Posted tagged ‘transferrable exemption’

Good News about Connecticut Estate Taxes (Avoid Accidental Disinheritance of Surviving Spouse)

November 26, 2017

Good News about Connecticut Estate Taxes. Governor Malloy recently signed a new state budget into law, including significant changes to the Connecticut estate tax exemption that will phase in over the next three years.

The current exemption of $2 million will be increased to $2.6 million in 2018; $3.6 million in 2019; and will be set to match the federal estate tax exemption (currently $5.49 million) in 2020 (after Connecticut made the change to its exemption, the federal exemption was increased to $11,000,000; how Connecticut will react is unclear). While this is good news for those who are worried about estate taxes at death, it could also cause unintended consequences for those with a particular kind of estate plan designed to avoid or minimize estate taxes.

Warning for Surviving Spouses! In many cases, the surviving spouse could be disinherited as the estate tax exemption increases over time. Under the terms of many Wills and revocable trust agreements, the increasing estate tax exemption will effectively shift more of the estate away from the surviving spouse and to an “Exemption Trust” or to family members other than the surviving spouse.

The Devil is in the Details. Many married couples in Connecticut, who expected their combined estates to exceed the pre-2018 $2,000,000 estate tax “exemption,” chose an estate plan (an “Exemption Trust Plan”) that distributes a portion of the estate that is equal to the estate tax exemption into a trust (the “Exemption Trust”) for the benefit of the surviving spouse and descendants. Usually, in an Exemption Trust Plan, the remaining assets pass either outright to the surviving spouse or to a “Marital Trust” for the surviving spouse’s benefit.

The Exemption Trust Plan eliminates the estate tax when one spouse passes away with the other spouse surviving. By the time both spouses have passed away, two exemptions ($4,000,000—the exemptions of both husband and wife) have shielded up to $4,000,000 from the Connecticut estate tax.

The Exemption Trust Plan uses a formula based on the size of the exemption available at the time of death. As the exemption increases, more passes to the Exemption Trust leaving less to pass to the surviving spouse. For example, suppose that you chose the Exemption Trust Plan when you prepared your documents many years ago and suppose that, when you pass away, your estate is worth $5 million. If you were to pass away in 2017, that would mean $2,000,000 (the 2017 Connecticut exemption) would go to the Exemption Trust, while the remaining $3,000,000 would go to your surviving spouse, either outright or in trust. However, if you were to pass away in 2020. after the new estate tax exemption reaches its maximum, your entire estate of $5 million would go to the Exemption Trust, with nothing left for the surviving spouse.

Avoid Accidental Disinheritance of Surviving Spouse. This accidental disinheritance of the surviving spouse can be avoided with proper planning. For example, documents could be amended to modify the formula described above, perhaps requiring that a minimum amount will pass to the surviving spouse regardless of the estate tax exemption that would apply at death. This would be particularly helpful in plans where the marital share is supposed to pass outright to the surviving spouse, since it would guarantee some kind of outright gift to the spouse.

If you have an estate plan that could be impacted by these new tax changes, or if you simply have not revisited your estate plan in some time, please contact our office to discuss the best way to take care of your family after you pass away.

Posted November 26, 2017, by Chipman, Mazzucco, Land & Pennarola, LLC.  For a related treatment of the topic see: Video on Basic Estate Planning after ATRA Updated for 2017.

Estate Settlement and Trust Administration Seminar

August 6, 2015

LocationEthan Allen Hotel, 21 Lake Ave Ext, Danbury, CT 06811

Date:  September 24, 2015

Time:  7:00 to 9:00 (Doors open at 6:30)

Register here:  Seminar Registration.  Or, call 203-744-1929 for reservations.  For more contact information, go to the end of this post.

No admission charge.  Our seminars are always strictly educational.

Description

We will cover the topics listed below.  Each listed Part corresponds to a Part in our Estate Settlement and Trust Administration video which you can see on YouTube here:  Estate Settlement and Trust Administration Video.

To get the most out of the seminar, attendees should view the whole video before attending.  We understand that time may not permit that, however, and we are structuring the program to make certain it will be well worth your time even if you do not view the video.

Send Us Your Questions

If you think of a question before the seminar, let us know right away before you forget.  If the question is appropriate for a group educational program, we will try to answer it during the program.  Send your questions here: rsl@danburylaw.com (Richard S. Land) or here ksg@danburylaw.com (Kasey S. Galner).

 Seminar Topics

Part 1:  Introduction.  Estate settlement steps starting with the probate application and the inventory.

Part 2: A continuation of estate settlement steps including problems relating to real estate, tangible personal property and estate and income taxes.  The importance of identifying problems early.  A description of our estate settlement letter and estate settlement checklists.  A discussion of the importance of post mortem tax planning.

