According to folklore, an ancient Chinese curse is “May You Live in Interesting Times.” Certainly, it does not get more interesting than 2010 for estate planners. 2010 has brought many major, temporary changes at the federal level. 2010 has also brought several unique changes at a state level. As I blogged about before, several states have overridden estate plans for decedents dying in 2010: https://www.aaepa.com/blog/2010/08/state-law-override-tax-benefits-bypass-trusts/. 2010 also may have … [Read more...] about May You Live in Interesting Times
As we all know, there is no estate or GST tax in 2010. However, the estate and GST taxes return next year. Without Congressional action, the applicable exclusion will be $1 million. Thus, a wealthy individual who dies on December 31, 2010, will face an entirely different tax outcome than one who dies the following day. Let’s look at someone with $100 million. If they die on this New Year’s Eve, their estate would owe no any estate tax, regardless of to whom the assets were given. If the person … [Read more...] about Having No Estate Tax: Is It an Opportunity to Die For?
Few expected that American billionaires could die without federal taxation of their estates. However, that’s the situation we have in 2010. George Steinbrenner and other billionaires have died this year and, under current law, their estates owe no federal estate tax. There have been several pieces of legislation which would reinstate the estate tax. Some would do so retroactively. But, would retroactive legislation pass constitutional muster? In Untermyer v. Anderson, 276 U.S. 440 (1928), the … [Read more...] about Can Congress Reinstate the Estate Tax Retroactively?
As estate planning attorneys, we know how important trusts are for probate avoidance, tax minimization, and asset management. But, clients often do not give enough consideration to the identity of the trustee who is to follow in their footsteps. Successor trustees are critical to managing the assets during periods of the client’s incapacity and at the client’s death. These successor trustees will make decisions regarding how the assets should be invested and whether they should be distributed … [Read more...] about Trustees are Central to Trust Function
Samuel Goldwyn once said, “An oral contract is as good as the paper it’s written on.” But is this always the case? The truth is a legal document can be binding and effective even if it isn’t perfectly drafted and neatly printed up on expensive paper. Would you believe a will can be valid if it’s handwritten on a big piece of wood? That’s what happened with the Last Will and Testament of Marilyn S. Rhodeback, of Johnstown, New Jersey. Ms. Rhodeback passed away earlier this year and her will, … [Read more...] about What Makes a Legal Document “Legal”?
What would a permanent repeal of the estate tax do to the nonprofit sector? At first blush, it might not seem like estate taxation and philanthropy have much of a link. But there’s a strong connection. Built in to the federal estate tax is a deduction for charitable bequests. Plus, charitable donations made during a person’s lifetime reduce that person’s taxable estate, also reducing the ultimate estate tax bill. Study after study has found that, because of the way charitable contributions are … [Read more...] about Philanthropy and the Estate Tax
The last couple of years have brought the topic of the federal estate tax to the forefront like never before. Not only has there been debate over what Congress should do. The polarizing subject of the fundamental fairness of the tax itself has also taken center stage. Here are some reasons in support of the fairness of the estate tax: The estate tax is the fairest method for reducing the deficit. Why? Not necessarily because it taxes those most able to pay, but because it taxes those least … [Read more...] about The Fairness of the Estate Tax
When it comes to passing on wealth to the next generation, people seem to fall firmly into one of two camps: either they want to leave all the riches they’ve accumulated during their lifetimes to their children, or they adopt the worldview that inherited wealth, in and of itself, is not necessarily a good thing. The philanthropists who signed the Giving Pledge this summer tend to fall into the second camp. Through the Pledge, Bill Gates and Warren Buffett invited the wealthiest Americans … [Read more...] about Inherited Wealth: How Much is Too Much?
Failure to tell the IRS enough on a Federal gift tax return (Form 709) can hamstring your clients’ efforts to minimize their taxes through FLP and FLLC transfers. How? First, let’s look at what has to be disclosed. The IRS Regulations governing reporting of gifts require a taxpayer to disclose enough to apprise the IRS of: The nature of the gift, and The basis of the value being reported At a minimum, the IRS needs to know the identities and relationship of the transferor and transferee, … [Read more...] about Disclosure Is Key To Discount Planning
When one spouse dies leaving significant assets, a primary goal is to pass those assets on to the surviving spouse in such a way as to minimize the survivor’s taxable estate when he or she eventually passes away. Competing with this goal are income tax goals. When the first spouse dies, their executor can allocate $1.3 million in additional basis to assets passing to any beneficiary, including a bypass trust. The executor can allocate another $3 million in additional basis to assets passing to … [Read more...] about Decisions, Decisions: Bypass Trust vs. Marital Share
In any year, assets passing from a decedent to his or her surviving spouse do so tax-free because of the unlimited marital deduction. The potential tax consequences come into play when the survivor eventually dies. A common estate planning strategy is for the predeceasing spouse to leave the most assets possible in a bypass trust for the use of the surviving spouse and children, and avoid taxation at the surviving spouse’s death. Thus, in 2009, the typical plan would leave $3.5 million to the … [Read more...] about State Law May Override Tax Benefits of Bypass Trusts
Every estate planning attorney is well aware that the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) will sunset on December 31, 2010. So far, the most-discussed provisions of the Act have been the estate tax provisions. However, there is much more to EGTRRA than the estate tax provisions. A number of income tax provisions are scheduled to return to their pre-2001 status, too. Tax Brackets EGTRRA created six tax brackets: 10%, 15%, 25%, 28%, 33%, and 33%. If the Act is … [Read more...] about What You May Not Know About EGTRRA