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:

Lawmakers Consider Changes to New Jersey’s Death Tax Laws

New Jersey is one of those rare states that collects not just one, but two death taxes.  First, New Jersey residents are subject to a death tax on their estate if the value exceeds a measly $675,000 – this is called the New Jersey estate tax.  Second, certain relatives and all non-relatives who inherit from a New Jersey resident (including brothers, sisters, nieces, nephews, and friends) are subject to a death tax on the amount they inherit – this is called the New Jersey inheritance tax.

Both Indiana and North Carolina repealed their state death taxes in 2013.  In addition, multiple states have tweaked their state death tax laws over the past few years to make them, well, for lack of a better phrase, less taxing – this includes Maryland, Minnesota, New York, Rhode Island, Tennessee (where the state death tax will go away for good in 2016) and Washington.  With all of these recent favorable state death tax moves, it should come as no surprise that New Jersey lawmakers are considering changes to their state’s death tax laws since New Jersey not only collects two death taxes, but also has the lowest estate tax exemption by nearly $250,000 (the state exemptions currently range from $921,655 in Rhode Island – which will increase to $1.5 million beginning in 2015 – to $5.34 million in Delaware and Hawaii).

While Governor Chris Christie supports raising the estate tax exemption to $1 million, some lawmakers would go as far as to completely repeal both death taxes, while others would raise the estate tax exemption to match the federal exemption (which is currently $5.34 million; this is the route that both Maryland and New York have taken).  According to Ashlea Ebling of Forbes, there are currently 21 bills that have been introduced to make changes to New Jersey’s estate tax, inheritance tax, or both.  Nonetheless, with New Jersey’s well-publicized budgetary problems and death taxes bringing in $700 million in revenues annually, it appears that the death tax debate is raging at the wrong time.

So will lawmakers be able to make death less taxing in New Jersey?  I predict that at the very least the estate tax exemption will be increased to $1 million, but the inheritance tax will remain untouched.  Stay tuned to see if I’m right.

Photo: John Francis Bongiovi, Jr., known publicly as Jon Bon Jovi, a New Jersey native

3 Reasons It Takes So Long to Receive an Inheritance

Usually the first thing that the beneficiary of an estate or trust asks is when they can expect to get their inheritance check. Unfortunately sending out the inheritance checks is the very last item on the “to do” list of the personal representative or trustee.  Why?  Because the personal representative or trustee has to fulfill all of the duties and responsibilities that are required for settling an estate or trust before handing the assets over to the beneficiaries.  Otherwise,the personal representative or trustee can be held personally liable for any unpaid bills and taxes.

Even with a simple estate or trust, the duties and responsibilities of the personal representative or trustee can be tedious and will delay the final distribution of the assets.  What can be so time-consuming about settling an estate or trust that will cause the plans you have for your inheritance to be put on hold?  Consider the following:

  1. Probate takes time and money. Probate is necessary when a deceased person leaves behind assets that are titled solely in the individual’s name without any beneficiary designated.  This is true even if the deceased person created a revocable living trust provided that the trust was not fully funded at the time of death.  Probate is a state court process that takes time and money and will delay the delivery of your inheritance check.
  2. Tax returns have to be filed and taxes have to be paid.  The personal representative or trustee is responsible for filing the deceased person’s final income tax return(s) and paying any taxes that are due.  Aside from this, the estate or trust may owe state estate taxes or inheritance taxes or federal estate taxes, in which case these returns must be filed and these taxes must be paid.  Finalizing tax returns and paying any taxes due will delay the delivery of your inheritance check.
  3. Beneficiaries have their own agenda. Even though the beneficiaries of an estate or trust usually want to get their inheritance checks in their hands as soon as possible, they don’t always act quickly or follow instructions.  Inevitably there will be at least one beneficiary who drags their feet when asked to provide information or sign and return legal documents or who will skip a signature and require documents to be resent.  One disengaged beneficiary will spoil it for the rest and delay the delivery of your inheritance check.

For additional information about why settling an estate or trust takes so long and what to do with your inheritance, refer to the following:

Photo: © MCA Records

Death Tax Repeal Act – Like a Broken Record

Just like President Obama’s repeated budget proposals that would decrease the federal estate tax exemption and increase the estate tax rate, the House-sponsored Death Tax Repeal Act (H.R. 2429) is like a broken record.  Rumor has it that now that the House has garnered enough backers for H.R. 2429 to pass it (the bill currently has 221 co-sponsors, including three Democrats, which brings the total three above the number required for a House majority), supporters are pushing for a vote on the bill as early as September.

The name of the bill clearly states its purpose – to completely eliminate the federal estate tax (although getting rid of the “death tax” simply sounds more ominous, doesn’t it?).  The generation-skipping transfer tax would disappear too, but the gift tax would remain with a $5 million lifetime exemption indexed for inflation and a 35% tax rate.

So why is this bill like a broken record?  Because there have been dozens of bills introduced to repeal the federal estate tax since President George W. Bush was successful in doing it in 2001, although his repeal didn’t even go into effect until 2010 and the tax ended up being retroactively reinstated anyway.  There is even a companion bill in the Senate, S. 1183, also called the Death Tax Repeal Act, which has 38 co-sponsors (all Republicans).  The thought is if the House passes their death tax bill in September and the Republicans take the Senate in November, then the Senate will finally have enough votes to get a death tax repeal bill passed.  Of course, even this happens – it won’t, but for the sake of argument, let’s assume it does – President Obama will veto the bill.  End of story, back to square one, and the ballad of death tax repeal will continue to play on, just like a broken record.