Part 3:  Accounting requirements and fees and costs including the fees of the Probate Court, Executor fees and attorneys.

Part 4:  A description of trust administration, the duties of a trustee and the related risks.

Part 5:  The most common problems related to being a trustee including accounting, investing and self-dealing.

Part 6:  A continuation of a description of the Trustee’s most common problems including personal liability for contracts entered into as trustee and claims based on a trustee’s negligence and torts including claims related to contaminated property.  Trustee compensation is also discussed.

SEMINAR LOCATION AND TIME

The seminar will be on September 24, 2015, at the Ethan Allen Hotel, 21 Lake Ave Ext, Danbury, CT 06811 from 7:00 p.m. to 9:00 p.m. The doors will open at 6:30. Refreshments will be served.

These seminars are always well attended and space is limited. If you wish to attend, or if others you know are interested in attending, to reserve space call us (203-744-1929) or send an e-mail message to me (Richard Land at rsl@danburylaw.com) or Kasey Galner (at ksg@danburylaw.com) or Deb Jewell (at doj@danburylaw.com) containing your name, number attending, telephone number and e-mail address.

You may also register here: Seminar Registration.

 Posted on 8/6/2015 by Richard S. Land, Member, Chipman, Mazzucco, Land & Pennarola, LLC.

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

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Estate Settlement and Trust Administration Video Posted to YouTube

June 5, 2013

 New Video: Estate Settlement and Trust  Administration in Connecticut

Parts One and Two of our video/slideshow presentation on Estate Settlement and Trust Administration in Connecticut  have been posted to YouTube.  They discuss estate settlement up to preparation of the final account.

Additional parts will be posted in the future dealing with fiduciary accounting, expenses involved in estate settlement and trust administration, and important principles of trust administration.

Go directly to the YouTube Playlist. Click on the image below:

Web-Playlist-Image

You can view Part I separately (13 minutes) here:

Estate and Trust Administration in Connecticut Part 1

Connecticut Estate and Trust Administration Part 1

You can view Part 2 separately (15 minutes) here:

Estate and Trust Administration in Connecticut Part 2

Connecticut Estate and Trust Administration   Part 2

We hope you find our Estate Settlement video informative.  Stayed tuned for the rest of the videos in the series.

 If you have any questions, please contact us.
 
 

Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

 

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

 
     
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Estate Planning For Married Couples: The Basics

April 28, 2013

Married couples who are U.S. citizens have estate planning options available to them that are not available to unmarried couples. Opportunities arise upon the death of the first spouse which, if proper planning is done, can protect assets from estate taxes, creditors, and long term care costs.

The following is a massive oversimplification of the estate planning process as it relates to estate taxes for U.S. citizen spouses (the rules for non citizens spouses are different and will not be addressed in this article). The purpose of this article is to help married couples understand some of the basic estate planning and estate tax concepts that we typically cover in an initial estate planning meeting. Without this basic understanding, important estate planning decisions are frequently postponed or, too often, ignored.

Although I refer primarily to Wills in this article, it should be noted that, for estate tax purposes, the planning techniques described below can be implemented through the use of Wills or Will substitutes such as Revocable Trust Agreements.

Estate Taxes

The Internal Revenue Service imposes a tax on certain transfers made for less than fair market value. If the transfers are made during life (i.e. gifts) the IRS imposes a gift tax. If the transfers are made upon death either through the terms of our Wills or through the laws of intestacy, the IRS imposes an estate tax. To keep things simple, I will limit our discussion to transfers at death and the estate tax. However, it is important to note that the two taxes are related and gifts made during life may have an impact on estate taxes payable upon death.

For the last few years, we have been writing about the uncertainty of the federal estate tax laws. Will the estate tax be repealed? Will the estate tax exemption be $1,000,000 or $5,000,000 or something in between? Will the portable exemption law become permanent or was it just a flash in the pan? Thanks to some last-minute decisions made by Congress, as of January 1, 2013, we now have some “permanent” federal estate tax laws (whatever permanent means). The federal estate tax exemption is now $5 million, indexed for inflation, which means that each U.S. citizen has a $5,250,000 estate tax exemption in 2013. In addition, portability has become a permanent fixture. I will discuss the portable exemption law later in this article.

Congress was not the only one keeping us on our toes – state estate tax laws have also fluctuated drastically over the years. Within the last decade, the Connecticut estate tax laws have changed numerous times and the Connecticut estate tax exemption has recently swung from $2,000,000 to $3,500,000 and back to $2,000,000.

As a result, for at least the time being, we are facing a $5,250,000 federal estate tax exemption and a $2,000,000 Connecticut estate tax exemption. New York has a $1,000,000 estate tax exemption which, unlike the Connecticut and federal exemptions, has remained relatively consistent over recent years.

