Wills & Estate Planning

Taxes, including income taxes, estate taxes, gift taxes and the tax forms associated with these taxes, along with probate knocked celebrity estates out of the top five most read Wills & Estate Planning blogs in April 2012, which shouldn't be surprising since millions of Americans had to file their 2011 income tax returns by April 17:

Top 5 Blogs Posted in April 2012

1. Do You Need to File an Income Tax Return for Estates and Trusts, Form 1041, For Your Revocable Living Trust?
2. S. 2242, Death Tax Repeal Permanency Act, Introduced in Senate
3. Top 5 Reasons Probate Takes So Long
4. Do You Need to File a Gift Tax Return, Form 709, For Gifts You Made in 2011?
5. When is IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Due?

Meanwhile, the most read blogs in April 2012 that were posted at any time were not exactly the same as those that were the most read in March 2012, with Elizabeth Taylor's estate and 2012 estate tax, gift tax and generation-skipping transfer tax changes jumping on to the list for the first time:

Top 5 Blogs in April 2012 Posted at Any Time

1. 2011 Gift Tax Exclusion - Annual Exclusion vs. Lifetime Exemption
2. 2012 Annual Exclusion From Gift Taxes Remains Unchanged
3. When is a Federal Estate Tax Return Required to be Filed?
4. Who Will Inherit Elizabeth Taylor's Estate?
5. 2012 Estate Tax, Gift Tax and Generation Skipping Transfer Tax Exemption Changes

Read more:

• And Now, the Top 20 Wills & Estate Planning Blogs of 2010
• And Now, the Top 20 Wills & Estate Planning Blogs of 2011
• Wills & Estate Planning Blog Archive - April 2012

A recent study has shown that death does not deter identity theft, in fact, in many cases it makes it easy for criminals to strike. The study, conducted by ID Analytics, revealed that the identities of 2.5 million dead Americans are stolen each year and used to do things such as open lines of credit and establish cell phone service. But while it may be obvious that a deceased person can be an easy target for identity theft - who has the legal authority to report the theft of a deceased person's identity and pursue criminal charges? - there are several steps that surviving family members can take to help to prevent this type of crime:

1. If a loved one enters a nursing home or similar type of facility prior to death, then it will be important to secure all financial records, checkbooks, credit cards and the like and also limit those who have access to the secure information. Doing this while the person is alive will go a long way to preventing misappropriation of financial information during life as well as after death.


2. After death, state agencies such as taxing authorities and health care agencies should be promptly notified of the death and provided with a copy of the death certificate. In addition, all credit card accounts should be promptly closed and the actual cards physically destroyed (see more on this below).


3. If the estate is being probated, then the executor will need to review all claims filed against the estate and confirm that each and every expense was in fact incurred by the decedent. A few years ago I assisted with probating an estate in which the decedent's credit card was stolen by a neighbor and several thousand dollars were charged on the day the decedent died. Once this was discovered, the police were contacted and the neighbor was arrested. It was then just a matter of providing the credit card company with copies of the death certificate and police report to get the claim filed against the estate dismissed.


4. With so many financial transactions occurring online these days, is important to keep a list of e-mail and social media accounts and their login information. This will give surviving family members what they need to cancel such accounts after death, which will in turn prevent personal and financial information from being stolen and exploited by identity thieves.

• Time.com: Grave Robbing: 2.5 Million Dead People Get Their Identities Stolen Every Year
• The 8 Types of Identity Theft
• What is Your Risk of Identity Theft?
• Protect Yourself from Identity Theft
• Step by Step Guide - How to Probate an Estate

When Diana, Princess of Wales, died on that warm night in Paris in 1997, she left behind two young princes and an estate valued at approximately £21 million. And of course a woman of her stature had a last will and testament which she signed in June 1993 and then modified with a first and only codicil in February 1996. The original will and codicil left the young princess's estate in equal shares to the young princes when each child reached the age of 25.

Since both princes are over the age of 25 (William Arthur Philip Louis, known as Prince William, is currently 29, and Henry Charles Albert David, known as Prince Harry, is currently 27), one would think that they had already received their inheritances a few years ago, but not so fast. Apparently the executors of Princess Diana's estate, her mother, Frances Ruth Shand Kydd, and her oldest sister, Lady Elizabeth Sarah Lavinia McCorquodale, did not like the provisions of the will because they were able to obtain a variation order from the High Court of Justice in December 1997. Under the terms of "The Arrangement," as it is referred to in the court order, the will was modified to provide that part of Princess Diana's estate will be distributed outright to each of her sons upon turning the age of 30.

