2014 Most Read Wills & Estate Planning Articles May Surprise You

Welcome to my first post of 2015!  In case you’re curious, below are the top ten most read articles in 2014 over at my Wills & Estate Planning Guidesite on About.com:

  1. See How the Federal Estate Tax Exemption Has Changed Since 1997
  2. How to Find a Deceased Person’s Will
  3. See How the Gift Tax Annual Exclusion Has Changed Since 1997
  4. Will Your Inheritance Cost You in Taxes?
  5. State Estate Tax and Exemption Chart
  6. 2014 State Death Tax Exemption and Top Tax Rate Chart
  7. State Inheritance Tax Chart
  8. How to Locate Online Probate Court Dockets and Request Copies of Documents
  9. What is a Revocable Living Trust?
  10. What Are the Grounds for Contesting a Will?

If you’re interested in reading any of the articles, simply click on the article name.

Well, that is certainly a hodge podge of topics, isn’t it?  – estate, inheritance and gift taxes, wills, probate dockets, revocable living trusts, will contests – but then again, estate planning covers a hodge podge of topics, that’s why my Guidesite currently has 19 different categories!

The final count on page views for my Wills & Estate Planning Guidesite in 2014 topped 8.4 million, so thanks to all of my readers for reading and my newsletter subscribers for subscribing – if you’re not a newsletter subscriber yet, you can sign up here:  Weekly Wills & Estate Planning Newsletter.

2015 U.S. State Death Taxes – A Primer on Where They’ve Been and What’s Changing

As the U.S. federal estate tax exemption continues to increase to astronomical levels (the 2015 exemption will be $5,430,000 per person), several U.S. states that collect a death tax are either trying to become more attractive tax-wise to retirees, blowing it all out and keeping pace with the federal exemption, or making the state death disappear once and for all.

While the following U.S. states will collect some form of a death tax in 2014 – Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, and Washington –in 2015 the following eight states will see changes to their state death tax laws:

   Delaware enacted an estate tax that was only supposed to be around between July 1, 2009 and June 30, 2013. Instead, the Delaware legislature acted in the spring of 2013 to keep the estate tax up and running and it is still being collected today.  The Delaware exemption is adjusted for inflation each year so that it matches the federal exemption, so in 2015 the Delaware exemption will be $5,430,000, up from $5,340,000 in 2014.  Refer to Overview of Delaware Estate Tax Laws for more information.

◊   Hawaii enacted an estate tax that went into effect on May 1, 2010.  Back then the exemption was only $3,600,000, but in May 2012 the Hawaii legislature tweaked the estate tax laws to tie the Hawaii exemption to the federal exemption for deaths occurring after January 25, 2012.  Therefore, the 2015 Hawaii exemption will be $5,430,000, up from $5,340,000 in 2014.  Note that Hawaii is also the only state that currently recognizes portability of its exemption between married couples.  Refer to Overview of Hawaii Estate Tax Laws for more information.

◊   Maryland has had a $1,000,000 estate tax exemption for many years.  However, in May 2014 the Maryland legislature made significant changes to the estate tax laws, including increasing the exemption on an annual basis until it matches the federal exemption in 2019.  Therefore, in 2015 the exemption will increase to $1,500,000.  Aside from this, Maryland will begin recognizing portability of its estate tax exemption between married couples in 2019.  Refer to Maryland Estate Tax Changes Go Into Effect in 2015 for more information about the 2014 legislation.

◊   Minnesota made some crazy changes in 2013 by enacting a state gift tax which was then retroactively repealed in 2014.  In addition, the estate tax exemption was retroactively increased from $1,000,000 to $1,200,000 for 2014 deaths and the estate tax rate was modified so that the first dollars are taxed at 9% and maxes out at 16%.  The estate tax exemption will then increase in $200,000 increments until it reaches $2,000,000 in 2018, so the 2015 exemption will be $1,400,000.  Finally, married couples can now use ABC Trust planning to defer the payment of all estate taxes until after the death of the second spouse.  Refer to Overview of Minnesota Estate Tax Laws for more information.

