Estate Trust Plan

2012-02-13T10:00:00.000-08:00

It is not uncommon in a cosmopolitan cultural melting pot like New York City to see many international residents, some of them marrying or partnering with U.S. citizens. You might know a French woman married to a Spanish man living in New Jersey with a summer house in the Hamptons. Or perhaps a Canadian who has lived in the U.S. for thirty years with his or her American partner, and has never thought to simply become a U.S. citizen. As our society becomes more and more global, and the federal estate tax laws continue to change, the need for international estate planning is especially important for married couples when one or both spouses is not a U.S. citizen. Failure to plan could result in the unnecessary payment of gift and estate tax which could leave a surviving spouse without sufficient assets.

Foreign Nationals as “Residents”

If a person is a resident non-citizen, he or she is subject to the same estate tax rules as U.S. citizens, including taxation on his or her worldwide property. The test for “residency” differs with the type of tax being imposed. A foreign national who is deemed a “resident” for U.S. income tax purposes may not qualify as a “resident” for U.S. estate and gift tax purposes. For gift and estate tax purposes, a person is a “resident” if the foreign national’s domicile is in the U.S. In general, a foreign national will be considered domiciled in the US if he or she is currently in the U.S. with no present intention of leaving. If the person has a non-U.S. domicile, he or she will be considered a non-resident alien for gift and estate tax purposes, even if he or she is living in the United States at that time. The determination of “domicile” may turn on proof of certain factors.

Planning Issues for Non-US Citizen Spouses

U.S. estate and gift taxes operate very differently for married couples where one or both spouses are non-citizens. There are three main differences involved: (1) they are not entitled to the full marital deduction (exemption from taxes above the then-effective federal estate tax exemption); (2) they are not entitled to unlimited lifetime transfers between spouses; and (3) there is no presumption of jointly held property that fifty percent is in the estate of each spouse, and the spouse will have to show the extent of their contribution. Non-citizen spouses are entitled to annual exclusion gifts of $13,000 per year per person, and they are entitled to a “super” special annual exclusion gift to their spouse of $139,000 (indexed for inflation for 2012).

Estate and Gift Tax Differences

A U.S. domiciliary (including non-citizen resident-aliens) is subject to estate tax on his or her worldwide assets. This is in addition to any estate tax that the home country might impose. There are treaties between the U.S. and other countries allowing for some credits for taxes paid in one country. For example, the U.S. has a gift and estate tax treaty with Germany, allowing some credits and concessions to German foreign nationals who may owe U.S. estate and gift tax on worldwide assets.

U.S. citizen spouses can leave unlimited amounts to their spouses at death without incurring any immediate estate tax liability. Bequests from U.S. citizen to non-citizen spouses do not qualify for the unlimited marital deduction and estate tax liability is incurred as soon as the first spouse dies (although surviving spouses can attempt to become a U.S. citizen after the death of the first spouse and can avoid that result). Non-resident aliens may only pass $60,000 of U.S. property at death before incurring estate tax liability. Congress is concerned that a non-citizen spouse might leave the country, impeding the government’s ability to recoup the estate tax on the death of the surviving spouse.

The marital deduction is important as applies to amounts in excess of the applicable federal estate tax exemption, currently $5,120,000 but anticipated to revert to $1 million at a top tax rate of 55% if Congress does not renew or amend the 2010 Tax Relief Act.

A deceased spouse can leave assets to a surviving non-citizen spouse up to the decedent’s estate tax exemption in effect at that time without incurring any estate tax. Those assets, however, will be subject to estate taxes when the non-citizen spouse dies to the extent those assets are left in the surviving spouse’s name.

Non-citizen spouses can attempt to replicate the tax-deferral techniques that citizen spouses enjoy by incorporating two types of testamentary trusts in their wills: a “credit shelter” trust to shelter the amount of the available estate tax exemption, and a “QDOT” for the balance of the estate. The Trustee of the credit shelter trust can provide the surviving spouse with income and principal as needed for health, education, maintenance and support. The balance of the assets in the credit shelter trust pass estate tax free to the designated beneficiaries of that trust.

