Estate Taxes

Friday, July 22, 2011

Recent Press Coverage of Estate Planning (July 22, 2011)

Hani Sarji of Forbes notes that this is a great time to use gifts as an estate reduction strategy if you live in a state that has an estate tax threshold lower than the current federal estate tax threshold of $5 million per person ($10 million for a married couple). If you live in a state that has its own estate tax but no gift tax, like Vermont, then you can gift property during your life to reduce your estate value to less than the state estate tax exemption level, and still avoid gift taxes on the federal level. The current high gift exemption level extends only through 2012, so you need to plan ahead accordingly. See How to Cut State Death Taxes – Without Moving (July 13, 2011).

Jay Adkisson writes in Forbes about ten rules to keep in mind regarding asset protection. Most importantly, there are many strategies available if you start planning before a claim arises, but few that work after a claim or liability arises. And engaging in asset protection after a claim is filed is likely to make matters worse. Other rules include pairing asset protection with insurance, ensuring personal assets are not placed in business entities, and avoiding asset protection plans that are so complex they are hard to clearly explain. See Ten Rules for Asset Protection Planning (July 13, 2011).

Ashlea Ebeling of Forbes discusses ways to avoid a protracted battle over your estate. Advice includes treating siblings equally, making a list of specific items that should go to named heirs, keeping track of loans and advances, including a “no contest” clause, and spelling out clearly if you intend to disinherit someone. See 10 Ways to Lawsuit-Proof Your Estate (July 13, 2011).

Deborah L. Jacobs of Forbes reviews the unusually difficult challenges facing executors of people who died in 2010, a year when there was the option to avoid the federal estate tax (but pay capital gains taxes) or apply the estate tax law as it exists in 2011 with its $5 million exemption level. Issues include locating purchase records to determine cost basis for many assets, coping with new paperwork and forms issued by the IRS for this unusual year, and meeting the fiduciary obligations of impartiality when one of several available strategies benefits one group over another. See New Heirs Face Confusing Tax Choice (July 13, 2011).

Janet Novack of Forbes writes about ways to pass on frequent flyer rewards before or after you die. Each program has its own set of rules, but several allow a parent or grandparent to use their miles to purchase tickets for someone else. Also, ensure someone has your list of accounts, passwords and usernames, because some plans don’t allow transfer of points to an heir, but will allow someone to log on and redeem points after your death. See How to Pass On Your Frequent Flyer Miles (July 13, 2011).

Friday, July 15, 2011

Recent Press Coverage of Estate Planning (July 15, 2011)

Saabira Chaudhuri of the Wall Street Journal wrote two articles about the importance of keeping your heirs aware of key documents, and where the documents can be found. Chaudhuri points out that some insurance companies are failing to pay out life insurance policies because the company may not be obligated to determine if a policyholder is alive, they simply pay a claim when beneficiaries come forward. The articles lists 25 key documents that your heirs should be able to find quickly after you die, and a follow-up article lists several more. See The 25 Documents You Need Before You Die (July 2, 2011) and Read This Before You Die (July 7, 2011).

Caren Chesler of Private Wealth reports that wealthy Americans are leaving more of their wealth to charities and less to their children. Reasons for the trend, according to a survey by U.S. Trust, include that parents believe their children won’t be able to handle an inheritance, that their children will become lazy, that their children will make poor decisions, and that their children would be taken advantage of by outsiders. See Tough Love (July 2011).

Arden Dale of the Wall Street Journal points out that some states are repealing state estate taxes, some are hiking state estate taxes, and some states don’t have an estate tax. It leads to a lot of confusion, particularly for families that have residences in more than one state. See State Estate Tax Changes Make Plans Trickier (July 8, 2011).

Carolyn T. Geer of the Wall Street Journal stresses the importance of properly filling out beneficiary designation forms and discusses what types of financial accounts usually have beneficiary designations, who can be named as a beneficiary, and who should not be named as a beneficiary, among other issues. See Beware the Beneficiary Form (July 6, 2011).

Friday, May 27, 2011

Recent Press Coverage of Estate Planning (May 27, 2011)

Lauren Foster of Barron’s reviews five common mistakes that non-professional trustees make when managing a trust. Pitfalls include failing to keep adequate records, failing to diversify trust assets, failing to recognize conflicts of interest and treating beneficiaries and remaindermen appropriately, and expecting timely and reasonable compensation for taking on the role of trustee. See The Five Biggest Ways to Bungle a Trust (May 21, 2011).

Arden Dale of the Wall Street Journal discusses how heirs and executors of people who died in 2010 are struggling with important estate administration decisions. Part of the problem lies in that fact that executors can choose among two estate tax regimes, one with no estate tax but a complicated capital gains framework, and one with an elevated federal estate tax threshold. On top of that, the IRS hasn’t issued some important forms, which leads to questions about elections and due dates. See A Tough Call for Heirs (May 21, 2011).

Friday, May 06, 2011

Recent Press Coverage of Estate Planning (May 6, 2011)

Arden Dale of the Wall Street Journal reports that fewer people may owe federal estate taxes because of the high federal exemption level, but an increasing number may be paying state estate taxes. Some states, such as Connecticut, are attempting to lower their estate tax threshold to collect more in estate taxes. See Some States Push for More Estate Taxes (Apr. 29, 2011).

Kelly Greene of the Wall Street Journal writes about ways to use the increased gift tax exemption to pay the education expenses of children and grandchildren. Some grandparents are setting aside money using the current high gift tax exemption to create common trusts for infants and toddlers, whereby grandchildren can in the future access the trust for college costs. See Paying Grandkids’ College Bill (Apr. 30, 2011).

Friday, March 18, 2011

Press Coverage of Estate Planning this Week (March 18, 2011)

Christina Benz of Morningstar holds a discussion with Deborah Jacobs on what people ought to know about the new estate tax laws passed in December 2010. Topics include spousal portability, increased exemption amounts, what to look for in older estate plans that may need updating, and gifting opportunities, among others. See Is Your Wealth Safe Under New Estate Tax Laws? (Mar. 18, 2011).

Lewis Saret of Forbes reviews the proposed changes to the estate tax laws that the Obama Administration submitted with their proposed 2012 federal budget. Major provisions include returning estate, gift and generation skipping transfer tax rates to 2009 levels, making portability permanent, requiring estate tax values and basis values to be consistent, limiting valuation discounts, and imposing a minimum 10-year term on grantor retained annuity trusts. See Obama Estate Tax Budget Proposals (Mar. 11, 2011).

