By Misty A. Watson
For trustees and personal representatives of 2010 estates, new legislation passed on December 17, 2010, provides two options for tax treatment of assets from an estate created in 2010.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 made sweeping changes to estate taxes for 2011 and 2012 and retroactively made several changes for estates in 2010.
The new estate tax law allows an estate created in 2010 to elect out of the estate tax for 2010 which results in the application of the modified carryover basis rules.
Option One – Modified Carryover Basis
Elect out of the estate tax and complete IRS Form 8939 to allocate which assets in the estate will have their basis increased to the value of the assets as of the decedent’s date of death. This allocation is limited to $1,300,000 for non-spouse beneficiaries and $3,000,000 for a spouse beneficiary.
The executor of the estate is given the authority to complete the Form 8939 and make such allocations of the basis. There are also additional increases for capital loss carryovers and other losses. The proposed allocation must be provided to the beneficiaries prior to the election.
The basis step-up still does not apply to property which is considered “income in respect of a decedent” which includes traditional IRAs and 401(k)s.
Option Two – Five Million Dollar Estate Tax Exemption
Elect to subject the estate assets to estate tax and obtain a basis increase for all assets of the estate. The estate tax exemption amount was increased to $5 million for 2010 at a rate of 35% tax for assets over the $5 million.
For 2010 estates under $5 million, electing into the estate tax makes perfect sense.
If the decedent’s total value of assets on his or her date of death was under $5 million, electing into the estate tax allows the basis of the assets to be increased to a maximum of $5 million (depending on the date of death value) without paying estate tax. Even 2010 estates which have assets over $5 million need to evaluate whether electing to pay the estate tax would result in less tax than electing to allocate the limited basis amounts.
Similar to the modified carryover basis rules, IRAS, 401(k)s, and other qualified retirement plan assets are not eligible for a basis increase.
Action Steps
Whether to elect in or out of the estate tax exemption is unique to each situation.
Trustees and personal representatives of 2010 estates are advised to seek professional advice on which election is best. A fiduciary for a 2010 estate making the modified carryover basis election should carefully weigh each election against the duties the fiduciary owes to each beneficiary of the trust or estate.
Notice of the election and which assets are being chosen for the carryover basis step-up should be provided to each beneficiary prior to the election being made. All elections should be completed in a timely manner to comply with the Act’s requirement of filing such elections with the IRS within nine months from the date of enactment.
01/18/11 6:00 AM
Estate Planning, Tax, Trusts | Comments Off |
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Important Tax Options for Estates of Those Who Passed Away in 2010
By Misty A. Watson
A care plan is written information about how to best care for your child’s health needs. A care plan may include specific medication your child takes and the time they take it, particular foods your child should avoid, how often your child gets physical therapy, or what to do for your child in an emergency. For families with children who have special needs, a care plan can convey vital information to caretakers. This may include doctors, nurses, therapists, emergency medics, teachers, child care providers, respite providers, grandparents, friends, and neighbors.
In the event you are no longer able to care for your child and a legal guardian must step in, the information in the Care Plan can be invaluable to the guardian. Information regarding medications, specialists, and even night time routines can give the guardian necessary information to provide a sense of comfort during a difficult time for the child. I encourage you to check out a sample Care Plan for your child we have prepared for your convenience.
10/28/10 6:00 AM
Estate Planning, Special Needs | Comments Off |
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The Importance of Care Plans & Beyond
By Patrick J. Murphy
The revised Illinois Power of Attorney Act, 755 ILCS 45/2-1 et seq. provides greater protection to principals. These revisions are designed to minimize abuses of the elderly, incapacitated and disabled persons by their agents serving under powers of attorney. House Bill 6477, the new state bill containing the changes, was passed by both houses and signed into law by Governor Quinn on July 26, 2010. The effective date for the changes is July 1, 2011. All powers of attorney which were validly executed prior to this date will continue to remain effective.
A few highlights of the changes to this Act are:
- Definitions of these key terms: “incapacitated,” “incurable or irreversible condition,” “permanent unconsciousness,” and “terminal condition,” some of which are borrowed definitions from the Health Care Surrogate Act.
- The agent’s duties and standard of care for the principal are expanded, particularly in the area of record keeping, as well as liability for neglect or elder abuse.
- The agency-court relationship has been rewritten to allow the review of an agent by the court and additionally adds new remedies to protect the principal.
- New paragraphs with respect to successor agents, co-agents, and powers executed in another state or country.
- Forms for Certification and Acceptance of Authority of agent, successor agent, and co-agents are available.
- New paragraph has been added with respect to persons who may be witnesses to the signature of the principal on a power of attorney. For instance, the witness cannot be a relative of the principal or agent by blood, marriage or adoption, an agent or successor agent, the attending doctor or relative of the doctor, owner or operator or relative of an owner or operator of the health care facility of the principal.
- The health care power does not authorize the agent to make any anatomical gifts, and incorporates recent improvements to the Disposition of Remains Act. The principal’s agent is to be treated as the principal in using and disclosing health records as governed by HIPAA.
- A specific “Notice to Agent” is required under the new statutory short form power of attorney to be given to the agent detailing the agent’s rights and responsibilities so that agents know what they should do and should not do.
If you are interested in learning more about the specifics about the changes to the Illinois Powers of Attorney Act, or any estate planning need please give our office a call and we can provide you with further information
10/18/10 2:00 PM
Estate Planning, Healthcare, Probate | Comments Off |
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Illinois Changes Its Power of Attorney Laws
By Thomas G. Glick
Most people don’t realize that in Missouri Probate Courts have jurisdiction to involuntary commitment of people who are mentally ill. These can be initiated by the police, by doctors or by the friends and family of the person with a mental illness.
Locking up a person who hasn’t committed any crimes is a pretty extreme measure but this provision is for people who are so sick that they represent a threat to themselves or others. My associate Misty Watson and I recently wrote an article [download PDF] aimed at other lawyers on the subject. The relevant lengths of time may also be helpful to non-lawyers as well.
07/1/09 8:02 AM
Estate Planning, Family Law, Probate, Special Needs, Trusts | Comments Off |
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Helping a Family Member with Mental Illness
By Thomas G. Glick
A lot of people ask me about quick probate, particularly for small estates. It allows people to quickly and cleanly transfer items, including bank accounts, brokerage accounts even homes and real estate to heir or beneficiaries under a will with nominal assistance from a lawyer and quick.
Missouri has adopted a super-fast, super-easy high speed probate tool called the Small Estate Affidavit.
I have written about it and given CLE presentations to lawyers and judges [download PDF]. I’m always surprised by how many people don’t know more about it.
This is a great tool for people.
05/1/09 8:22 AM
Estate Planning, Family Law, Probate, Trusts | Comments Off |
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Small Estates in Missouri
