Tag: US estate tax
With his election victory in the not too distant past, President-elect Donald Trump is receiving extensive coverage in the media. Although the issues following him vary widely, as we at Hull & Hull LLP are estates lawyers, our focus is on the effect the President-elect is having in the estates community.
US Estate Tax
As previously blogged by Hull & Hull LLP, the President-elect is considering abolishing estate tax in the United States altogether. This is a departure from the current US model which sees married couples exempt for the first $10.9 million in their estate, with any surplus amount being taxed at 40%. In relation to this current model, recent polls suggest that in 2015 only 10,800 estate returns were filed with about half of those being taxable.
No date has been set for the anticipated repeal.
As well, the President-elect seeks to change capital gains owing at death such that if capital gains are held until death and valued under $10 million, they will not be taxed. Apparently, the rationale is to support small businesses and family farms.
As a result of this change, it is predicted that beneficiaries of large estates will be able to avoid paying capital gains on the inherited asset if they do not sell what they inherit. They can wait to pay the tax when there is an opportune time to do so. Otherwise, those beneficiaries who are in ready need of money, will have to sell the asset, thereby triggering the tax owing.
As a result of the changes to estates and capital gains tax, pundits predict the dawn of dynastic wealth (i.e. monetary inheritance that is passed on to generations that didn’t earn it) in the United States of America.
Now, given what we have learned about the President-elect’s platform regarding estate tax and capital gains tax, consider meeting with a professional advisor to ensure your estate plan is up to date.
Find this topic interesting? Please also consider these related Hull & Hull LLP Blogs:
- Blind Trusts – Who Controls Donald Trump’s Assets While President?
- Estate Issues for Americans to Consider Before Moving North
- S. Inheritance Tax Deductions for Surviving Spouses
The lack of federal estate tax in the US for those who died in 2010 was the talk of many blogs and news reports for much of last year. In a recent statement from the IRS, Executors for such estates have been given until November 15, 2011 to make a decision regarding the taxes to be applied to the estate they are administering.
The option allows the Executor to skip paying an estate tax, or to pay tax with a $5 million per-person exemption and a 35 percent top rate, the same as applied in 2011. On its face this may seem like an easy decision, why pay taxes if it’s unnecessary, but the choice to pay tax may bring with it long term benefits for the beneficiaries of the estate. By incurring the tax, the Executor allows for a transfer of certain assets at a stepped up basis, creating a significant potential benefit to the beneficiaries. If the taxes are not paid by the Estate, significant capital gains could remain owing on certain assets, potentially impacting the beneficiaries negatively.
Complicating this choice are administration issues relating to the forms related to filing. It is anticipated that the required forms will be released in the early fall, still giving the Executors time to file. Certainly, Executors will be considering their fiduciary obligations and the various financial implications for the estate very closely in the coming months.
Even north of the border, where most of us aren’t directly affected by the choices plaguing American Executors, the fiduciary obligations and issues facing Executors are similar. If the choices made by the American Executors make their way to the courts, we’ll be paying close attention.
Nadia M. Harasymowycz – Click here for more information on Nadia Harasymowycz.
Recently on our website, Bianca La Neve blogged on the uncertainty surrounding the U.S. Death Tax and Jennifer Hartman blogged on Nabokov’s unfinished work "Laura" which the author had wanted destroyed but which his executor published anyway.
One would be forgiven for thinking the two blogs could not possibly have anything to do with one another.
But the recent death of J.D. Salinger, notoriously reclusive author of "Catcher in the Rye," has caused at least one commentator to consider the dilemma posed to the estate of a deceased author in the context of the legal uncertainty that Bianca recounted in her blog. As Richard A. Behrendt, self-described "tax geek" observes (as quoted in Floyd Norris’s blog posted on the New York Times website on January 29, 2010):
"Many have predicted that the representatives of the estate of someone who dies [during the period between January 1, 2010 and the date of implementation of any retroactive death tax] would mount a constitutional challenge to the retroactivity of the law…. Another unique issue [with respect to Salinger’s estate] is valuation. Some reports have hinted that Salinger had anywhere from 2 to 15 unpublished novels in his safe. Not to suggest that there is an unpublished “Catcher in the Rye” lying around (which has sold 60 million copies), but the possibility raises some really interesting valuation questions, namely, how much is an unpublished Salinger novel worth for federal estate tax purposes?"
For another interesting consideration of Salinger’s estate from an estate law perspective see this link.
David Morgan Smith
David Morgan Smith – Click here for more information on David Smith.
Listen to Foreign Real Estate Issues
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss foreign real estate issues and tax planning.
Hull on Estate and Succession Planning Podcast# 52 – The Necessity of a Will in Successful Succession Planning
Listen to "The Necessity of a Will in Successful Succession Planning"
Read the transcribed version of "The Necessity of a Will in Succession Planning"
During Hull on Estate and Succession Planning Episode #52, Ian Hull and Suzana Popovic-Montag discuss the importance of having a Will in succession planning.
They cover a range of necessary Will provisions including:
- The appointment of a guardian for your children;
- How to deal with authority over your children’s property and the Office of the Children’s Lawyer ;
- Avoiding the Corvette effect;
- Common disaster clauses; and
- US Estate taxes.