03 November

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Estate Tax Savings – Inflation’s Golden Lining?

The inflation rate in the United States hit 8.2 percent year over year in the month of September meaning it is at a multi-decade high, according to NBC News. The spike in inflation has caused pain for many Americans due to the increase in food prices, housing prices, and medical care. However, there may be a golden lining to the ever-increasing inflation rate - reduced estate taxes. Reports indicate inflation could actually help save high-net-worth individuals close to $700,000 by reducing the estate tax bill that’s imposed on their assets when they pass on. How Inflation Impacts Estate Taxes Many people do not know that the estate tax is indexed to consumer costs. Since prices for food, clothing, housing, etc. have increased due to inflation, an adjustment will be made to the amount exempted from estate tax liability. Analysts predict the total amount couples will be able to shield from the estate tax...

15 September

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

Posted by Bobby Feisee

in Bobby's Blog, News

I 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...

10 September

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Estate Tax Exemption May Be Modified Post-Election

Posted by Bobby Feisee

in Bobby's Blog, News

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...

12 November

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Estate Tax May Survive Federal Tax Reform

Posted by Bobby Feisee

in Bobby's Blog

Congress is in the midst of debating tax reform which features an attempt to possibly repeal the federal estate tax (also referred to as the "death tax"). This tax typically effects high value estates that can result in a whopping 40 percent estate tax. In fact, the 40 percent estate tax affects approximately 0.2 percent of estates in America. That translates to 5,460 estates in 2017, according to the nonpartisan Tax Policy Institute. Though, there are sizable exemptions to the estate tax under current law. For example, in 2017, the estate tax exemption is $5.49 million per individual. This means an individual can leave $5.49 million to their heirs and pay no federal estate or gift tax, according to Forbes. There has been long-held criticism behind the premise of the federal estate tax, especially in conservative circles. They point out that the estate tax is essentially a double-tax on hard-earned income and harms...

16 August

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Multiple States Reducing Estate Tax Threat for Families and Businesses

Posted by Bobby Feisee

in Bobby's Blog

Since 2014, approximately nine states have eliminated or lowered their estate taxes. This was accomplished primarily by modifying and increasing specific exemptions thereby reducing the number of households that could be hit with a large estate tax bill. For example, Maryland is planning to raise its current $3 million estate tax exemption to $4 million in 2018. The District of Columbia is ahead of the game. In 2014, D.C. passed a major tax reform deal that included increasing its estate tax exemption amount from $1 million to $2 million at the start of 2017 and to ultimately match the generous federal exemption level ($5.49 million for 2017, indexed for inflation), starting in 2018, according to Forbes. Other states are going even further. For example, New Jersey plans to eliminate its estate tax entirely, according to the Wall Street Journal. Currently, six states have repealed their estate taxes over the past 10 years, including Virginia. Why...

03 December

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New Administration May Mean Major Estate Tax Changes

Posted by Bobby Feisee

in Bobby's Blog

The estate tax (also known as the "death tax") may be on the proverbial chopping block with President-elect Donald Trump ascending to Commander-in-Chief, along with a Republican-controlled Congress. Most, if not all, Republicans oppose the estate tax. President-elect Trump’s tax plan expressly calls for an outright repeal of the tax and imposing a capital gains tax on assets left to heirs above $10 million, according to Forbes.com. The estate tax is generally not an issue for most people due to the sizable exemptions afforded under the tax code. However, people often make the mistake that estate planning is the same thing as estate tax planning. Rather, estate tax planning is one component of estate planning but there are many other issues your family must deal with on death as it is a major life event and you still will need to deal with local governments, financial institutions and family dynamics. Here is...

10 August

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There’s No Such Thing as a “Simple Will”

Posted by Bobby Feisee

in Bobby's Blog

I get this request, in some form or another, on a regular basis - “I want a simple will.” The client is thinking they have a relatively straightforward collection of assets and a “typical” family. Then they drop the proverbial bomb and reveal that they have a half-interest in a rental property based in Honolulu, natural gas interests in another state, and a general partnership worth somewhere between $100,000 and $5,000,000. They also divulge the fact that they have one child who is physically disabled and another child who has served jail time with two divorces under their belt. Clearly, a simple will is not going to be in the picture. And I make this determination in many instances when meeting with clients. Each individual’s estate is unique. It is important to look at all the complexities and nuances so your estate plan is detailed, thorough, and legally valid. When meeting with...

28 July

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Slammed: IRS Takes Big Chunk Out of Detroit Pistons Owner’s Estate

Posted by Bobby Feisee

in News

Who says the government is broke? The Internal Revenue Service (IRS) just took $388 million from the estate of Detroit Pistons owner Bill Davidson, according to Forbes.com. A dispute arose after Mr. Davidson passed away and the IRS claimed it was owed $2 billion in estate, gift, and generation-skipping taxes. The IRS argued that the Davidson Estate undervalued corporate stock and improperly valued self-cancelling installment notes (SCINs). As to the stock, the IRS said that the estate low-balled the value of privately held Guardian stock held in trust for Davidson’s children and grandchildren. Mr. Davidson’s estate took the IRS to U.S. Tax Court challenging the assessment of any additional taxes, especially taxes worth $2 billion. The parties agreed to a settlement and the Davidson Estate will pay $187 million in gift taxes, $152 million in estate taxes, and $49 million in generation-skipping taxes. Certainly a sizable chunk of money, but far less than the...

02 April

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Battle Royal: IRS v. The Estate of Michael Jackson

Posted by Bobby Feisee

in Current Events

The King of Pop faced numerous legal challenges during his life, but arguably the biggest battle is taking place after his passing. The Internal Revenue Service (IRS) is seeking close to $731 million from Michael Jackson’s estate. Yes, you read that number correctly - $731 million. How did the IRS arrive at such a huge tax bill? Well, IRS auditors determined that the value of Mr. Jackson’s estate totaled $1.17 billion. This means his estate qualifies for the top rate of the estate tax – a staggering 40 percent, according to bankrate.com. Therefore, the total tax bill includes $525.6 million in taxes and $205.1 million in gross valuation misstatement and negligence penalties,according to Forbes.com. Obviously, Mr. Jackson’s estate challenges the calculation of such a huge tax bill. The biggest disagreements focus on the value of Mr. Jackson’s intangible and intellectual property (e.g., the King of Pop’s name, likeness...

29 December

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Estate Planning Tip: Watch Out for State Taxes

Posted by Bobby Feisee

in Bobby's Blog

When people begin estate planning, they probably think about the federal estate tax (commonly referred to as the “death” tax). However, a lesser-discussed tax issue is state estate and inheritance taxes. This is a complex, state-based issue and it’s advisable for you to sit down with an experienced estate planner to make sure your plan takes into consideration potential state taxes. Some states collect estate taxes and while other states collect inheritance taxes (some actually collect both). You may be thinking, “what the heck is the difference between an estate tax and an inheritance tax?” Well, an inheritance tax is based on who receives a deceased person's property and how the beneficiary is related to the deceased person. An estate tax is based on the value of the deceased person's estate and not on who gets what, according to the Memphis Daily News. State tax laws are always changing, so...