Overview of Tennessee Inheritance Tax Laws for 2013

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Understanding How Tennessee Inheritance Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Tennessee, then you live in one of a handful of states that collects a state death tax. The estates of Tennessee residents who die in 2013, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Tennessee, are subject to a state death tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Estate Tax vs. Inheritance Tax

While the Tennessee death tax is referred to as an "inheritance tax" in the Tennessee legislative code, it is really an estate tax since it is collected based on the value of the overall estate located in Tennessee (hence, a true "estate tax"); it is not a tax that is collected based on who actually inherits the estate located in Tennessee (a true "inheritance tax").

Interestingly enough, the Tennessee legislative code also provides for an "estate tax," which is actually a type of "pick up tax" that was tied to the amount of federal estate tax that was collected from the estates of decedents who died before 2005.

Since the Tennessee legislative code refers to both an inheritance tax and an estate tax, this article refers to the death tax that is currently collected under Tennessee law as an "inheritance tax," even though the tax is assessed against the assets located in Tennessee and not against the individual beneficiaries who inherit the estate.

When is an estate subject to the Tennessee inheritance tax in 2013?

For Tennessee residents, an estate may be subject to the Tennessee inheritance tax if the total gross estate exceeds $1,250,000.

For nonresidents of Tennessee, an estate may be subject to the Tennessee inheritance tax if it includes real estate and/or tangible personal property having a situs within the state of Tennessee and the gross estate exceeds $1,250,000.

Note: In May 2012, legislation was enacted which will phase out the Tennessee inheritance tax by 2016. See more on this below in the section titled "What is the future of the Tennessee inheritance tax?"

What Tennessee inheritance tax forms must be filed?

All estates with a gross value that exceeds $1,250,000 must file a Tennessee inheritance tax return, Form INH-301, even if no Tennessee inheritance tax will be due as a result of applicable deductions and exemptions.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Tennessee inheritance tax may be due on the B Trust after the first spouse's death if there is a gap between the Tennessee inheritance tax exemption and the federal estate tax exemption. Nonetheless, a married decedent's estate can make an election on Form INH-301 to treat property as marital deduction qualified terminable interest property ("QTIP") for purposes of calculating the Tennessee inheritance tax. Thus, married Tennessee residents can defer payment of both Tennessee and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Tennessee inheritance tax return and tax payment due?

Form INH-301 must be filed and any inheritance tax due must be paid within nine months after the decedent's date of death unless an extension of time to file the return and pay the tax is granted. An extension of time to file Form INH-301 may be requested for up to one year by filing Form INH-304, Application for Extension of Time to File Inheritance Tax Return. Nonetheless, even if an extension is granted, it will not delay the time for payment of any inheritance tax that may be due.

Where is the Tennessee inheritance tax return filed?

Mail the Tennessee inheritance tax return, Form INH-301, and all other required forms to:

Tennessee Department of Revenue
Andrew Jackson State Office Building 500
Deaderick Street
Nashville, Tennessee 37242-0600

What are the Tennessee inheritance tax rates?

Anything over the $1,250,000 Tennessee inheritance exemption for 2013 is taxed at the following rates:

Where can I find additional information about Tennessee inheritance taxes?

For more information about Tennessee inheritance taxes and estate taxes, refer to the Tennessee Department of Revenue's Inheritance Tax webpage, Guide to Tennessee Inheritance and Estate Taxes, and Inheritance Tax Guide.

For assistance with Form INH-301 and Tennessee inheritance tax questions, call the Tennessee Department of Revenue toll free (in state only) at 800-342-1003 or 615-253-0600.

For information about the rules that apply to the estates of decedents who died in 2012 and prior years, refer to Overview of Tennessee Inheritance Tax Laws for 2012 and Prior Years.

Overview of Vermont Estate Tax Laws

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Understanding How Vermont Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Vermont, then you live in one of a handful of states that still collect a local death tax. The estates of Vermont residents, as well as the estates of nonresidents who own real estate and/or tangible personal property and/or income-producing property located in Vermont, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Vermont estate tax?

If the decedent was a resident of Vermont at the time of death, the estate may be subject to the Vermont estate tax if the federal gross estate exceeds $2,750,000 on the date of death or if the estate is required to file a federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.

For nonresidents of Vermont, an estate may be subject to the Vermont estate tax if it includes Vermont sitused property (real estate, tangible personal property, and/or income-producing property sitused in Vermont) and the federal gross estate exceeds $2,750,000 on the date of death or if the estate is required to file a federal estate tax return.

Note: The Vermont estate tax exemption was increased to $2,750,000 on January 1, 2011. Prior to this date, the exemption was as follows:

2006 - 2010 = $2,000,000
2004 - 2005 = $1,500,000
2002 - 2003 = $1,000,000
2001 - 2002 = $675,000

What Vermont estate tax forms must be filed?

The personal representative or other fiduciary representing an estate that is subject to the Vermont estate tax must complete and file the Vermont Estate Tax Return, Form E-1.

Additional documents that must be filed with the Vermont Department of Taxes when a Vermont Estate Tax Return is required to filed are as follows:

If no federal estate tax is due and no federal estate tax return (IRS Form 706) is required to be filed, nonetheless the estate representative must complete and file a pro forma IRS Form 706, including all exhibits and appraisals, with the Vermont Estate Tax Return.

When federal estate tax is due and all assets are located in Vermont, the first page of IRS Form 706 must be included with the Vermont estate tax return.

When federal estate tax is due and some assets are located outside of Vermont, IRS Form 706 must be attached to the Vermont Estate Tax Return, but excluding exhibits and appraisals.

A duplicate of the Estate Tax Closing Letter issued by the IRS must be filed with the Vermont Department of Taxes.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Vermont death tax may be due on the B Trust after the first spouse's death due to the gap of $2,500,000 between the Vermont exemption of $2,750,000 and the 2013 federal exemption of $5,250,000. While some states allow a married decedent's estate to make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the local estate tax, Vermont law does not specifically allow for this. However, one commentator on Vermont estate taxes has stated that "representatives of the Vermont Department of Taxes have stated informally that Vermont will recognize whole or partial QTIP elections for properly drafted trusts as long as the election is, or would be, binding for both federal and Vermont estate tax purposes." (See Planning for the Vermont Estate Tax for more about this issue.) Thus, married Vermont residents should consult with a Vermont estate planning attorney to determine if they can incorporate ABC Trust planning into their estate plans.

When are the Vermont estate tax return and tax payment due?

The Vermont Estate Tax Return, Form E-1, must be filed, and any estate tax due must be paid, within 9 months of the decedent's date of death. An extension of time to file the Vermont Estate Tax Return does not extend the time to pay, so an estimate of the estate tax to be due must be paid with the extension of time request. Where are the Vermont estate tax return filed and tax payment made?

Mail all required forms and any payment due to:

Vermont Department of Taxes
133 State Street
Montpelier, VT 05633-1401

What is the Vermont estate tax rate and how is the tax calculated?

Computing the Vermont estate tax is a convoluted process. According to Vermont estate planning attorney Richard W. Kozlowski, the Vermont estate tax is based on "a complicated and slightly regressive tax system, with marginal tax brackets that begin at 35% (for the first dollars in excess of $2.75 million) and then decrease to 9.6% for estates in excess of $3.4 million, and then rise again to a max rate of 16% for estates in the $10+ million range." (See ESTATE TAXATION - FEDERAL & VERMONT on Mr. Kozlowski's website for his overview of Vermont estate taxes.)

Page 4 of the current Vermont Estate Tax Return, Form E-1, contains "Computation Schedules" for calculating the Vermont estate tax bill for residents and nonresidents.

Where can I find additional information about Vermont estate taxes?

For more information about Vermont estate taxes, refer to the Vermont Department of Taxation's website: Vermont Estate Tax.

You may also call the Vermont Department of Taxation at (802) 828-6820.

Refer to Vermont estate planning attorney Richard W. Kozlowski's article, ESTATE TAXATION - FEDERAL & VERMONT, for an overview of the Vermont estate tax laws.

Does Vermont collect an inheritance tax?

Does Vermont collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, Vermont does not collect a local inheritance tax.

Overview of Rhode Island Estate Tax Laws

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Understanding How Rhode Island Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

If you live in Rhode Island, then you live in one of the remaining states that collects a state estate tax or a state inheritance tax. The estates of Rhode Island residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Rhode Island, are subject to a state estate tax under the following guidelines.

When is a Rhode Island Estate Tax Return Required to be Filed?

For a Rhode Island resident, a Rhode Island Estate Tax Return, Form 100A, must be filed if the decedent's gross estate plus adjusted taxable gifts exceeds $675,000 in 2009, $850,000 in 2010, $859,350 in 2011, $892,865 in 2012, or $910,725 in 2013.

For a nonresident, the estate must file Form 100A if the estate includes real or tangible personal property located in Rhode Island and the gross estate plus adjusted taxable gifts exceeds $675,000 in 2009, $850,000 in 2010, $859,350 in 2011, $892,865 in 2012 or $910,725 in 2013.

A signed copy of the federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, must accompany Form 100A if the estate is required to file Form 706.

Note: The Rhode Island estate tax exemption increased from $675,000 to $850,000 on January 1, 2010, and has been indexed for inflation beginning in 2011.

When is the Rhode Island Estate Tax Return and Any Payment Required Due?

