Matthew Curtiss, Esq

Connecticut Law Tribune: Where There’s A Will, There’s A Way – To Object

“I’d definitely say I’ve had more will contests in the last six months than I had in the first three years [as probate judge],” said Newington Probate Judge Robert A. Randich. “No doubt the economy has something to do with it.”

Randich has had four cases involving contested wills in the last few months after handling only a couple in the last three years. Economic pressures play a part and there’s usually a communication breakdown in a family that strains relations further, Randich said.

“People are watching each dollar with greater scrutiny,” he added, and they’re more likely to challenge wills in court.

East Hartford Probate Judge Allan T. Driscoll has four ongoing contested will cases where in the past he wouldn’t see more than one at a time. “I’m attributing it to the economy,” Driscoll said.

via www.ctlawtribune.com

While I think the economy has much to do with the uptick in will contests, I'd propose another reason:  the modern American family.

Families are more separated like no other previous generation.    We text and email and Facebook, but very few families live in the same town anymore and have sunday night dinners together or frequent each other's homes.

Siblings are often separated by states rather than a few miles. And when that happens, often communcations break down and misunderstandings arise.

The parents end up unknowingly being the foundation of the family:  the peacekeepers and moderators.  Unfortunately, in my experience, when the parents pass on, with that lack of moderation , all of that built up lack of communication is exposed raw to the world and disagreements over the silliest and smallest things can arise.

I'm not sure society can change in this respect, but perhaps our means of communication and community can.

Congress and Estate-Tax Revisions - WSJ.com

Q: Who in Congress are the key leadership players on revising the estate tax? Is this a separate issue or part of overall tax reform? Is it possible they will deal with this prior to their August recess?

—L.R., Santa Fe, N.M.

A: Among the major players are Senate Majority Leader Harry Reid, a Nevada Democrat, and Sen. Max Baucus (D., Mont.), who heads the Senate Finance Committee, which oversees tax legislation.

Others include Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee; Sen. Jon Kyl (R., Ariz.); and Sen. Blanche Lincoln (D., Ark.)

The main focus is on the Senate since the House already has approved estate-tax legislation. Among the key players in the House: Speaker Nancy Pelosi, a Democrat from California, and Democratic Rep. Sandy Levin of Michigan, chairman of the powerful Ways and Means Committee. Rep. Dave Camp of Michigan is the ranking Republican on the Ways and Means Committee.

On your question about timing: Nobody knows when Congress will act, or whether this tax will be dealt with as part of some wide-ranging legislation. It's possible that the Senate might reach agreement in coming weeks. But lawmakers might wait to tackle the issue until after the November elections.

via online.wsj.com

I good primer on who is sitting on their hands and who is not at this juncture.

Time running out to exploit gift tax break | Reuters

NEW YORK, June 7 (Reuters) - U.S. gift tax rates are the lowest since the Depression, but advisers say rich clients are refraining from giving money to heirs because they are still reeling from losses they suffered during the financial crisis.

.......

Sue Stevens, a Deerfield, Illinois-based financial planner, said even her wealthiest clients are reluctant to give away their money after seeing their fortunes diminish during the financial crisis.

"Everyone is scared they're going to run out of money," said Stevens. "But I tell them that, with rates going up, this is a pivotal year for tax planning and we need to be thinking of every opportunity."

And the cost of doing nothing could be high. Lawmakers have been debating changes to U.S. tax policy. If Congress fails to act, as happened last year, the top gift and estate tax rates will jump to 55 percent in 2011.

The 2010 gift tax rate is the lowest since 1934, when the rate was 33.5 percent, according to a study by tax publishing company CCH.