With Prince William's 30th birthday fast approaching on June 21, it is speculated that he will have the right to receive a lump sum of £10 million, or about $16 million U.S. dollars. And what will the young prince do with all of that money? Some believe he will use it buy a home for him and his wife, Catherine, the Duchess of Cambridge (the former Kate Middleton who already turned 30 back in January), close to his father's Highgrove retreat. Pure speculation, of course.

• Prince William in line for £10m payout from Diana's estate as he turns 30
• Prince William's 16 million inheritance
• What Does Princess Diana's Will Say?
• Famous Wills and Celebrity Estates

Last week I wrote about the top 10 tax friendly states for retirees: Estate Taxes, Income Taxes, Property Taxes, Sales Taxes - Where to Retire Now. Well, it's quite possible that this list will look different next year as several states consider completely eliminating broad-based taxes such as state income taxes and state property taxes. In fact, on June 12 voters in North Dakota, which has seen an oil boom in recent years coupled with low unemployment and budget surpluses, will go to the polls to decide whether to eliminate local property taxes. Aside from this, in a handful of other states, including Kansas, Oklahoma and Missouri, proposals have been made to completely eliminate each state's income tax.

Currently there are seven states that do not collect a state income tax - Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming - and two states which only tax dividends and interest - New Hampshire and Tennessee. According to NPR's Alan Greenblatt in "States Looking to Make Some Taxes Less Inevitable," the last time a state eliminated its income tax was all the way back in 1980, when Alaska did so after completion of the Trans-Alaska Pipeline System. So how can states afford to do away with huge revenue-raising taxes in these trying economic times? Good question. While politically eliminating property taxes or income taxes will no doubt be a winner at the voting precincts, replacing hundreds of millions in lost revenue will present a different set of challenges. The theory is that less taxes will allow residents to spend more, thereby stimulating the state's economy and increasing the bottom line. But predicting consumer spending is certainly not an exact science as Joe Miller, vice chair of the North Dakota Senate's Finance and Taxation Committee points out, "If [North Dakota's] commodity markets turn around in a major way, we can really be in a hurt bag." Why? Because it is certainly easier to get rid of a broad-based tax than implement one.

While not a broad-based revenue generator like state property taxes and income taxes, Ohio has already moved to eliminate its state estate tax in 2013 and Indiana's state inheritance tax will be phased out by 2022. Aside from this, initiatives are underway in Nebraska, North Carolina and Oregon to eliminate each state's estate tax or inheritance tax, and Tennessee residents are waiting on Governor Bill Haslam to sign into law two bills currently sitting on his desk that will repeal the state gift tax retroactively back to January 1, 2012, and phase out the state estate tax by 2016.

• Where You'll Pay the Most in State and Local Taxes
• Best States for Retirees
• State Estate Tax and Exemption Chart
• State Inheritance Tax Chart

The lawsuit filed against Michael Jackson by Ola Ray, the June 1980 Playboy Playmate who starred with Jackson in his music video for the song "Thriller," has been settled for an undisclosed amount. Last week I reported in Thriller Co-Star Goes to Court With Michael Jackson's Estate that Ms. Ray had sued Michael Jackson before he died because she claimed that her original employment contract entitled her to a certain percentage of profits made from the video and its merchandise, but she had not been paid any royalties since the 1980s. With the trial set to start last Monday, the executors of Michael Jackson's estate opted to settle with Ms. Ray instead of proceeding with the trial. Aside from Ms. Ray, Jackson was also sued by the director of the video, John Landis, of Animal House and Blues Brothers fame, on similar grounds, but to date that case has not been resolved.

• MJ Estate Settles War with Chick From 'Thriller' Video
• Watch the video: Michael Jackson - Thriller
• A Collection of Blogs About Michael Jackson's Estate
• Famous Wills and Celebrity Estates
• An Interview with John Landis

On Friday actress Reese Witherspoon, pregnant with her third child, appeared at an emergency hearing in the Davidson County probate court located in Nashville, Tennessee, in front of Judge Randy Kennedy, asking him to impose a court-supervised conservatorship on her father, 70-year-old John D. Witherspoon, a retired physician. Reese's mother, Mary Elizabeth "Betty" Witherspoon, had filed a lawsuit earlier in the week against her husband of 42 years, claiming that he had committed bigamy by marrying a woman named Tricianne Taylor in Gatlinburg, Tennessee, on January 14 while he was still married to Betty. In the lawsuit, Betty alleged that John suffers from the early onset of dementia and has a drinking problem and although the couple has been separated since 1996, they were never divorced, and so she wants the marriage to be annulled.

Judge Kennedy barred the media from attending the hearing and ordered all court records sealed, which is customary in cases involving the allegations of mental incapacity. In the meantime, Betty Witherspoon, a retired nurse and former college professor, was successful in obtaining a restraining order against Tricianne Taylor which precludes her from using the last name of Witherspoon for any purpose. Ms. Taylor allegedly tried to use the Witherspoon name to obtain a loan and coerced John Witherspoon to change his last will and testament.