The QDOT resembles a marital trust but has certain requirements that must be met. The surviving spouse is only entitled to income from the trust, not principal unless the Trustee withholds the applicable estate tax. The Trustee must be a U.S. citizen (or a U.S.-domestic corporate trustee). And, the principal is subject to estate tax at the death of the surviving spouse. Life insurance proceeds are counted as part of the gross estate for the purpose of calculating the estate tax. If the assets in the QDOT are over a certain amount, the U.S. trustee must be a bank or the individual U.S. Trustee must furnish a bond for a certain amount of the value. Non-probate assets (i.e. joint assets or assets passing by beneficiary designation) can be transferred to the QDOT if the property is transferred prior to the estate tax return due date.

For example, Tom dies with $6 million in his name in 2012. His spouse, Mary, is a U.S. resident but not a U.S. citizen. The first $5,120,000 passes tax free because of the applicable federal estate tax exemption. He is only entitled to pass an additional $139,000 to Mary free of estate tax (this is the same as the super-annual exclusion for lifetime gifts). The remaining assets in his estate ($741,000) will be subject to a federal estate tax at a rate of 35% unless he has a QDOT in his will, or the Executor makes an irrevocable QDOT election on the estate tax return. This would defer estate tax on the money placed in the QDOT until Mary’s death.

Guardianship Issues

Many foreign nationals want to name family members residing in the foreign home country as executor, trustee, or agent under your U.S. estate planning documents

In New York, non-resident aliens are not eligible to serve as fiduciaries under the statutory law. In addition, logistical issues and language barriers can make it impractical. A U.S. court will have initial jurisdiction over the guardianship of minor children and will require a local resident to serve as guardian. You may nominate the person as the guardian, but it is important to name back-up guardians in the event that the court does not confirm the appointment. There is also the question of the ability of the non-U.S. Guardian to leave the U.S. pending appointment.

The lesson learned is that it is especially critical for non-US citizens to make sure they have the right documents in place to meet their objectives in a time of crisis.

Be Prepared!

2011-10-20T10:37:00.000-07:00

If nothing else, Hurricane Irene taught us - like good Girl Scouts and Boy Scouts - that we should always be prepared. We can never predict the weather or the path of a hurricane, or tornado, or earthquake (two out of three of which occurred in a single week in New York City!). Being prepared for any disaster gives us peace of mind that we can act calmly under pressure. In short: Make a Disaster Plan, Make a Personal Financial Crisis Plan, and Make a Legal Plan. Keep reading for some quick and easy steps you can take in your quest to "be prepared":

1. Make a Disaster Plan:

Develop a plan - preferably written, even if it's just in an email! - with your family. Your plan should cover:

where your household and family members will reunite after a disaster. Identify two places to meet: one right outside your home and another outside your neighborhood, such as a library, community center, or place of worship.
Identify all possible exit routes from your home and neighborhood.
Designate an out-of-state friend or relative that household members can call if separated during a disaster. If New York City phone circuits are busy, long-distance calls may be easier to make. Your out-of-state contact can help you and your family communicate when local land lines and cell towers are down.
Account for everybody's needs, especially seniors, people with disabilities, and non-English speakers.
Ensure that household members have a copy of your household disaster plan and emergency contact information to keep in their wallets and backpacks.
Pack a "go" bag that has sufficient emergency supplies for all household members and pets. Make sure your "go" bag includes cash for immediate money needs (in an electrical power outage, ATM machines will not work!)
Decide how you will handle caring for any pets or whether you will take them with you. Have a copy of your veterinarian's contact information and any pet insurance policies in your "go" bag.
Review your plan with your children - it's never too soon!

2. Make a Personal Financial Crisis Management Plan:

Mitigate your mess! Are you insured? Where are your insurance policies (homeowners, life, auto, disability)? Are they up to date? Are all your valuables on your homeowner rider? Are you covered in cases of flood? For that matter, are you in a flood zone and do you need a separate rider? (to see if you are in a flood zone check http://www.freeflood.net).

Many Brooklynites were taken by surprise when, after Hurricane Irene, the entire borough was declared a "flood zone." Confirm that you do not need any additional insurance to protect you. Take an inventory of all your home, auto, disability, and life insurance policies, put it in writing, and make sure you have copies. You should also keep a detailed list of your bank accounts, investments, trusts, titles and deeds, mortgages and home equity loans, credit and debit cards, and tax records in a safe and secure place, together with all contact information and online passwords.