Friday, February 18, 2011

Press Coverage of Estate Planning this Week (February 18, 2011)

Carla Fried of the New York Times reviews how the new estate tax laws affect lifetime gifts. Because federal gift taxes are now closely aligned with federal estate taxes, many parents will find that it makes sense to give gifts during their lifetime rather than provide an inheritance after their death. This is particularly relevant  during the next two years when the gift exemption is relatively high. See Estate and Gift Rules: Some Clarity for Now (Feb. 12, 2011).

Ashlea Ebeling of Forbes writes about states that have a separate estate or inheritance tax aside from the federal estate tax. The situation is constantly in flux, with states adopting or amending their estate tax laws every year. If you are planning on taking estate taxes into consideration when planning on where to retire, the advice is “prepare for the worst, and hope for the best.” See More States Want to Tax Your Estate (Feb. 15, 2011).

Christine Benz of Morningstar advises on steps to take regarding your IRAs in the context of estate planning. Recommendations include getting professional advice when naming beneficiaries, considering a charity as a beneficiary, and contemplating a conversion from a traditional IRA to a Roth IRA if you don’t expect to need the money during your lifetime. See Dos and Don’ts for Leaving IRA Assets to Your Loved Ones (Feb. 17, 2011).

Friday, February 11, 2011

Press Coverage of Estate Planning this Week (February 11, 2011)

David Cay Johnston of the New York Times writes that estate plans need to build in flexibility because the estate tax laws are constantly changing. For instance, many estate planning attorneys don’t think the current $5 million exemption level will be reduced, but they nonetheless suggested it would be imprudent to draft a plan that did not take the possibility of a reduced exemption level into account. See Certainty on Tax, But Just For Two Years (Feb. 9, 2011).

Andrew and Danielle Mayoras write in Forbes about what happened to some celebrities who died in 2010 without proper estate planning in place. Stories include what to avoid, such as not updating your estate plan after a significant life event such as divorce. See Estate Tax Lessons From George Steinbrenner, Gary Coleman and More (Feb. 4, 2011).

René A. Guzman of Hearst Newspapers suggests adult children should have a conversation with their parents about estate planning. One way to bring up the topic is to suggest that the conversation is about avoiding unnecessary burdens on their loved ones, including their spouse. See Preparing Parents for the Inevitable (Feb. 8, 2011).

Wednesday, February 09, 2011

NEET Tips

NEET Tips answers questions posed online to the NEET website

How much is the Vermont estate tax?

The Vermont estate tax is a graduated rate on a decedent’s taxable estate exceeding $2.75 million in 2011. For decedents dying in 2012, the threshold is scheduled to rise to $3.5 million. The graduated rate starts at less than one percent for taxable amounts below $90,000, and rises steadily in increments until it tops out at 16 percent for taxable amounts above $10.04 million.

Monday, February 07, 2011

NEET Tips

NEET Tips answers questions posed online to the NEET website

What is the special rule affecting step up of cost basis in 2010?

Because there was no federal estate tax in 2010, a tax provision that caused property to have its cost basis “stepped up” to the fair market value of the asset on the owner’s date of death did not apply in 2010. Thus, property such as stocks and real estate were inherited at the deceased owner’s cost basis. This has implications for capital gains taxes when the asset is eventually sold.

However, the Tax Relieve Act of 2010, passed in December, allows executors to choose between the pre-existing law (where no federal estate tax existed but also no step-up in cost basis), and the new law which made the estate tax retroactive to January 1, 2010, reinstated the cost basis step up rule, and raised the exemption level to $5 million per person.

Most people will benefit from the new federal estate tax rules because they will not exceed the federal exemption level and will be allowed to step up the cost basis of the decedent’s assets. If unsure, executors of a deceased person’s estate should talk to an estate planning attorney or a CPA to determine which approach makes the most sense for the particular circumstances.

Wednesday, January 19, 2011

NEET Tips

NEET Tips answers questions posed online to the NEET website

Is the estate tax going away?

No. On the federal level, the Tax Relief Act of 2010 extended the prior Bush tax cuts through 2012, but did not eliminate the estate tax as some in Congress wanted. Congress did raise the federal estate tax exemption amount to $5 million per person, reunited the estate tax with the gift tax, and introduced spousal portability of a deceased spouse's unused exemption amount.

In Vermont, meanwhile, the estate tax exemption amount rose from $2 million to $2.75 million in 2011, and is scheduled to rise again in 2012. Nonetheless, the estate tax persists on both the federal and state level at least for the next two years.

What will happen in 2013, after the estate tax provisions contained in the Tax Relief Act of 2010 expire? No one knows. Congress planned for the Tax Relief Act of 2010 to expire shortly after the next presidential election, so it is certain to be a campaign issue, and the future of the estate tax will likely turn on who wins the election in 2012.

Friday, January 14, 2011

Press Coverage of Estate Planning this Week (January 14, 2011)

Bill Bischoff of SmartMoney reviews the basics of estate planning for singles in light of the Tax Relief Act of 2010. For people with a net worth below $5 million, an update of one’s plan to recognize the new $5 million estate tax exemption level is appropriate, and if your estate is above $5 million, then reducing your taxable estate through annual exclusion gifts (up to $13,000), and paying for a relative’ educational or medical expenses may make sense. See Estate Planning Update for Singles (Jan. 12, 2011).

Arden Dale of the Wall Street Journal encourages readers to avoid complacency and ensure they have some estate planning in place. Despite new federal exemption levels for the estate tax, many people should revisit their wills because either they don’t have one, or they have one that has become out of date. See Planning For Your Estate, Tax Deal or Not (Jan. 11, 2011).

Christine Benz of Morningstar reviews issues related to inherited IRAs, including what happens if the IRA doesn’t have a beneficiary designation, what happens if a deceased person’s estate is the beneficiary, and what to do if the person listed as the account beneficiary wants to disclaim the account. See More Must-Knows About Inherited IRAs (Jan. 13, 2011).

Wednesday, December 22, 2010

NEET Tips

NEET Tips answers questions posed online to the NEET website.

What is the Marital Deduction?

