State Estate Taxes - Update on Vermont Estate Taxes
Thursday July 9, 2009
Back on May 29 I wrote about the current laws governing the estates of Vermont residents and nonresidents who own real estate and tangible personal property located in Vermont. Well, it turns out that on June 2, 2009, the Vermont legislature overrode Gov. Jim Douglas' veto of a bill that reduced Vermont's state estate tax exemption from $3,500,000 down to $2,000,000. To make matters even worse, the $2,000,000 state estate tax exemption has been made retroactive to January 1, 2009.
The bottom line - for the estates of decedents affected by Vermont estate taxes dying on or after January 1, 2009, the threshold for a taxable estate is only $2,000,000, leaving a gap of $1,500,000 between the state exemption and the federal exemption. Aside from this, Vermont doesn't allow for a state QTIP election through the use of ABC Trust planning, so residents and nonresidents owning real and tangible personal property located in Vermont need to be aware of the state estate tax exemption gap.
The Michael Jackson Family Trust - So What is a Family Trust?
Wednesday July 8, 2009
OK, enough already about Michael Jackson's estate, but unfortunately I think that his estate plan has created some confusion when it comes to understanding a basic estate planning term - "Family Trust."
Traditionally in the estate planning arena a "Family Trust" is another term used for the "B Trust" in an AB Trust system that is commonly used by married couples to maximize the use of each spouse's exemption from federal estate taxes. In fact, Family Trust is the term that I use in my clients' estate planning documents, but at my last firm they used the term "Bypass Trust" and at the firm before that they used "Credit Shelter Trust." No big deal - all of these terms refer to the B Trust in an AB Trust plan.
So leave it to Michael Jackson to create confusion by naming his Revocable Living Trust the "Michael Jackson Family Trust." No, Michael Jackson's "Family Trust" isn't a B Trust, Bypass Trust, Credit Shelter Trust, or even a Family Trust in the traditional sense of the term - it's simply the name Michael Jackson decided to use for his Revocable Living Trust (or more likely what his estate planning attorney decided to name the trust). He could have named it the "Michael Jackson Revocable Trust" or the "Michael Jackson Living Trust" or even the "Thriller Trust" - in other words, the name of a Revocable Living Trust, or of any trust for that matter, really isn't important. Instead, what is important is what the written trust agreement says.
So the bottom line is don't let Michael Jackson's estate plan confuse you - his Family Trust has nothing to do with saving on estate taxes in the traditional sense of a Family Trust - it's just a name.
Is Michael Jackson's Will Valid?
Tuesday July 7, 2009
Rumors have been circulating since Michael Jackson's death about the validity of his 2002 Last Will and Testament, and yesterday it was reported that more than one will exists. So what? Michael Jackson's will that was signed in July 2002 is apparently his last will, and on top of that it is a Pour Over Will that is designed to take assets from his estate (meaning things titled in his individual name or as a tenant in common) and put them inside the Michael Jackson Family Trust, a Revocable Living Trust that has become irrevocable now that Jackson is dead. With that said, Michael Jackson's will isn't the relevant legal document - the Michael Jackson Family Trust is. And as I wrote yesterday in Michael Jackson's Will vs. the Michael Jackson Family Trust, it's quite possible that Michael Jackson amended the trust or completely restated its terms years after the July 2002 will was signed, and if this is the case then it will be more important to focus on the validity of the trust than on the validity of the will. And even if the 2002 will is found to be invalid, that doesn't mean the trust, which, again, could have been amended or completely restated long after the 2002 will was signed, is invalid. This makes for ongoing court room drama and posturing that in the end will keep the lawyers representing Michael Jackson's family and business associates busy and fill their pockets with legal fees.
This begs the question, could any of this have been avoided? Perhaps, if Michael Jackson had shared his estate planning goals with his family, but as flighty as Michael Jackson was it's possible that he changed his mind and his estate plan frequently. As in life, in death Michael Jackson continues to weave one tangled web.
Michael Jackson's Estate - Update on the Latest Court Moves - Round 1 Goes to Branca & McClain
Monday July 6, 2009
A stunning decision was handed down this morning in the struggle for control over Michael Jackson's estate - Los Angeles Superior Court Judge Mitchell L. Beckloff has ignored arguments from Jackson's mother, Katherine Jackson, and handed temporary control of the estate to family attorney John Branca and music executive John McClain, two of the three executors named in Michael Jackson's July 2002 Last Will and Testament. As reported on Saturday in The Latest Court Moves, the third person named as executor, accountant Barry Siegel, previously declined to serve.
According to Josh Grossberg for E! Online, attorneys for Katherine Jackson argued that "there is concern over handing over the keys to the kingdom so quickly." But Judge Beckloff did not agree, stating that "someone needs to be at the helm of the ship" and that he believed "Branca and McClain would act in the best interest of the estate and be best equipped to sort through various complicated legal and financial problems." Enough said.
Of course, in making his decision Judge Beckloff was just following the terms of Michael Jackson's July 2002 will, and if/until that will is determined to be invalid, it will continue to govern the disposition of Jackson's estate along with the terms of the Michael Jackson Family Trust.
The next day in court regarding Michael Jackson's estate is Monday, August 3, 2009, at 8:30 a.m. in department 5, 111 North Hill Street, Los Angeles, CA 90012, when Judge Beckloff will decide who to appoint as permanent executors over Michael Jackson's "kingdom." And later that day at 10:30 a.m. in the same court room Judge Beckloff will decide who to appoint as the permanent guardian for Jackson's three minor children.