Planning Considerations for Married Couples

At the core of estate tax planning for married couples is the concept that transfers between spouses who are U.S. citizens occur free of gift or estate tax because there is an unlimited marital deduction. Accordingly, if our focus was merely on estate tax exposure upon the first spouse’s death, our job as estate planners would be pretty easy: “Just leave everything outright to your spouse and you have no estate tax issues! (Now here’s our invoice).”

Instead, our focus is on the surviving spouse’s estate and what happens at the surviving spouse’s subsequent death. If the first spouse to die gives everything outright to the surviving spouse, there may not be any estate tax issues upon the first spouse’s death, but the surviving spouse may end up with an estate that is larger than the applicable estate tax exemptions and may be exposed to estate tax upon the surviving spouse’s death.

For example, let’s say that Gracie and Dunkin are married U.S. citizens (in reality Gracie and Dunkin are our family dogs, but for the purposes of this article they are a happily married human couple). Dunkin dies (sorry dad) owning an estate worth $4,000,000 which passes outright to Gracie according to the terms of Dunkin’s Will. Now Gracie has Dunkin’s $4,000,000 in addition to her own assets worth $2,000,000 leaving her with a total estate of $6,000,000. When Gracie passes away, if the federal estate tax exemption is $5,250,000, then (ignoring the impacts of the portable exemption law discussed below) $750,000 could be exposed to federal estate tax. In addition, if Gracie was a Connecticut resident when she died, $4,000,000 could be exposed to Connecticut estate tax ($6,000,000 – $2,000,000 (the Connecticut exemption)).

If Gracie and Dunkin had taken certain steps in their estate planning, their estate tax liabilities could have been eliminated or significantly reduced. The most common way to do so is through the use of trusts which would be established through the terms of the Wills (or Will substitutes). For a discussion about the basics of trusts, including factors to consider regarding the use of trusts, please see: The Benefits of Trusts and Avoiding the Trustee’s Worst Nightmare.

The Wills would allow for a portion of the first spouse’s estate to pass to a trust for the benefit of the surviving spouse (frequently called a “credit shelter trust,” “bypass trust” or “exemption trust;” for the purposes of this article, we will call it an “exemption trust”). Property passing to the exemption trust would not qualify for the marital deduction because it is not property passing to the surviving spouse (unless the trust is drafted in a way which would qualify for the marital deduction). Instead, the property passing to the exemption trust would use part of or all of the first spouse’s exemption. The exemption trust would then be shielded by the first spouse’s exemption and would not be subjected to an estate tax when the surviving spouse dies (again, this is an oversimplification, intended to highlight the basic concepts).

There are two techniques which are frequently used to reduce or eliminate estate taxes for the surviving spouse through the use of exemption trusts – the Disclaimer Option and the Formula Option.

The Disclaimer Option

The Disclaimer Option would look like this: Dunkin’s Will provides that, upon his death, all of his estate will pass to Gracie outright, but it would give Gracie the option to “disclaim” (refuse to accept) all or a portion of the property. The “disclaimed property” would pass to a trust for Gracie’s benefit (the “Disclaimer Trust”). The Disclaimer Trust is a type of exemption trust which would use a portion of or all Dunkin’s estate tax exemption and would not be subject to estate tax on Gracie’s subsequent death.

[Note: A “disclaimer” is the irrevocable refusal to accept a gift of property. The general rule is that for a disclaimer to be effective for tax purposes the disclaiming party cannot have any interest in the disclaimed property following the disclaimer. There is, however, a special exception which allows a surviving spouse to disclaim property passing into a trust created under the deceased spouse’s Will for the benefit of the surviving spouse. Such a trust must, however, be narrowly drafted because the surviving spouse may not have any powers over trust principal.]

The Formula Option

The Formula Option would look like this: Dunkin’s Will provides that, upon his death, a fraction of his estate equal to the applicable estate tax exemption at the time of his death (either the federal exemption or the state exemption) will pass to a trust (the “Formula Exemption Trust”) for Gracie’s benefit. The Formula Exemption Trust would use a portion of or all Dunkin’s estate tax exemption and would not be subjected to estate tax on Gracie’s death. The rest of Dunkin’s estate would pass either outright to Gracie or to a trust for Gracie’s benefit which could qualify for the marital deduction.

Which Works Best?

The Disclaimer Option and the Formula Option can produce almost identical estate tax results but in different ways; and there are pros and cons associated with both options.

Under the disclaimer option, the surviving spouse has flexibility to make the planning decisions at the time of the first spouse’s death. No trust is created unless the surviving spouse decides that it makes sense from a tax perspective (with some help from advisors). The surviving spouse would have the option to disclaim any portion (or none) of the deceased spouse’s property. This is typically viewed as a good thing – allowing the decision to be made when all the facts are available (applicable exemptions, value of estate assets, surviving spouse’s needs, etc.).