The marital deduction allows for unlimited lifetime gifts between spouses, and for unlimited transfer of assets from a decedent to their surviving spouse. The deduction, equal to the value of the assets transferred, applies as a deduction against gifts in the calendar year when occurring between living spouses, or as a deduction against the deceased person’s gross estate for estate tax purposes.

For gifts between spouses, if the recipient spouse of a gift is not a U.S. citizen at the time of the gift, the deduction is limited to $100,000. For estate taxes, if the surviving spouse is not a U.S. citizen, the deduction is also limited, but the limitation can be circumvented through use of a qualified domestic trust set up before the death of the first spouse.

The marital deduction is an important estate planning option that is frequently used to rebalance estates between spouses, and to delay estate taxes until the death of the second spouse so that the surviving spouse’s standard of living is not substantially reduced.

Friday, December 17, 2010

Press Coverage of Estate Planning this Week (December 17, 2010)

Ben Steverman of Bloomberg Businessweek reviews the favorable provisions in the tax law progressing through Congress and finds that the “new rules would make it possible to pass on fortunes to heirs with less fuss and lower taxes than all but a brief period of the past 80 years.” The tax review addresses estate tax exemptions, favorable rules such as portability and reunification of the estate and gift tax laws, and income and investment taxes. See It’s a Great Time to Be Rich (Dec. 15, 2010).

Friday, December 03, 2010

Press Coverage of Estate Planning this Week (December 3, 2010)

Ashlea Ebeling of Forbes writes about a one-time opportunity to make distributions from certain types of trusts that could avoid up to a 55 percent generation skipping transfer (GST) tax. Because the GST tax lapsed in 2010, alongside the federal estate tax, there may be an opportunity to make distributions from GST non-exempt trusts to grandchildren and other skip beneficiaries before the end of 2010, and thereby avoid the GST tax . See Payday for Trust Babies (Dec. 2, 2010).

Friday, November 19, 2010

Press Coverage of Estate Planning this Week (November 19, 2010)

Chuck Epstein of InvestorPlace Media discusses the basics of stretch IRAs, why tax deferred compounding is so important, and some common IRA mistakes to avoid. See Is a ‘Stretch’ IRA Right for You? (Nov. 18, 2010).

Paul Sullivan of the New York Times reviews steps some people are taking to reduce estate and gift taxes in this time of tax uncertainty. Issues include trying to take advantage of there being no estate tax in 2010, while being mindful that legislation could still occur to reinstate an estate tax for this year. See Planning for Income and Estate Taxes in an Uncertain Time (Nov. 12, 2010).

Friday, September 17, 2010

Press Coverage of Estate Planning this Week (September 17, 2010)

Deborah L. Jacobs writes in the New York Times of ways to reduce exposure to future estate taxes without giving away all of your money. Her list includes purchasing life insurance, remarrying and leaving assets to your new spouse, lending money to family members at today’s low interest rates, and contributing to a 529 education savings plan. See Devising Strategies While the Estate Tax Is in Limbo (Sept. 15, 2010).

Bob Carlson writes in Retirement Investing about events that might prompt a review and updating of your estate plan. Factors that argue for a review include: changes in investment values or net worth; changing personal values; changing tax laws; an evaluation of whether your fiduciaries are still the best people for the specific task; and changes in your personal life, such as a death or divorce in the family. See Knowing When to Revise a Plan (Sept. 13, 2010).

Friday, August 13, 2010

Press Coverage of Estate Planning this Week (August 13, 2010)

Chuck Jaffe of Marketwatch discusses conversations with his late brother, who advised that people should get their estate planning affairs in order so that they can focus on more meaningful issues when death is near. The brother, who contracted an illness and died 46 days later, suggested that talking about estate planning with an attorney when everyone is healthy is easy, talking about death when one is dying would be unimaginable. See 46 Days to Live: What’s Your Plan? (Aug. 2, 2010).

Floyd Norris of the New York Times recounts how the Bush tax cuts of 2001 came into being, and how politics will affect whether the estate tax comes back in 2011 at a threshold of $1 million. Congressional factions, even more partisan now than in 2001, remain in no mood to compromise, and a return to the $1 million estate tax threshold and higher tax rates appears increasingly likely. See Taxes No Longer So Certain (Aug. 12, 2010).

Pamela Yip of the Dallas Morning News points out that estate planning is not just for the rich. She states that everyone should have a will, and reviews some common estate plan mistakes that people make, including not knowing the value of everything you own, failing to update your plan, leaving everything to your spouse, over-relying on joint tenancy, and picking the wrong people as executors and trustees. See Estate Planning Lets Your Will Rule After You’re Gone (Aug. 6, 2010).

Jeffrey McKenna, Esq., writes in the Lincoln County Record that almost always a financial account that has a beneficiary designation will overrule provisions in a will that would have the account pass to someone other than the listed designated beneficiary. Beneficiary designations are common on life insurance, annuities, and IRAs, all of which are contracts. The associated beneficiary designations are a part of the contract, and a provision in a will cannot change the contract. Reviewing your beneficiary designations every couple of years on these and other accounts is essential to ensure your estate plan works the way you intended it to. See What Controls: The Will or “The Box” (Aug. 13, 2010).

Irving Blackman, Esq., writes in ContractorMag.com, about the estate planning issues that arise when a client is planning for second or third marriages. Types of issues that are prevalent include age differences between the new spouses, health issues, kids from prior marriages, lack of a premarital agreement, and how to provide for the surviving spouse without disinheriting your children. See Estate Planning for Second, Third Marriages, Etc. (Aug. 9, 2010).

Friday, August 06, 2010

Press Coverage of Estate Planning this Week (Aug. 6, 2010)

Samantha Maziarz Christmann of the Buffalo News answers questions about estate planning, addressing issues such as whether your estate plan is up to date and consistent with beneficiary designations on your insurance and financial accounts, whether you can access a deceased parent’s financial accounts to pay for funeral expenses, and if insurance proceeds are taxable, among others. See A Plan for Ever After (Aug. 2, 2010).

Kimberly Palmer of U.S. News and World Report discusses how to talk to your parents about the estate tax and estate planning. Some bits of advice: don’t be afraid to raise the issue, many parents increasingly look to their children for help managing their finances; emphasize the importance of financial stability, because the elderly want to ensure they don’t outlive their resources; and suggest some simple steps to take now, such as making lifetime gifts if your parents are wealthy, or completing basic estate planning documents if they are less well off. See How to Talk to Your Parents About the Estate Tax (Aug. 3, 2010).