3. Make a Legal Plan

An emergency crisis could leave your loved ones without you, either temporarily or permanently. While it is not something anyone wants to think about, you could be adding to the pain of that loss innumerable complications and financial chaos if you do not appropriately plan. Everyone should have essential estate planning documents such as a Last Will and Testament, Health Care Proxy, Power of Attorney, and Living Will. Make sure you review it every few years or anytime you or a close family member experiences a significant life change such as marriage, divorce, or a birth of a new family member. Every review should ensure appropriate beneficiary designations and titling of assets.

4. Put it Online: Many companies offer "online vaults" to give you secure access to your legal and financial documents from any location with an internet connection. Many financial service companies and financial planners offer this as a courtesy to their customers and clients.

Even more important than having your documents is knowing where they are! We give our clients "document locator cards" to keep in their wallet and to give to their agents so that your loved ones know where and how to find our documents in a time of crisis. You should also keep photocopies of those documents in your "go" bag.

By investing time and money into a personal crisis management plan you will have a strategic plan in place to be prepared when faced with economic and natural disasters. More information about how you can be prepared and make a plan is available at the NYC Prepared Website

Defending the Indefensible: No Defense for DOMA

2011-05-03T12:30:00.000-07:00

On February 23, 2011, the Obama administration announced that it would abandon its defense of the federal law that limits the definition of marriage between a man and a woman. The effect was that House -- if it chose to stand by its law - would not be represented by the Department of Justice but rather would have to go out and retain its own counsel.

Now, the law firm that was retained by the House announced that it would also abandon its defense of DOMA. King & Spalding withdrew from the matter, claiming that it failed to appropriately vet the case for conflicts of interest before accepting the matter.
Clement, the attorney in charge of the case, left King and Spalding in protest for a boutique litigation firm in Washington D.C.
The cases at issue arose out of the Second Circuit in New York and are on their way to the United States Supreme Court. In the first, Windsor v. United States (10-cv-8435 (SDNY), plainitff Edith Windsor sued to recover a refund of $350,000 in estate taxes she had to pay at the death of her same-sex spouse of 44 years, Thea Clara Spyer, whom she had married in Canada, a marriage recognized by New York State.
In Pederson v. OPM, 10-cv-1750 (D. Conn), seven gay and lesbian plaintiffs who are legally married before being widowed are arguing the unconstitutionality of DOMA as a result of their exclusion from laws governing defined benefit pension plans and state retirement plans, laws governing benefits for federal retirees, the IRS Code, Social Security laws, and the Family Medical Leave Act.

Cuomo Leads the Fight for Gay Marriage in New York

2011-04-26T08:54:00.000-07:00

Led by Governor Cuomo, the renewed fight for gay marriage hits the suburbs. With support from Lady Gaga, Julianne Moore, and other celebs, Governor Cuomo is reinitiating legislation that would legalize gay marriage in New York, making it the sixth state and seventh locale to do so if it succeeds.

http://www.latimes.com/business/nationworld/wire/sns-bc-us--nygaymarriage,0,674295.story?amp

The organized effort, spearheaded by Cuomo, will hopefully turnaround a surprising 2009 defeat of a proposed bill to legalize same-sex marriage in the New York State Senate which fell short of passage by 8 votes despite the Assembly's (and New York State Bar Association's) strong approval and support.

Out-of-State Same-Sex Marriage Recognized by Surrogate

2011-04-21T18:21:00.000-07:00

In the void created by the Legislature's failure to legalize same-sex marriage last year, the New York State courts are paving the way for affording more rights to same-sex couples.
The First Department recently cleared the way for a same-sex spouse to inherit the estate of his deceased partner. The case involved the New York City Surrogate’s recognition of a Canadian same-sex marriage for the purpose of ascertaining who was a decedent’s sole distribute in a probate proceeding. Decedent Ken Ranftle married his partner, Craig Leiby, in Quebec in June 2008. Mr. Rantfle died five months later, leaving a a will (containing an in terrorem clause) making specific bequests of approximately $30,000 to three brothers and a goddaughter. He left the residue of his estate to his same-sex partner and nominated executor, who he had married in Canada. The partner offered the will for probate without citation to the decedent’s “natural” heirs in intestacy.