◊   New York joined the mix of states making changes to estate tax laws in April 2014.  And of course New York had to do things a little different.  Instead of making it easy and having the changes go into effect either retroactively back to the first of the year or not beginning until 2015, the New York exemption is $2,062,500 between April 1, 2014 and March 31, 2015, and then increases to $3,125,000 between April 1, 2015 and March 31, 2016.  The New York exemption will then continue to increase until it matches the federal exemption in 2019.  Refer to Overview of Changes to the New York Estate Tax Exemption Between 2014 and 2019 for more information.

◊   Rhode Island increased its estate tax exemption from $675,000 to $850,000 for deaths occurring in 2010 and began adjusting the exemption for inflation on an annual basis for deaths occurring in 2011 and beyond.  Nonetheless, in June 2014 the legislature was at it again, and so the Rhode Island exemption will increase from $921,655 in 2014 to $1,500,000 in 2015, and the exemption will then be adjusted annually for inflation in future years.  Refer to Changes are Coming to Rhode Island Estate Taxes in 2015 for more information.

◊   Tennessee acted in May 2012 to repeal its state gift tax retroactively to January 1, 2012 and phase out the state death tax by 2016 (note that the Tennessee death tax is referred to as an inheritance tax in the Tennessee statutes, but its really an estate tax).  The Tennessee inheritance tax exemption will therefore increase from $2,000,000 in 2014 to $5,000,000 in 2015.  Refer to Overview of Tennessee Inheritance Tax Laws for more information.

◊   Washington tweaked its state estate tax laws in June 2013 in several ways.  First, the $2,000,000 is now indexed for inflation annually.  Therefore, the exemption will increase from $2,012,000 in 2014 to $2,054,000 in 2015.  Second, the estate tax rates for the top four brackets were increased by one percentage point so that the top rate is now 20% for taxable estates valued at least $9,000,000.  Finally, certain family-owned businesses now receive an estate tax exemption of up to $2,500,000.  Refer to Overview of Washington Estate Tax Laws for more information.

For more information about U.S. state death taxes, refer to the following:

Listen Up 2011, 2012 & 2013 U.S. Estates – Don’t Miss Out on the Portability Election

The clock is quickly ticking away for the estates of certain married U.S. taxpayers who died between January 1, 2011 and December 31, 2013.

What will happen to these estates when the clock strikes midnight on January 1, 2015?  They will no longer have the ability to make a “late” portability election with regard to the federal estate tax exemption.

What is the Portability Election and How is it Made?

Portability started with the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.  Under this law, a surviving spouse was allowed to add their deceased spouse’s unused federal estate tax exemption to their own exemption and apply the combined exemptions (up to a total of $10 million in 2011 and $10.24 million in 2012) to gifts made during life and/or transfers made after death. Portability was supposed to disappear in 2013, but the American Taxpayer Relief Act of 2012 made it permanent for deaths occurring in 2013 and beyond.

In order to make the portability election, the executor of the estate must timely file a federal estate tax return (IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) and include the portability calculation.  Form 706 is timely filed if it is filed either (i) within nine months after the date of death, or (ii) by the last day of the period covered by an extension, whichever is later.

What Are the Special Rules for Making the Late Portability Election?

The uncertainty surrounding the future of portability coupled with the June 2013 U.S. Supreme Court decision in the case of Windsor v. United States (which held that Section 3 of the Defense of Marriage Act is unconstitutional and prompted Treasury and the IRS to issue a ruling that same sex married couples will be treated as married for all federal tax purposes, including making the portability election) led to a lot of confusion and inevitably the failure of many executors to make the portability election.

In response to this confusion, Rev. Proc. 2014-18 was issued in early 2014 which allows an executor to make a “late” portability election on or before December 31, 2014 if the estate meets the following criteria:

  1.  The taxpayer must be the executor of the estate of a decedent who was survived by a spouse; died between January 1, 2011 and December 31, 2013; and was a citizen or resident of the U.S. on the date of death; and
  2. The estate was not required to file a federal estate tax return; and
  3. The estate did not file a federal estate tax return; and
  4. A person permitted to make the portability election on behalf of the decedent files a federal estate tax return on or before December 31, 2014; and
  5.  The person filing the federal estate tax return states at the top of the return that it is being “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”
What Should You Do?