Form 100A must be filed and any tax due must be paid within nine months of the decedent's death.

An extension of time to file Form 100A may be requested, however, even if an extension is granted it won't delay the time for payment of any tax due.

Where is the Rhode Island Estate Tax Return Filed?

Mail the Rhode Estate Tax Return (Form 100A), a $25.00 filing fee, any payment due, and all other required forms to:

Rhode Island Division of Taxation Estate Tax Section
One Capitol Hill
Providence, RI 02908

Make checks payable to "RI Division of Taxation."

What is the Rhode Island Estate Tax Rate?

The tax rate is a progressive rate that maxes out at 16% for the amount above $10,040,000.

Are Transfers to a Surviving Spouse Taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used traditional AB Trust planning to reduce their federal estate tax bill, a Rhode Island estate tax may be due on the B Trust after the first spouse's death since there is a gap between the Rhode Island estate tax exemption and the federal estate tax exemption (for example, the gap in 2012 is equal to a whopping $4,107,135). A married decedent's estate is, however, authorized to make an election on Form 100A to treat property as marital deduction qualified terminable interest property ("QTIP") for Rhode Island purposes, so married Rhode Island couples can defer payment of both Rhode Island estate taxes and federal estate taxes until after the death of the surviving spouse by using an ABC Trust scheme instead of AB Trust planning.

Do Nontaxable Estates Have to File Any Forms?

For gross estates valued at the exemption amount or less, Form 100, Estate Tax Credit Transmittal, can be filed to obtain discharge of the automatic statutory lien that attaches to all Rhode Island real estate a person owns at death, to obtain a Notice of No Tax Due for probate administration purposes, and to allow the sale of Rhode Island securities, including Rhode Island incorporated stock, Rhode Island state and municipal bonds, and mutual funds organized as business trusts that do business in Rhode Island.

Form 100 should be signed by the executor, administrator, trustee or heir at law of the deceased person. It should be mailed along with a death certificate and $25.00 filing fee to the address listed above for Form 100A.

Note: As mentioned above, the Rhode Island estate tax exemption was increased from $675,000 to $850,000 on January 1, 2010, and was then indexed for inflation beginning in 2011. Does Rhode Island Impose a Lien on the Deceased Person's Property?

Form T-77, Discharge of Lien Form, must be filed along with Form 100A or Form 100 if the decedent had any interest in real estate located in Rhode Island. Form T-77 must be filed in triplicate and the description of the real estate must be stated as the tax assessor's description which can be found on the property tax bill issued by the applicable city or town.

Form T-79, Estate Tax Waiver Form, must be filed along with Form 100A or Form 100 if the decedent had any interest in a security of a Rhode Island incorporated business requiring an estate tax waiver. Form T-79 must be filed in duplicate.

Where Can I Find Additional Information About Rhode Island Estate Taxes?

For more information about Rhode Island estate taxes, refer to the Rhode Island Division of Taxation website.

Overview of Oregon Estate Tax Laws

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Understanding How Oregon Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Oregon, then you live in one of a handful of states that collects a state death tax. The estates of Oregon residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Oregon, are subject to a state death tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Does Oregon collect an estate tax or an inheritance tax?

Prior to 2012, the Oregon death tax was referred to as an "inheritance tax" in the Oregon code, but effective January 1, 2012, the Oregon death tax became known as an "estate tax." This makes sense since Oregon's death tax is collected based on the value of the estate (hence, an "estate tax"), as opposed to being based on who inherits the estate (hence, an "inheritance tax").

In this article, the Oregon death tax collected on or before December 31, 2011 is referred to as an inheritance tax, the Oregon death tax collected on or after January 1, 2012 is referred to as an estate tax, and both taxes are referred to in general as the death tax.

When is an estate subject to the Oregon inheritance tax or estate tax?

For Oregon residents, an estate may be subject to the Oregon inheritance tax or estate tax if the total gross estate exceeds $1,000,000.

For nonresidents of Oregon, an estate may be subject to the Oregon inheritance tax or estate tax if it includes real estate and/or tangible personal property having a situs within the state of Oregon and the gross estate exceeds $1,000,000.

What Oregon inheritance tax or estate tax forms must be filed?

For deaths that occurred on or before December 31, 2011, estates with a gross value that exceeds $1,000,000 must file an Oregon inheritance tax return, Form IT-1, even if no Oregon inheritance tax will be due as a result of applicable deductions and exemptions.

For deaths that occurred on or after January 1, 2012, estates with a gross value that exceeds $1,000,000 must file an Oregon estate tax return, Form OR706, even if no Oregon estate tax will be due as a result of applicable deductions and exemptions.

Are Oregon Registered Domestic Partners treated the same as married couples?

In 2007 the Oregon legislature passed HB 2007. Under the provisions of this law, the instructions for the Form IT-1 were amended to provide that the term “surviving spouse” may be replaced with "surviving Oregon Registered Domestic Partner."

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse or registered domestic partner are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, an Oregon death tax may be due on the B Trust after the first spouse's death due to the gap of $4,120,000 between the Oregon exemption of $1,000,000 and the federal exemption of $5,120,000. Nonetheless, a married decedent's estate can make an election to treat a trust of which the surviving spouse is the sole beneficiary as "special marital property" for purposes of calculating the Oregon death tax. Thus, married Oregon residents can defer payment of both Oregon and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Oregon death tax return and tax payment due?

The Oregon death tax return must be filed and any death tax due must be paid within nine months after the decedent's date of death.

An extension of time to file the Oregon death tax return and pay any tax due will be accepted for Oregon if granted by the Internal Revenue Service. If the estate does not have to file a federal estate tax return, then mark "For Oregon Only" at the top of IRS Form 4768 and federal guidelines will be used to consider the request. If an extension of time to pay is granted, the tax must be secured by collateral acceptable to the Oregon Department of Revenue. In addition, an extension of time to file the return does not extend the time to pay the tax, and interest will accrue during the extension period.

Where is the Oregon death tax return filed?

Mail the Oregon inheritance tax return, Form IT-1, or the Oregon estate tax return, Form OR706, and all other required forms and documentation to:

Oregon Department of Revenue
P.O. Box 14110
Salem, OR 97309-0910

If you are using a private delivery service such as FedEx or UPS, then use the following address:

Oregon Department of Revenue
955 Center Street
NE Salem, OR 97301-2555

What are the Oregon inheritance tax or estate tax rates?

For deaths that occurred on or before December 31, 2011, once the value of the net estate exceeded $1,000,000, the entire value of the estate was taxed. Inheritance tax rates ranged from 0.8% to 16% of the adjusted taxable estate.

For deaths that occurred on or after January 1, 2012, the first $1,000,000 of an estate is exempt from the estate tax calculation. For a table showing the estate tax rates that went into effect on January 1, 2012, refer to Lawmakers Tweak Oregon Estate Tax.

Overview of New Jersey Estate Tax Laws

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Understanding How New Jersey Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

In addition to a state inheritance tax, New Jersey also imposes a separate state estate tax which has been decoupled from the federal estate tax laws. Here is a summary of the current New Jersey estate tax laws.

When is a New Jersey Estate Tax Return Required to be Filed?

A New Jersey estate tax return, Form IT-Estate, must be filed if the decedent's gross estate plus adjusted taxable gifts exceeds $675,000. How is the New Jersey Estate Tax Calculated?

The New Jersey estate tax is either the maximum credit for state inheritance, estate, succession or legacy taxes allowable under the provisions of the Internal Revenue Code in effect on December 31, 2001 (this is called the "Form 706 Method"), or an amount determined pursuant to the Simplified Tax System prescribed by the Director, Division of Taxation (this is called the "Simplified Form Method").

The Form 706 Method must be used if the taxpayer is required to file a federal estate tax return, IRS Form 706.

If the taxpayer isn't required to file IRS Form 706, then, in addition to the Form 706 Method, the Simplified Form Method may be used provided that it produces a tax liability similar to the Form 706 Method.

When is the New Jersey Estate Tax Return and Any Payment Required Due?

Form IT-Estate must be filed and any tax due must be paid within nine months of the decedent's death, or nine months plus 30 days if the Form 706 Method is used.

An extension of time to file Form IT-Estate may be requested, however, even if an extension is granted it won't delay the time for payment of any tax due.

The Form 706 Method requires that Form IT-Estate be prepared and filed along with a 2001 IRS Form 706. This is in addition to IRS Form 706 for the year of the decedent's death if one is required to be filed. Where is the New Jersey Estate Tax Return Filed?

Mail the New Jersey estate tax return, Form IT-Estate, and all other required forms to:

NJ Inheritance Tax and Estate Tax
P.O. Box 249
Trenton, New Jersey 08695-0249

What is the New Jersey Estate Tax Rate?

The tax rate is a progressive rate that maxes out at 16% for the amount above $10,040,000.

Are Transfers to a Surviving Spouse Taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a New Jersey estate tax may be due on the B Trust after the first spouse's death if there is a gap between the New Jersey estate tax exemption and the federal estate tax exemption at the time the federal estate tax comes back into effect. A married decedent's estate is authorized to make an election on Form IT-Estate to treat property as marital deduction qualified terminable interest property ("QTIP") for New Jersey purposes, but married New Jersey couples cannot defer payment of both New Jersey estate taxes and federal estate taxes until after the death of the surviving spouse using an ABC Trust scheme.

Are Transfers to a Surviving Domestic Partner Taxable?