Friday, July 23, 2010

Press Coverage of Estate Planning this Week (July 23, 2010)

Conrad de Aenlle of the New York Times discusses estate planning in the context of people who live in more than one country, noting that sometimes two wills are necessary to cover both local law, and the laws of the country of permanent residence. He also stresses coming to grips with the last step you will ever take, death, and having at least some basic instructions in place. See Estate Planning Step 1: Recognize You Are Going to Die (July 15, 2010).

Sandra Block of USA Today contrasts the fate of George Steinbrenner’s heirs with what could happen to heirs of decedents in 2011 and beyond. Because Steinbrenner died in 2010, his estimated $1.15 billion estate escaped approximately $500 million in federal estate taxes; beginning in 2011, under current law, decedents will face taxes of up to 55 percent on estates over $1 million. Block also discusses the current status of estate tax reform in Congress. See Estate Tax to Return in 2011, And It Could Hurt Ordinary Folks (July 22, 2010).

Friday, June 18, 2010

Press Coverage of Estate Planning this Week (June 18, 2010)

Daisy Maxey of the Wall Street Journal offers some reasons why college students ought to have wills, including ensuring that their parent’s estate planning is not disrupted. Absent a will, intestacy laws in most states would pass assets back to the parents where the son or daughter is not married and has no children. Passing money up a generation may lead to its being needlessly taxed when the parents pass on. See Planning for the Unthinkable (June 14, 2010).

David Kocieniewski of the New York Times questions the real impact of a return to the estate tax threshold of $1 million in 2011, suggesting estate planning and favorable tax provisions for small businesses make fewer estates liable for estate taxes. Furthermore, even with the low estate tax threshold, the number of affected estates would be low by historical standards. See What An Estate Tax Looks Like to the Taxman (June 11, 2010).

Paul Sullivan of the New York Times finds that the one-year repeal of the estate tax is making this a busy time for estate planners, both to fix older estate planning documents that didn't anticipate repeal of the estate tax, and to take advantage of estate planning methods that will likely soon be less appealing because of new legislation. See Confusion Over the Dormant Estate Tax Keeps Advisors Busy (June 11, 2010).

Annie Gasparro of the Wall Street Journal recounts some of the reasons that converting a traditional IRA to a Roth IRA may not make sense. She lists large near-term tax increases, owners too close to retirement, and potentially higher tax brackets during retirement. See Why You Shouldn’t Convert to a Roth IRA (June 14, 2010).

Kristen McNamara of the Wall Street Journal reviews actions taken by various states to attract trusts, including relaxing or voiding limits on how long a trust can last, eliminating income taxes for trusts, and enhancing asset protection features. See States Want Your Trust (June 14, 2010).

Friday, June 11, 2010

Press Coverage of Estate Planning this Week (June 11, 2010)

David Kocieniewski of the New York Times reports that Dan L. Duncan may be the first American billionaire able to pass his fortune to his heirs estate tax free. The estate, estimated at $9 billion, will likely give Congress pause in attempting to reinstate the estate tax retroactive to January 1, 2010, as the Duncan heirs would have ample means to fight such a law in the courts. See Legacy for One Billionaire: Death, but No Taxes (June 8, 2010).

Deborah L. Jacobs of Forbes suggests taking some steps now in preparation for the return of the estate tax in 2011, including reviewing life insurance policies, ensuring not all assets are jointly owned with your spouse, considering annual gifts, funding college savings plans, and converting to a Roth IRA. See Prepare For the Return of the Estate Tax (June 9, 2010).

Ashlea Ebeling of Forbes reviews the status of state-imposed estate and inheritance taxes for 2010. Currently, 19 states impose an estate and/or inheritance tax. That could change abruptly in 2011, depending on what happens to the federal estate tax. See The State Estate Grab, 2010 Edition (June 9, 2010).

Stephanie Fitch of Forbes discusses Qualified Personal Residence Trusts as a means for protecting the family vacation home so that your children and grandchildren can enjoy it as much as you do. These trusts, informally known as QPRTs, make sense when property valuations are low both to pass along sizable assets and reduce final estate taxes. See How to Pass Down Your Family Vacation Retreat (June 9, 2010).

Mark Maremont and Leslie Scism of the Wall Street Journal tell the story of an elderly wealthy investor who purchased $56 million of life insurance and then assigned or sold the rights to the death proceeds to investors. The decedent’s spouse claims this violates public policy and New York laws, and thus she should be named the beneficiary. The case will likely impact the viability of what is known as “stranger owned life insurance.” See Lawyer’s Heirs Fight Insurers in $56 Million Policy Intrigue (June 11, 2010).

Wednesday, June 02, 2010

Report on Status of the Federal Estate Tax

The Tax Foundation, which calls itself a "nonprofit, nonpartisal research and public education organization," has issued a brief overview of the federal estate tax, its recent history, and arguments for and against resurrecting the estate tax in 2011 or sooner. While opinionated at times, the report nonetheless provides some good context to today's confusing estate tax situation. See The Federal Estate Tax: Will it Rise From the Grave in 2011 or Sooner? (May 2010).

Friday, May 28, 2010

Press Coverage of Estate Planning this Week (May 28, 2010)

Robert Frank of the Wall Street Journal notes a proposal to “prepay” estate taxes through “prepayment trusts” is being discussed in Congress as talks to re-instate the federal estate tax continue. Although details are scarce, one proposal would allow people to put assets into a prepayment trust for five years, pay a 35 percent capital gains tax on appreciation, then the trust assets would pass to the owner’s beneficiaries estate tax free. See Proposed Estate Tax: Pay Now, Die Later (May 21, 2010).

Martin Shenkman writes in Financial Planning that clients often defer updating their estate plans because “nothing has changed.” Shenkman points out the many life changes that occur, such as the birth, marriage or death of a family member, or a change in the client’s health or financial status. Additionally, he points out that federal and state laws are constantly changing. To say nothing has changed is “a dangerous excuse for clients to ignore vital changes that could completely undermine their intentions.” See “Nothing Has Changed” (June 1, 2010)

Friday, May 07, 2010

Press Coverage of Estate Planning this Week (May 7, 2010)

Ashlea Eberling of Forbes discusses the uncertain future of the estate tax, and some measures you can take to remove some of that uncertainty, including having a contingency plan for this year in which no federal estate tax exists (yet), keeping records of the tax basis of your assets, reconsidering if your son or daughter should take on the potentially complicated role of executor in these uncertain times, and making gifts to charities and family members. See How to Protect Your Family From Estate Tax Uncertainty (May 4, 2010).

