Archive for the 'Estate Administration' Category

Ohio’s Estate Tax Is No More!

Its official folks!  Just this afternoonGovernor Kasich signed the bill repealing the Ohio estate tax .

“By repealing this suffocating tax, Gov. Kasich and the Ohio legislature have made their state stronger – and made it a model for the remaining 21 other states who continue to impose state estate or inheritance taxes, including three of Ohio’s neighbors: Indiana, Kentucky, and Pennsylvania,” says Dick Patten, president of the American Family Business Institute, a no-death-tax lobbying group.

The repeal takes effect January 1, 2013.

For 2011, Ohio is still one of 22 states that along with the District of Columbia currently have estate and/or inheritance taxes. (Yes, that’s separate from the federal estate tax). Among estate tax states, Ohio currently has the lowest exemption amount per estate, just $338,333, but the lowest top rate at 7%. The more dollars in an estate, the more the rate matters as opposed to the exemption amount– that is the amount an individual can leave without paying tax.

Once the Ohio repeal becomes law, New Jersey will have the distinction of being the state with the lowest estate exemption at $675,000.

Click here for a map of where not to die.

My man Brad picked up on this earlier today.   The above quotes were lifted from this article at

Obama Signs 2010 Tax Relief Act – What Do Trust & Estate Bloggers Talk About Now?!

My man Greg posted a very complete summary here on his blog which I have generously re-posted below:


Two-year extension of all current tax rates through 2012

  • Rates remain 10, 25, 28, 33, and 35 percent
  • 2-year extension of reduced 0 or 15 percent rate for capital gains & dividends
  • 2-year continued repeal of Personal Exemption Phase-out (PEP) & itemized deduction limitation (Pease)

Temporary modification of Estate, Gift and Generation-Skipping Transfer Tax for 2010, 2011, 2012

  • Reunification of estate and gift taxes
  • 35% top rate and $5 million exemption for estate, gift and GST
  • Alternatively, taxpayer may choose modified carryover basis for 2010
  • Unused exemption may be transferred to spouse
  • Exemption amount indexed for inflation in 2012

AMT Patch for 2010 and 2011

  • Increases the exemption amounts for 2010 to $47,450 ($72,450 married filing jointly) and for 2011 to $48,450 ($74,450 married filing jointly).  It also allows the nonrefundable personal credits against the AMT.

Extension of “tax extenders” for 2010 and 2011, including:

  • Tax-free distributions of up to $100,000 from individual retirement plans for charitable purposes
  • Above-the-line deduction for qualified tuition and related expenses
  • Expanded Coverdell Accounts and definition of education expenses
  • American Opportunity Tax Credit for tuition expenses of up to $2,500
  • Deduction of state and local general sales taxes
  • 30-percent credit for energy-efficiency improvements to the home (IRC section 25C)
  • Exclusion of qualified small business capital gains (IRC§1202)

Temporary Employee Payroll Tax Cut

  • Provides a payroll tax holiday during 2011 of two percentage points. Employees will pay only 4.2 percent on wages and self-employed individuals will pay only 10.4 percent on self-employment income up to $106,800.

Source:  Financial Planning Association


Reductions in Individual Income Tax Rates through 2012

  • Income brackets remain 10, 25, 28, 33, and 35 percent
  • Capital gains and dividend rates remain at 0 or 15 percent
  • Repeal of the Personal Exemption Phase-out (PEP)
  • Repeal of the itemized deduction limitation (Pease limitation)
  • Marriage penalty relief
  • Expanded dependent care credit
  • Child Tax Credit
  • Earned income tax credit

Education Incentives Extended Through 2012

  • Expanded Coverdell accounts and definition of education expenses
  • Expanded exclusion for employer-provided educational assistance of up to $5,250
  • Expanded student loan interest deduction
  • Exclusion from income of amounts received under certain scholarship programs
  • American Opportunity Tax Credit of up to $2,500 for tuition expenses

Extension of Certain Expiring Provision for Individuals through 2011

  • Above-the-line deduction for qualified tuition and related expenses
  • Tax-free distributions of up to $100,000 from individual retirement plans for charitable purposes.  Donors may treat donations made in January 2001 as if made in 2010.
  • 30-percent credit for energy-efficiency improvements to the home (IRC section 25C)
  • Deduction of state and local general sales taxes
  • Parity for employer-provided mass transit benefits
  • Contributions of capital gain real property for conservation purposes
  • Deductibility of mortgage insurance premiums for qualified residence
  • Estate tax look-through of certain Regulated Investment Company (RIC) stock held by nonresidents for decedents dying before January 1, 2012
  • Above-the-line deduction for certain expenses of elementary and secondary school teachers

Alternative Minimum Tax (AMT) Relief

  • The legislation increases the exemption amounts for 2010 to $47,450 (individuals) and $72,450 (married filing jointly) and for 2011 to $48,450 (individuals) and $74,450 (married filing jointly).  It also allows the nonrefundable personal credits against the AMT.