Federal estate tax laws do not have a provision providing a deduction for property passing to a domestic partner. However, if a New Jersey decedent was a partner in a civil union and died on or after February 19, 2007, and was survived by his or her partner, then a marital deduction equal to that permitted to a surviving spouse under the provisions of the Internal Revenue Code in effect on December 31, 2001, is permitted for New Jersey estate tax purposes.

Does New Jersey Impose a Lien on the Deceased Person's Property?

For New Jersey decedents dying after December 31, 2001, the New Jersey estate tax remains a lien on all property of the decedent as of the date of death until paid. No property may be transferred without the written consent of the Director of the Division of Taxation.

Where Can I Find Additional Information About New Jersey Estate Taxes?

For more information about New Jersey estate taxes, refer to New Jersey Inheritance and Estate Tax General Information on the New Jersey Division of Taxation website.

Overview of Massachusetts Estate Tax Laws

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Understanding How Massachusetts Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Massachusetts, then you live in one of a handful of states that still collect a state estate tax. The estates of Massachusetts residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Massachusetts, are subject to a state estate tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Massachusetts estate tax?

For Massachusetts residents, an estate may be subject to the Massachusetts estate tax if the value of the gross estate, plus adjusted taxable gifts, exceeds the applicable exclusion amount in the Internal Revenue Code in effect on December 31, 2000. The applicable exclusion amounts for Massachusetts estate tax purposes are $700,000 for 2003, $850,000 for 2004, $950,000 for 2005, and $1,000,000 for 2006 and later years. Thus, in general, under current law an estate may be subject to the Massachusetts estate tax if the value exceeds $1,000,000. For nonresidents of Massachusetts, an estate may be subject to the Massachusetts estate tax if it includes real estate or tangible personal property having a taxable situs within the state of Massachusetts and the value of the gross estate exceeds $1,000,000 under the criteria set forth above.

What Massachusetts estate tax forms must be filed?

The estate representative of an estate that is subject to the Massachusetts estate tax must first complete a federal estate tax return, IRS Form 706, with a revision date of July 1999 and all applicable schedules. Once the federal return is completed, the estate representative can prepare the Massachusetts Estate Tax Return, Form M-706.

In addition to IRS Form 706 with a revision date of July 1999 and a Form M-706, the following documents may be required to be filed:

A Federal Closing Letter submitted to the Massachusetts Department of Revenue within two months of receipt, if the filing of a federal Form 706 is required. This includes both the federal letter of acceptance and line adjustments, if any. Copies of federal changes must be accompanied by an Application for Abatement/Amended Return (Form CA-6), or by an amended Form M-706, as appropriate. No Massachusetts Estate Closing Letter will be issued without a copy of the Federal Closing Letter.

A Certificate Releasing Massachusetts Estate Tax Lien (Form M-792) in triplicate for each parcel of real estate where a release of lien is required. A copy of the deed or certificate of title, and the purchase and sale agreement (or mortgage commitment), if any, should be provided.

A Massachusetts Nonresident Decedent Affidavit (Form M-NRA) for the estates of nonresident decedents.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Massachusetts estate tax may be due on the B Trust as a result of a gap between the Massachusetts exemption and the federal exemption. In 2013, that gap is $4,250,000. Nonetheless, a married decedent's estate can make a Massachusetts-only election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP Trust" for short) for purposes of calculating the Massachusetts estate tax. Thus, since there is a significant gap between the Massachusetts estate tax exemption and the federal exemption and a state-only QTIP election is allowed, married Massachusetts residents can defer payment of both Massachusetts and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Massachusetts estate tax return and tax payment due?

The Massachusetts estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's date of death.

By submitting an "Application for Extension of Time to File Massachusetts Estate Tax Return" (Form M-4768), an extension of time to file Form M-706 may be granted for a reasonable period, provided the application is made on or before the original due date of the return and 100% of the estimated amount of Massachusetts estate tax is paid. Failure to pay at least 80% of the amount of estate tax finally determined to be due on or before the due date will void any extension of time to file, and the return will be subject to the late filing penalty and, possibly, the late payment penalty. Interest will accrue on any unpaid tax from the original due date.

By filing an "Application for Extension of Time to Pay Massachusetts Estate Tax" (Form M-4768A), an extension of time to pay Massachusetts estate taxes may be granted for a reasonable period, but not to exceed six months. However, when an extension of time to pay is granted, interest on any unpaid tax accrues from the original due date. An extension is granted only for reasonable cause. An extension of up to three years from the due date may be granted upon a showing of undue hardship.

Where are the Massachusetts estate tax return filed and tax payment made?

Payment of the Massachusetts estate tax must be made by a check payable to the :Commonwealth of Massachusetts." Enter the decedent’s full name and Social Security number in the memo portion of the check. The executor signing the return is personally liable for payment of any tax shown on the return if it is not otherwise paid.

The return and the tax payment should be sent to the following:

Massachusetts Estate Tax Unit
P.O. Box 7023
Boston, MA 02204

What is the Massachusetts estate tax rate?

Effective for dates of death on or after January 1, 2003, the Massachusetts estate tax for the estates of residents and nonresidents is computed with reference to the allowable federal estate tax credit for state death taxes allowed in the Internal Revenue Code in effect on December 31, 2000.

If an estate consists solely of property subject to Massachusetts estate taxation, it pays to Massachusetts an amount equal to the federal credit for state death taxes computed using the Internal Revenue Code in effect on December 31, 2000.

In the case of a resident of Massachusetts who owned or transferred real estate or tangible personal property located outside of Massachusetts, Massachusetts grants a credit for estate or inheritance taxes properly paid to other states.

In the case of a nonresident of Massachusetts who owned or transferred real estate or tangible personal property located in Massachusetts, the amount of the Massachusetts nonresident estate tax is the proportion of the allowable credit from the federal estate tax return that the gross value of the Massachusetts property bears to the entire federal gross estate wherever situated.

For an explanation and examples on how to calculate the Massachusetts estate tax, refer to following information listed on the Massachusetts Department of Revenue website: A Guide to Estate Taxes (Applicable to dates of death on or after January 1, 2003).

When is a release of Massachusetts estate tax lien required?

For dates of death on or after January 1, 1997, if the amount of the gross estate requires the filing of a Massachusetts estate tax return, a "Certificate Releasing Massachusetts Estate Tax Lien" (Form M-792) is required for real estate that is owned jointly with rights of survivorship or as tenants by the entirety, real estate that is held in a trust and other real estate that is not part of the probate inventory but is includible in the taxable gross estate. Form M-792 may be required for probate real estate where there is a sale pending (or mortgage commitment), and no closing letter has been issued.

For estates of decedents dying on or after January 1, 2003 that are not required to file M-706, an affidavit of the executor, subscribed to under the pains and penalties of perjury, recorded in the applicable Registry of Deeds and accurately stating that the value of the decedent's gross estate does not require a Massachusetts estate tax filing, is required to release the gross estate of the lien. The Massachusetts Department of Revenue does not publish blank affidavits for filing in the Registry of Deeds, although some Registries may publish sample affidavits and provide them to the public.

For the estates of decedents dying on or after January 1, 2003 that equal or exceed the Massachusetts filing requirement for the year of death, the Commissioner of Revenue will release the lien with respect to property if the Commissioner is satisfied that the collection of the tax will not be jeopardized. The Commissioner will release the lien by issuing Form M-792, "Certificate Releasing Massachusetts Estate Tax Lien."

Where can I find additional information about Massachusetts estate taxes?

For more information about Massachusetts estate taxes, refer to the Massachusetts Department of Revenue website: A Guide to Estate Taxes (Applicable to dates of death on or after January 1, 2003).

Overview of Maryland Estate Tax Laws

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Understanding How Maryland Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Maryland, then you live in one of a handful of states that still collect a state estate tax. In addition, Maryland is one of six states that collects a state inheritance tax (New Jersey is the only other state that collects both an estate tax and an inheritance tax.)

The estates of Maryland residents, as well as the estates of nonresidents who own real estate, tangible personal property, and/or one or more business entities located in Maryland, are subject to a state estate tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Maryland estate tax?

For Maryland residents, an estate may be subject to the Maryland estate tax if the federal gross estate, plus adjusted taxable gifts, plus property for which a Maryland qualified terminal interest property (QTIP) election was previously made on a Maryland estate tax return filed for the estate of the decedent's predeceased spouse, equals or exceeds $1,000,000.

For nonresidents of Maryland, an estate may be subject to the Maryland estate tax if it includes real estate or tangible personal property having a taxable situs within the state of Maryland and the value of the federal gross estate equals or exceeds $1,000,000 under the criteria set forth above.

What Maryland estate tax forms must be filed?

The estate representative of an estate that is subject to the Maryland estate tax must first complete a federal estate tax return, IRS Form 706, for the year of the decedent's death, even if the estate is not required to file a federal estate tax return. Once the federal return is completed, the estate representative can prepare the Maryland Estate Tax Return, Form MET-1.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Maryland estate tax may be due on the B Trust as a result of a gap between the Maryland exemption and the federal exemption. In 2013, that gap is $4,250,000. Nonetheless, a married decedent's estate can make a Maryland-only election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP Trust" for short) for purposes of calculating the Maryland estate tax. Thus, since there is a gap between the Maryland estate tax exemption and the federal exemption and a state-only QTIP election is allowed, married Maryland residents can defer payment of both Maryland and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Maryland estate tax return and tax payment due?

