by Garrett Spangler on October 1, 2010
The estate tax was appealed for this, the final year of the 2001 Bush administration estate tax bill. As discussed here and elsewhere, no one was expecting the tax to get this far without additional changes to prevent the lapse this year. Of course the heirs of former Yankees owner George Steinbrenner and the handful of other billionaires who passed away this year could not be happier…..but I digress.
The question now becomes, what will happen next year?
The way the 2001 estate tax bill was structured, without changes to the law there will simply be a reversion to the same estate tax levels in existence prior to enacting the bill. That means estate assets in excess of $1 million will be taxed next year. Unfortunately, as the November elections for many congressional members loom, it is highly unlikely that anything will happen before next month.
Congress will have some time at the end of the year to try to get a new bill together to address the concern that at the $1 million level, many middle class families that the tax did not intend to affect will have federally taxable estates when they die. The odds are sinking that changes will be made at all this year however, because reports out of Washington indicate that there are quite a few items that Congress will attempt to bring to vote, possibly leaving the estate tax to flounder once again. Specifically, I think the extension of tax cuts for only the middle class will take top priority.
While I certainly won’t expect them to occur, I still intend to hold out hope that something will be done for the estate tax. Estate planning professionals, elderly individuals, and those with large estates could all benefit from a little more certainty with respect to the future of the estate tax.
by Garrett Spangler on September 17, 2010
No matter what your personal opinion might be about the right for homosexual couples to get “married”, the general view seems to be changing toward at least providing equal legal rights for gay and lesbian couples. Younger generations may bring about more sweeping changes in terms of equal rights as they age, but the elders in the LGBT community currently face a disproportionate amount of antigay bias which is unlikely to change anytime soon.
Estate planning for same-sex couples is no different from other areas of the law, making it difficult to enjoy the same benefits provided to couples of opposite sexes. While some of this can be changed by amending legislation, the traditions and values instilled in our elder generations regarding homosexuality are far more difficult to alter. Considerations should be made in both areas when same-sex couples discuss end-of-life decision making.
I will always recommend discussing the particulars with an estate planning attorney to find out what might be best for your situation, but I encourage you to take a look at a recent article written precisely about this topic. If you have family, friends, or clients that may be homosexual and planning for their future it is a terrific read. (Although in the interest of full disclosure, I must admit that it was written by a former professor of mine at Temple Law…..Shout out to the cherry and white!).
Check out the article on SSRN here: Gay and Lesbian Elders: Estate Planning and End-of-Life Decision Making
by Erica Intzekostas on September 16, 2010
Much debate surrounds the firing earlier this week of a New Jersey Transit employee who was terminated from his job as a train coordinator when his employer learned, through the media, that the employee had publicly burned pages from the Quran on the 9th anniversary of the 9/11 attacks. The burning did not occur during work hours and, as heinous an act as it is, it is considered protected free speech. New Jersey Transit issued a statement that the actions violated the code of ethics imposed on its employees.
New Jersey is an at-will state and this employee was employed at-will. This means that he can be fired at any time for any reason, or for no reason at all, as long as the termination is not prohibited by a specific law or public policy. (For example, a New Jersey employer cannot fire someone based on their race, ethnicity, or religious beliefs.)
There is, however, another issue, which is one that is not being discussed, but is likely what led to New Jersey Transit’s decision, and that is liability. These actions by this former employee demonstrated at best, intolerance and at worst, violent hatred, towards a religion and the group of people practicing that religion. Imagine being Muslim, seeing this man on the news burning a copy of the Quran, and then wondering what will happen if you encounter him next time you are taking the train to work, worrying that he will harass or even harm you if he realizes you are Muslim. Perhaps you will reconsider taking out your copy of the Quran to read on the train. Now imagine that same employee, maintaining his job even after his employer knew about his actions, harassing or harming a Muslim passenger or fellow employee. That injured party would most certainly have a claim against New Jersey Transit for ignoring the employee’s demonstrably hateful actions and keeping him employed and in a position to cause harm to passengers and fellow employees.