Temporary Estate Tax Relief and Modification of Gift and Generation-skipping Transfer Taxes

  • Higher exemption, lower rate. The legislation sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes for two years, through 2012. The exemption amount is indexed beginning in 2012. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011. The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year.
  • Portability of unused exemption. Under current law, couples have to do complicated estate planning to claim their entire exemption.  The proposal allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without such planning. The proposal is effective for estates of decedents dying after December 31, 2010.
  • Reunification of estate and gift taxes. Prior to the 2001 tax cuts, the estate and gift taxes were unified, creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests. The proposal reunifies the estate and gift taxes. The proposal is effective for gifts made after December 31, 2010.
  • As noted above. the look-through of RIC stock held by non-resident decedents is extended through 2011

Temporary Extension of Investment Incentives

  • Extension of bonus depreciation for taxable years 2011 and 2012
  • Small Business Expensing: increase in the maximum amount and phase-out threshold under section 179. Sets the maximum amount and phase-out threshold for taxable years 2012 at $125,000 and $500,000 respectively, indexed for inflation.  (Previously-passed legislation raised the 2010 and 2011 max amount and phase-out at $500,000 and $2,000,000 respectively.)

Extension of Certain Expiring Provisions for Businesses through 2011

  • Enhanced charitable deduction for corporate contributions of computer equipment for educational purposes
  • Enhanced charitable deduction for contributions of food inventory
  • Enhanced charitable deduction for contributions of book inventories to public schools
  • Special rule for S corporations making charitable contributions of property
  • 15-year straight-line cost recovery for qualified leasehold improvements
  • Employer wage credit for activated military reservists
  • Tax benefits for certain real estate developments
  • Extension of expensing of environmental remediation costs
  • Treatment of interest-related dividends and short term capital gain dividends of Regulated Investment Companies (RICs)
  • Work opportunity tax credit (WOTC)
  • 100% Exclusion of qualified small business capital gains held for more than 5 years (IRC§1202)
  • Research credit
  • Qualified Zone Academy bonds

Extension of Unemployment Insurance

  • The unemployment insurance proposal provides a one-year reauthorization of federal UI benefits.

Temporary Employee Payroll Tax Cut

  • The legislation creates a payroll/self-employment tax holiday during 2011 of two percentage points. The employer’s share of the payroll tax remains unchanged.  This means employees will pay only 4.2 percent on wages and self-employed individuals will pay only 10.4 percent on self-employment income up to $106,800.  The social security trust fund is made whole by transfers from the general fund.
  • How all this madness affects you with some advice from the Zucker Law Firm:

    Income Taxes

    • All income tax rates will remain the same for the next two years as they have for the previous ten.  References to the extension of Bush tax cuts means that tax rates cut in 2001 will remain in effect at least through 2012.
    • Individuals earning more than $200,000 or couples earning more than $250,000 will not pay higher tax rates.
    • The social security tax rate (referred to as a “payroll tax holiday”) will drop from 6.2% to 4.2% in 2011.  However, the Making Work Pay Credit has expired.
      • According to the Tax Policy Center, over 99% of those earners in the lowest quintile (up to $17,873 per year) will end up with less take-home pay since the social security rate drop does not save taxpayers as much as the Credit did.
      • About half of the earners in the second quintile ($17,873 to $34,896 per year) will also have less take-home pay as well.
      • About 85% of those earning more than $34,896 will see increases in take-home pay in 2011.

    Unemployment Insurance

    • The law extends unemployment insurance benefits for 13 months.  2 million people will continue to receive their benefits.
    • COMMENT:  Obama essentially bargained for the payroll tax holiday and the extension of unemployment insurance to keep most people from having to pay more taxes during this recession.

    Alternative Minimum Tax (AMT)

    • A “patch” has been re-implemented so that about 21 million people, mostly in the middle class, will not be subject to the AMT for 2010 and 2011.
    • You will most likely have the same AMT responsibility as last year.