The Maryland estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's date of death.

An automatic six-month extension of time to file the Maryland estate tax return and related forms may be requested on Form MET-1E (or up to one year if the person required to file the return is located outside of the U.S.); however, this will not extend the time to pay the tax, and interest will accrue during the extension period. In addition, a penalty of up to 10% will be assessed if the estate tax bill is not paid by the estate tax return due date.

Where are the Maryland estate tax return filed and tax payment made?

For Maryland residents, the Maryland Estate Tax Return, Form MET-1, should be filed with the Register of Wills of the county where the decedent's probate estate is being administered or, if no probate estate is required, then in the county where the decedent resided at the time of death.

For nonresidents, file the Maryland Estate Tax Return, Form MET-1, with the Register of Wills of the county where the nonresident owned real estate or tangible personal property.

For links to all 24 Maryland Register of Wills websites, refer to the Office of the Register of Wills website.

Mail the estate tax payment directly to the Comptroller of Maryland on or before the due date of the Maryland estate tax return at the following address:

Comptroller of Maryland Estate Tax Section
P.O. Box 828
Annapolis, MD 21404-0828

What is the Maryland estate tax rate?

According to the Maryland Comptroller's website, there is no Maryland estate tax rate table. Instead, the Maryland estate tax tax is calculated using the maximum allowable credit for state death taxes under §2011 of the Internal Revenue Code, as computed for Maryland purposes, less any Maryland inheritance tax paid to the Register of Wills. For decedents dying after December 31, 2005, the tax cannot exceed 16% of the amount by which the decedent’s taxable estate exceeds $1,000,000. If the Maryland inheritance tax is equal to or exceeds the federal credit for state death taxes, no Maryland estate tax is due.

For an explanation and tips on how to calculate the Maryland estate tax, refer to following information listed on the Comptroller of Maryland's website: Maryland Estate Tax Calculation Method.

Where can I find additional information about Maryland estate taxes?

For more information about Maryland estate taxes, refer to the Comptroller of Maryland's website: Maryland Estate and Inheritance Tax.

Call the Maryland Comptroller's Office with your Maryland estate tax questions at 410-260-7850 from Central Maryland or 1-800 MD TAXES from elsewhere, Monday - Friday, 8:00 a.m. - 5:00 p.m. EDT.

You can also e-mail your Maryland estate tax questions as well as fiduciary tax questions to taxhelp@comp.state.md.us. How have the Maryland estate tax laws changed over the past few years?

On May 22, 2012, Maryland Governor Martin O'Malley signed the "Family Farm Preservation Act" into law. This legislation, which was passed by unanimous votes in both the House and Senate, reduces the Maryland estate tax rate assessed against Maryland farms valued over $5 million from 16% down to 5% when the property passes to someone who agrees to continue to use it for agricultural purposes. If the property is then taken out of agricultural use within 10 years of the owner's death, the estate tax will be recaptured. The law went into effect on July 1, 2012 and applies to deaths occurring after December 31, 2011.

 

Overview of Illinois Estate Tax Laws

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Understanding How Illinois Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Illinois, then you live in one of a handful of states that still collect a state death tax. The estates of Illinois residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Illinois, are subject to a state death tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

How have the Illinois estate tax rules changed in the past few years?

The Illinois estate tax rules have changed significantly in the past few years. In 2009, the Illinois estate tax exemption was $2,000,000. In 2010, the Illinois estate tax was repealed due to changes in the federal estate tax laws. In 2011, the Illinois legislature acted quickly to reinstate the state estate tax with a $2,000,000 exemption. Then, in December 2011, the Illinois legislature acted to raise the estate tax exemption to $3,500,000 for 2012 and $4,000,000 for 2013. The information presented below applies to deaths that occur in 2012 only.

When is an estate subject to the Illinois estate tax?

For Illinois residents, a 2012 estate may be subject to the Illinois estate tax if the total gross estate exceeds $3,500,000.

For nonresidents of Illinois, a 2012 estate may be subject to the Illinois estate tax if it includes real estate and/or tangible personal property having a situs within the state of Illinois and the gross estate exceeds $3,500,000. What Illinois estate tax forms must be filed?

The estate representative of a 2012 estate that is subject to the Illinois estate tax must file an Illinois Estate & Generation-Skipping Transfer Tax Return, Form 700, as well as a federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return (or any other form containing the same information), even if the estate is not required to file IRS Form 706. IRS Form 706 must include all schedules, appraisals, wills, trusts, attachments, etc., as the federal Form 706 would have for a 2011 decedent with a tentative taxable estate plus adjusted taxable gifts over $2,000,000. The Illinois estate tax will then be determined using the inter-related calculation for 2012 decedents as discussed below.

Note that when the 2012 tentative taxable estate plus adjusted taxable gifts exceeds $5,120,000, Illinois Form 700 is to be prepared in the same manner for 2012 as for 2011, and must therefore include a copy of IRS Form 706 with all attachments.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, an Illinois death tax may be due on the B Trust after the first spouse's death due to the gap of $1,620,000 between the Illinois exemption of $3,500,000 and the federal exemption of $5,120,000. Nonetheless, a married decedent's estate can make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the Illinois estate tax. Thus, married Illinois residents can defer payment of both Illinois and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Illinois estate tax return and tax payment due?

The Illinois estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's date of death.

An extension of time to file the Illinois estate tax return and related forms and pay any tax due may be requested; however, this will not extend the time to pay the tax, and interest will accrue during the extension period.

Where are the Illinois estate tax return filed and tax payment made?

For Cook, DuPage, Lake and McHenry Counties, file the original of the return with:

Office of the Attorney General Revenue Litigation Bureau
100 West Randolph Street
13th Floor
Chicago, Illinois 60601

For all other counties, file the original of the return with:

Office of the Attorney General Revenue Litigation Bureau
500 South Second Street
Springfield, Illinois 62706

Effective July 1, 2012, an additional copy of the return, without attachments, must also be filed with the State Treasurer as indicated below.

Effective July 1, 2012, all estate tax payments should be directed to one of the State Treasurer’s offices, which is encouraging people to mail the applicable returns, attachments, and payments to the Springfield office; however, taxes may be paid in person at either office indicated below:

By mail or in person:

Illinois State Treasurer Estate Tax Division
400 W. Monroe, Suite 401
Springfield, IL 62704

In person: Illinois State Treasurer
100 West Randolph Street
Suite 15-600
Chicago, IL 60601

How is the Illinois estate tax calculated?

The Illinois estate tax is determined using the inter-related calculation. For both resident and non-resident decedents, the tax base will be calculated assuming all assets are located within Illinois. (Line 6, Schedule A or B, Form 700). The percentage of Illinois assets to total assets is then computed with the percentage applied to the tax base for apportionment purposes to determine the amount of Illinois estate tax due.

For deaths that occurred on or after January 1, 2012, use the following calculator provided by the Illinois Attorney General's office to calculate the tax due: 2012 Decedent Estate Tax Calculator. Where can I find additional information about Illinois estate taxes?

For more information about Illinois estate taxes, including information for the estates of decedents who died in 2011 and prior years, refer to the Illinois Attorney General's Estate Tax webpage. For more information about estate tax payments, refer to the Illinois Treasurer's Inheritance Tax and Estate Tax webpage.

Overview of Hawaii Estate Tax Laws

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Understanding How Hawaii Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Hawaii, then you live in one of a handful of states that still collect a local death tax. The estates of Hawaii residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Hawaii, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes.  For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Hawaii estate tax?

In 2013, an estate of a resident of Hawaii, or a nonresident of Hawaii but U.S. resident or citizen, is taxable in Hawaii and a Hawaii Estate Tax Return, Form M-6, is required to be filed if the taxable estate (determined using IRS Form 706, Part 2, line 3a) is $5,250,000 or greater. Nonetheless, if the decedent is survived by a spouse and the spouse is allowed to claim an election for transfer, or "portability," of the deceased spouse’s unused estate tax exclusion amount, then a Hawaii Estate Tax Return must be filed to make the election. See more on portability below.

The estate of a nonresident of the U.S., not a U.S. citizen, is taxable and a Hawaii Estate Tax Return is required to be filed if the taxable estate (determined using IRS Form 706-NA, Part II, line 1) is $60,000 or greater.

What Hawaii estate tax forms must be filed?

The personal representative or other fiduciary representing an estate that is subject to the Hawaii estate tax must complete and file the Hawaii Estate Tax Return, Form E-1.

Additional documents that must be filed with the Hawaii Department of Taxation when a Hawaii Estate Tax Return is required to filed are as follows: ◾IRS Form 706 (for the year of death) completed through Part 2, line 12, or IRS Form 706-NA completed through Part II, line 8 ◾All federal schedules with federal Forms 712, as required ◾Death certificate ◾Will ◾Trusts ◾Power of appointment documents ◾A copy of another state’s estate tax return or foreign estate tax return, if the estate is subject to other estate taxes ◾Any valuations or appraisals

Note that for estates that are not required to file a Hawaii Estate Tax Return, the personal representative or person(s) in possession, control, or custody of the decedent's property must file a Request for Release, Form M-6A, with the Department of Taxation if the agent wishes to obtain a release which indicates that the personal representative or person(s) in possession, control, or custody is/are free from taxes under chapter 236E, Hawaii Revised Statutes (HRS).