The Formula Option also has advantages. The most significant advantage is that the surviving spouse can have broad power over the principal of the trust in the Formula Exemption Trust but not in the Disclaimer Trust. For example, the surviving spouse can have unlimited authority to appoint principal to other family members (typically descendants) both during life and at death through the terms of the surviving spouse’s Will.

This can be particularly beneficial in situations where a child falls on hard times (drug addiction, creditor issues, bad marriage, etc.) after the death of the first spouse. The surviving spouse would have the flexibility to change how the assets in the Formula Exemption Trust will be distributed when the trust terminates. For example, the surviving spouse’s Will could direct that assets in the Formula Exemption Trust will not pass outright to the child dealing with problems, but would be held in a separate trust which would protect the assets from creditors, divorcing spouses, or the beneficiary’s addictions. The surviving spouse can not have this authority over assets in the Disclaimer Trust.

Another potential advantage with the Formula Option is that the terms of the Will already provide the amount (based on the formula) that will pass to the Formula Exemption Trust. With the Disclaimer Option, the decision to disclaim assets is left to the surviving spouse and must made within nine months of the first spouse’s death. This can be challenging for a surviving spouse who is grieving and may have trouble focusing on estate tax planning issues soon after the first spouse’s death.

On the other hand, if assets or estate tax exemptions change significantly and documents are not updated to reflect the changing circumstances, the Formula Option has the potential to “disinherit” a surviving spouse. For example, if the formula is based on the federal exemption (currently $5,250,000), and the value of the first spouse’s estate is less than $5,250,000, all of the assets could pass to the Formula Exemption Trust and nothing would pass outright to the surviving spouse. This may not have been the couples’ intent back when the federal exemption was $1,000,000 (when the Wills were prepared).

Each couple will need to determine which option is best suited to their unique situation. If you prefer the “wait and see” approach and are not concerned about your spouse’s ability to make the decision in the future, then perhaps the Disclaimer Option would be your best bet, even though the Disclaimer Trust is a less flexible trust. On the other hand, you may decide that the Formula Option is better suited for your situation since it will provide your spouse with greater control over the property in the Formula Exemption Trust.

Portable Exemption Law

The now “permanent” federal estate tax laws have introduced another layer to our estate planning discussions. This added layer is referred to as the portable estate tax exemption law. The portable estate tax exemption law is applicable to married couples and provides that, when the first spouse dies, the surviving spouse may elect to take the unused portion of the deceased spouse’s federal estate tax exemption.

For example, if Dunkin dies and leaves everything outright to Gracie, we’ve already established that the assets pass free of estate tax due to the unlimited marital deduction. This means that Dunkin has not used any of his $5,250,000 federal estate tax exemption. The portable exemption law allows Dunkin’s executor to elect to allow Gracie to add Dunkin’s unused exemption ($5,250,000) to Gracie’s own estate tax exemption ($5,250,000), leaving Gracie with a total federal estate tax exemption of $10,500,000 (in this example) at her death.

The new portable exemption law has led many estate planners to encourage clients to consider simplifying their documents and eliminate complex trust provisions. However, trust provisions, like the ones described above, are still applicable in many cases.

For instance, the portable exemption does not change the state estate tax obligation. The fact that the portable exemption law may allow $10,500,000 to be sheltered from Gracie’s federal estate tax, does not mean that the same amount would be sheltered from Gracie’s Connecticut or New York estate tax. She would only have her $2,000,000 Connecticut estate tax exemption (or her $1,000,000 New York exemption if she moved to New York). Accordingly, for Connecticut and New York residents, planning techniques described above are still an important tool in reducing or eliminating estate taxes.

Factors unrelated to estate taxes such as asset management, young beneficiaries or beneficiaries dealing with special problems, may also warrant the use of trusts and other complex provisions in our Wills. For more on this issue, see: Simplify Your Estate Plan Maybe.

In addition, many people are worried about nursing home costs and are interested in protecting assets from the costs of long term care. Married couples have a unique opportunity to shelter assets upon the death of the first spouse through the use of trusts established under the terms of their Wills. For more information about protecting assets from long term care costs, please see our other posts:

Special Needs Trusts

Elder Law – Basics of Planning for Incapacity

Posted on 4/28/2013 by Kasey S. Galner, Associate, Chipman, Mazzucco, Land & Pennarola, LLC.

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

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Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

Basic Estate Planning Video Updated to Reflect ATRA

February 24, 2013

The American Taxpayer Relief Act of 2012 (“ATRA” effective January 1, 2013) will change everything about estate tax planning.  We recently updated our Basic Estate Planning Video to reflect ATRA and posted it to YouTube.