    Estate & Gift Taxes

    • Each person’s first $5 million will be exempt from estate taxes.  Gifts up to $5 million during one’s lifetime are also exempt from gift taxes.  Above that amount, rates will be subject to a maximum 35% rate.
    • Approximately 3,600 families will be hit with the estate tax in 2011 & 2012, down from an estimated 5,500 in 2010.  Inherited amounts now receive a full step-up in basis, and 2010’s limited carryover amounts expire.
    • The estate tax rate is retroactive to January 1, 2010.  Representatives of those dying in 2010 may select between the new estate tax rate and the law in place during most of 2010 (no estate tax with capital gain limitations).
    • Any unused exemption by one deceased spouse is portable to the second spouse’s estate.  The executor of the first spouse must actively elect this option on an estate tax return, even if there is no liability owed.
    • STRATEGIES (discuss with your estate planning attorney before implementing):
      • If you have over $5 million – while the same rates apply, gifting will still be cheaper than passing assets through the estate.  Example:  You want to give $6 million to your children.  If gifted before your death, you will owe an additional $350,000 in gift tax.  If you wait until after your death, the $6.35 million will instead result in $472,500 in estate taxes.  See this post for another example.
      • If you have between $1 million and $5 million – don’t avoid A-B trust planning despite the new higher exemption.  Remember that the new rates only apply for two years.  While it is unlikely that the 2012 Congress would allow the estate tax exemption to revert back to $1 million with a maximum 55% rate, they will certainly be looking for ways to increase revenues.  Avoiding planning could cause you a bigger hit than necessary.
      • If you have below $1 million – you probably do not need to worry too much about estate taxes at this time.  However, DO NOT ignore estate planning – topics such as insurance ownership, guardianships, digital assets, powers of attorney, etc. are still important and necessary for all adults.  If you do, we’ll have to start to put annoying ads all over billboards, radio, TV, our blogs, etc. :)

    Generation-Skipping Tax

    • Zero for the remainder of 2010.  Unified with estate and gift taxes in 2011 and 2012.  The first $5 million of gifts to grandchildren will be exempt from generation-skipping taxes, with a maximum 35% rate above that amount.
    • STRATEGIES:  A loophole exists here.  Through the end of 2010, amounts in a multigenerational generation-skipping trust can be transferred into a new trust for the benefit of the grandchildren only and will be subject to 2010’s 0% generation-skipping tax rates.  Check this post for further details.

    Happy planning!

    Debts Owed By A Decedent/Their Estate

    An interesting, and disappointing article this morning from the NYT, “You’re Dead? That Won’t Stop the Debt Collector.”  I’m not disappointed in the NYT, its a fine article I guess, rather, I’m disappointed by the number of people who are apparently willing to pay the debts of their deceased relative(s):

    The people on the other end of the line often have no legal obligation to assume the debt of a spouse, sibling or parent. But they take responsibility for it anyway.


    In Ohio, if an individual passed away owning a debt, that debt becomes a debt of their estate.  In order to collect that debt, the creditor has 6 months from the date of decedent’s death to make a claim against the estate or the claim is forever barred.  (See R.C. 2117.06) …  Forever!

    In order to make a claim, the creditor just has to send notice to the fiduciary (Executor or Administrator) of decedent’s estate, in a writing that hopefully gives the fiduciary enough information to make judgement as to the claim’s validity.  What does “writing” mean?  Case law in Ohio has left the definition pretty, broad…  It just has to be written down; some form, any form of writing will do…  I suppose it should legible, but that’s really it.  So long as that writing is received within 6 months from decedent’s death, you have made a valid claim.  (Whether the fiduciary accepts or rejects the claim is a whole separate matter.)

    Ok, well what happens if someone has passed away but their estate hasn’t been opened yet so there is no fiduciary appointed by the court to serve?  In that case, as a  creditor, you can open the estate yourself even if your only reason for doing so is to collect a debt.  I see it all the time.  Hell, I do it all the time.

    So, don’t just go paying a decedent’s debts…  Make the creditors work for it!  Or, if you’re a creditor, call a probate attorney who knows what they’re doing to make the claim on your behalf.  I wrote an article on this that was published a while ago, so I would qualify as one of those people to call, but please just call someone.  Money is tight right now so don’t go making deals to pay someone else’s debts if you don’t have to.

    Don’t even get me started on Franklin County Local Rules (e.g. 62.1, hint hint)…  Very few people understand that rule – why its there, why it says what it does, how to comply with it, etc…

    Equalizing Mom/Dad’s Estate Distributions When Assets Pass Via Joint Accounts

    I see this all the time:

    Mom/Dad passes away (no surviving spouse) and their will leaves everything to their children equally…  Except for that money which passed automatically outside of probate to the child that lived near Mom/Dad and was helping them with basics of their daily lives – paying bills, taxes, etc., because they were the joint-owner on the account in order to help mom/dad with those daily activities.

    What to do?

