Bobby’s Blog

2 Nov

You Were Named the Executor or Administrator of an Estate – What To Expect

When someone is designated as a personal representative for an estate, their mind is often inundated with questions and concerns about what they are legally obligated to do. In many instances, personal representatives are named an Executor/Executrix or an Administrator/Administratrix.

Similarities and Differences between an Administrator and an Executor

You may be wondering, “What is different from being named an Administrator versus an Executor?” Well, an Administrator is the individual appointed by a court to oversee an estate when someone passes away without a Last Will and Testament. In contrast, an Executor is the individual named by a decedent in their estate plan to oversee the administration of their estate, including the distribution of assets and management of any outstanding liabilities.

Despite these differences, there are a number of similarities between Executors and Administrators. For example, both Executors and Administrators are subject to the jurisdiction of a probate court. Both Executors and Administrators are considered to be fiduciaries, which means they have been bestowed with the highest duty of trust and responsibility that can be imposed by law.

Responsibilities Associated with Being a Personal Representative

When you are designated as a personal representative, there are specific duties you should prepare to carry out in order to properly administer an estate. These duties include:

  • Auditing and inventorying the assets of the estate;
  • Distributing the assets of the estate;
  • Pay off valid debts and liabilities of the decedent;
  • File necessary paperwork in the probate action;
  • File necessary tax documents;
  • Notify beneficiaries;
  • Notify other interested parties;
  • If litigation is filed, take action to defend  the interests of the estate; and
  • Maintain specific types of estate assets to ensure they do not diminish in value.

It is worth noting that Executors do not obtain the full authority to complete the above-listed tasks until the decedent’s Will is admitted to a court and recorded. Once the Will is formally admitted to court, the Executor will need to file a bond and take an oath in the court in which the record is made. This means if you are alerted to your designation as an Executor, you cannot start inventorying or distributing assets until you are formally recognized as the Executor of the estate by a probate court.

Refusing Role of Executor

If you are named as an Executor to an estate, but you do not feel capable of properly handling the responsibilities of this position, you have the right to refuse. If you decide to refuse, an alternate Executor will become responsible for the estate. If there is no alternate, the court will appoint an Administrator.

Compensation Structure for Executors and Administrators

If you agree to serve as a personal representative for an estate, it is important to know that you do not have to work for free. For example, if you serve as an executor in Maryland, you are allowed to claim a fee of 9 percent of the estate’s value as compensation for your services. For estates of greater than $20,000, an executor may claim an additional 3.6 percent of the value over $20,000 as compensation.

If you serve as an Executor in Virginia, the amount of compensation varies and subject to the discretion of the court which has jurisdiction over the estate.  Nevertheless, as a general guideline, Virginia courts have considered a reasonable fee for executors to be around 5 percent of the estate assets.  While there is no specific compensation rate set by statute in Virginia, multiple jurisdictions have proactively established guidelines for assessing an executor’s commission, and the amount is predicated primarily on the following factors:

  • Complexity of the estate;
  • Responsibilities assumed by the executor, and
  • Amount and type of professional services required to administer the estate

If you agree to serve as executor in D.C., the compensation standards are similar to Virginia in that the principle of “reasonable” compensation is the governing standard. This means a court will award a fee based on factors such as:

  • Size of the estate
  • Complexity of the estate
  • Compensation customarily charged for other types of similar estate

Have Questions? Speak to an Experienced Estate Planning Attorney

It is important to understand that serving as a personal representative is not something to be taken lightly. If you are tasked with this important responsibility, consider contacting an experienced and knowledgeable estate planning attorney to help guide you through the process. The InSight Law team is here to help. Contact our office today to schedule a meeting.

19 Oct

Streamlined Loan Forgiveness Application Now Available for PPP Borrowers

If you received a loan totaling $50,000 or less through the Paycheck Protection Program, the administrative burden associated with applying for forgiveness is now much lighter. The Small Business Administration recently issued Form 3508S, which is a far simpler loan forgiveness application, especially in comparison to the original 3508 form and even the 3508EZ form. For example, Form 3508S is a single page and requires very little paperwork when applying for PPP loan forgiveness. Small business owners who borrowed $50,000 or less will need to certify the following:

  • Loan funds were used for eligible expenses;
  • Payroll costs were at least 60 percent of the forgiveness amount; and
  • You meet the owner-employee’s limitations and caps.

In addition, PPP loan borrowers also need to provide some form of documentation supporting the eligible payroll and nonpayroll payments from the covered period, including:

  • Payment receipts, cancelled checks, or account statements documenting the amount of employer contributions to employee benefit plans;
  • Copies of lender amortization schedules and receipts or cancelled checks verifying eligible payments from the covered period;
  • Business rent or lease payments; and
  • Business utility payments.

The supporting documentation will need to be retained for six years after the date your PPP loan is forgiven or repaid in full.

The SBA anticipates that this new form will enable almost 70 percent of PPP loans to be easily forgiven.  The SBA arrived at this conclusion because, out of a total of 5.2 million PPP loans that the agency approved, around 3.5 million loans were in amounts of $50,000 or less.