Each year, individuals can make a gift of $13,000 to any number of people without incurring gift tax. They can also give $1 million over this amount during their lives without paying a gift tax.

via www.reuters.com

Keep in mind that the $13K annual exclusion can be effectively doubled if spouses give to the same person.  Non-cash gifts such as real estate and personal property owned jointly can utilize the "gift splitting" rules which allows spouses who own those assets jointly to gift away 50% of the value of that asset.  For example, a married couple gifting a $500K home owned jointly to their child could split that gift so that each spouse utilizes only $250K of their lifetime gift tax exemption.

Proposed Estate Tax: Pay Now, Die Later - The Wealth Report - WSJ

Some new proposals kicking around Congress make for even weirder possibilities. According to Tax Notes, Sen. Jon Kyl (R., Ariz.) is reportedly mulling a kind of prepaid estate tax.

It is unclear exactly how the plan would work, but one scenario would allow people to create “prepayment trusts.” They could put assets into the trust for five years and pay a 35% capital-gains tax on the gains of the assets. When the taxpayer dies, the assets would pass to heirs without any estate tax.

As Tax VOX points out, “The option provides two big tax breaks: there’s no tax on the owner’s basis of assets transferred to the trust and any subsequent profits are taxed at the preferential capital gains tax rates.”

The effect for the government is to create much-needed revenue now, but a big drop-off in collections later, which could get around Congress’s pay-as-you go rules.

via blogs.wsj.com

Seems plenty reasonable in light of the inaction and do-nothing currently going on.

Plus, it might incentivize wealthy families into pre-paying now rather than waiting for some future impact which may or may not happen down the line. (would a wealthy 85 year old widower pre-pay in 2008 knowing the estate tax exemption was going to $1M in 2011? maybe....)

What say you?

US Senate Effort To Reduce Estate Tax Hits Turbulence

WASHINGTON -(Dow Jones)- Senators seeking a bipartisan deal to cut taxes on wealthy estates said negotiations have stalled, as several Senate Democrats strongly condemned the efforts Tuesday.

President Barack Obama has proposed exempting estates worth less than $3.5 million, or $7 million for couples, and taxing wealth above that amount at 45%.

Senators that want to reduce estate tax rates even further have in the past two weeks closed in on a compromise that would not add any more to the deficit, at least in the short-term, than Obama's plan. The plan would start at Obama's proposed levels in 2011, but gradually phase down to a 35% rate and a $5 million exemption level.

But Tuesday they said that a proposed compromise is in limbo. "Nothing is clear about how the estate tax will be considered," said Sen. Jon Kyl (R., Ariz.), the lead Republican in the negotiations. "Last week I believed there was an agreement on what the details were going to be. That may not be the case now."

"There's no agreement on estate tax, neither on substance nor on process. None whatsoever," said Senate Finance Committee Chairman Max Baucus (D., Mont.), who is one of two Democrats involved in the talks, the other being Sen. Blanche Lincoln (D., Ark

via www.nasdaq.com

Dear Senators:

I understand that this is an election year, but can you please at least pretend that this is an issue which needs to be rectified?

Yes, taxes need to be raised, the issues of who bears the brunt of that tax and for how much is a huge issue which needs more than a cursory thought; but allowing families and beneficiaries to swing in some sort of purgatory is unconscionable. You all knew this was coming for more than a few years.

Please get something done.

Thank you in advance,
Me

Living Wills Do Make a Difference at the End of Life - NYTimes.com

Researchers at the University of Michigan in Ann Arbor combed through the records of over 4,000 individuals over age 60 and found that almost a third of these patients would eventually become too incapacitated to make the necessary decisions regarding medical treatment at the end of life. But among them, nearly all of those with a living will requesting limited or comfort care only ultimately did receive such care at the end of their lives. And those patients who specified all care possible were far more likely to receive aggressive care than those who did not request it.

“We need to take the initiative to document decisions seriously,” said Dr. Maria J. Silveira, lead author of the study and an assistant professor of internal medicine at the University of Michigan. “Every person who comes through the door at age 60 or above has a significant chance of losing decisional capacity.”

via www.nytimes.com

A large portion of my practice encompasses drafting estate planning documents for new parents and younger couples. Parenthood often pushes us to examine the future in ways we never had to before. I think with these younger couples, the choice of guardians and trustees for their children are the paramount choices that they make.

