Documentation filed earlier this week in Oakland County probate court in Michigan by Aretha Franklin’s children indicates that she died without a will or a trust. On the forms, a box was checked signaling that “the decedent died intestate”. What does this all mean?
Dying without a Last Will and Testament or a revocable living trust means that a person is intestate and the laws of the state in which they resided at death will spell out who is to receive the assets of the estate. Under Michigan law, Ms. Franklin’s estate will pass equally to her children as she was unmarried at the time of her death. Ms. Franklin’s niece has also requested that she be appointed as the personal representative or executor of the estate. Thus, it appears that the law of unintended consequences may now apply as Ms. Franklin may not have wanted her children to become the beneficiaries. She may have wanted to include charity or friends perhaps even other relatives in her estate plan. She may not have wanted to have her niece serve as the personal representative, a role that presumably will be compensated. But, without a Last Will and Testament or revocable living trust, we will never know what her true wishes were.
It will also be interesting to see how the administration of Ms. Franklin’s estate unfolds now that the process will be a public one. A number of questions will have to be asked and answered, including, but not limited to: What debts does the singer have? Michigan may not have a state level estate tax or inheritance tax, but how will the Federal estate tax be paid? Exemptions from Federal estate tax are high ($11.18 million per person in 2018), and valuations of Ms. Franklin’s will have to be done to determine the total value of her estate. What assets will each beneficiary ultimately receive? Presumably some of the assets are not standard such as royalties from Ms. Franklin’s records. Will an agreement be reached amongst the beneficiaries regarding the management and distribution of the assets? Unfortunately, the process that has begun will be lengthy, likely expensive and could result in the dismantling of a legacy if the process devolves into an ugly court battle similar to what has happened with Prince’s estate when he died without a will. And in the end, all of this uncertainty could have been avoided or at least minimized had Ms. Franklin simply planned, which means “you better think” before you decide you do not need a plan. #QueenofSoulDiesWithoutWill #QueenofSoul #estateplanning #intestacy
The IRS recently announced the estate and gift exemption levels for 2018 and they continue to increase as per legislation passed in January 2013. The applicable exclusion amount from Federal estate tax will increase to $5.6 million per person allowing a married couple to shelter $11.2 million from Federal estate tax, the rate for which is currently set at 40%. The lifetime exemption from gift tax remains coupled with the exemption from Federal estate tax, and therefore, this exemption will also increase to $5.6 million per person. The annual gift exclusion amount will also increase for the first time since 2013 and will be $15,000 per person. Virginia continues to not impose a state level estate tax. Maryland’s exemption from estate tax will increase to $4 million while the District of Columbia’s now $2 million exemption will rise to meet the Federal exemption beginning in 2018 so long as there is a revenue surplus.
Additionally, in the last article, the fate of the proposed valuation discounting regulations was still up in the air. However, Treasury issued a second report to the President in which those regulations were withdrawn. Therefore, the availability of valuation discounting on certain transfers of interests held in closely held or family owned businesses remains available and is currently no longer under threat.
For seniors and those with disabilities, a cost-of-living adjustment (COLA) for Social Security and Social Security Income (“SSI”) will increase monthly benefits by 2.0%. In addition, the cap on the amount of earnings subject to payroll tax will increase to $128,700. Finally, the tax brackets, standard deductions, Pease and PEP limitations, kiddie tax and other credit and deduction levels for 2018 were announced. Many are watching the tax reform debate to see if any of these numbers will change, so stay tuned… #taxreform #estateplanning #estatetax #taxplanning #taxtime #COLA2018 @bgnthebgn
Welcome to the New Year! As with any new year, there are usually changes to a variety of important numbers for estate planning and elder law purposes. This year the applicable exclusion amount from Federal estate tax is set at $5.49 million per person. The lifetime exclusion from gift tax is also $5.49 million per person and the exemption from generation skipping transfer tax is $5.49 million. The annual exclusion from gift tax remains at $14,000. The annual exclusion for gifts to non-U.S. citizen spouses increased to $149,000.
For local jurisdictions that have estate tax, the District of Columbia increased its estate tax exemption from $1,000,000 to $2,000,000. Maryland’s exemption from estate tax has increased to $3,000,000. Virginia continues to have no state level estate or inheritance tax.
In the elder law field, the Medicaid spousal impoverishment numbers were released increasing the minimum community spouse resource allowance (CSRA) to $24,180 and the maximum CSRA to $120,900. The maximum monthly maintenance needs allowance is now $3,022.50 while the minimum remains at $2,002.50. The minimum home equity limit is now $560,000 and the maximum is $840,000, but be aware that local jurisdictions may apply these limits differently.
If you have questions regarding the new limits and how they may impact your estate planning, your should consult your professional advisor. #estateplanning #taxplanning #elderlaw @bgnthebgn
In an earlier post I described the new rules for basis consistency about which executors and their advisors must be aware. In an update to that earlier post, I highlighted the regulations that had been issued. The deadline for complying with the new rules was March 31, 2016. On March 23, 2016, the IRS issued another notice further extending the deadline to comply with the new rules until June 30, 2016. This extension gives executors and their advisors more time to digest the new rules and regulations, and hopefully, more accurately complete Form 8971 and Schedule A. #estateadministration #taxplanning #basisconsistency #form8971 #IRSregulations #taxplanning #estatetax
I previously posted about the new rules for basis consistency about which executors and their advisors must be aware. I noted that the IRS had indicated that regulations would be forthcoming. Late last week the proposed regulations were released relating to both Section 1014(f) and Section 6035 and I have highlighted a few points below.
One of the biggest issues about which clarity was being sought was whether an executor of an estate in which an estate tax return is being filed to take advantage of portability needs to complete and file Form 8971. The proposed regulations exclude such returns from the requirement; that is, if an executor is simply filing for portability, then Form 8971 is not required.
For those who are required to file an estate tax return, the regulations provide some additional guidance as to how an executor is to go about satisfying this new requirement. For example, if at the time the Form is due, the executor does not yet know what assets a beneficiary will receive, then the executor must report all assets the beneficiary may receive. This ultimately means that the same assets may be reported to several different beneficiaries. This also means that an executor will be required to supplement the initial filing of Form 8971 and make it clear to the beneficiaries which filings are the final ones.
Moreover, it now appears that when a beneficiary who originally received an asset from an estate subsequently transfers that asset to another family member or entity, the transferring beneficiary will also be required to file Form 8971 with the IRS and report the basis to the family member or entity. This requirement impacts many individuals who otherwise had no reporting requirement to the IRS and may not be paying attention to the fact they now have these requirements.
Lastly, the new rules, as clarified by the regulations, do not allow for a step-up in basis (a discussion from an earlier post) in certain circumstances. After discovered assets that should have been disclosed on the estate tax return and were initially not, will have a zero basis, and therefore, be subject to greater income taxes consequences when sold unless certain corrective measures are taken.
What these new rules and proposed regulations tell us is that if you are dealing with a taxable estate, then you should consult with your professional advisor about various filing requirements to avoid missing a filing and incurring the resulting penalties. #estateadministration #basisconsistency #form8971 #IRSregulations #taxplanning #estatetax
Exemptions from estate tax continue to increase as per the legislation passed in January 2013. Here is an article that gives a brief summary of the key numbers for 2016. Be sure to also check out various changes to state level estate and inheritance taxes that came into effect in 2016. #estatetax #estateplanning #taxplanning