    Oftentimes its a pretty simple matter that involves the joint-title holder with mom/dad gifting an amount of money to each of the other kids necessary to offset the joint-owners extra benefit…  However, one needs to ask the question: Is this advisable from a tax perspective?  What is this annual exclusion thing I hear about?

    The Annual Exclusion:
    In 2009, one can give $13,000 to anyone without encountering any potential gift tax liability…  That’s $13,000 per person, not in the aggregate.  So, if this is enough to offset the extra amount received by the one child, then great, inquiry over, gift away!  If not though, if more needs to be given to the other siblings than the annual exclusion allows, then gifting is still possible but you may have some gift tax liability.  So lets talk about that, what is the gift tax and when does it matter?

    The Federal Gift Tax and The Federal Estate Tax Interplay:
    Its not what you think…  Usually, you think of payinga tax; actually writing a check to the government.  Not so with the gift tax (most of the time).  If you give more than the annual exclusion amount to anyone in a given year, then the amount given that exceeds the annual exclusion reduces, dollar-for-dollar, the individual exclusion for federal estate taxes – $3.5 million in 2009.  As an example:  Lets say you give someone $14,000 in 2009.  The annual exclusion has been exceeded by $1,000.  If the person who made the gift then dies in 2009, their individual exemption for the Federal Estate Tax is $3,499,000.  That $1,000 over the annual exclusion reduced their individual exemption for the Federal Estate Tax by $1,000.  Therefore, it only really matters if your estate is near the exemption amount – otherwise, I’d say go ahead and make the equalizing gift to your siblings.

    What if the sibling who was the joint-owner with mom/dad doesn’t want to equalize the amount received by the other siblings?  Well then tough, that sibling is a jackass, game over.  Absent some wrongdoing on that sibling’s part, calling them an ass at every successive family event is about all you can do.  Legally its their money.  There is no legal obligation to equalize the distributions coming from the estate.  Arguably there may be a moral obligation but you can’t usually sue on those.

    Of course, the better way to deal with this is to not have to deal with it at all…  Call an experienced estate planning attorney to help you or your parents.  And don’t be shy about this stuff.  If your parents (or someone else you love) is getting up there in age, tell them to call someone.  Its about planning for these little earthquakes before they happen.  You’ll pay a little bit now to get it done, but you’ll pay 3-times more (on average) after your loved-one has passed and you and the estate attorney are forced to fix things.

    Yves St Laurent Estate Sale

    A quickie this morning with the tale of what Professor Berry is calling perhaps the greatest estate sale of all time

    Yves St Laurent died on June 1, 2008.  Last week, Christie’s conducted a three-day sale of his estate in Paris which included paintings, art objects, and furniture.

    The sale brought in over $475 million which included $27.5 million for [a really ugly chair]. <– this is my commentary

    Thanks Professor…  Check out his post for a picture of one of the ugliest chairs I’ve ever seen.

    Order Issued On Helmsley Trust

    Its been a while since I posted anything on Leona Helmsley’s estate/trust troubles but this morning Professor Berry published this post about an order having issued by the court.

    The trustees had filed an action asking the court to determine the scope of their discretion to apply trust funds for charitable purposes. 

    The “mission statement” of the trust dated March 1, 2004 provides that the trustees may make grants for “(1) purposes related to the provision of care for dogs; and (2) such other charitable activities as the Trustees shall determine.”

    The trustees asserted that this mission statement was revoked by later documents. 

    The Attorney General of the State of New York, representing potential charitable beneficiaries, successfully claimed that this issue is irrelevant because the trust expressly states that the trustee’s discretion is not limited by mission statements. 

    Accordingly, the court held that “the trustees may apply trust funds for such charitable purposes and in such amounts as they may, in their sole discretion, determine.”

    Thanks Professor…  I had been wondering where this case went.

    Another Heath Ledger Post – Life Insurance Dispute Settled

    In September of 2008 TMZ broke the story about Heath Ledger’s life insurance company draggin their feet on paying out his $10,000,000 policy to his daughter Matilda.  The reasons given were:

    1. Allegations that his death was a suicide rather than accidental
    2. He may have lied on the form where he stated he had never taken any illegal drugs.

    Matilda’s attorneys filed suit alleging the insurance company (ReliaStar Life) was acting in bad faith.  According to TMZ this morning, that case has now been settled for an unknown amount.

    What Happens to Heath Ledger’s Oscar?

