service has established a “safe harbor” for letting the vast majority of taxpayers off the gift reporting hook. If the taxpayer does not make total gifts to the Trump Account beneficiaries in excess of the gift tax annual exclusion, the contributions will be treated as gifts of present interests, and no gift tax return will be required.
Example. Uncle Donald makes $5,000 contributions in 2026 to three Trump Accounts, one each for Huey, Louie, and Dewey. If he makes no other gifts to the boys, no gift tax return will be needed. But if Uncle Donald gives Huey an additional $15,000 cash gift in the same year, that would bring his total for Huey to $20,000, which is over this year’s exclusion amount. In that event, gift tax returns would be required for the gifts to all three of the nephews.
Why was the IRS so accommodating to taxpayers? Practicalities ruled the day. The IRS processes about 300,000 gift tax returns per year. As of July 1, more than 6 million Trump Accounts had been established. The IRS does not have the manpower to process another 6 million gift tax returns, especially considered than none of them will be paying a tax, and almost none of those making Trump Account contributions will ever pay a federal gift or estate tax.
The better solution would be for Congress simply to make clear that Trump Account contributions qualify for the annual exclusion from gift taxes.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
Data on the short-term effects of the One Big, Beautiful Bill Act enacted a year ago are becoming available. They show that predicting the real effects of tax legislation remains a tricky business.
The average tax refund rose by 11.5% in 2026, compared to 2025, reaching $3,276. The total number of refunds grew 6%, to 99,138,000.
About 72.9 million taxpayers claimed one of the new “no tax on” deductions created by OBBBA. Over 29 million taxpayers claimed the deduction for overtime, which was about 10 million more than had been projected by tax observers. But the average deduction claimed was only $3,100, far below the cap of $12,500 on the overtime deduction. There may have been some confusion about determining when one’s excess hours qualified for the deduction.
The deduction for car loan interest was claimed by 1.4 million filers. One issue with this deduction is that it was limited to cars with a final assembly in the USA, which tax preparers had to verify. Still, the IRS estimated that there were about 6 million loans made on purchases of qualifying vehicles, so the low number of claimants is puzzling.
Over 7.5 million taxpayers claimed the tips deduction, with an average claim of $7,000. The deduction limit is $25,000, and there are income limits as well. This year there will be new tip reporting requirements for employers, which may simplify tax filings for those who earn tips.
The business tax changes have received high marks from some tax observers, notably changes in international taxation, the permanence of the pass-through deduction, and the immediate expensing of R&D costs. R&D spending had fallen when the costs were required to be capitalized, but since OBBBA R&D is up 5%.
For the first eight months of this fiscal year, the IRS collected $3.66 trillion in federal revenue. This was $174 billion more, about 5% more, than was collected during the same period before OBBBA adoption. Unfortunately, federal spending is increasing even faster, so the deficit continues to grow.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
Larry Holderman executed his last will and testament on August 20, 1999. He named his parents, Franklin and Clara, as his sole beneficiaries. The will specifically disinherited Larry’s two children, Bly and Pearl. No reason for the disinheritance was given. The will did not have a residuary clause, it did not contemplate the possibility that Larry’s parents might die before him.
They did. Franklin died in 2002, Clara died in 2007. Larry did not amend his will, and apparently did no further estate planning for the rest of his life. Larry died in 2022.
The 1999 will was presented for probate. Larry’s children argued that because the will provided for no alternative beneficiaries and it had no provision for the residuary estate, it had lapsed and become ineffective. Under that theory, Larry died intestate, and under the laws of intestate succession the two surviving children would divide his estate.
A niece presented an alternative approach, invoking the Kansas anti-lapse statute. That law provides that when a bequest is made to a spouse or relative and that person dies before the testator, the descendants of that person will inherit the property unless the will includes an alternate disposition. In other words, Larry’s two nieces, who were descended from his parents, would inherit. The niece also argued that Larry’s disinheritance of his children also cut off any claims from his four grandchildren. The grandchildren agreed that the anti-lapse law applied, but protested that the will did not mention them in any way, and that they were also the descendants of Larry’s parents and so entitled to a share of the estate.
The probate court ruled against Larry’s children, and adopted the view of the grandchildren, who will share the estate with the nieces. The children appealed the decision, but they lost.
Both sides asked the court to order that the estate pay for their attorney’s fees, roughly $20,000 each. The court awarded fees to the prevailing party, but not to the children who “tried to find a loophole to suggest they should inherit their father’s entire estate despite his clear and directly contradictory wishes” [Matter of Estate of Holderman, Court of Appeals of Kansas].
Article ©2026 M.A. Co. All rights reserved. Used with permission.
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