The Surrogate issued a decree granting probate, ruling that the partner was the decedent’s surviving spouse and sole distributee under EPTL 4-1.1 (the intestacy law), significantly expanding statutory law. The Surrogate4 held that the decedent’s same-sex marriage was valid under the laws of Canada, where it was performed, and did not fall into either of the two exceptions to the marriage recognition rule as the marriage was not affirmatively prohibited or proscribed by natural law. Accordingly, the Surrogate found that the marriage was entitled to recognition, and that citation for probate need not issue to anyone under SCPA 1403(1)(a).

One of the three brothers sought to vacate the decree and file objections, arguing that recognition of marriage violated New York’s public policy. The Surrogate rejected the claim and the brother appealed.

The Court of Appeals of New York has ruled that same-sex marriage is not valid if contracted in New York because the New York State Legislature has not specifically provided for such marriage in a duly enacted law. The Court of Appeals has also ruled, however, that New York should recognize marriages in foreign countries and other states where same-sex unions are legal and recognized. Although Governor Paterson issued an executive order directing state agencies to recognize same-sex marriage, the Legislature has failed to accept the Court of Appeals invitation to act, and the bill narrowly failed to pass last year.

The Attorney General’s office supported Mr. Leiby (the same-sex partner) with an amicus brief urging the recognition of the Canadian marriage, as did the New York City Bar.

The Appellate Division First Department upheld the Surrogate’s ruling that the marriage recognition rule affords comity to out-of-state marriage validly entered into in another jurisdiction. Marriage is valid if valid in the place where contracted. The rule does nopt extend where contrary to prohibitions of natural law (i.e. incest) but that same-sex marriage does not fall within those two exceptions. The First Department agreed with the Surrogate’s rejection of the brother’s contention that same-sex marriage violated public policy on the grounds that the issue had been “specifically addressed and rejected” by the Fourth Department.

However, and significantly, in the Court’s view, the legislature’s failure to enact a bill recognizing same-sex marriage or recognition of validly performed out-of-state same-sex marriage was not an expression of public policy for the state. In the absence of an express statutory prohibition, legislative action or inaction did not qualify as an excpeiton to the marriage recognition rule. Ranftle v. Leiby, NYLJ 1202483192791 at *1 (Surr., N.Y., February 24, 2011).

The First Department ruling is a significant deterrent to "natural heirs" who seek to challenge a decedent's will leaving everything to his or her same-sex spouse, or a same-sex spouse inheriting from his or her partner in intestacy.

The decision came the day after the Obama administration announced that it would no longer defend the Defense of Marriage Act, which defines marriage as the union between one man and one woman for federal law purposes.

Speak Now Or Forever Hold Your Peace - Some States Require Pre-Mortem Contests

2011-04-21T10:34:00.000-07:00

Thought your heirs would have to fight it out only when you're gone? Think again! A small but increasing number of states are passing laws to allow you (the eventual decedent!) to invite your heirs to contest your estate while you're still alive! The trend gives new meaning to "speak now or forever hold your peace"!

Click here to read "A Will and a Way" on the Wall Street Journal blog

The WSJ reports:

The process generally starts when beneficiaries, and the disinherited, are notified of the contents of the will or trust. Those who fail to act before set deadlines—often 30 to 120 days after notification—"are barred from contesting a will or trust upon death," says , a lawyer at Gordon, Fournaris & Mammarella, P.A. in Wilmington, Del.

Among the states allowing this procedure in one form or another are: Alaska and Nevada (both wills and trusts), Ohio, Arkansas and North Dakota (only wills, and only for in-state residents or real property owners), and Delaware (currently for trusts only; legislation pending for residents' wills).