The SBA also issued guidance advising that small businesses with no employees or businesses where the owner is the only employee, can now have most, or all, of their PPP loan forgiven. Additionally, the SBA issued a new rule also relaxes the scrutiny requirements on lenders to review documentation from small businesses proving how the money was spent.

The new forgiveness form and guidance from the SBA was met with much fanfare in the business community since many small businesses have been reticent to spend much, if any, money to grow their business due to concerns with the PPP loan hanging over their heads. Relieving businesses of the loan burden could now enable them to actually spend and take more risk at went enter the final months of 2020. However, the SBA points out there’s no guarantee and is still pushing for continued support from Congress in the next stimulus bill. In addition, it is pushing for the SBA to extend the new guidance to loan $150,000 or less.

Have Questions? Contact InSight Law

If you need assistance with how to navigate the complexities of the PPP loan forgiveness process, InSight Law is here to help. Contact our office today to speak to an experienced attorney.

30 Sep

Presidential Debate Highlights Differences in Tax Policy

The first debate of the 2020 presidential election took place recently and it was…unique. It’s fair to say this was a norm-shattering debate that ran high on emotions and low on substantive discussions pertaining to federal policy. It was not particularly entertaining, but it was revealing in certain moments. The issue of taxes is one prominent example that highlights the stark differences between the candidates. Let’s take a look at each candidate’s proposals when it comes to tax policy.

Joe Biden’s Tax Proposals

The Biden campaign released a number of policy papers, including Vice President Biden’s plan regarding taxes. If elected, Joe Biden would seek to repeal many of the tax changes that were codified in the Tax Cuts and Jobs Act. In addition, a Biden administration would seek to tax capital gains at ordinary income tax rates for individuals earning in excess of $1 million. A Biden administration would also seek to eliminate step-up in basis for inherited assets with capital gains, instead taxing those gains at death.

The Biden campaign also indicated they would seek to adjust the corporate income tax rate, cap the value of itemized deductions to 28 percent for those in higher marginal tax brackets and impose a 12.4 percent Social Security payroll tax on wage and self-employment income earned in excess of $400,000.

Donald Trump’s Tax Proposals

President Trump’s tax proposals are vague and lack much specificity. For example, President Trump has proposed an unspecified tax cut in an effort to boost take-home pay. He also suggested the creation of a “Made in America” tax credit, but has yet to release any substantive details on how this credit would be applied.

President Trump also proposed an expansion of Opportunity Zones, a program created under his tax reform legislation that was intended to help spur investment in economically distressed census tracts by providing capital gains tax relief for individuals and businesses investing in qualified opportunity zones, according to the Tax Foundation.

Tax Policy Will Be a Major Issue in the Coming Years

No matter who wins the 2020 presidential election, there is no doubt that tax policy will be at center stage in the coming years. This is because a number of tax cuts and credits that were enacted under the Tax Cuts and Jobs Act of 2017 (“TCJA”) are scheduled to phase out or expire in the near future. For example, in 2022, businesses will be required to deduct research and development costs over five years rather than immediately. In addition, the deduction for business net interest expense will be limited. In 2023, full expensing for short-lived business investments will begin phasing out. Furthermore, in 2026, the individual income tax changes under the TCJA will expire. These tax changes include the following:

Reduction of individual income tax rates;

The increase in the standard deduction, and

The expanded child tax credit

Concerned about Taxes and Your Estate? Contact InSight Law

If you are concerned about potential tax changes that could impact your estate, now is the time for action. If you are proactive and plan appropriately, it is possible to protect your assets from unnecessary taxation on your hard-earned assets. To learn more, contact InSight Law today.

15 Sep

Info You Need to Know – Estate Taxes Levied at Both the State and Federal Level

recently published a blog discussing the potential modifications to the federal estate tax and the push to have the federal estate tax exemption revert to “historic norms.” It appears some states may be targeting their own estate tax exemptions in an effort to raise additional revenue. For example, the D.C. Council approved the Budget Support Act of 2020 containing a number of significant tax changes, including a change to the D.C. estate tax exemption. Specifically, when someone passes away in D.C. on or after December 31, 2020, their estate would be exempt from the D.C. estate tax up to $4 million. This is a notable reduction from the current exemption for D.C. residents of $5.6 million. Though, the D.C. Council also included annual cost-of-living increases for the exemption amount.

State-Level Estate Taxes

When it comes to estate taxes, much of the spotlight winds up going to the federal estate tax to the point where many folks fail to properly plan and prepare for potential state-level estate taxes. In fact, approximately 12 states, along with the District of Columbia, impose some form of an estate tax. Furthermore, six states impose a separate inheritance tax. If you reside in Maryland, you are subjected to BOTH an estate tax and an inheritance tax.

Washington State and Hawaii both levy a 20 percent estate tax, which is the highest state-level estate tax rate in the country. Eight states, along with the District of Columbia, are the next highest with a top estate tax rate of 16 percent. D.C. previously had the highest estate tax exemption, but that will no longer be the case due to the passage of the Budget Support Act.

