As the old song by Paul Simon contemplates, there are fifty ways to leave your lover, and there are also fifty ways to plan, administer and litigate estates and trusts. I have recently become aware of various situations in which attorneys assume that because things are done a certain way in the state in which they practice, they are done the same way in other states.
I am licensed in three states, Colorado, Utah and Wyoming, and deal regularly with the significant differences between them. For example, Colorado tends to use “by representation” in dealing with passing assets down the generations, but Utah and Wyoming both use “per stirpes.” Read more >>
IRS Revenue Procedure 2017-34, effective as of June 9, 2017, increases the amount of time that a surviving spouse has to file an estate tax return (Form 706) for the purpose of electing portability of the Deceased Spousal Unused Exclusion amount (otherwise known as “DSUE”). The portability election, which was first introduced in 2010 and made permanent under the American Taxpayer Relief Act of 2012, offers a great way for a surviving spouse to preserve the unused estate tax exemption of their deceased spouse. The DSUE amount can then be added to the surviving spouse’s own exemption amount and be used to shelter the surviving spouse’s lifetime gifts and transfers at death from estate taxes.
Prior to June 9, 2017, a portability election was required to be made on a timely filed estate tax return, due to the IRS nine months from the decedent’s date of death, with the availability of an automatic six month extension. The IRS has once before provided some relief from this deadline in Revenue Procedure 2014-18, but that ruling was temporary and provided no relief for the estates of decedents dying after January 1, 2014. The IRS claims to have been flooded with numerous requests for an extension of time to file for the portability election and has issued this new Revenue Procedure to provide a simplified method to obtain the extension to elect portability for a decedent’s estate who has no estate tax filing requirement to the later of (i) January 2, 2018 or (ii) the second anniversary of the decedent’s date of death. Note that the regulation provides that this longer deadline is not available to the estate of a decedent if an estate tax return was timely filed. In such case, the executor either will have elected portability by timely filing the return or will have affirmatively opted out of portability by not making the election. Read more >>
As long as I have been a probate paralegal, and even prior when I worked in financial services, I have spoken about assets with beneficiary designations, including life insurance, retirement accounts and annuities passing outside of probate as if they were a foregone conclusion. Period. End of Story. However, some recent situations have reminded me that the plot of the story may indeed have a surprise ending.
First of all, it bears reminding to our clients, that documents with beneficiary designations do not pass in accordance with the general instructions in the Decedent’s Will. I recently worked with a client that became concerned when we learned that an estranged family member received a portion of an IRA account due to the beneficiary designation. It was very confusing and upsetting to her that this family member received assets in addition to those provided for in the Will.
Secondly, there are situations where the beneficiary designation needs to be reviewed and confirmed, both at the time the designation is made and at the time of the claim. Read more >>
As regular readers of this blog know, one of our favorite topics is digital assets, including estate planning for digital assets. Today, we’re taking a slightly different focus and discussing developments in digital estate planning, more commonly known as electronic wills.
One of the more recent developments in estate planning is the concept of electronic wills. In general, an electronic will is one that is signed and stored electronically. Instead of signing a hard copy document in ink, the testator electronically signs the will, and it is also signed by witnesses and notarized electronically. Not surprisingly, companies like LegalZoom are very interested in this topic.
The Oklahoma Supreme Court recently upheld a ruling that has required the Personal Representative of an Estate to take the necessary steps to transfer the deceased spousal unused election (DSUE) to the surviving spouse. The case stems from the rights created by the federal gift and estate tax laws regarding portability. More specifically, beginning in 2010 one spouse was allowed to transfer, at death, his or her unused gift and estate tax exemption to the surviving spouse. Prior to 2010, each spouse had his or her own gift and estate tax exemption, but any portion of that exemption which remained unused by the spouse at death could not be transferred to the surviving spouse.
In In re Estate of Vose, 390 P.3d 238 (Okla. 2017), the Personal Representative of the Estate, one of the children of the decedent by a prior marriage, had refused to make the required election for transfer even though the surviving spouse agreed to pay the cost required to prepare the necessary Federal Estate tax return to do so. Read more >>
With income tax season upon us, we are inundated with warnings from the IRS to take extra caution when filing our individual income tax returns with identity theft on the rise. But identity theft also happens to Decedents.
We recently had an estate that filed a final individual income tax return for a Decedent and the estate was expecting a sizeable refund. When the refund check did not arrive, we attempted to track it down with the IRS. All calls to the IRS hit dead-end after dead-end. No agent at the Service would talk with us even though we had the Personal Representative on the phone line with us and all necessary information to validate our identity. Read more >>
Does the fact that a husband and wife create “mirror-image” wills or trusts mean that they have entered into a contract with their spouse to maintain the dispositive provisions in the document? The law in Colorado is very clear that no contract exists merely because the documents are “mirror-image” or reciprocal.
Pursuant to Colo. Rev. Stat. § 15-11-514, a contract to make a devise may be established only by:
(i) provisions of a will stating material provisions of the contract, (ii) an express reference in a will to a contract and extrinsic evidence proving the terms of the contract, or (iii) a writing signed by the decedent evidencing the contract. The execution of a joint will or mutual wills does not create a presumption of a contract not to revoke the will or wills. (emphasis added).
It is well documented that all of our lives have become more data-driven and we are practically tethered to our electronic devices. Therefore, it should not be surprising to realize that more and more of our assets, and those of our clients, have a digital component. What may be surprising, however, is just how much value we place on our digital assets. Surveys report that the average value of personal digital assets owned by individuals globally ranges from $35,000 – $55,000.
A few key words typed into any search engine, including a review of articles written on this blog, will provide a wealth of information on accessing digital assets, including digital assets in your clients’ estate planning documents, and safeguarding your digital assets inventory. However, after the client’s death, once we have a list of their digital assets, and have gained access those assets, it is prudent for the probate and trust practitioner to remember to value those assets. Read more >>
RUFADAA is a significant leap by the State of Colorado to catch up to the digital age. Prior to the passage of the law, the pervasive use of electronic banking and investing has posed a problem for many fiduciaries. Without the receipt of paper statements, personal representatives, financial agents, trustees and conservators have had a difficult time locating an individual’s assets, sometimes leading to an exhaustive search of several banking and financial institutions before asserts are uncovered. Read more >>
Will the estate tax be eliminated as part of the tax reform promised by the incoming administration? Unfortunately, my crystal ball is not working well and I don’t have an answer for that question. I would, however, like to share a bit of the tortured history of the estate and gift tax since the Civil War in the hope that it might give us some perspective when wondering what the future will bring.
A series of Acts between 1862-64 created an inheritance tax which helped finance the war effort. Rates were between .75% and 5% and there was an exemption of $1,000. In 1870 the inheritance tax was repealed. An estate tax was again instituted to fund a war effort in 1916, in response to World War I. The rates were between 1% and 10% and there was an exemption of $50,000.