Background

April 30, 2013 (Updated April 20, 2015)

We offer seminars to our clients, their advisors, and other friends of the firm, every year.  One of the most popular has been our Basic Estate Planning Seminar.  On March 14, 2013, we offered our Basic Estate Planning seminar at the Maron Hotel, Danbury, Connecticut.  The seminar covered the topics mentioned below.

Those who could not attend the seminar may be interested in taking a look at the Basic Estate Planning video that we recently finished updating to reflect the recently enacted American Taxpayer Relief Act of 2012 (effective January 1, 2013).

The presentation is in 15 parts.  Click on the red  “Basic Estate Planning after ATRA (15 Parts)”  heading below and then click “Play All” under “Basic Estate Planning” at the top of the YouTube page.

Basic Estate Planning after ATRA (15 Parts)

We describe each of the parts below with an individual link to each one. 

Part 1:  Introduction.  Wills and probate property vs. nonprobate property.

Part 2: Beneficiaries, mistakes with nonprobate property, trust basics, guardian appointments, life insurance beneficiary designations, and estate taxes.

Part 3:  Wills, the estate taxation of life insurance death benefits, tax issues and asset protection issues relating to Wills, and disclaimer Wills.

Part 4: Formula marital deduction Wills, exemption trusts, risk of disinheriting the surviving spouse as estate tax exemptions increase, the portable estate tax exemption, and asset protection bypass trusts.  

Part 5:  Formula marital deduction Wills (and exemption trusts) vs. disclaimer Wills (and disclaimer trusts), and common estate planning mistakes.

Part 6:  Common estate planning mistakes continued, the duties of an Executor, the duties of the Trustee, the duties of a guardian, planning for post-death cash needs, and the generation skipping tax.

Part 7: Retirement plan accounts (IRAs, 401(k) plans, 403(b) accounts, etc.), estate taxation on retirement plan accounts, the risk of a circular tax on tax problem at death of account owner, life insurance and irrevocable life insurance trusts as a solution.

Part 8: Retirement plan accounts and related income tax issues, effects of beneficiary designations on deferral periods, spouse as beneficiary and tax deferred rollovers, required minimum distributions, and tax treatment of inherited IRAs, and the five year payout rule.

Part 9: Revocable living trusts, the living trust as a Will substitute, probate avoidance, planning for incapacity, and establishing a revocable living trust.

Part 10:  Comparison of revocable living trust plan with non-living-trust plan, treatment of lifetime issues, powers of attorney as an alternative to the revocable living trust, and what it means to avoid probate.

Part 11:  Comparison continued, avoiding ancillary probate in other states where real property is located, creditors’ claims and safe harbors for the Executor, and income and estate taxes.

Part 12:  Comparison (continued), accounting requirements, releases from liability, continuing trusts and continuing probate court jurisdiction, reasons for considering revocable living trusts, management during incapacity, and real property in other jurisdictions.

Part 13:  Reasons for considering a revocable living trust (continued), controversial estate plans, probate notice requirements, disruption of support for third parties, probate and related delays, simplifying estate settlement for survivors, nonreasons for considering revocable living trusts, the living trust as tax neutral, and probate court fees.


Part 14: Gift planning, gift and estate tax exemptions, exclusions for small gifts, gifts to education funds (529 plans), exclusions for qualified tuition and medical costs, gift tax marital deductions,  gifts to U.S. citizen spouse, and gifts to noncitizen spouse.

Part 15: Gifts of life insurance policies, incidents of ownership, irrevocable trusts as owner, three year rule relating to transfers of life insurance policies, and sophisticated gift techniques (qualified personal residence trusts, grantor retained annuity trusts, valuations for gift tax purposes, gifts to charities and charitable trusts).

 Posted on 2/24/2013 by Richard S. Land, Member, Chipman, Mazzucco, Land & Pennarola, LLC.

 

Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

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Simplify Your Estate Plan Maybe

January 13, 2013

The recent American Taxpayer Relief Act (effective 1/1/2013) could have been named the Great American Estate Planning Simplification Act. All but the very wealthy could call January 1, 2013, Federal Estate Tax Liberation Day. In other words, all but the very wealthy will be able to rely on simple Wills (Wills that don’t include complicated tax and trust provisions) unless one of the exceptions listed below applies to you.

Exceptions:

(1) You live in a state that still has an estate tax. Connecticut has an estate tax with an “exemption” of $2,000,000 and New York has an estate tax with an exemption of $1,000,000.

(2) Special problems plague your beneficiaries: creditor problems; divorces and troubled marriages; poor judgment; gambling habits; drug dependence; health problems; special needs; and poor financial training, financial skills or lack of interest in financial matters.

(3) A need to plan for long term care, whether at home or in a nursing home, for a surviving spouse or other beneficiary.

(4) Your primary beneficiary is your current spouse from a second marriage and you want to provide for the children of a previous marriage.