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, since the Hawaii estate tax exemption equals the federal estate tax exemption, a Hawaii death tax will not be due on the B Trust after the first spouse's death since there will not be a gap between the Hawaii exemption and the federal exemption.

Are transfers to a civil union partner taxable?

On January 1, 2012, civil unions became recognized in Hawaii. Civil unions entered into in a jurisdiction other than Hawaii are also recognized, provided that the relationship meets Hawaii’s eligibility requirements, has been entered into in accordance with the laws of the other jurisdiction, and can be documented. Hawaii law provides the Internal Revenue Code (IRC) sections and provisions referred to in Hawaii’s estate and generation-skipping transfer tax Laws that apply to a husband and wife, spouses, or person in a legal marital relationship will apply to partners in a civil union with the same force and effect as if they were “husband and wife”, “spouses”, or other terms that describe persons in a legal marital relationship.” Accordingly, references to “married”, “unmarried”, and “spouse” also means “in a civil union”, “not in a civil union”, and “civil union partner”, respectively.

Is portability of the Hawaii estate tax exception allowed between spouses?

Yes, but portability of Hawaii's estate tax exemption applies only to decedents who die after January 25, 2012 and who were U.S. residents or U.S. citizens and validly married on the date of death (including Hawaii civil unions or the equivalent) and to nonresidents of U.S., not U.S. citizens, where allowed by any applicable treaty obligation of the United States.

What is the Hawaii estate tax rate?

The Hawaii estate tax rate is a progressive one that starts out at 5% and tops out at 16%.

When are the Hawaii estate tax return and tax payment due?

The Hawaii Estate Tax Return, Form M-6, must be filed, and any estate tax due must be paid, within 9 months of the decedent's date of death. An extension of time to file the Hawaii Estate Tax Return does not extend the time to pay any tax due.

An extension to file the Hawaii Estate Tax Return, Form M-6, is based on the federal extension to file the federal estate tax return. Hawaii does not have a separate extension form, but an automatic six-month extension to file Form M-6 will be granted if: 1.A copy of the IRS approved extension to file the federal estate tax return, IRS Form 4768, is attached to Form M-6; and 2.Form M-6 is filed by the due date specified by the IRS for filing the federal estate tax return.

Where are the Hawaii estate tax return filed and tax payment made?

Mail all required forms and any payment due to:

Hawaii Department of Taxation
P.O. Box 259
Honolulu, Hawaii 96809-0259

Where can I find additional information about Hawaii estate taxes?

For more information about Hawaii estate taxes, refer to the Department of Taxation's website: Hawaii Department of Taxation.

You may call customer service at 808-587-4242 or toll free at 1-800-222-3229; Telephone for the Hearing Impaired at 808-587-1418 or toll free at 1-800-887-8974; or send a fax to 808-587-1488.

You may also email the department at Taxpayer.Services@hawaii.gov

Correspondence may be mailed to:

Taxpayer Services Branch
P.O. Box 259
Honolulu, HI 96809-0259

Does Hawaii collect an inheritance tax?

Does Hawaii collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, Hawaii no longer collects a state inheritance tax because it was replaced with a state estate tax under "The Estate and Transfer Tax Reform Act of 1983."

Overview of District of Columbia Estate Tax Laws

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Understanding How DC Estate Taxes Affect an Estate

By Julie Garber, About.com Guide If you live in the District of Columbia, then you live in one of a handful of jurisdictions that still collect a local death tax. The estates of DC residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in DC, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the DC estate tax?

For DC residents, an estate may be subject to the DC estate tax if the total gross estate exceeds $1,000,000.

For nonresidents of DC, an estate may be subject to the DC estate tax if it includes real estate and/or tangible personal property having a situs within the District of Columbia and the gross estate exceeds $1,000,000. Ads

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If the estate is not passing to a surviving spouse or being donated to charity and the estate is subject to the DC estate tax, then the estate representative must file a DC Estate Tax Return called Form D-76.

If the estate is passing to a surviving spouse or being donated to charity and the estate is subject to the DC estate tax, then the estate representative must file a DC Estate Tax Return called Form D-76EZ.

The following documents should be attached to DC Form D-76 or DC Form D-76EZ, if applicable:

A copy of Form FR-77 (Extension of Time to File DC Estate Tax Return)     A copy of the Letters of Administration     A copy of the Power of Attorney     A copy of the decedent's Last Will and Testament     A complete copy of IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, including all attachments, if the estate is required to file IRS Form 706; OR, a current copy of pages 1-3 of IRS Form 706, if the estate is not required to IRS Form 706     A copy of all certified appraisals of the decedent's property and a copy of the Death Certificate.

Note that as indicated above, a DC Estate Tax Return may be required to be filed even if a federal estate tax return, IRS Form 706, is not required to be filed. In addition, even if the estate will not be required to file IRS Form 706, if a DC Estate Tax Return is required to be filed, then pages 1 - 3 of IRS Form 706 need to be prepared and filed with the DC Estate Tax Return.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a DC death tax may be due on the B Trust after the first spouse's death due to the gap of $4,250,000 between the DC exemption of $1,000,000 and the federal exemption of $5,250,000. While some states allow a married decedent's estate to make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the local estate tax, DC law does not specifically allow for this, although some practitioners have been able to do this. Thus, married DC residents should consult with a DC estate planning attorney to determine if they should incorporate ABC Trust planning into their estate plan.

When are the DC estate tax return and tax payment due?

The DC estate tax return must be filed, and any estate tax due must be paid, within 10 months after the decedent's date of death.

A six-month extension of time to file the DC estate tax return and related forms and pay any tax due may be requested; however, this will not extend the time to pay the tax, and interest will accrue during the extension period. Interest is charged at the rate of 10% per year, compounded daily and without regard to any extension.

All extension requests must be requested using DC Form FR-77; IRS Form 4768 will not be accepted. Where are the DC estate tax return filed and tax payment made?

Mail returns and payments to:

Office of Tax and Revenue Audit Division Estate Tax Unit
P.O. Box 556
Washington, DC, 20044-0556

Checks should be made payable to the "DC Treasurer."

How is the DC estate tax calculated?

The DC estate tax rate is a progressive tax that maxes out at 16% for estates valued at $10,040,000 or more. Use the Estate Tax Computation Worksheet to calculate the tax due.

Where can I find additional information about DC estate taxes?

For more information about DC estate taxes, refer to the DC Office of Tax and Revenue's Estate, Fiduciary, and Inheritance Taxes Frequently Asked Questions.

Does DC collect an inheritance tax?

Does the District of Columbia currently collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, the District of Columbia inheritance tax was repealed effective for deaths occurring on or after April 1, 1987.

State Estate Tax and Exemption Chart

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NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Currently only a handful of states and the District of Columbia collect a state estate tax. Below is a chart that lists which states collected state estate taxes from 2009 through 2013, along with each state's respective state estate tax exemption. Summary of Changes to State Estate Tax Laws

Here is a summary of the changes that took effect with regard to state estate tax laws between 2009 and 2013:

Delaware enacted a state estate tax that was only supposed to be effective for deaths occurring between July 1, 2009 and July 1, 2013. Nonetheless, in the spring of 2013 the Delaware legislature acted to eliminate the sunset of the tax.

Two states saw their estate tax exemption increase on January 1, 2010: Rhode Island's exemption increased to $850,000 and Connecticut's exemption increased to $3,500,000; however, see more on these two states below.

Two states saw their state estate tax disappear on January 1, 2010, due to state legislative action: Kansas and Oklahoma.

On June 27, 2011, S.L. 2011-330 was signed into law by North Carolina Governor Beverly Perdue. This law clarifies that the North Carolina estate tax does not apply to the estates of decedents who died in 2010 but will apply to the estates of decedents dying on or after January 1, 2011 with a $5,000,000 exemption, which is indexed for inflation in 2012 and future years.

Illinois saw its estate tax disappear on January 1, 2010 due to repeal of the federal estate tax, and despite the retroactive reinstatement of the federal estate tax, Illinois' tax did not come back automatically like in North Carolina. Nonetheless, the Illinois legislature acted quickly at the beginning of 2011 to reinstate the Illinois estate tax for the 2011 tax year with a $2,000,000 exemption. However, in December 2011 the Illinois legislature acted to increase the exemption to $3,500,000 in 2012 and $4,000,000 in 2013.

*Hawaii brought back its state estate tax effective May 1, 2010. Note that although the Hawaii estate tax exemption appears to be set at $3,500,000 for deaths occurring before January 26, 2012, in calculating the tax due the tax really does not kick in until the estate exceeds $3,600,000. In May 2012, Hawaii tweaked its estate tax laws to provide that the Hawaii estate tax exemption will be tied to the federal estate tax exemption for decedents dying after January 25, 2012.

The Rhode Island estate tax exemption will be adjusted for deaths occurring on or after January 1, 2011 based on the percentage increase in the Consumer Price Index rounded to the nearest $5.00.

Vermont's estate tax exemption was increased to $2,750,000 effective January 1, 2011.

On May 4, 2011, the Connecticut estate tax exemption was retroactively decreased from $3,500,000 back down to $2,000,000 for deaths occurring on or after January 1, 2011.

On June 30, 2011, Ohio Governor John Kasich signed the 2012 - 2013 budget into law, which eliminates the Ohio estate tax effective for deaths occurring on or after January 1, 2013.