Ryan J. Foley of Bloomberg BusinessWeek reports on a Wisconsin Supreme Court case that allowed the recipient of a pay-on-death account to avoid a proportionate share of estate taxes when the deceased did not specify how the tax apportionment should occur. This case points out the need for carefully drafted wills and trusts to ensure estate taxes are apportioned as the client desires. See Court: Estate , Not Heirs, Responsible for Taxes (May 4, 2010).

Kelly Greene of the Wall Street Journal discusses the use of trusts with IRAs to ensure that children and grandchildren don’t blow the account if they inherit an IRA account while still young. These trusts must be closely integrated with specific beneficiary designations to work properly. See Leaving Your Roth IRA to the Kiddies (May 2, 2010).

Deborah L. Jacobs of Forbes sheds light on why stretching out IRA accounts makes sense, and some of the steps IRA owners can take to get the maximum value out of the their IRA for themselves and their children. See How to Stretch Out an IRA (May 4, 2010).

Friday, April 30, 2010

Press Coverage of Estate Planning this Week (Apr. 30, 2010)

Deborah L. Jacobs of Forbes discusses actions to take now to reduce estate taxes later, which may prove particularly valuable if the estate tax is not fixed before next year and we return to a $1 million per person threshold and a 55 percent tax rate. Her recommendations include maximizing annual gifts, planning that removes life insurance proceeds from your taxable estate, funding a college account, and paying a family member’s tuition or medical expenses, among others. See Six Ways to Leave Less for Uncle Sam (Apr. 28, 2010).

Friday, April 23, 2010

Press Coverage of Estate Planning this Week (Apr. 23, 2010)

Financial Advisor Magazine reports that as more high-profile deaths occur in 2010, questions about making a new estate tax retroactive are mounting. In April, Texas billionaire Dan Duncan died, leaving an estate of $9 billion, according to the article. If Congress tries to re-instate the estate tax this year and make it retroactive to January 1, beneficiaries can be expected to fight long and hard because so much money is at stake. See Deaths Highlight Estate Tax Question (Apr. 22, 2010).

Yuki Noguchi of National Public Radio discusses the effects of the lapse of the federal estate and generation skipping transfer tax in 2010, which is offset by additional capital gains taxes on beneficiaries when they sell inherited assets. See There May Be a Tax Upside to Dying in 2010 (Apr. 20, 2010).

Deborah L. Jacobs of Forbes writes that the past decade could in hindsight be viewed as the golden era of wealth transfer if the current estate tax laws remain unchanged. In 2011, citizens may be able to pass far less tax free and have fewer methods to minimize the tax bite. See Estate Tax Could Come Back With Sharp Bite (Apr. 18, 2010).

Maria Baler writes in the Dedham Transcript about how to plan for your kids, offering tips including appointing someone to make decisions for your children in your absence, naming a personal guardian and a property guardian, and having young adults fill out advance directives for health care. See 5 Facts You Should Know About Planning to Protect Your Kids (Apr. 16, 2010).

Friday, April 16, 2010

Press Coverage of Estate Planning this Week (Apr. 16, 2010)

Amy Feldman of Bloomberg BusinessWeek discusses the interplay of reduced federal estate taxes but increased capital gains taxes because of the loss of step-up in basis for decedent’s assets in 2010. Allocating the available step-up in basis among assets can be particularly tricky for executors, who may be favoring some beneficiaries over others, whether they intend to or not. See Mind the Estate Tax Gap (Apr. 15, 2010).

Friday, March 19, 2010

Press Coverage of Estate Planning this Week (Mar. 19, 2010)

Paul Sullivan of the New York Times writes about incorporating strategies to deal with state estate taxes into your estate plan. Two issues to watch for are the use of formula clauses and qualified terminal interest property (QTIP) trusts. Some states allow a separate QTIP election from that made on a federal return, other states do not. See No Federal Estate Tax, But What About Your State? (Mar. 11, 2010).

Donald J. Korn of Investor’s Business Daily discusses the importance of a financial power of attorney as part of your estate plan, and provides some advice on who to pick as your agent, who to give the document to, and how to improve the odds that your financial institution will accept yours. See Don’t Let Power of Attorney Fool You (Mar. 12, 2010).

Ian Mount of the New York Times provides advice on how to prepare a family business for the next generation, including identifying successors, grooming the new leaders, retaining key employees and minimizing tax liabilities, among others. See How to Prepare Your Business for Succession (Mar. 17, 2010).

Friday, February 26, 2010

Press Coverage of Estate Planning this Week (Feb. 26, 2010)

Mark S. Eghrari, Esq., writes in Forbes that you shouldn’t expect your estate plan will get a free pass because of the lapse of the federal estate tax in 2010. He suggests presuming there will be an estate tax in existence at your death, and recommends credit shelter trusts, irrevocable gift trusts, and family limited partnerships, among other estate planning vehicles. See Planning For the Estate Tax’s Return (Feb. 23, 2010).

E. Lawrence Brock, Esq., writes in ChinoHills.com (Chino, Calif.) about common estate planning mistakes, including not having an estate plan, selecting the wrong trustee, failing to plan correctly for large IRAs, and not talking to your family about your plan. See The 10 Most Common Estate Planning Mistakes (Feb. 22, 2010).

Friday, February 19, 2010

Press Coverage of Estate Planning this Week (Feb. 19, 2010)

Laura Saunders of the Wall Street Journal writes about why the lack of a federal estate tax could raise taxes for some moderately wealthy people but significantly reduce taxes for the very rich. See Why No Estate Tax Could Be a Killer (Feb. 13, 2010).

Deborah L. Jacobs of the New York Times offers some strategies for beneficiaries to consider in 2010, during this time of estate tax uncertainty, including holding off on selling appreciated assets and managing assets in separate accounts to allow disclaiming of assets if that makes tax sense. See Estate Tax’s Unclear Fate Challenges Heirs (Feb. 18, 2010).