(5) Your children or other beneficiaries are too young to handle an inheritance or have special needs to consider.

(6) You have a business which will require management if it is to provide appropriately for your beneficiaries after your death.

(7) You are concerned about the management of your assets for you and your family in the event of your incapacity.

(8) You want to disinherit an undeserving relative or you would like to include provisions in your planning documents that your survivors might consider controversial.

(9) You have difficult-to-manage assets (for example, a closely held business, rental properties, collections of art, antiques and other creative works, weapons, etc.).

(10) You are concerned that your surviving spouse’s remarriage after your death will result in a diversion of your assets away from your children or other intended beneficiaries.

(11) You may be wealthier (for estate tax purposes) than you think you are. To determine the size of your estate, start by counting everything that will pass to others at the time of your death: home, retirement accounts, annuities, IRAs, life insurance, bank accounts, stocks and bonds—everything. Is it over $5,250,000? If so the Great American Estate Planning Simplification Act probably does not apply to you.

(12) You are in a same-sex or other “nontraditional” committed relationship (married or otherwise).

(13) Your estate is increasing and there is a strong possibility that, as a result of your efforts, luck, inflation, additional life insurance, or a combination of such factors, you will join the ranks of the “very wealthy”. In that case, it may be important for your documents to include all the existing tools for effective “post mortem” tax planning. See: It’s Not Too Late (Fixing Your Estate Plan After Your Death).

(14) You want to provide for your grandchildren by bypassing your children to some extent.

(15) You want to provide benefits for your grandchildren in amounts that may exceed one generation skipping tax exemption (currently $5,250,000).

(16) Although disadvantages of probate are often overstated, you nevertheless wish to arrange your affairs to avoid probate.

(17) Unique facts reveal unique problems that often require unique (and perhaps not simple) solutions.

With the above exceptions (and probably others I have not thought of), a simple Will may be all you need.

For those of you who currently have in place more complicated, tax sensitive documents, it may be very important for you immediately to change to something simpler. If the tax provisions in your Will are based on the federal estate tax exemption, failure to change to a simpler Will may result in unnecessary Connecticut or New York estate tax (more than $250,000 for Connecticut residents and more than $400,000 for New York residents) at the time of your death. For more details, see our companion post on this blog here: “New Risks of Unnecessary State Estate Taxes.”

For an excellent summary of the changes resulting from the Act, go to this post prepared by Clearwater, Florida, Attorney Alan Gassmann: Summary of the American Taxpayer Relief Act of 2012.

Posted on 1/13/2012 by Richard S. Land, Member, Chipman, Mazzucco, Land & Pennarola, LLC.

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

For Email Marketing you can trust.

Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

New Risks of Unnecessary State Estate Taxes

January 13, 2013

The American Taxpayer Relief Act (effective 1/1/2013) created an opportunity for many to simplify their estate plans. In our companion article on this blog, Simplify Your Estate Plan Maybe, we encouraged you to consider simplification. Without simplification, many married couples risk the imposition of an unnecessary state estate tax (the focus of this post).

In Simplify Your Estate Plan Maybe, we also encouraged you to take a look at Clearwater, Florida, Attorney Alan Gassmann’s excellent summary here: Summary of the American Taxpayer Relief Act of 2012.

It sounds strange and counterintuitive, after so many decades of convincing clients that complex trust arrangements were necessary to save federal estate taxes, but it is true: by adopting a simple estate plan (and revoking the old complex one), a Connecticut married couple can save as much as $250,000 and a New York married couple can save as much $400,000.

Connecticut Residents: Many estate plans are based on documents that provide that, when one spouse passes away, an amount equal to as much as the federal estate tax exemption (as of 1/1/2013 this is $5,250,000) will pass to a trust for the benefit of the surviving spouse. If the amount passing to the trust exceeds the Connecticut estate tax exemption of $2,000,000, a Connecticut estate tax will be imposed. If the full amount of the federal exemption passes to the trust, the Connecticut estate tax would be approximately $250,000. The Connecticut estate tax would be avoided if all the $5,250,000 were to pass to the surviving spouse or if the amount passing to the trust were limited to $2,000,000 (the Connecticut estate tax exemption).

New York Residents: The New York estate tax exemption is $1,000,000. If an amount equal to the federal estate tax exemption ($5,250,000) were to pass to the trust, the New York estate tax would be approximately $400,000. The New York estate tax would be avoided if all the $5,250,000 were to pass to the surviving spouse or if the amount passing to the trust were limited to $1,000,000 (the New York estate tax exemption).