From a purely business standpoint, weighing the risk of a wrongful termination claim against a potential claim by an injured co-worker or passenger, it seems clear that New Jersey Transit made the right decision.
by Erica Intzekostas on September 14, 2010
The City of Philadelphia is experiencing a budget crisis. So in an apparent effort to raise revenue, Philadelphia City Council recently passed legislation creating the Tobacco and Tobacco-Related Products Tax, which was signed into law on June 1, 2010 and came into effect July 1, 2010. The City then proceeded to send notices to taxpayers who have a Philadelphia Business Tax Account Number alerting them that the City’s “records indicate that your business may sell tobacco and/or tobacco-related products.” The notice goes on to instruct the taxpayer that if they do not sell tobacco or tobacco-related products, then they must fill out and send back the attached form by September 30th, that failure to do so “will result in a Tobacco and Tobacco-Related Products Tax account being created for your business”, and that failure to file a Tobacco and Tobacco-Related Products Tax return beginning on January 31, 2011 “carries a $5,000 penalty.” My husband, who sells no products whatsoever let alone tobacco, received one of these notices. And, according to the City agent who I called this morning because I could not figure what business name to put on the form that we had to send back (turns out the name to put on the form was not the name of my husband’s business, but his individual name), every single Philadelphia taxpayer with a Philadelphia Business Tax Account Number was sent such a form, regardless of the type of business they own. As soon as the guy at the City’s Revenue Department answered the phone (after I had been on hold nearly a half an hour), before I even mentioned the word “tobacco”, he knew exactly why I was calling. I can only imagine how many calls they must have to field every day from confused taxpayers like myself. Not to mention all the money that went into mailing the notices and the resources that will now have to go into processing the returned forms and dealing with those taxpayers who fail to send back their forms even though they do not sell tobacco-related products. Makes you wonder how much revenue this new tax will end up netting.
by Garrett Spangler on September 10, 2010
Many of us have causes and charities that are near and dear to our hearts that we like to give a little something to each year. Often people will include their favorite charities in their Will as a final act of kindness when they pass. If you are like so many others who have seen their retirement savings and potential estate reduced over the last few years amid the economic downturn, life insurance may be a great way to provide something to your charity of choice when you pass without reducing other estate assets.
Using life insurance is a cost effective way of leaving a nice gift to charity at a reduced cost. It may even be as simple as changing a current policy that you no longer need due to reduced debt, grown children, or other changes in your life to benefit a charity. Options include simply changing the policy beneficiary, adding a charitable giving rider, gifting policy dividends, and donating the policy itself.
If this sounds like a gifting tool that you may be interested in learning more about, I encourage you to contact your tax planning professional to discuss the costs and benefits of the options available to give using life insurance. For a comparatively small amount of money, you can leave a considerable legacy to the cause that matters most in your life.
by Garrett Spangler on September 2, 2010
On Tuesday, an estate planning attorney who drafted a marital agreement for the McCourts’, owners of the Los Angeles Dodgers, testified in the midst of their heated divorce battle. According to reports, the agreement provides for sole ownership of the Dodgers to go to Frank McCourt while Jamie McCourt contends that the document should be thrown out and the assets split evenly under the community property laws of California.
The divorce proceedings continue to fall mostly into the “he said - she said” contentiousness that often accompanies messy divorces. What seems to be clear is that at one time Frank trusted Jamie enough to give her the CEO position in the Dodgers organization, only to later ask her to step down because he no longer seemed to believe that she could run the team.
While this type of battle is unique because of the high profile of the Dodger’s baseball team and the large net worth of the couple involved, the dispute is anything but unusual. It appears that the situation may have come up because while many assets were specifically mentioned in the document, it appears that the Dodgers organization was not, leaving some room for interpretation as what constituted a joint asset.
I hope that others take note of the situation here and make sure that they spell out any marital agreement that they develop in more specific terms to reduce confusion. As a Phillies fan though, I also hope that this aspect of the team continues to dominate the headlines as opposed to a miraculous run to contend for a wild-card playoff spot as we approach the fall classic.
by Madeline Martin on August 23, 2010
Although currently on August Recess, last week the US Senate gave “unanimous consent” for emergency funding to secure the US - Mexican border. They reconvened to vote on language changes that the House of Representatives had made to the bill and to honor the late (former) Alaskan Senator, Ted Stevens. The “unanimous consent” is a procedure by which the Senate can pass a bill (or resolution) by voice vote, rather than a full roll-call vote.
The bill, which is expected to be signed by President Obama today, appropriates some $600 million for the hiring of new border patrol agents, and an upgrade of communication, operation and patrolling technologies and facilities.
The legislation had strong bipartisan and executive branch support. Most major news outlets are focusing on the Southwestern border issues, but what’s also interesting is how these expenditures will be paid for.