• Reese Witherspoon appears with parents before Davidson County judge
• Reese Witherspoon appears at parents' emergency hearing in Nashville
• What is Guardianship or Conservatorship?
• Duties and Responsibilities of a Guardian or Conservator
• How to Avoid Guardianship or Conservatorship

As the early baby boomers begin to hit retirement age, many are in the process of researching the perfect place to retire. With each state having its own estate tax, income tax, property tax, and sales tax laws, which state, and even which city, baby boomers choose to retire in will have a direct impact on their bottom line. Recently CNBC.com ranked the fifty U.S. states based on their overall tax burden. According to the CNBC.com analysis, which is derived from information provided by tax service company H & R Block, the top ten states with the current overall lowest tax burdens are as follows:

1. Wyoming. Wyoming ranks number one because it has low property taxes, a low sales tax, low gasoline taxes, and no personal or corporate income taxes. Wyoming also does not currently collect a state estate tax or state inheritance tax.


2. Alabama. Alabama has the second lowest property tax rate in the country and a low gasoline tax which may nonetheless be offset by municipalities that assess a local gasoline tax on top of the state tax. Alabama also does not currently collect a state estate tax or state inheritance tax.


3. Colorado. Colorado has a comparatively low 4.63% personal income tax and a comparatively low 2.9% state sales tax. Colorado also currently does not collect a state estate tax or state inheritance tax.


4. Louisiana. Louisiana has the third lowest property tax rate in the country and a relatively low 4% state sales tax. Louisiana also does not currently collect a state estate tax or state inheritance tax.


5. Tennessee. Tennessee has no personal income tax on salaries or wages but does collect a 6% tax on dividends and interest known as the "Hall Tax." Aside from this, Tennessee has a relatively high state sales tax rate of 7% and currently collects both a state estate tax (referred to as an "inheritance tax" in the state code) and state gift tax.


6. Utah. Utah has a 5% personal income tax rate and a 4.7% state sales and use tax. Utah also does not currently collect a state estate tax or state inheritance tax.


7. New Mexico. The top New Mexico income tax rate is 4.9%, the gasoline tax is $.17 per gallon, and the state sales tax rate is 5.13%. New Mexico also does not currently collect a state estate tax or state inheritance tax.


8. Delaware. The top Delaware income tax rate is 5.95% and the state ranks forty-third for property taxes. On the downside, Delaware began collecting a state estate tax for deaths occurring on or after July 1, 2009, but the current state estate tax exemption mirrors the federal exemption at $5.12 million.


9. South Dakota. South Dakota collects no personal or corporate income taxes, the state sales tax rate is 4%, and the gasoline tax is $.22 per gallon. South Dakota also does not currently collect a state estate tax or state inheritance tax.


10. Florida. My home state of Florida collects no personal income taxes and has a low gasoline tax rate of $.17 per gallon. On the downside, while the state sales tax rate is 6%, municipalities can add a local sales tax which can make the top sales tax rate max out at a whopping 9.5%. In addition, Florida has high property taxes which can be somewhat mitigated on a primary residence by the homestead exemption and "Save Our Homes" cap on assessments. On the up side, Florida does not currently collect a state estate tax or state inheritance tax.

Of course, taxes are only one of many factors that soon-to-be retirees will need to consider when deciding where to retire. Things such as the overall cost of living, access to health care, weather, and local culture will also play major roles in the decision-making process. But, at least theoretically, states which have lower taxes should attract retirees, and so many other important factors, except for the weather which cannot be controlled, should fall right into line with low taxes.

• CNBC.com - States to take shelter from the storm of taxes
• What's the Difference Between an Estate Tax and an Inheritance Tax?
• State Estate Tax and Exemption Tax Chart
• State Inheritance Tax Chart
• Best States for Retirees
• A Quick Guide to Florida Homestead Laws

Last week the estate of Humphrey Bogart sued British luxury clothing brand Burberry over its use of a photograph of the actor from the final scene of the movie, Casablanca, on Facebook and Twitter. According to the estate's lawsuit filed in Los Angeles, Burberry used the Casablanca photograph in which Bogie is sporting a classic Burberry trench coat without the estate's permission. According to Burberry's counter-suit filed in New York, the picture was used as part of a "timeline" showing the history of the company, which was founded in 1856, in order to depict the development of its "culture, products and people" over the years, and not for the sale of any particular merchandise.