In the past, estate planners worried that, if the surviving spouse were to receive 100% of the assets, the surviving spouse’s estate would be large and exposed to the federal estate tax at the surviving spouse’s death. The rules have changed, however, to enhance the surviving spouse’s federal estate tax exemption. Not only would the surviving spouse have his or her own $5,250,000 federal estate tax exemption, the surviving spouse would also receive the unused portion of the deceased spouse’s exemption (in this case $5,250,000). As a result, the surviving spouse would have a total federal estate tax exemption of $10,500,000, more than enough to shield all but the wealthiest from the federal estate tax.

Keep in mind, however, that the state estate tax could still apply at the surviving spouse’s death. As a result, clients might still want to engage in planning to reduce state estate taxes. Such planning would resemble the planning which, in the past, revolved around the federal estate tax exemption. In addition, the surviving spouse may simply decide to move to a state that has no estate tax.

Posted on 1/13/2012 by Richard S. Land, Member, Chipman, Mazzucco, Land & Pennarola, LLC.

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

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Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

Video of July Basic Estate Planning Seminar Posted to YouTube

October 8, 2012

The video of our July Basic Estate Planning Seminar has been posted to YouTube.  You can access it below.

The question and answer sections were the focus of this seminar.

Richard S. Land, attorney and member of Chipman Mazzucco, made  the presentation in five parts, each part building on the preceding one and followed by a question and answer session.

Part One (and the Part One Q&A): Will basics; consequences of not having a Will, the difference between probate property and nonprobate property; trusts; guardians; and executors.

Part Two (and the Part Two Q&A): federal and Connecticut estate taxes and estate tax “exemptions”; the “portable” estate tax “exemption”; “exemption” increases and decreases; the estate tax marital deduction; assets included in an estate for estate tax purposes; life insurance as part of the estate for estate tax purposes; 529 education plan accounts; and Will and trust provisions designed to save estate taxes including the differences between trusts created by a surviving spouse’s disclaimer and trusts established under a formula provision included in the Will.

Part Three (and the Part Three Q&A): common mistakes made in estate planning; jointly owned assets; things to consider when selecting Executors, Trustees and Guardians; retirement plan accounts (IRAs, 401(k), 403(b), etc.); how rules relating to required minimum distributions from retirement accounts affect the drafting of Wills, trusts and beneficiary designations; and life insurance and irrevocable life insurance trusts to provide estate liquidity.

Part Four (and the Part Four Q&A): revocable living trusts; incapacity planning; probate avoidance; the probate process; controversial estate plans and other reasons to use a revocable trust; and nonreasons for using revocable living trusts.

Part Five (and the Part Five Q&A): gift planning; gift tax exemptions; exclusions from taxable gifts; the marital deduction; gifts of life insurance and irrevocable life insurance trusts; proposals for estate tax reform and changes to estate tax exemptions and tax brackets; Roth IRA conversions; making gifts of interests in a home or vacation home; large gifts in 2012 to take advantage of 2012 (current) large exemptions.

Each part is a slightly condensed version of the more detailed slideshow type presentation you can find here:

The slideshow presentation is more detailed and  includes more subjects relevant to planning for New York residents but has no Q&A. 

We hope you find this information helpful.

Posted on 10/8/2012 by Richard S. Land, Member,  Chipman, Mazzucco, Land & Pennarola, LLC.

 We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below. 

 
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Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

Basic Estate Planning Seminar With Extended Q&A Format

July 5, 2012

LocationMatrix Corporate Center, Sunset Vista Room, Fourth Floor, 39 Old Ridgebury Road, Danbury, CT

Directions:  Directions to Chipman MazzuccoDon’t rely on your GPS.  Please read and follow these directions.

Date:  July 26, 2012

Time:  5:30 to 7:30 pm (Doors open at 5:00)

Register here:  Seminar Registration.  Or, call 203-744-1929 for reservations.  For more contact information, go to the end of this post.  

No admission charge.  Our seminars are always strictly educational.

Description

We will cover the topics listed below.  Each listed Part corresponds to a Part in our Basic Estate Planning Video which you can see on YouTube here:  Basic Estate Planning Video.  If you would like to have the video on DVD, please let us know and we will send you one.

The Seminar will have four sections.  Each section will summarize topics covered in the video.  Q&A will follow each section.

To get the most out of the seminar, attendees should view the whole video before attending.  We understand that time may not permit that, however, and we are structuring the program to make certain it will be well worth your time even if you do not view the video.

Send Us Your Questions

If you think of a question before the seminar, let us know right away before you forget.  If the question is appropriate for a group educational program, we will try to answer it during the program.  Send your questions here: rsl@danburylaw.com (Richard S. Land) or here ksg@danburylaw.com (Kasey S. Galner).

 Seminar Topics

Part 1:  Introduction.  Wills and probate property vs. nonprobate property.

Part 2: Beneficiaries, mistakes with nonprobate property, trust basics, guardian appointments, life insurance beneficiary designations, and estate taxes.