$600,000.00 is a serious amount of money to expend when most departments are being ordered to cut spending and having to deal with the prospect of reduced budgets.
But the proponents of the “emergency bill” insist that the bill will “pay for itself” and perhaps even result in a surplus.
The program will be paid for by increased filing fees for certain companies applying for non-immigrant work visas. Such companies are those which have more than 50 or more employees and more than 50% of their workforce holding non-immigrant work visas.
The increase in fees is to be enforced from the date of enactment through September 30, 2011.
In response, the USCIS is in the process of changing the Petition for Nonimmigrant Workers (Form I-129). In the meantime, if you are filing an H-1B, L-1A and L-1B visa petition for a client to which the new fee does not apply, the USCIS requests that you include a statement with your petition(s) with an explanation or evidence. All petitioners are asked to note in BOLD CAPITAL LETTERS at the top of their cover letters whether or not the fee is applicable.
by Garrett Spangler on August 16, 2010
No news isn’t necessarily good news with respect to the estate tax. It is now August and no action has yet been taken by Congress to provide some guidance as to what a new estate tax law may look like, whether the 2009 estate tax may be reinstated, or if the 2001 estate tax changes by the Bush administration will lapse altogether.
While tax professionals like myself are continuing to hold out hope that changes will be made this year on the estate tax front, there are no clear signs that it will happen. Many members of Congress are seeking reelection and the contested issue will likely be one of many talking points that members of both parties will discuss as election day gets closer. While that may be great for politicians, where does that leave the rest of us?
For starters, with an unpredictable future.
As I have discussed in other blog entries, the estate tax could be repealed or reinstated at 2001 levels, both of which are extremes and rather unlikely. That means that it will probably settle in somewhat close to 2009 levels ($3.5 million personal exemption & 45% top tax rate) with possibly a slightly higher exemption or lower top rate.
No matter where the terms end up, it appears there will be an estate tax for the foreseeable future. That just means one thing, as the end of the year gets closer, it is more and more likely that wealthy, feeble Momma (or Grand-Momma as the case may be) better watch her back!
by Garrett Spangler on August 2, 2010
2010 has been an unusual year for estate planning…..and it’s only August. We await word from Congress as to what the new estate tax laws will be next year and attempt to plan for clients while there is presently no estate tax. Unfortunately I am not a soothsayer (I kind of wish I were sometimes, but I digress) and so we will all have to wait and see where the new exemption amount and tax rates will fall.
If you are doing some estate planning this year however, it is a good idea to discuss the use of a flexible plan that incorporates a disclaimer trust with your tax professional. Trusts come in all shapes and sizes to fit your specific needs. Unlike most trusts which require decisions when drafted however, a disclaimer trust provides an opportunity to make a decision later, when the heirs of an estate will have all the facts about the level of exemption and applicable tax rate.
In a nutshell, the way a disclaimer trust works is each spouse will name the other spouse as the beneficiary of their estate. Then, language will allow the surviving spouse to disclaim some, all, or none of the estate passing to them at the time the first spouse dies. This allows the surviving spouse to maximize their tax benefits and minimize the effects of over- or under-funding a trust.
While there is no one-size-fits-all approach in estate planning, a plan which gives you the flexibility to make a decision in the future when you have all the facts seems to be a good choice.
by Garrett Spangler on July 23, 2010
On Wednesday, the Senate voted down a proposal to make the temporary repeal of the estate tax a permanent part of our tax code. The proposal was made by Republican Senator Jim DeMint from South Carolina and was voted down 39-59 by the senators attending the session.
Meanwhile, many exorbitantly wealthy people who an estate tax would affect have voiced their support for its reinstatement over the past week. A former Treasury Secretary, an heir to the Walt Disney fortune, and others echoed the opinions of uber-rich individuals such as Bill Gates and Warren Buffet that reinstating the estate tax is the right thing to do. New life was given to the debate after billionaire Yankees owner George Steinbrenner passed away last week, passing his tremendous fortune to his heirs tax free.
The estate tax, which actually only taxed less than 1% of the wealthiest individuals who passed away in 2009, had gradually increased its exemption levels over the last decade and was then repealed for 2010. If no changes are made, the estate tax will be reinstated January 1, 2011 with a $1 million exemption. While reinstatement at this level could affect far more people than originally intended, it is likely that the newfound energy surrounding this debate will encourage Congress to enact a new estate tax law before the end of the year.