Conrad DeAenlle of the New York Times discusses some the intricacies of the interplay between estate taxes and capital gains taxes in 2010, and some advice on actions to take this year, including giving gifts and ensuring your estate plan is up to date. See That Fog Still Hasn’t Lifted From the Estate Tax (Feb. 14, 2010).

David John Marotta writes in the DailyProgress.com (Charlottesville, Va.) about discussing your parents’ finances and estate planning to head off arguments with your siblings, and recounts how his parents put everything in writing. See Your Parents’ Estate Plan Part 1: Why You Need to Know (Feb. 15, 2010).

Deborah L. Jacobs of the New York Times discusses estate planning disclaimers, and how they might be particularly useful in 2010. She adds, on the other hand, that disclaimers are not always used by spouses and others, so planning with disclaimers can entail some risks. See Saying ‘No Thanks’ to a Bequest (Feb. 18, 2010).

Friday, February 12, 2010

Press Coverage of Estate Planning this Week (Feb. 12, 2010)

Shelly Banjo and Arden Dale of the Wall Street Journal discuss the dilemma of whether to re-do an estate plan when the future of federal estate taxes is so uncertain. Most attorneys agree that you should have an estate plan review to understand what the current law is and how it impacts your existing plan. See Making A Plan Amid Estate-Tax Limbo (Feb. 9, 2010).

Christopher Yugo writes in the Northwest Indiana Times about the different ways a successor trustee can take over trustee duties, and what paperwork banks and other institutions may want to see to accept the new trustee’s instructions. See Assuming Your Position As Trustee (Feb. 12, 2010).

Arden Dale of the Wall Street Journal covers what some states are doing to ensure that estate plans of people dying in 2010 are not upended by the federal government’s lack of an estate tax in 2010. Because no federal estate tax exists so far in 2010, some plans will yield results that the decedents did not anticipate. See States Pulled Into Estate Tax Vacuum (Feb. 11, 2010).

Friday, January 29, 2010

Press Coverage of Estate Planning this Week (Jan. 29, 2010)

Liza Horvath of The Herald of Monterey County discusses including incentives in trusts to encourage good behavior, such as a bonus upon the attainment of a college degree or gainful employment. Disincentives can also be used, for example prohibiting distributions if a beneficiary exhibits self-destructive behavior such as gambling, substance abuse or criminal activity. See Using Trusts as Incentives for Success (Jan. 25, 2010).

Tom Stemmy writes in The Capital (Annapolis, Md.) about filing gift tax returns even if no gift tax is due. He includes some examples of where things can go wrong, and tips on making gifts within the IRS guidelines. See Gift Transfers – Is Reporting to the IRS Really Necessary? (Jan. 24, 2010).

Eileen Ambrose of the Baltimore Sun recounts how the federal estate tax lapse occurred, and some of the problems it may cause for existing estate plans. See Look Out for Confusion Over End of Estate Tax (Jan. 26, 2010).

Friday, January 15, 2010

Press Coverage of Estate Planning this Week (Jan. 15, 2010)

Paul Sullivan of the New York Times discusses some of the complexities of not having an estate tax in 2010, including the modified carryover basis rules that are applicable in lieu of the estate tax. See A Bizarre Year for the Estate Tax Will Require Extra Planning (Jan. 9, 2010).

Kathleen Pender of the San Francisco Chronicle writes that many people who die in 2010, when there is no estate tax, may be worse off than had they died in 2009, because the modified carryover basis rules will impact many middle class families that would not have been affected under the 2009 estate tax. See Death of Estate Tax Leaves Some Heirs Worse Off (Jan. 10, 2010).

Ashlea Eberling of Forbes writes about steps you can take to ensure your pets are cared for if you should die. Advice ranges from basic instructions on the pet’s care for the new pet owner, to including your pet in your estate plan. See Caring For Fido After You’re Gone (Jan. 13, 2010).

Friday, January 08, 2010

Press Coverage of Estate Planning this Week (Jan. 8, 2010)

Deborah L. Jacobs of Moneywatch.com provides an overview of what’s happening to the estate tax on the federal level, steps to take now in case Congress doesn’t re-institute the federal estate tax this year, and some general financial moves to consider sooner rather than later. See Estate Tax: What You Need to Know for 2010 (Jan. 5, 2010).

Martin Vaughan of the Wall Street Journal points out some hidden dangers in existing estate plans due to the one year lapse of the federal estate tax, particularly for surviving spouses of people who die in 2010. The problem centers on formula clauses predicated on the existence of the federal estate tax. Such clauses could go awry when no tax exists. See Repeal of Estate Tax Creates Planning Dilemmas (Dec. 31, 2009).

Laura Saunders of the Wall Street Journal discusses how end-of-life decisions are being impacted by the lapse of the estate tax in 2010. At the end of 2009, some patients were trying to hold on until 2010 to avoid the estate tax. At the end of 2010, some patients may seek to pull the plug earlier than they otherwise would. See Rich Cling to Life to Beat Tax Man (Dec. 30, 2009).

Friday, December 18, 2009

Press Coverage of Estate Planning This Week (December 18, 2009)

Ashlea Eberling of Forbes writes about the implications of Congress not acting on estate tax laws before the end of this year. In 2010, federal estate taxes disappear, but that could lead to many problems for existing estate plans, and institution of new cost basis rules for inherited assets, which are certain to affect more people than currently impacted by the estate tax. See Congress Throws Estate Plans Into Disarray (Dec. 17, 2009).

In a second story by Forbes’ Ashlea Eberling, she notes that during the uncertainty regarding estate taxes, it may be tempting to put off action until next year, or even 2011, to let the dust settle. That would be risky, she says, because many aspects of estate planning have little to do with the federal estate tax. She lists several actions to take now, regardless of what Congress does. See Eight Steps to Protect Your Family (Dec. 14, 2009).

Friday, October 23, 2009

Press Coverage of Estate Planning This Week (October 23, 2009)

Laura Saunders of the Wall Street Journal points out that if the estate tax disappears in 2010, as is scheduled to happen under current law, far more people will be caught up in new rules affecting the step up in cost basis that inherited assets receive. Under current rules, beneficiaries typically receive a stepped-up cost basis equal to an asset’s value on the decedent’s date of death. If the estate tax disappears, those rules change and assets retain their original cost basis, which could make for an administrative nightmare, as well as higher capital gains taxes for far more people than are currently impacted by federal estate taxes. See Will the Estate Tax Disappear? (Oct. 22, 2009).