It's not that younger couples don't think about the end-of-life choices that a Living Will and Advance Health Care Directive entail, but its that the future is so far out, at least in perception.

While the living will portion of the Advance Health Care Directive is certainly important, its the appointment of health care representative which might be the bigger issue for younger people, since even a hospital stay for minor surgery might require health care decisions by someone while the patient is under anesthesia.

Her last gift: A little house in Newton, just for the cats - The Boston Globe

NEWTON - Muriel Bayne’s love for her cats was well known on Staniford Street in Auburndale. Neighborhood children called her the “Cat Lady’’ and Bayne’s pets were often seen contentedly peering from a picture window at the small ranch house where she lived for decades.

But Bayne, 77, had a weak heart. And after her husband’s death in 2001, she started worrying about what would happen to her cats when she died. So she penned a will, leaving them the home and a $300,000 trust. Weeks later, Bayne’s heart gave out.

That’s how Shadow, Dolly, Lady, and Spot became trust fund cats.

via www.boston.com

A good reminder that Connecticut recognizes pet trusts. For more info, take a look at my previous post on the subject.

NY Post: Leona kin $crew the pooch

More than 30 animal-rescue groups have written letters to the judge presiding over the administration of the late Queen of Mean's fortune, asking that she help carry out Helmsley's request that her money go to the dogs.

Helmsley died in 2007, leaving the majority of her $8 billion fortune to a charitable trust to be administered by close friends and relatives for "purposes related to the provision of care for dogs."

But when the trust started doling out her cash earlier this year, only $1 million of the first $136 million in grants went to canine causes.

via www.nypost.com

OK, so it's not as flashy as "Headless Body Found in Topless Bar".

Thanks to Attorney Matthew Berger for the heads up.

State Death Taxes Are the Latest Worry - WSJ.com

With the federal estate tax disappearing for most people, state death taxes have emerged as a surprise new worry.

This year, the federal exemption rose to $3.5 million per individual, or as much as $7 million per married couple. At the current level, only 5,500 estates a year are federally taxable.

That is down from the 17,500 estates that would have faced death taxes under the previous $2 million limit, the Urban-Brookings Tax Policy Center estimates.

The problem is that most states with estate or inheritance taxes haven't raised exemptions to match the federal limits. That means thousands of taxpayers who now escape the federal levy could still get hit with a state death tax.

via online.wsj.com

As the Wall Street Journal points out, the Feds don't talk with the States regarding estate tax exemptions and vice versa. States are usually left to play catch-up once the federal estate tax changes are made. The last few years have been relatively quiet; though many practitioners have been awaiting some resolution regarding the Connecticut "cliff tax" which will be going away on January 1, 2010. As of that date, if an estate is valued over the Connecticut exemption, the estate no longer get taxed all the way back to "$1 and above" but only on the amount over the exemption.

As of 2010, Connecticut should be in better shape in terms of the differences between its estate taxes and the Federal estate taxes.

Illinois Supreme Court: Wills can use religious tests -- chicagotribune.com

Though Erla Feinberg's final act might have disappointed most of her grandchildren, it carried out her late husband's dying wish in a way that held up in court.

In a unanimous decision Thursday, the Illinois Supreme Court ruled that Max Feinberg and his wife, Erla, could legally disinherit any grandchildren who married outside the Jewish faith as long as the method of doing so did not encourage divorce.

"Although those plans might be offensive to individual family members or to outside observers, Max and Erla were free to distribute their bounty as they saw fit and to favor grandchildren of whose life choices they approved," Justice Rita Garman wrote.

via www.chicagotribune.com

I wonder what the result would be if it were a race-based criteria in the Will rather than religious.

Thanks again to Attorney Matthew Berger for the heads up.