    A good summary of the facts to date from Professor Berry:

    • Australian actor Heath Ledger died on January 22, 2008 in New York City from an accidental drug overdose. 
    • Heath was well-known for starring in the movie Brokeback Mountain and for the role of “The Joker” in the Batman movie, The Dark Knight.
    • According to Jose Martinez, Heath Ledger assets go to parents, siblings, [New York] Daily News, March 8, 2008, Heath prepared a three page will in Australia in 2003 before becoming successful.  This will leaves his entire estate to his parents and siblings.
    • After executing this will, however, Heath’s former partner gave birth to a child, Matilda Rose Ledger.
    • According to Wendy Caccetta, Heath Ledger’s Matilda to get the lot, Perth Now, Sept. 27, 2008, Heath’s family has decided to allow the entire estate estimated at $20 million to pass to Matilda despite the provisions of Heath’s will.

    Professor Berry addressed the following in this post on Feburary 19:  “An interesting issue has now been raised — what would happen if Heath won the Oscar for Best Supporting Actor for his Joker performance?”  The goof professoir cites to an article by Steve Pond, And the Oscar goes to Matilda if Ledger wins, Yahoo! News, Feb. 18, 2009, which explains that Matilda would become the owner of the Oscar statuette.

    It gets interesting when Professor Berry explains that:

    because she is only 3, Matilda is legally unable to sign the winner’s agreement — a contract required of all nominees that says the recipient will not resell his or her Oscar without first offering it back to the academy for $1. The agreement is the academy’s way of limiting what might otherwise be a lively secondary market in Oscars.

    It is true a guardian could sign such an agreement and it would be binding until Matilda reaches 18 but after that, the agreement would not be binding on her.  To solve this problem, the Academy and Ledger’s family have agreed to this solution — Matilda’s mother will hold the statuette in trust until Matilda reaches 18 at which point she must either sign the agreement or return the statuette to the Academy.

    Very interesting stuff.  Thank you Professor!

    Real Estate Title Insurance Review: Living Trusts, Probate Estates

    Another one from Greg that got me thinking about what we do here in our office with regards to title insurance on real property in differnece circumstances…

    Greg’s post is a good one in that it gets one thinking about what one should think about/do when choosing to fund their living trust with real property, namely, does the homeowners’ policy allow a trust to be the owner, should it be added as an ‘additional insured’, should you call the insurance company? etc…

    It also got me thinking about a number of estates that I’m administering right now that have real property that has to be probated…  First thing to do is add the estate as an additional insured – a no-brainer there – but an even bigger concern arises if the home will be left vacant as a result of the decedent’s passing.  Most homeowners’ insurance policies require the home to be occupied and if the home is left unoccupied (usually for 90 consecutive days) then the coverage can automatically lapse.  A call into the insurance company to let them know is usually a good idea and, given the state of the market and how long a home is likely to sit there before a sale, the company will have to find out eventually…  And 90 days comes pretty quick.

    An experienced probate attorney is your safest bet…  I’ve worked recently with some attorneys who are, no doubt, very skilled in their area of regular practice, but probate drives them crazy and they miss these little things.  Its just these type of “little things” that get massive quick when the house is broken into or damaged by a storm or (god forbid) burns down (<– all of which have happened to me by the way) and the insurance carrier won’t pay. 

    Nightmare.  Don’t risk it.  Call someone who knows what they’re doing.

    Same-Sex Spouse To Inherit Deceased Partner’s Estate

    Saw this yesterday and its making its predictable rounds (here and here and here) today.  The actual decision was hard to find so I offer it to you here (PDF).  I enjoy these decisions; the ones whose menial size belies the hefty weight of their potential impact.  It seems a simple matter too: The Court was asked to determine the identity of decedent’s distributees entitled to receive notice of the probate of decedent’s will.

         The decedent married his same-sex partner, J. Craig Leiby, in Montreal, Province of Quebec, Canada on June 7, 2008.  He died on November 1, 2008 survived by Mr. Leiby and by three siblings.  The decedent had no children.  His parents predeceased him, as did another sibling, who also left no children.

         Marriages valid where solemnized have long been recognized in New York; exceptions exist only for marriages affirmatively prohibited by New York law, or proscribed by “natural law” [citation omitted] [footnote omitted].  As decedent’s marriage was valid under the law of Canada, where performed, and falls into neither exception to the general rule, the marriage is entitled to recognition in New York [citation omitted].

    Accordingly, Mr. Leiby is decedent’s surviving spouse and sole distributee.  [Notice] in this probate proceeding need not issue under SCPA 1403(1)(a) or any other provision of law to any other person as distributee.

    The ruling is boring insofar as it appears to merely affect notice, but its more interesting as a determination of standing…  If the Judge’s ruling holds, then family members of gay or lesbian decedents who were married and left a surviving spouse would have no standing in probate, since they would be neither heirs nor legatees of the gay or lesbian decedent.  Lacking standing they would not be able to challenge decedent’s will.