The WSJ continues:

Why bother to have a pre-mortem hearing? If a judge rules you are mentally competent and haven't been pressured into making inheritance decisions, your beneficiaries—and those being disinherited—are unlikely to have grounds upon which to launch a postmortem legal attack, says Julia Gold, a Reno, Nev., lawyer who specializes in estate planning.
If there is a court challenge, "the most important witness will be there to disprove the claims, and that's the person who signed the will," says Jonathan Blattmachr, director of estate planning for Alaska Trust Co. and an architect of Alaska's law.
Lawyers say the recent spate of pre-mortem legislation is partly the result of competition among states including Alaska, Delaware and Nevada to entice outsiders to establish trusts within their borders.
Alaska, Nevada, and Delaware let people who aren't state residents take advantage of at least some of their laws. Specifically, the laws can apply to out-of-state residents willing to set up a trust to hold their assets and hire or appoint a trustee—a representative to carry out the provisions of the trust—based in one of these states.
Alaska also allows non-Alaska residents with wills to use its courts for pre-mortem probate hearings. But you must attend the Alaskan court hearing in person, so unless a lot of assets are at stake, travel costs may be prohibitive.
Estate planners say these laws can help families prevent financially and emotionally draining battles over estates. But there are downsides. For example, those who revise a will or trust document after going through this process are likely to have to go through it again.
Moreover, those who seek pre-mortem rulings must be willing to disclose the contents of their estate documents—and face conflicts that may arise.
Mr. Gordon says one of his clients went through the process in 2006. Although the woman planned to divide her estate equally among her five children, she worried that two might contest her decision to put their shares into trusts, where trustees could prevent them—and their creditors—from accessing the money.
When given notice of this plan, the two children "had some resentment that they were being treated differently" from siblings, who were to receive their inheritances outright, says Mr. Gordon. But neither took action within the 120 days permitted under Delaware's statute. "The family worked things out," he says. Moreover, he adds, the client, who died soon after, "went to her grave knowing no challenge would take place."
One additional wrinkle: probate. When you die, your will must go through probate in your state of residence. As a result, there's no guarantee a court there will accept a pre-mortem ruling obtained in another jurisdiction, says Mr. Gordon.
A safer alternative: Establish a revocable trust in Alaska, Nevada or Delaware and put all your assets into it. If you hire a trustee in one of those states, your trust will be governed by its laws, forcing disgruntled heirs to abide by the outcome of a pre-mortem proceeding.

Don't Leave Them Out! Seminar on Estate Planning for Same-Sex (LGBT) couples on May 18th!

2011-04-17T12:32:00.000-07:00

May 18, 2011

7:00 – 8:30pm

Jewish Community Center of Manhattan

The Samuel Priest Rose Building

334 Amsterdam Avenue at 76^th Street

New York, New York 10023

(646) 505-444 (info)

(646) 505-5708 (registration)

Refreshments will be served

Seating is limited

TOPICS OF DISCUSSION WILL INCLUDE

· State of Affairs: Update on the Status Same-Sex Marriage in U.S. Jurisdictions

· Legal Advantages and Disadvantages Facing Same-Sex Couples

· Government Benefits Unavailable to Same-Sex Couples

· The Best Planning Tools and Techniques to Achieve Your Planning Goals

· Domestic Partnership Agreements

· Where There’s a Will, There’s a Way: Ensuring All Your Documents Fit Your Needs and Objectives

· A Matter of Trust(s): Deciding Which Trust is Right for You

· Special Issues Facing the Gay and Lesbian Senior Community

There will be special case studies that focus on the challenges faced by and the opportunities available to same-sex couples-, given the differences between a partnership/union and a marriage in the eyes of the Federal government.

Click here to email Alison Arden Besunder

Tune-Up for Tax Planning Year Round

2011-04-17T12:27:00.000-07:00

April 15th may have come and gone, but here are some "New Year's Resolutions" you can implement for increasing your wealth year round!

Find Lost Treasure: Check your state's "unclaimed funds" office. You may find money you didn't know you had. Go to http://www.osc.state.ny.us/ouf/index.htm to search.
Convert your regular IRA to a Roth IRA.
Contribute to your Roth IRA or Regular IRA.
Track your business and medical expenses through Quicken or Microsoft Money. You are entitled to deduct certain medical expenses in excess of a certain amount of your AGI.
Track your use of your flex spending account throughout the year and make sure you are spending it down. Flex spending accounts are "use it or lose it". You have until April 15th to submit for reimbursement for expenses incurred prior to December 31st. If you monitor it throughout the year, you won't have to cram in last minute doctor appointments during the busy holiday season when many medical practitioners are away.