When questioned about the lawsuit, Humphrey Bogart's son, Stephen Bogart, stated: "This is such an incredibly disappointing and disrespectful action by Burberry. Apparently they believe a shoe company can advertise the fact that Brad Pitt wore its brand while jogging down the street, or a beverage company can claim George Clooney drank its product in one of his movies -- all without even asking, much less obtaining, the actors' permission. Wouldn't that be a nice, clever way to get Hollywood icons to endorse or advertise products without paying compensation or, more importantly, obtaining permission?" He ended by asking, "What's next, a cigarette company can start an advertising program claiming Bogie smoked its brand, and there's nothing our family can do about it?" Advertising or not? The courts will have to sort it out.

Meanwhile, it was also revealed last week that the vessel used during the filming of the 1951 film African Queen, the movie for which Humphrey Bogart won his only best actor Oscar, has been saved from the junkyard. Late last year a Florida couple, Suzanne and Lance Holmquist, found the vessel rotting away at a Florida marina and decided to restore it. After six months of repairs costing $60,000, the Holmquists have the vessel back on the water and are taking passengers on river cruises in Key Largo, Florida. Since being put back in the water, Stephen Bogart has visited the Holmquists and given the restored vessel his stamp of approval.

• Bogart's estate sues Burberry over spreading Bogart picture on Twitter and Facebook
• Humphrey Bogart's boat 'African Queen' saved from scrapheap
• African Queen sails again
• Famous Wills and Celebrity Estates

Back in January 2011 I posted an estate tax straw poll which asked the following question: What do you think Congress will do with the federal estate tax for 2013 and beyond? The five possible answers are as follows:

1. Completely repeal it.
2. Extend the 2011/2012 levels of $5 million exemption, 35% tax rate.
3. Extend the 2009 levels of $3.5 million exemption, 45% tax rate.
4. Nothing, estate tax levels will revert to $1 million exemption, 55% rate on Jan. 1, 2013.
5. Something else.

There are currently over 440 votes in the poll, and the overwhelming choice is option #2 - extend the $5 million exemption and 35% estate tax rate - with 45% of the votes. The other votes are fairly evenly split among option #1 - complete repeal (19%), option #3 (17%) - extend the 2009 numbers, and option #4 - do nothing (16%), with option #5 -something totally different, coming in dead last (1%).

When I initially posted the poll in January 2011, I thought that option #1, complete repeal, was a distinct possibility. But lately, despite recent rumblings that the House may be moving towards voting on complete repeal (see House GOP freshmen pressure Boehner to call vote on 'death tax' repeal), I have been reconsidering my choice, especially in light of the conversations I have had over recent weeks with fellow estate planning attorneys as well as accountants and financial advisors. Many are concerned that Congress will not be able to get its act together in time to head off the significant roll back of the exemption from $5.12 million to $1 million and increase in the estate tax rate from 35% to 55%. In fact, every single professional I have spoken with thinks that option #4, do nothing, is inevitable given the current political and economic climate and impending presidential election. So it should be interesting to see how the poll results change from now until the election. I suspect that as the months pass by there will be an up tick in the number of votes for option #4, since do nothing appears to be what this Congress is really good at doing.

• What do you think? - Cast Your Vote in the New Estate Tax Straw Poll - What Do You Think Congress Will Do With Estate Taxes for 2013 and Beyond?
• Overview of Current Federal Estate Tax Laws
• Should the Federal Estate Tax Be Repealed?
• What is the Future of the Federal Estate Tax?

In March it was revealed that the Beverly Hills home where pop tart Britney Spears had a mental breakdown back in 2008 had come on the market for $2.995 million. Since Ms. Spears has been under a court-supervised conservatorship due to the breakdown, with her father, Jamie Spears, acting as her conservator, approval of the sale of the home could have been subject to a hearing in front of the probate judge who is overseeing the conservatorship. This would have essentially resulted in a bidding war since anyone could have attended the hearing and outbid the offer presented to the probate judge for approval. Instead, Jamie Spears decided to accept a $4.253 million offer and forgo a bidding war. While this is significantly above the asking price (rumor has it that the realtors who were handling the listing, The Sanborn Team, intentionally undervalued the list price in order to spark a bidding war), it is still less than the $6.8 million Ms. Spears paid for the property back in 2007.

Another twist to Ms. Spears' court-supervised conservatorship is the appointment of her fiancé, Jason Trawick, as a co-conservator back on April 25. This was apparently done at the suggestion of Simon Cowell in order to facilitate the contract negotiations aimed at making Ms. Spears a judge on The X Factor.

• Britney Spears' Beverly Hills Home Listed for "Probate" Sale
• Britney Spears Home Sale A Done Deal
• What is Guardianship or Conservatorship?
• Britney Spears Conservatorship: Jason Trawick Granted Legal Say in Fiancé's Finances
• What is a Probate Judge and What Does a Probate Judge Do?
• Celebrity Real Estate
• Famous Wills and Celebrity Estates - Actors, Actresses and Musicians