If you’re not sure if making the “late” portability election applies in your situation, hurry up and check with your estate planning attorney or accountant because the clock is ticking!

Where Should You Retire? It Depends on Who You Ask

A recent survey conducted by MoneyRates.com used the following factors to determine the list of the best and worst U.S. states for retirees:

  • The size and growth of the senior population
  • Economic factors
  • Crime
  • Weather
  • Life expectancy at age 65

Based on these five factors, Moneyrates.com found that the top ten states for retirees are as follows:

  1. Hawaii
  2. Iowa
  3. Idaho
  4. Florida
  5. Vermont
  6. Arizona
  7. Colorado and Maine (tie)
  8. Virginia
  9. Montana
  10. New Hampshire

Hmm.  Back in May, a similar survey conducted by Bankrate.com didn’t have Hawaii or Florida ranked among the top ten.  In fact, Hawaii didn’t even make the top twenty or thirty – Hawaii ranked #46 – and Florida barely made it into the top thirty – Florida ranked #39.

The factors Bankrate.com used to compile its list were as follows:

  • Cost of living
  • Crime rate (violence and property crimes)
  • Health care quality
  • State and local tax burden
  • Personal well-being
  • Weather

Using these six factors, below are the top ten U.S. states for retirees according to Bankrate.com’s survey:

  1. South Dakota
  2. Colorado
  3. Utah
  4. North Dakota
  5. Wyoming
  6. Nebraska
  7. Montana
  8. Idaho
  9. Iowa
  10. Virginia

So where should you retire?  Wherever you feel the most at home.

Photo: Aerial View of Hanalei National Wildlife Refuge, U.S. Fish and Wildlife Service

Alaska Joins Growing Number of States That Recognize Transfer on Death Deeds

Alaska is the latest state to recognize deeds that transfer ownership of real estate after death without the need for probate.

Dubbed “transfer on death deeds” (or “TOD deeds” for short) in some states, or “beneficiary deeds” in others, the list of U.S. jurisdictions that accept this type of deed through state legislation has grown to 25:

  1. Alaska
  2. Arizona
  3. Arkansas
  4. Colorado
  5. District of Columbia
  6. Hawaii
  7. Illinois
  8. Indiana
  9. Kansas
  10. Minnesota
  11. Missouri
  12. Montana
  13. Nebraska
  14. Nevada
  15. New Mexico
  16. North Dakota
  17. Ohio
  18. Oklahoma
  19. Oregon
  20. South Dakota
  21. Virginia
  22. Washington
  23. West Virginia
  24. Wisconsin
  25. Wyoming

Aside from this, three states – Florida, Michigan, and Texas – recognize “enhanced life estate deeds,” also known as “Lady Bird deeds,” under state common law, which in essence accomplish the same thing as TOD deeds.

How Does a TOD Deed Work?

How does a TOD deed work?  While the logistics vary from state to state, in general the owner of the real estate will sign a new deed which lists the beneficiaries who will inherit the property after the owner dies.  The new deed is then recorded in the applicable public land records (this is usually done at the court house of the county where the real estate is located and costs between $10 and $50).  Then, after the owner dies, their death certificate is recorded in those same public land records, and voilà, the beneficiaries named in the deed become the new owners of the property.

What happens if the owner decides they want to change the beneficiaries of the property after the new deed is recorded?  Then the owner will have to sign and record another TOD deed.

Is a TOD Deed Right for You and Your Family?

While the use of a TOD deed to avoid probate may appear to be a simple process, it is certainly not a “one-size-fits-all” solution to avoid probate and it is certainly not something you should attempt to do on your own because there are so many things that can go wrong.

If you are interested in using a TOD type of deed to avoid probate of your real estate after you die, then consult with an estate planning attorney in the state where your real estate is located to determine if this is the right solution for you and your family.

Photo: Aerial view of Aghileen Pinnacles, Lefthand Valley, Wilderness Area, Alaska; U.S. Fish and Wildlife Service