Julia Versau of the Northwest Indiana Times states that even in bad economic times, estate planning is important to protect assets, make sure they go to the right people, at the right time, and at the minimum trouble and expense. See Even in Bad Times, Lawyers Say Estate Planning is a Good Thing (Oct. 21, 2009).

Tuesday, September 29, 2009

Estate Planning Tip of the Week

What is a Credit Shelter Trust?

A credit shelter trust, also known as a bypass trust, is designed to shelter up to one full federal estate tax exemption amount.  All citizens are allowed an exemption from federal estate taxes, which represents the amount that can pass tax free to beneficiaries.  In 2009, the federal exemption amount allows up to $3.5 million in assets to pass to beneficiaries before federal estate taxes kick in.  However, too often people lose their exemption because they do not plan ahead.

For instance, suppose you and your spouse are together worth $4 million, which includes real estate, financial accounts, life insurance proceeds, recent inheritance from parents and various other assets.  If you and your spouse each have a simple will that passes the assets of the first to die to the survivor, the survivor could end up with a $4 million estate, but only one exemption.  If the exemption amount hasn’t changed at the time when the survivor dies, the estate may have a federal estate tax liability on the amount over $3.5 million.

One of the principal aims of trusts is to ensure that the first decedent’s exemption is not lost.  By creating a trust to preserve the first decedent’s exemption, money can later be placed in the decedent’s credit shelter trust such that it is not later included in the surviving spouses taxable federal estate.  For example, with the couple owning $4 million, half of that might be placed in the decedent’s credit shelter trust, and the surviving spouse’s trust would own the other half.  When the second spouse died, their taxable federal estate would amount to only $2 million, and thus even if the estate had grown in the intervening years, it would be unlikely to exceed the exemption amount of $3.5 million.

In 2011, under current law the federal exemption amount is scheduled to drop to $1 million per person, which makes planning ahead to avoid unnecessary federal estate taxes even more important.

Friday, August 14, 2009

Press Coverage of Estate Planning This Week (August 14, 2009)

Martin Vaughan of the Wall Street Journal reports that the U.S. House of Representatives will likely propose a temporary one-year extension of the current federal estate tax to carry through 2010 and prevent repeal of the estate tax next year.  This extension would be in lieu of a more long-term adjustment of the estate tax, which is scheduled to expire in 2010 but return in 2011 at a level that would impact far more taxpayers.  See Bid to Block Estate-Tax Repeal (Aug. 13, 2009).

Susan B. Garland of Kiplinger's Retirement Report points out that even if the federal estate tax threshold remains $3.5 million per person, state estate tax levels often differ.  Many states, including Vermont, have an estate tax threshold below the federal level, which can create unexpected estate tax liabilities and may require updating your estate plan.  See Protect Heirs From State Estate Taxes (Aug. 6, 2009).

Amy Feldman of BusinessWeek notes that new Roth IRA conversion rules taking effect in 2010 create opportunities for certain conventional IRA owners.  One big incentive is using a conversion for money to be left to children or grandchildren, because taxes paid now to complete the conversion are no longer part of your taxable estate, and the inheritors will never owe income tax on the distributions later.  See Is a Roth IRA Right for You? (Aug. 13, 2009).

Tuesday, August 11, 2009

Estate Planning Tip of the Week

    Did the federal estate tax and Vermont estate tax levels change in 2009?

    Yes. The federal estate tax exemption rose from $2 million in 2008 to $3.5 million in 2009. The exemption is the amount an individual can pass to their heirs without having to pay an estate tax. The top federal tax rate on taxable estates remained steady at 45 percent.

    In Vermont, the legislature passed a bill in June that reduced the Vermont estate tax exemption from matching the federal level (currently $3.5 million), to a $2 million level, which equals the state's pre-existing level in 2008. Thus, for decedents dying in 2009, a Vermont estate tax could be due even though a federal estate tax is not, if the decedent died with an estate valued between $2 million and $3.5 million. 

    For more information on federal and Vermont estate taxes, see 2009's Increased Estate Tax Exclusion Could Cause Problems, and Re-emergence of the Vermont Estate Tax on the Articles Page.

Friday, July 17, 2009

Press Coverage of Estate Planning This Week (July 17, 2009)

William Edy, Esq. writes in the News-Press.com that unfunded trusts achieve very little.  To work properly, assets such as financial accounts and real estate must be titled in the name of the trust, otherwise estate taxes can increase and the assets often must move through probate before being placed in the trust.  See Creating a Trust Meaningless Unless It Holds Assets (July 12, 2009).

Kate Ashford of Good Housekeeping reviews steps to take as your parents become less independent, including ensuring they have planned ahead for legal and financial issues and where to find help for issues that commonly arise.  See How to Help Your Aging Parents Without Going Broke (July 16, 2009).

Eileen Aj Connelly of the Associated Press provides an overview of the federal estate tax, including determining what assets are in one's estate, whether small business owners are more at risk of paying an estate tax, and whether it's possible to reduce the size of one's estate.  See Estate Tax Can Hit Ordinary People (July 16, 2009).

Monday, June 08, 2009

Re-Emergence of the Vermont Estate Tax

Different exclusion levels for federal and state estate taxes may catch many families by surprise, and after it's too late. Learn how to avoid a tax trap by ensuring your revocable living trust has the flexibility to address Vermont's new estate tax level in Re-Emergence of the Vermont Estate Tax on the Articles page.

Friday, May 22, 2009

Press Coverage of Estate Planning This Week (May 22, 2009)

Carolyn Bigda of Money Magazine points out that the depressed economy and recent federal estate tax changes may have made your current estate plan obsolete.  She lists five important questions to ask when determining if your estate plan needs updating.  See Rethinking Your Estate Plan (May 18, 2009).

Matthew M. Wallace, Esq. writes in the Times Herald (Port Huron, Mich.) about factors to consider and questions to ask a prospective attorney if you are seeking estate planning advice.  One nugget: "Planning an estate is the equivalent of legal heart surgery. You don't go to a family doctor for heart surgery, why would you go to a general practitioner for estate planning services?"  See Planning Matters: Picking Estate Attorney Complex (May 17, 2009).