Of the six states with inheritance taxes, Nebraska has the highest top rate at 18 percent. Maryland imposes the lowest top rate at 10 percent. All six states exempt spouses, and some fully or partially exempt immediate relatives.

Proper Planning is Key to Protect Your Estate from Excessive Taxation

As you can see, your estate could be subjected to potential taxation at the state and federal level. This is why it is so important to speak with an experienced trust and estate planning attorney so you can ensure your estate is not hit with a large, unexpected tax bill.

To learn more about strategies to help protect your estate, contact InSight Law today.

10 Sep

Estate Tax Exemption May Be Modified Post-Election

Former Vice President Joe Biden released a 110-page economic plan that included significant modifications to the estate tax exemption, in addition to other tax policies that could impact your estate.

Modifying the Estate Tax Exemption

Biden’s economic plan would seek to return the estate tax exemption to “historical norms.” This is a nuanced way of saying that the estate tax exemption should be reduced back to close to $5 million, rather than where the exemption is currently set at closer to $12 million.

The tax reform legislation that was passed recently included a doubling of the estate tax exemption. Specifically, the estate tax exemption was $5.49 million in 2017 and is now $11.58 million in 2020.

 In addition to reverting the estate tax to historical norms, Biden’s economic plan includes revenue enhancements through modifications to the individual income tax rate on households with taxable income in excess of $400,000, according to CNBC.com.

Modifying Step-Up in Basis

Former Vice President Biden’s economic plan includes modifications to the tax treatment of unrealized appreciation of assets passed on at death. The plan would prohibit a tax-planning technique referred to as the “step-up in basis,” which enables heirs to minimize capital gains taxes when they sell holdings that were inherited.

By taxing the unrealized gain at death, heirs would receive a tax bill at the transfer, regardless of whether they sell or keep the inherited assets. In addition, it would not be possible to avoid the tax hit by gifting an asset to a loved one while you’re alive. The appreciation would be subject to taxes upon the transfer under Biden’s economic plan.

Changes to Capital Gains Tax

Former Vice President Biden’s economic plan also includes modifications to the capital gains tax. For example, under current law, the long-term capital gains tax rate is 20 percent for single households with more than $441,451 in taxable income and $496,601 for married-filing-jointly households in 2020. Biden’s economic plan recommends subjecting gains to the same tax rate as ordinary income for households earning more than $1 million.

Take Action to Protect Your Estate by Contacting InSight Law Today

Whether or not you believe the polls, it is apparent that the 2020 election could lead to a dramatic change in the federal tax system. As a result, you need to be proactive and contact an experienced estate planning professional to discuss steps that can be taken to plan ahead and position your estate to lessen the potential adverse effects of another round of tax reform. Learn more by contacting InSight Law today.

10 Sep

Estate Tax Exemption May Be Modified Post-Election

Former Vice President Joe Biden released a 110-page economic plan that included significant modifications to the estate tax exemption, in addition to other tax policies that could impact your estate.

Modifying the Estate Tax Exemption

Biden’s economic plan would seek to return the estate tax exemption to “historical norms.” This is a nuanced way of saying that the estate tax exemption should be reduced back to close to $5 million, rather than where the exemption is currently set at closer to $12 million.

The tax reform legislation that was passed recently included a doubling of the estate tax exemption. Specifically, the estate tax exemption was $5.49 million in 2017 and is now $11.58 million in 2020.

 In addition to reverting the estate tax to historical norms, Biden’s economic plan includes revenue enhancements through modifications to the individual income tax rate on households with taxable income in excess of $400,000, according to CNBC.com.

Modifying Step-Up in Basis

Former Vice President Biden’s economic plan includes modifications to the tax treatment of unrealized appreciation of assets passed on at death. The plan would prohibit a tax-planning technique referred to as the “step-up in basis,” which enables heirs to minimize capital gains taxes when they sell holdings that were inherited.

By taxing the unrealized gain at death, heirs would receive a tax bill at the transfer, regardless of whether they sell or keep the inherited assets. In addition, it would not be possible to avoid the tax hit by gifting an asset to a loved one while you’re alive. The appreciation would be subject to taxes upon the transfer under Biden’s economic plan.

Changes to Capital Gains Tax

Former Vice President Biden’s economic plan also includes modifications to the capital gains tax. For example, under current law, the long-term capital gains tax rate is 20 percent for single households with more than $441,451 in taxable income and $496,601 for married-filing-jointly households in 2020. Biden’s economic plan recommends subjecting gains to the same tax rate as ordinary income for households earning more than $1 million.

Take Action to Protect Your Estate by Contacting InSight Law Today

Whether or not you believe the polls, it is apparent that the 2020 election could lead to a dramatic change in the federal tax system. As a result, you need to be proactive and contact an experienced estate planning professional to discuss steps that can be taken to plan ahead and position your estate to lessen the potential adverse effects of another round of tax reform. Learn more by contacting InSight Law today.