More Changes to NY's Power of Attorney

2010-10-14T09:42:00.000-07:00

If at first you don't succeed, amend the law again! That certainly seems to be the motto of the NY Legislature, who again legislated NEW new changes to the Power of Attorney statute as a result of the diligent and effective efforts of a special task force of the New York State Bar Association.

Powers of attorney ("POA") are frequently used in many areas of the law such as real estate, but very much so in trusts & estates and elder law. A POA allows a person (the principal) to appoint another individual (an agent) to act on his or her behalf. The powers authorized can range from the very narrow (a specific particular transaction) to the very broad (the "kitchen sink" method). Under the first amended law effective September 2009, the principal needed to execute a "Major Gifts Rider" in order to allow the designated agent to make transfers of the principal's assets to himself or herself.

The new "technical corrections" to the POA law took effect on September 13, 2010. The 2010 corrections make the following changes:
- the execution of the new POA does not revoke any previously drafted POA's unless specified in the document (the 9/09 POA revoked all prior POA's by default, including limited POA's that may have been on file with a banking institution);
- the word "Major" has been deleted from the phrase "Statutory Major Gifts Rider" and is now "SGR" (Statutory Gifts Rider) and not "SMGR"
- the agent's power to continue to make customary gifts and charitable contributions that the principal historically made is limited to a total aggregate of $500 unless the principal executes the SGR.
- the NY POA executed by a NY domiciliary while outside of NY will be effective.
- an out-of-state POA validly executed outside of NY state will be recognized in NY State.
- Minor, non-substantive variations in wording otherwise required by teh statute will not necessarily invalidate the POA forms.
- notaries on the POA may also serve as one of the two necessary witnesses on the SGR.
Perhaps most important, the spelling of "acknowledgment" was amended to take out the extra "e"!

The law also appeases the business and commercial community by excepting and excluding certain "business" transactions from the reach and application of the statute, including:
- a power given for a business purpose
- a power coupled with an interest;
- a power given to a creditor in connection with a loan or other credit transaction;
- powers given to facilitate the trasnfer of stocks, bonds, or other assets;
- proxy powers to exercise voting or management rights;
- a power used by a governmental subdivision, agency or instrumentality;
- a power authorizing a third party to prepare and file documents with the government or other third parties;
- a power authroizing a financial institution to take action relating to an account held at the institution;
- a power given as part of a holding in a business entity or condominium;
- a power contained in a business agreement authorizing an agent to take action relating to said business;
- a power given to a condominium managing agent;
- a power given to a real estate broker;
- a power authorizing the acceptance of service of process; and
- a power created by statutes, such as a power authroizing an agent to make health care decisions or decisions regarding disposition of remains.

Tax Cuts Still Set to Expire on New Year's Eve

2010-10-14T09:23:00.000-07:00

Originally Posted Thursday, February 11, 2010
Taxed Into the Beyond

Many financial advisors and accountants have said for the past two years -- and surprisingly are still saying -- that Congress is going to raise the estate tax exemption to $3.5 million or even to $5 million at 35%. These predictions have thus far failed to materialize and -- with 10 weeks until New Year's Eve -- it doesn't look like they will come to pass before the federal estate tax exemption returns to $1 million at a 55% tax rate. Lesson here? If you have to bet on Congress taking affirmative action to enact a law, or doing nothing and letting the law's built-in reversion take its course .... put your money on the later.

President Obama's proposed 2011 budget did ask Congress to make a number of tax changes impacting individuals. Here's a highlighted overview of what was proposed:

•Estate Tax: Surprisingly, the White House proposes permanently implementing a $3.5 million exemption with a maximum rate of 45% on taxable estates. Currently, absent action of Congress, the federal estate tax in 2011 will be 55% top rate for $1 million exemption level. Rumor has it that a proposal is gaining bipartisan traction in the Senate to raise the exemption to $5 million at a 35% top rate. However, the Obama proposal alone would increase the deficit by $262 billion over 10 years; it is difficult to see how a higher exemption and an incremental deficit increase will be pushed through.
•Alternative Minimum Tax ("AMT"): the White Hosue proposal assumes that Congress will change the AMT, a phenomenon which continues to exist despite it being completely out of step with the financial realities of today's economy and standards. The AMT was originally intended for only the highest income earners but instead has detrimentally impacted the middle-class. Protecting the middle-class from the AMT is estimated to cost the budget $660 billion over 10 years.
•Tax cuts expire: Noone can be surprised that the U.S.'s rapidly increasing debt and exponentially deteriorating economy is a recipe for a cash flow drought. Bush's 2001 and 2003 tax cuts are set to expire in 2011. Obama is doing what he promised and plans to let those tax cuts expire by their terms for "high-income" households ($200,000 for individuals; $250,000 for families). The proposal estimates a generation of $700 billion over 10 years as a result of eliminating the tax cuts. The proposal would raise the top individual income tax rates to 2001 rates: 33% tax bracket increases to 36%, and 35% bracket increases to 39.6%. However, the Obama proposal seems to imply that the 2001 and 2003 Bush tax cuts will remain permanent for "non-high income" individuals and households (those making less than $200,000 / $250,000 respectively).
•Capital Gains Taxes: long-term capital gains taxes would increase to 20% from 15%.
•Limit Itemized Deductions: Proposal would cap at 28% the rate at which "high-income" households can itemize their deductions. Net result? Deductions will be worth less to a "high-income" tax filer. Whether this has legs remains to be seen -- there has been Congressional chatter that this aspect of the proposal will reduce charitable giving. The proposal estimates generating $291 billion over 10 years by capping the deductions.
•Expand Child-Care tax credit: Those making less than $85,000 would be able to double the child and dependent care tax credit currently in place. Cost of the proposal: $12.6 billion added to the deficit over 10 years.
The list is non-exclusive and there are other aspects to the White House's proposal. This highlights some of the various elements that trusts & estate practitioners should keep in mind as these proposals, if passed, will impact estate planning techniques for their clients.
source: http://www.money.cnn.com/.

The "Other" Planned Parenthood: Estate Planning for New Parents and Parents-to-Be

2010-09-01T17:08:00.001-07:00

Free seminar: The "Other" Planned Parenthood: Estate Planning for New Parents and Parents-to-Be on September 29th in Park Slope and October 7th in Brooklyn Heights. Check this "to do" item off your list as September gets underway. Light refreshments will be served. Please invite any colleagues and friends you feel might be interested. I hope to see you there!

http://brooklyn.babybites.com/brooklyn-events/seminars/

Anyone Surprised Congress Can't Get It's EGTERRA Act Together?

2010-01-20T10:04:00.000-08:00

True to form, Congress failed to act before December 31, 2009, leaving the federal tax on multimillion dollar estates to expire. Although Democtracts have vowed to renew the tax retroactively in 2010, that eventuality appears less likely now that the Republicans have one more seat in the Senate after yesterday's upset in Massachusetts. This is the first time since its implementation in 1916 that there will be no estate (aka "death") tax. If Congress continues to sit on its hands, the estate tax will be reinstated in 2011 back to 2001 numbers at $1 million.

The estate tax reportedly yields $25 billion in annual revenue for the cash-strapped government.

Despite the publicity swirling about the repeal and reset of the estate tax, the unexpected capital gains tax on inheritances in 2010 has gone largely unnoticed by the general public. In effect, the capital gains tax replaces the estate tax for 2010, since heirs will have to pay capital gains tax upon sale of bequeathed assets. The capital gains tax applies to most assets such as real property, art collections, and businesses, ranges from 15 to 28%, applies to estates in excess of $1.3 million, and would be calculated on any gains from the time of purchase. This tax will disproportionately impact the middle class, probably even more so than prior estate tax regime.

In 2009, the estate tax was a maximum of 45 percent on estates worth more than $3.5 million per person ($7 million per couple). When it resets in 2011, it will do so at a 55 percent rate on estates greater than $1 million ($2 million per couple).

Congress' failure to resolve this has obviously put practitioners an dclients in a difficult position. At this point, no advisor or lawyer can say with 100% certainty that a client and their family is completely or sufficiently protected from estate taxes.

If Congress does manage to accomplish in 2010 what it should have done in 2009 and pass a retroactive estate tax, it is worth noting that the United States Supreme Court has already upheld a retroactive estate tax in Carlton v. U.S. Scalia quite appropriately coined this "bait and switch" taxation.