Part 3:  Wills, the estate taxation of life insurance death benefits, tax issues and asset protection issues relating to Wills, and disclaimer Wills.

Part 4: Formula marital deduction Wills, exemption trusts, risk of disinheriting the surviving spouse as estate tax exemptions increase, the portable estate tax exemption, and asset protection bypass trusts.

Part 5:  Formula marital deduction Wills (and exemption trusts) vs. disclaimer Wills (and disclaimer trusts), and common estate planning mistakes.

Part 6:  Common estate planning mistakes continued, the duties of an Executor, the duties of the Trustee, the duties of a guardian, planning for post-death cash needs, and the generation skipping tax.

Part 7: Retirement plan accounts (IRAs, 401(k) plans, 403(b) accounts, etc.), estate taxation on retirement plan accounts, the risk of a circular tax on tax problem at death of account owner, life insurance and irrevocable life insurance trusts as a solution.

Part 8: Retirement plan accounts and related income tax issues, effects of beneficiary designations on deferral periods, spouse as beneficiary and tax deferred rollovers, required minimum distributions, and tax treatment of inherited IRAs, and the five year payout rule.

Part 9: Revocable living trusts, the living trust as a Will substitute, probate avoidance, planning for incapacity, and establishing a revocable living trust.

Part 10:  Comparison of revocable living trust plan with non-living-trust plan, treatment of lifetime issues, powers of attorney as an alternative to the revocable living trust, and what it means to avoid probate.

Part 11:  Comparison continued, avoiding ancillary probate in other states where real property is located, creditors’ claims and safe harbors for the Executor, and income and estate taxes.

Part 12:  Comparison (continued), accounting requirements, releases from liability, continuing trusts and continuing probate court jurisdiction, reasons for considering revocable living trusts, management during incapacity, and real property in other jurisdictions.

Part 13:  Reasons for considering a revocable living trust (continued), controversial estate plans, probate notice requirements, disruption of support for third parties, probate and related delays, simplifying estate settlement for survivors, nonreasons for considering revocable living trusts, the living trust as tax neutral, and probate court fees.

Part 14: Gift planning, gift and estate tax exemptions, exclusions for small gifts, gifts to education funds (529 plans), exclusions for qualified tuition and medical costs, gift tax marital deductions,  gifts to U.S. citizen spouse, and gifts to noncitizen spouse.

Part 15: Gifts of life insurance policies, incidents of ownership, irrevocable trusts as owner, three year rule relating to transfers of life insurance policies, and sophisticated gift techniques (qualified personal residence trusts, grantor retained annuity trusts, valuations for gift tax purposes, gifts to charities and charitable trusts).

SEMINAR LOCATION AND TIME

The seminar will be on July 26, 2012, at the Matrix Corporate Center, Sunset Vista Room, Fourth Floor, 39 Old Ridgebury Road, Danbury, Connecticut from 5:30 p.m. to 7:30 p.m. The doors will open at 5:00. Refreshments will be served.

These seminars are always well attended and space is limited. If you wish to attend, or if others you know are interested in attending, to reserve space call us (203-744-1929) or send an e-mail message to me (Richard Land at rsl@danburylaw.com) or Kasey Galner (at ksg@danburylaw.com) or Lynn D’Ostilio (at lsd@danburylaw.com) containing your name, number attending, telephone number and e-mail address.

You may also register here: Seminar Registration.

 Posted on 7/4/2012 by Richard S. Land, Member, Chipman, Mazzucco, Land & Pennarola, LLC.

Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

Planning Question and Answer Sessions. Please Take This Survey!

May 15, 2012

When Do You Want an Estate Planning Q&A Session?  Please take this survey.

 May 15, 2012.

We recently published a Basic Estate Planning video on YouTube and DVD.  We hope that you will have a chance to see it if you have not already done so.

You can see the YouTube version here:  Basic Estate Planning Screencast on YouTube

We are scheduling group meetings so that interested parties can ask questions related to the subjects in the video.  There will be no charge or obligation. 

Location: Chipman Mazzucco, Attorneys, Matrix Corporate Center, 39 Old Ridgebury Road, Suite D-2, Danbury, Ct. o6810.

We ask you to click on the link below to complete this survey so that we know what will be convenient for you.  It will take only one minute.

Survey Link

 
Thank you for participating in the survey.  It will be a great help to us in our efforts to help you.
 
 
Posted on 5/15/2012 by Richard S. Land, Member, Chipman, Mazzucco, Land & Pennarola, LLC.

Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

We frequently post articles relating to estate planning, estate settlement and elder law issues to this blog. We also post notices about our client seminars here. When we do, we send out notices to clients and friends of the firm. If you would like to get our notices, please join our mailing list by clicking below.

     
  Join Email List  
     

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