Deborah Jacobs of the New York Times includes three stories in a recent section highlighting estate planning.  First, the benefits and pitfalls of powers of attorney for finances. See Putting Your Faith in a Power of Attorney (May 21, 2009).  Second, the importance of creating a record of accounts and passwords for online financial accounts and authorizing a trusted child or friend to manage the accounts if you become incapacitated.  See When Others Need the Keys to Your Online Kingdom (May 21, 2009).  Third, the practice of adult adoption, why it's done, and what can go wrong.  See Adult Adoption a High-Stakes Means to an Inheritance (May 21, 2009).

Arden Dale of Dow Jones Newswires writes about giving away stocks as gifts.  Several factors should be considered when choosing which stocks to give, and you will need to analyze the interplay between gift taxes, estate taxes and income taxes.  See Thinking About Taxes When Giving Stock (May 18, 2009)

Friday, May 15, 2009

Press Coverage of Estate Planning This Week (May 15, 2009)

The North Bay Business Journal (San Francisco, Calif.) included two articles focused on the status of the federal estate tax and treading carefully into new planning strategies.  Teresa Norton and Kristen Ingersoll of Beyers Costin provide an introductory article on the federal estate tax, and proposed legislation to update it.  See The State of the Estate Tax (May 11, 2009).  Jay Silverstein of Moss Adams LLP writes that the current economy makes this a great time to transfer wealth to future generations, but any new strategy must mesh well with your existing personal and business planning.   See Unique Estate Planning Opportunities: Proceed with Caution (May 11, 2009).

Mike Spector and Shelly Banjo of the Wall Street Journal caution that gift annuities can turn into empty promises if the charity seeks bankruptcy protection.  Determining the financial health of a charity can be difficult because they are not rated in the same way that large insurance companies are.  See Donors Find Gift Annuities Can Stop Giving (May 12, 2009).

Paula Span of the New York Times writes about whether philanthropist Brooke Astor was sufficiently competent when she made significant changes to her estate plan at age 101.  What constitutes testamentary competency, the evidence used to demonstrate competency, and why assessing competency can be difficult are issues in a New York court case where Astor's son and his attorney are accused of swindling Astor out of tens of millions of dollars.  See The Tricky Question of Competence (May 11, 2009).

Friday, April 24, 2009

Press Coverage of Estate Planning This Week (April 24, 2009)

Jeff McKenna, Esq., writes in TheSpectrum.com about the basics of probate: why probate exists, what it accomplishes, and why having a will does not avoid probate. See Probate -- What is It? (Apr. 2, 2009)

Phyllis Furman of the New York Daily News discusses estate planning for blended families, with some tips on what to do before meeting an estate planning attorney. See Remarried and Have Kids?  You Need a Detailed Plan for After You're Gone (Apr. 20, 2009).

Jane M. Kim of the Wall Street Journal discusses how Barack and Michelle Obama have used an often overlooked feature of a college savings plan to front load five years worth of annual exclusions into a fund to pay for college.  Aside from funding the savings plan, the technique  is an excellent way to get assets, and their future appreciation, out of your taxable estate.  See Obamas Pump Up College Savings (Apr. 18, 2009).

Friday, April 17, 2009

Press Coverage of Estate Planning This Week (April 17, 2009)

The Wall Street Journal's most recent Wealth Manager Report (Apr. 13, 2009) includes five stories focused on estate planning.  All are worth reading.  In The Mess They Left, Suzanne Barlyn gives advice on how to find a decedent's key documents, including the will or trust, financial statements, personal property memorandums and others.  In The Right Steps, Michaela Cavallaro discusses the unique problems that face blended families, where one or both spouses has children from a prior marriage. In Financial Prescription, Shelly Banjo and Kristen McNamara address estate planning in the context of a chronic illness and incapacity.  In A Time for Giving, Nate Hardcastle reviews why a low interest rate environment is an ideal time to give assets to children.  Finally, in Covering Your Assets, Mark Klimek provides a status report on Family Limited Partnerships with advice on common pitfalls to avoid.

Friday, April 03, 2009

Press Coverage of Estate Planning This Week (April 3, 2009)

Arden Dale of Dow Jones Newswires writes about investing trust assets from the institutional trustee's perspective.  How flexible a trustee will be often depends on the number of beneficiaries, and whether future conflicts among them are likely.  See Changing Investments in a Trust (Apr. 2, 2009).

Deborah L. Jabobs of the New York Times discusses how moving to another state could impact your estate plan.  If you move, but fail to sever ties with the former state, both states may make estate tax claims against your estate.  See Wherever You Go, the Taxman Goes (Apr. 2, 2009).

Charles V. Bagli of the New York Times recounts a 25-year fight over a New York real estate developer's estate.  Two daughters thought their father died broke and without a will in 1956, but learned otherwise in 1983.  It turns out the brother had for many years been managing muliple properties passed down from his father.  See Family Fued Over Estate Nears an End After 25 Years (Mar. 30, 2009).

Friday, February 27, 2009

Press Coverage of Estate Planning (Feb. 27, 2009)

New York Times writer Deborah L. Jacobs writes on issues to consider in finding and working with an estate planning lawyer, including whether a lawyer is necessary, how to locate an attorney, pricing and dual representation issues. Good Advice Makes All the Difference in Estate Planning (Feb. 26, 2009).

In a separate story, Jacobs advises reviewing estate plans to look for formula clauses that might put too much money in a credit shelter trust because of the higher federal estate tax exemption amount (see related NEET article Here). She also addresses Grantor Retained Annuity Trusts, Family Limited Partnerships and the importance of completing beneficiary designation forms. Study Estate Plans Before Laws Shift (Feb. 26, 2009).

Dow Jones Newswires writer Arden Dale also addresses the higher federal estate tax exemption amount, particularly as it affects estates during the economic slump. Dale cautions to keep estate plans flexible. Getting Personal: Wills Affected By New Tax Laws, Market Decline (Feb. 26, 2009).

Thursday, February 05, 2009

Depressed Financial Markets Make This a Good Time to Make Gifts

A broad downturn in asset values means that you can give away assets at firesale prices and remain within the annual gift tax exclusion amount, which rose to $13,000 in 2009. For instance, if you have stock that has fallen but expect that it will eventually bounce back, now may be a good time to get the asset out of your taxable estate. See the article, "Annual Gift Exclusion Amplified by Depressed Financial Markets" on the Articles Page for more information.