On January 1, 2012, the name of Oregon's death tax changed from an "inheritance tax" to an "estate tax." In addition, while the Oregon estate tax exemption (formerly inheritance tax exemption) remains at $1,000,000 for 2012 and future years, the tax will only apply to the value of an estate in excess of $1,000,000 (under prior law once an estate exceeded $1,000,000 the tax applied to the entire estate). The estate tax rates have also been changed for 2012 and future years such that the majority of estates valued between $1,000,000 and $2,000,000 will pay slightly less in taxes and estates valued over $2,000,000 will pay slightly more in taxes. Note that on November 6, 2012, Oregon Ballot Measure 84, which would have repealed Oregon's estate tax by 2016, was defeated, so it does not appear that Oregon's estate tax will be repealed any time soon.

Effective January 1, 2013, Maine's estate tax exemption increased to $2,000,000 and the estate tax rate has been lowered.

In May 2012 Tennessee repealed its state gift tax retroactively to January 1, 2012. In addition, the Tennessee estate tax (referred to as an inheritance tax in the Tennessee statutes) will be phased out by 2016.

In June 2013, Washington tweaked its state estate tax laws in several ways that will affect the estates of decedents who die on or after January 1, 2014. First, the $2,000,000 exemption will be indexed for inflation on an annual basis. Second, the estate tax rates for the top four brackets will increase by one percentage point. Finally, certain family-owned businesses will receive an estate tax exemption of up to $2,500,000.

In an unusual move, Minnesota enacted a state gift tax that went into effect on July 1, 2013. Aside from this, Minnesota tweaked its estate tax laws as they are applied to nonresidents who own real estate in Minnesota. The new legislation includes Minnesota property held in a pass-through entity such as an S corporation, a partnership (including a multi-member LLC taxed as a partnership), a single-member LLC or similar entity, or a trust in a nonresident's estate.

In July 2013, North Carolina's estate tax was repealed retroactively to January 1, 2013.

State Estate Tax Rates

For information about current state estate tax rates, refer to the 2013 State Death Tax Exemption and Top Tax Rate Chart. State Inheritance Taxes

For information about state inheritance taxes, which are not the same as state estate taxes, refer to the State Inheritance Tax Chart.

State Estate Tax and Exemption Chart

State 2009 Exemption 2010 Exemption 2011 Exemption 2012 Exemption 2013 Exemption
Connecticut $2,000,000 $3,500,000 $2,000,000 $2,000,000 $2,000,000
Delaware $3,500,000 effective 07/01/2009 $3,500,000 $5,000,000 $5,120,000 $5,250,000
District of Columbia $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
*Hawaii No state estate tax $3,600,000 effective 05/01/2010 $3,600,000 $3,600,000 or $5,120,000 $5,250,000
Illinois $2,000,000 No state estate tax $2,000,000 $3,500,000 $4,000,000
Kansas $1,000,000 No state estate tax No state estate tax No state estate tax No state estate tax
Maine $1,000,000 $1,000,000 $1,000,000 $1,000,000 $2,000,000
Maryland $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Massachusetts $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Minnesota $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
New Jersey $675,000 $675,000 $675,000 $675,000 $675,000
New York $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
North Carolina $3,500,000 No state estate tax $5,000,000 $5,120,000 No state estate tax
Ohio $338,333 $338,333 $338,333 $338,333 No state estate tax
Oklahoma $3,000,000 No state estate tax No state estate tax No state estate tax No state estate tax
Oregon $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Rhode Island $675,000 $850,000 $859,350 $892,865 $910,725
Tennessee $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,250,000
Vermont $2,000,000 $2,000,000 $2,750,000 $2,750,000 $2,750,000
Washington $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000

 

Connecticut Estate Tax Laws

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Connecticut, Land of Both Estate and Gift Taxes

NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Connecticut residents, as well as nonresidents who own real estate and/or tangible personal property located in Connecticut, are subject to gift taxes and state estate taxes under the following guidelines.

What is the Connecticut taxable estate?

The Connecticut taxable estate is the sum of (1) the total value of the decedent’s federal gross estate less allowable deductions other than the deduction for state death taxes; and (2) the aggregate amount of Connecticut taxable gifts made by the decedent during his or her lifetime for all calendar years beginning on or after January 1, 2005.

When is an estate subject to the Connecticut estate tax?

If the Connecticut taxable estate as determined above exceeds $2,000,000, then Connecticut estate tax is due and payable on the value of the taxable estate, including the first $2,000,000. Note: For deaths occurring on or after January 1, 2010 and on or before December 31, 2010, the state estate tax exemption was increased from $2,000,000 to $3,500,000.

What Connecticut estate tax forms must be filed?

All estates subject to the Connecticut estate tax must file Form CT-706/709, Connecticut Estate and Gift Tax Return, with the Connecticut Department of Revenue Services, and also file a copy of Form CT-706/709 with the appropriate Connecticut probate court.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce federal estate taxes, Connecticut estate tax may be due on the B Trust after the first spouse's death. A married decedent's estate is authorized to make an election on Form CT-706/709 to treat property as marital deduction qualified terminable interest property ("QTIP") only for purposes of calculating the Connecticut estate tax (this is called a "state QTIP election"). What this means is that if the estate is passing to a surviving spouse through an ABC Trust scheme, then the payment of both Connecticut and federal estate taxes can be deferred until after the death of the surviving spouse.

Do Connecticut nontaxable estates have to file any tax forms?

If the sum of the Connecticut taxable estate is $2,000,000 or less for deaths occurring before January 1, 2010 or after January 1, 2011, or $3,500,000 for deaths occurring between January 1, 2010 and December 31, 2010, then no Connecticut estate and gift tax return will be due. However, all Connecticut estates must file Form CT-706 NT, Connecticut Estate Tax Return (For Nontaxable Estates), with the appropriate Connecticut district probate court. Do not file Form CT-706 NT with the Department of Revenue Services. Form CT-706 NT must be filed with the appropriate Connecticut district probate court.

When is the Connecticut estate tax return and any payment required due?

For deaths occurring before July 1, 2009, Form CT-706/709 for the Connecticut estate tax is due within nine months after the date of the decedent's death unless an extension of time to file is requested.

For deaths occurring on or after July 1, 2009, Form CT-706/709 for the Connecticut estate tax is due within six months after the date of the decedent's death unless an extension of time to file is requested.

Use Form CT-706/709 EXT, Application for Estate and Gift Tax Return Filing Extension and for Estate Tax Payment Extension, to apply for an extension of time to file.

Payment of the Connecticut estate tax is due at the same time as Form CT-706/709 unless an extension of time to pay has been granted.

Where is the Connecticut estate tax return filed?

Mail the Connecticut estate tax return, Form CT-706/709, and all other required forms to:

Department of Revenue Services
P.O. Box 2978
Hartford, CT 06104-2978

Do not mail your Connecticut nontaxable estate return, Form CT-706 NT, to the Department of Revenue Services. Instead, this form gets filed with the appropriate Connecticut district probate court. What is the Connecticut estate tax rate?

The Connecticut estate tax rate is a progressive one that starts with 5.085% of the first $100,000 over the $2,000,000 threshold and rises to 16% for the amount above $10,100,000.

Where can I get more information about Connecticut estate taxes?

For more information on Connecticut estate taxes, refer to Connecticut Estate Tax Resources From the Department of Revenue Website.

What about other states that collect estate taxes or inheritance taxes?

For information about other states that collect estate taxes, refer to the State Estate Tax and Exemption Chart.

For information about state inheritance taxes, which are different from state estate taxes, refer to the State Inheritance Tax Chart.

About.com

Estate Tax Tables 1997-2013

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Historical Federal Estate Tax Exemptions and Rates: 1916 - 1997

Year

Estate   Tax Exemption

Top   Estate Tax Rate

1916

$50,000

10%

1917   - 1923

$50,000

25%

1924   - 1925

$50,000

40%

1926   - 1931

$100,000

20%

1932   - 1933

$50,000

45%

1934

$50,000

60%

1935   - 1940

$40,000

70%

1941

$40,000

77%

1942   - 1976

$60,000

77%

1977

$120,000

70%

1978

$134,000

70%

1979

$147,000

70%

1980

$161,000

70%

1981

$175,000

70%

1982

$225,000

65%

1983

$275,000

60%

1984

$325,000

55%

1985

$400,000

55%

1986

$500,000

55%

1987   - 1997

$600,000

55%

 


Historical and Future Federal Estate Tax Exemptions and Rates: 1997-2013

Year

Estate   Tax Exemption

Top   Estate Tax Rate

1997

$600,000

55%

1998

$625,000

55%

1999

$650,000

55%

2000

$675,000

55%

2001

$675,000

55%

2002

$1,000,000

50%

2003

$1,000,000

49%

2004

$1,500,000

48%

2005

$1,500,000

47%

2006

$2,000,000

46%

2007

$2,000,000

45%

2008

$2,000,000

45%

2009

$3,500,000

45%

*2010

$5,000,000   or $0

35%   or 0%

2011

$5,000,000

35%

**2012

$5,120,000

35%

**2013

$5,250,000

40%


State Estate Tax and Exemption Chart

State

2009   Exemption

2010   Exemption

2011   Exemption

2012   Exemption

2013   Exemption

Connecticut

$2,000,000

$3,500,000

$2,000,000

$2,000,000

$2,000,000

Delaware

$3,500,000   effective 07/01/2009

$3,500,000

$5,000,000

$5,120,000

$5,250,000

District   of Columbia

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

*Hawaii

No   state estate tax

$3,600,000   effective 05/01/2010

$3,600,000

$3,600,000   or $5,120,000

$5,250,000

Illinois

$2,000,000

No   state estate tax

$2,000,000

$3,500,000

$4,000,000

Kansas

$1,000,000

No   state estate tax

No   state estate tax

No   state estate tax

No   state estate tax

Maine

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$2,000,000

Maryland

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

Massachusetts

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

Minnesota

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

New   Jersey

$675,000

$675,000

$675,000

$675,000

$675,000

New York

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

North   Carolina

$3,500,000

No   state estate tax

$5,000,000

$5,120,000

No   state estate tax

Ohio

$338,333

$338,333

$338,333

$338,333

No   state estate tax

Oklahoma

$3,000,000

No   state estate tax

No   state estate tax

No   state estate tax

No   state estate tax

Oregon

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

Rhode   Island

$675,000

$850,000

$859,350

$892,865

$910,725

Tennessee

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,250,000

Vermont

$2,000,000

$2,000,000

$2,750,000

$2,750,000

$2,750,000

Washington

$2,000,000

$2,000,000

$2,000,000

$2,000,000

$2,000,000

Inheritance Tax Chart

State

Are   Spouses Exempt?

