Budget Proposals from Obama Administration-A BIG Step Backward

The probability of these provisions becoming the law of the land is uncertain, at this point, and perhaps unlikely.  “Permanent” in estate tax  lingo is, apparently, a transitory term.  Since the new law does not have a built in expiration, we have called it permanent, and the structure of the transfer tax regime appears settled-but see below! These provisions are significant: A return to the estate tax exemptions of 2009 ($3.5 million at death, with a limit of $1 million during life) Exemptions would NOT be indexed for inflation Estate and Gift Tax rates going from 40% to 45% Limit on the GST Exemption to 90 years Limit on GRAT terms to no less than ten years Limits on retirement plans to $3 million Mandated […]

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Estate Tax Filers: An Exclusive Club

The Congressional Research Service has issued a report concluding that the new estate tax regime is permanent.  They noted that: The estate tax will affect less than 0.2% of decedents over the next decade The estate tax is concentrated among high income taxpayers: 96% is paid by the top quintile, 93% by the top 5%, 72% by the top 1%, and 42% by the top 0.1% About 0.2% of estates with half or more of their assets in businesses will be subject to the estate tax About 65 farm estates (or approximately one per state) are projected to be subject to the estate tax About 94 estates (about two per state) with half their assets in small business with owners who expect their heirs to […]

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The Will Doctor® Notes the Emerging Discipline of Thanatology: the study of Death

As the baby boomers start thinking about old age, the study of death will grow.  Already a specialty with a course of study, there are a few organizations which you should be aware of: ADEC:  The Association for Death Education and Counseling® is an international, professional organization dedicated to promoting excellence and recognizing diversity in death education, care of the dying, grief counseling and research in thanatology.  Based on quality research, theory and practice, the association provides information, support and resources to its international, multicultural, multidisciplinary membership and to the public.   http://www.adec.org//AM/Template.cfm?Section=Home The Center for Thanatology: A publisher, but an interesting site (and museum) for the Will Doctor!  http://www.thanatology.org/home.html The process of dying is still little understood, but I learned a great deal from a […]

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Trending Recognition of our Digital Lives within the Estate Plan

The is a growing group of tools and resources on line (see prior post) to help people express their thoughts and feelings digitally for use at their passing.  Of course, serious problems can arise if the personal representatives of the deceased don’t have access to appropriate logins and passwords.  So, the law is slowly grappling with this:  Adding to the list of states that have passed laws pertaining to digital estates, the Virginia Legislature passed HB 1752 today affording parents of deceased minors access to their social media accounts. The bill’s description reads: Powers of personal representatives; digital accounts. Provides that the personal representative of a deceased minor has the power to assume the deceased minor’s terms of service agreement with an Internet service provider, […]

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2012 Gift Tax Return Tsunami

We expect that 350 estate and gift tax examiners in the IRS will have a hard time reviewing the estimated 500,000 gift tax returns which will be filed for gifts last year.  The Will Doctor will accordingly try to file such returns for our clients on or before the filing date, without extensions.  The thinking is that we should get the three year statute of limitations running early so the IRS can focus on filers between April and October 15, 2013. Of course, the actual number of estate tax returns filed has dramatically decreased in recent years along with the size of the estate and gift tax exemptions.  Of the filed returns, there are a much smaller number of  taxable returns.  So we can expect that […]

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Estate and Gift Planning Safe from Fiscal Cliff II Revenue Raising?

Our relief after learning of the continuation of the existing tax regime on December 32nd (true, right?) is tempered by the recognition that $3.63 Trillion needs to be added to revenues in the coming decade to pay for the tax benefits we enjoy.  Obama’s estate and gift tax proposals in this area are still on the table, including: Elimination of the discounts on fractional gifts of business interests for “marketability”.  Marketability is the largest component by far in our discount planning, and this would be very painful.  Discounts for “lack of control”, also called the minority interest discount, would remain. Unification of the estate/gift and income tax regimes by terminating the use of Grantor Trusts-the foundation of many of our most treasured planning techniques; Limit […]

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Estate and Gift Taxes Under the Act

Forty Percent Estate, Gift, and GST Tax Rate The highest marginal FEDERAL estate and gift tax rate has increased from 35% to 40%-half way to the 45% originally promoted by the Obama Administration in its proposals over the last two years.  The 40 percent rate is the only change from 2012 federal transfer tax law. Note: Remember, for New Yorkers, the addition of NY Estate Taxes adds about 10% to the Federal rate, bringing aggregate estate taxes to a 50% level for taxable estates above the exemption amounts.  New York continues to have NO gift tax. The 40 percent Federal rate is reached at a taxable estate or cumulative gifts of $1 million. The 40 percent gift tax rate translates into a 28.57 percent tax-exclusive rate if […]

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The American Taxpayer Relief Act

In the early morning hours of Jan. 1, 2013, the Senate, by a vote of 89-8, passed H.R.8, the “American Taxpayer Relief Act” (the Act). Late on that same day—hours after the government had technically gone over the “fiscal cliff”—the House of Representatives, by a vote of 257 to 167, also passed the bill. The Act, which the President is expect to quickly sign into law, would prevent many of the tax hikes that were scheduled to go into effect this year and retain many favorable tax breaks that were scheduled to expire. However, it would also increase income taxes for some high-income individuals and slightly increase transfer tax rates. This article provides an overview of the Act’s key provisions. Highlights of the Act include […]

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Senate Ends Estate Tax Uncertainty; House Must Act to Finalize

We await details, but the last minute deal includes a provision to continue the $5.12 million estate tax exemption-and (subject to confirmation) the $5.12 million lifetime gift tax exemption as well! Whether such amounts remain indexed to inflation is not yet clear.  The status of the Generation Skipping Transfer Tax Exemption is not yet known.  Like other legislative changes before it, modifications of the new law, if passed, will be anticipated via technical corrections and IRS rulings. Based on a quick assessment of our clients who engaged in planning and gifting to beat the fiscal cliff, we believe that: 1) year end gifts remain valuable to remove future appreciation in the value of gifted property from the estate tax; 2) until other technical provisions of […]

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The Will Doctor’s Prescriptions

The Obama Victory increases the chances of success for his administration’s estate and gift tax proposals, highlighted in the last post.  This is a middle ground compromise between the horror of returning to 2001 Exemptions and Rates, and the generosity of the 2012 $5.12 million exemption and 35% rate. Huge uncertainty remains.  At this point, it appears that the administration is threatening to let the economy go over the fiscal cliff to force Republican cooperation, but neither camp will accept culpability.  The result is a potential stalemate until the spring, when the you know what hits the fan, and they take action (best bet is Obama’s proposal), and pass the law retroactively to December 31st.  Pure speculation, but something to chew on. Looking down the road […]

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