Are   Descendants Exempt?

Are   Domestic Partners Exempt?

*Is   Life Insurance Included?

Tax   Rate

Tax   Form

Due   Date

**Indiana

Yes

No

No

No

1%   to 20%

Form
IH-6

9   months after death

Iowa

Yes

Yes

No

No

5%   to 15%

Form
IA 706

Last   day of ninth month after death

Kentucky

Yes

Yes

No

No

4%   to 16%

Form   92A200, 92A202, or 92A205

18   months after death

Maryland

Yes

Yes

Certain   transfers

No

10%

Varies

Varies

Nebraska

Yes

No

No

No

1%   to 18%

Form   500

12   months after death

New   Jersey

Yes

Yes

Yes

No

11%   to 16%

Form
IT-R or IT-NR

8   months after death

Pennsylvania

Yes

No

No

No

4.5%   to 15%

Form
REV-1500 or
REV-1737A

9   months after death

**Indiana's inheritance tax has been repealed effective January 1, 2013. Thus, the information in the chart above refers to deaths that occurred in 2012 and prior years.

You’re Young; Do You Need an Estate Plan?

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While the trend these days is for people to live well into their 80s and 90s, I'm hearing more and more about the unexpected deaths of people in their 30s, 40s, and 50s. During my 15 years of practice I've met with my fair share of young widows or widowers or the parents of a child who died unexpectedly, and in all cases but one there wasn't any estate planning done. And even in the one estate where the deceased husband did have a will, it had been written while he was still single and lived in New Jersey and it hadn't been updated after the birth of his child, his second marriage, or even after the couple moved to Florida. What a mess that was to deal with and I hate to say this, but in the big picture the young family probably would have been better off without any will at all instead of an extremely old and out of date will. I can't emphasize enough how important it is for everyone, young and old alike, to have an estate plan. But as my example of the young husband who failed to update his will after major changes in his life demonstrates, that's really not enough. You also need to make sure that all of the important documents that are included in your estate plan - wills, trusts, powers of attorney, advance medical directives - are kept up to date and change as your family, finances, and the law change. This will require a yearly meeting with your estate planning attorney, but that's OK because you need to understand that estate planning is not a one shot deal but an ongoing process. And the time to start the process or continue the process is now.

In a 2004 survey conducted by Lawyers.com, the two most frequent reasons adult Americans cited for not having an estate plan were insufficient assets and not being old enough to need a plan. Sadly, those who hold these beliefs are greatly mistaken. With life's ups and downs comes the need for basic estate planning for both the young and old alike. Here are six estate planning tips for young singles and couples that can nonetheless be used by singles and couples of all ages.

1. Don't Rule Out a Prenuptial Agreement If you are young and do not think that you need a prenuptial agreement before getting married, think again. Many circumstances warrant at least considering a prenuptial agreement, including being involved in a family-owned business or owning your own business; having part of your paycheck stashed away in a 401(k) or other retirement plan; the possibility of inheriting assets from your family; owning a residence that will be used as the marital home; or marrying someone who has already accumulated a large amount of debt. A prenuptial agreement can protect what assets you currently have or significant assets that you expect to inherit, and can also protect you from your spouse-to-be's debts acquired before the marriage.

2. Make an Estate Plan for Medical Emergencies Twenty-six year old Terri Schiavo of Florida certainly did not anticipate slipping into a coma in 1990 and then having her husband and parents fight over her medical care and ultimate wishes for the next 15 years. Planning for medical emergencies is a must for everyone and should include the signing of two important legal documents called a Living Will and an Advance Medical Directive.

3. Make an Estate Plan for Financial Emergencies If you are out of the country on business and your spouse is at home trying to sell the house, or if you are in an accident and expected to fully recover but will be in the hospital for a while, then you will need a Durable Power of Attorney to allow your spouse or other person of your choice to manage your finances and sign legal documents on your behalf.

4. Make an Estate Plan for an Untimely Death Planning for an untimely death is important, particularly if you are in a committed relationship and/or have young children. If you fail to make an estate plan, then the state where you live at the time of your death will make one for you and in most situations the plan will not be what you would have wanted had you taken the time to make your own plan. Aside from this, assets titled in your individual name will need to be probated to transfer them into your beneficiaries' names after you die. Having at least a basic Last Will and Testament in place that puts someone in charge of settling your estate and names your preferred beneficiaries and a guardian for your minor children will give your loved ones peace of mind during a difficult time.

5. Make an Estate Plan for Your Minor Children Even if you do not think that you have enough money or property to need an estate plan, you will need to make a plan if you have minor children. If you do not, then control of the minor's inheritance will be taken over by a court-supervised guardian or conservator. Then, depending on the laws of the state where the minor lives, when the minor reaches the age of 18 or 21 all of the remaining guardianship funds will be turned over to the young adult, free and clear of any guidance or strings attached. Aside from this, if you and the other parent of your children both die while the children are still minors, then the children will become wards of the court until a judge can decide who the children should live with until they become adults.

6. Buy Term Life Insurance When you are young, term life insurance is really cheap and can offer your family financial security if you were to die prematurely. The insurance proceeds can be used for things such as paying off your outstanding medical and credit card bills; paying off your mortgage; replacing your lost income; paying for your children's care and education; and/or paying for a live in nanny, day care or after school care. Term life insurance is also easy to buy these days with services like Intelliquote, Quickquote and Reliaquote. Or, if you are offered term life insurance at work, buy it.

Everyone Needs an Estate Plan

Estate planning is not just for older or wealthy people. Younger people, especially those with minor children, need to have a will and estate plan in place in order to give instructions to their loved ones to follow in the event of a debilitating accident or untimely death. Celebrities like Heath Ledger, Anna Nicole Smith (also known as Vickie Lynn Marshall), Princess Diana, John F. Kennedy, Jr., Janis Joplin, Michael Jackson, and, most recently, Brittany Murphy, all died unexpectedly, and yet each and every one of them had a will and estate plan. It's just common sense.

Julie's Wills & Estate Planning Blog

What We Inherit From Parents and Attitudes It Creates

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"Happy families are all alike; every unhappy family is unhappy in its own way."  -Tolstoy, Anna Karenina

Have you read Jonathan Franzen's new novel, "Freedom"? It has the dubious distinction of being one of Oprah's Book Club selections and receiving a devastating review in The New Republic.

There being no such thing as bad publicity, the breadth of comment and reaction in many venues at many levels of criticism and approbation has it firmly ensconced on the New York Times best-seller list. The main plot, the train wreck of a marriage between Patty and Walter Berglund and all the collateral damage caused to other family members and friends, I will leave to your reading.

The Berglunds are liberals during the George W. Bush administration and raise a family, have affairs, destroy relationships and generally wreak havoc. As Ruth Franklin, writing for The New Republic says, Freedom is a "The Way We Live Now" novel in which, as in Trollope's novel of that title, the perfidy and moral vacuity of the age are laid bare. "Mistakes were made."

Near the end of the book, Patty Berglund's mother, Joyce, is trying to make an estate plan. She is a widow and owner of a family estate her husband inherited from his father.

Spoiler Alert: The story that follows about Patty's family is near the end of the book. You may want to wait and read the book. On the other hand, in truth, this particular vignette has precious little to do with the rest of the book; and you won't really be spoiling anything.

What is Joyce's problem? Her children and other family members are pressuring her. Her son Edgar, his wife and numerous children live in the estate, which has fallen into grave disrepair. They live there rent free, of course. This son has produced Joyce's only grandchildren. He threatens that he, his wife and the precious grandchildren will relocate to a settlement on the West Bank in Israel if he doesn't get his way.

Patty's two sisters, Abigail and Veronica, who were the favorites while Patty was growing up, have failed to become self-supporting and count themselves entitled to mother Joyce's support.

Patty hasn't been part of the family for years — since the first Thanksgiving after she married Walter. Now she is back in the picture trying to broker a deal. But of course, she and her children aren't in line for part of the inheritance — she has been the family black sheep for too long.

Also in the picture are Joyce's two brothers-in-law. Her husband received the family estate from his parents. The other two brothers were left other assets in the will but, regrettably, these declined in value and were worthless when they were inherited. Joyce feels they may have a moral claim on part of the family estate.

What is the inheritance here? False claims of entitlement, emotional blackmail, long-held grudges, greed, and jealousy. Who is the property owner? That would be Joyce. Does anyone care, does anyone even ask, what she wants? Joyce is paralyzed by the conflicting demands, so does nothing? This is always making a decision in itself. By doing nothing she is choosing to let New York's intestacy statute apply, dividing the estate equally among the four children. And who is to say that is not the best thing?

From generation to generation: what is the legacy for Patty and Walter's two children? That selfishness and cruelty continue down the family tree? That people are really "selfish and shortsighted and egotistical and needy." Will Walter make sure that his children get the lake cottage he inherited from his mother? Will one of the children demand that they get all of it — cutting off a sibling in juvenile rivalry?

And you, what will you do with your estate? Are you avoiding making decisions because you know the children will be "unhappy?" Are you planning your dispositions secretly, so the bomb will go off after the funeral when the will is read?

By Patti S. Spencer, Staff Writer

Unintentionally Disinheriting Your Children- It’s Easier than You Think

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One of the strange outcomes of sloppy estate planning work is the case of unintentionally disinherited children.  Obviously this isn't something that most of us want to do, as you can ask 100 parents off of the streets whom they want to inherit their estate and all but a handful would answer, "My kids."  Unfortunately, many estate plans fail to accommodate this simple wish.

How Disinheritance Happens

The most common way that an unintentional disinheritance occurs is responsible parents draft what is referred to as an 'I love you will'.  This is a simple will that essentially says that when one spouse dies, the other will inherit the estate.  When the second spouse dies, the estate will then go to the children.  Sounds reasonable enough, right?

This is all well and good as long as neither spouse remarries after the other dies.  However, many spouses will remarry and draft another 'I love you will', and this creates a major problem.  In this second will, children from the first marriage are left out in the cold, as when the second parent dies, the entire estate is passed on to the second spouse and not the children.  At that point, it is entirely up to the second spouse as to whether or not the kids will see any money.

Since it is a second marriage, the odds of animosity towards the second marital partner are significantly higher.  This means that the chances of an unintentional disinheritance are much greater.  To solidify this concept, let's use a hypothetical example.

Example:  Matt and Lisa and Jeff

Matt and Lisa were married at the age of 25 and had two children - Jake and Anna.  Being responsible parents, Matt and Lisa drafted a simple will that would pass the estate on to the surviving spouse and then on to the kids.  Unfortunately, Matt had a heart attack at the age of 42 and died.  Lisa inherited the estate and life insurance proceeds.

Lisa, also 42, began dating a couple of years later and fell in love with Jeff.

After dating for two years, they tied the knot at the age of 46.  Being responsible adults, they updated their estate plan to reflect their recent marriage and put together another 'I love you will'.  Their marriage was strong and everyone was happy.

Shortly after Lisa's 67th birthday, she died.  Her estate plan that was drafted more than 20 years earlier was reviewed and executed.  Jeff inherited the estate and Lisa's children received nothing.  Feeling this wasn't right, Lisa's children, Jake and Anna, contested the will to no avail.

This created animosity and Jeff decided to draw up a new will that eliminated Jake and Anna as beneficiaries.  And there you have it:  an unintentional disinheritance.

Wrapping Up

In this post, we examined the concept of an unintentional disinheritance and how it happens.  If you wish to avoid having something like this occur, there are a number of ways to do so that can be as complicated as drafting a trust with QTIP provisions to simply updating your will based on changing needs.  We will explore these solutions in upcoming articles, but for now, it is important that you recognize this problem exists - particularly if you're already remarried with children.

 

Top 5 Estate Planning Mistakes

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I recently read a report that suggested that only about 20 percent of the population has a formal estate plan. After reviewing the points below, please take a minute to consider whether it's time for you to create or update your estate plan.

Here are five estate planning mistakes that people make that can be avoided.

1. Dying without a will or trust - If you die without a will or trust, the state in which you reside and the IRS will simply make one for you.  Of course, they have no interest in avoiding or reducing estate taxes, minimizing estate administration costs or protecting your family and legacy. The distribution of your assets will just be turned over to the Probate Court. The probate process is needlessly time consuming, frustrating and expensive. It is also open to the public, meaning creditors, predators or anyone else will have complete access to all information about your estate. For the vast majority of people, the benefits far outweigh any initial costs.

2. Having an "I love you" will – An”I love you” will is one in which all the decedent's assets have been left to the spouse. On paper, it might seem to be a caring, thoughtful gesture, but the reality is quite different, because such a will simply passes the complex issues and problems associated with transferring and protecting wealth onto the spouse or other loved ones.  It creates more problems than it solves, particularly for future generations.

3. Giving property outright to your children - Here is another solution that might sound good at first, but ignores several important realities. For instance, what if the child in question is too immature to handle the responsibility of a large sum of money on his or her own? What if the child suffers a severe financial setback that puts the inheritance at risk to creditors?  What if the child marries a fortune-hunter, is addicted to drugs or alcohol, gets divorced or remarried? You may need to protect your children and heirs from their own poor decisions.  These assets are also gifted assets which carry potentially large IRS penalties if not handled properly.

4. Owning property jointly - There are two types of joint ownership, Joint Tenancy with Right of Survivorship (JTWROS) and Tenants in Common (TIC).  Problems with JTWROS include postponement of probate only until last tenancy, the loss of the double step-up in tax basis creating more to pay in capital gains taxes, and outright distribution.  With TIC, you also lose the double step-up in tax basis where it's available, and your property is subject to the estate plan of each tenant as well as probate for each tenant.

5. Not having a trust - A trust is the single most effective estate planning tool available. There are many different types of trusts.  Among the better known and more commonly used are revocable trusts, irrevocable trusts and testamentary trusts. A Trust protects your privacy, and will help you leave what you want, to whom you want, in the way you want at the lowest possible cost overall.  The additional advantage is that you avoid Probate altogether, which means that the settlement of the living trust will be done swiftly, without court or attorney's involvement, in contrast to having only an "I love you" Will.

The Living Trust book

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The Living Trust book, by Henry Abts, III
"The Bible on How to Avoid Probate"
Over 1 million copies sold

The Living Trust book was written by Henry Abts III, founder of The Estate Plan. The Living Trust did not just materialize overnight. The seeds germinated for many years, he was influenced by situations that he encountered through personal experiences as well as a host of situations specific to his clients. Meeting with thousands of clients gave Henry the opportunity to address their technical questions in terms they could understand. When the clients asked for written information to forward to their parents in Florida, or to their children in New York, he began writing his experiences down. As the years passed, many of Henry’s clients, and eventually a publishing agent, asked him to write a book about the Living Trust in layperson’s terms. They felt he had a way of explaining complex concepts in simple and understandable terms. The Living Trust took four years of writing and a year of editing and was first published in June 1989. The book immediately became a nationwide success. It was updated in 1993, 1997, and in 2002, and more than one million copies have been sold.

The Living Trust : The Failproof Way to Pass Along Your Estate to Your Heirs

• The Living Trust makes the old-fashioned will obsolete
• Includes information on the estate tax, the gift, and the generation-skipping tax
• Eliminates estate-devouring probate charges and attorneys' fees
• Guarantees a timely distribution of funds to your heirs
• Assures that no one may contest or overturn your wishes regarding disposition of your estate
• Shows how to protect your business, savings, and retirement from frivolous lawsuits
• Legally valid in all fifty states

A Living Trust is a simple, inexpensive legal alternative that eliminates the costs and delays of probate and ensures that your loved ones will receive their inheritance promptly and exactly as you intended. The Living Trust- the bible on how to avoid probate- will show you how to take full advantage of this critical estate planning tool. The updated edition of The Living Trust includes the latest information on trust formations, tax changes, distribution rules, and more. It also offers:

• Insight into abuses within the probate system
• Advice on how to protect your business, savings, and retirement funds from frivolous lawsuits.
• The effects of the Economic Growth and Tax Reconciliation Act of 2001 on estate tax, gift tax, the generation-skipping tax, and stepped-up evaluation.

Sample and ancillary documents, including estate preservation and tax-saving documents, a living will, and costs of a Living Trust, all updated to reflect the latest tax changes and Living Trust requirements.

You may think your heirs have been well provided for, but did you know that:

• Your loved ones may have to wait more than two years before receiving a penny from your estate- even though you left a legally valid will?
• Costs of probating your will may eat up more than 10 percent of your estate- money your heirs will never receive?
• The specific instructions of your bequest may be contested or changed completely- even though clearly spelled out in your will?
• A will cannot help you in life. If you become incapacitated or your judgment comes into question, it becomes a matter for the courts to decide and is a very public process.

OUR GIFT TO YOU

View a portion of the book by clicking on the links below.

Chapter 1 - Lest We Forget

Chapter 2 - The Agony Of Probate

Appendix A

~ "The Living Trust is unquestionably the layman's most nearly complete source on living trusts...Recommended reading for anyone who wants to maximize his net estate left to heirs, speed asset distribution after death, avoid will challenges, minimize estate costs, and maintain privacy." -Robert Bruss, Esq., and nationally syndicated real estate columnist, Chicago Tribune

Click Below to Get Your Copy Now!