Estate Taxes by State - Does Missouri Have an Estate Tax?
Does Missouri have an estate tax? The answer is no, Missouri currently does not collect an estate tax, although things were different a few years ago before major changes took effect with regard to federal estate tax laws. Prior to January 1, 2005, Missouri, like many other states, collected a separate state estate tax, called a "pick up tax," that was actually equal to a portion of the overall federal estate tax bill.
On January 1, 2005, the pick up tax was officially phased out under the provisions of the Economic Growth and Tax Relief Reconciliation Act ("EGTRRA"). In response to these changes in federal law, 18 states and the District of Columbia chose to enact laws that allow the assessment of a local estate tax. But the Missouri legislature did nothing and as a result Missouri no longer collects a state estate tax.
One thing to keep in mind is that the pick up tax is scheduled to come back in 2011 due to the sunset of EGTRRA, and if this happens then the Missouri estate tax will come back. Of course, no one really believes that Congress and President Obama will allow EGTRRA to sunset. Instead, it is anticipated that at the very least a one year patch will be enacted that will keep the federal estate tax in place and possibly bring back the pick up tax, which has already been proposed by H.R. 2023, introduced by Rep. Jim McDermott (D-WA) in April 2009.
- What's the Difference Between an Estate Tax and an Inheritance Tax?
- What is the Pick Up Tax?
- Which States Still Collect a State Estate Tax?
- Which States Collect a State Inheritance Tax?
- What is the Future of the Federal Estate Tax?
- One Year Patch Likely to End Federal Estate Tax Repeal
- Missouri Department of Revenue Estate Tax Information
Overview of S. 2784 - A Bill to Permanently Extend the Federal Estate Tax as in Effect in 2009
On Tuesday Sen. Thomas R. Carper (D-DE) and Sen. George V. Voinovich (R-OH) introduced yet another bill that addresses the federal estate tax: S. 2784 - "A bill to amend the Internal Revenue Code of 1986 to permanently extend the estate tax as in effect in 2009, and for other purposes." This bill provides for the following:
- Maintaining the $3,500,000 federal estate tax exemption in 2010 and then indexing it for inflation in 2011 and beyond.
- An estate tax rate of 45%.
- Unification of the gift tax exemption with the estate tax exemption.
- Portability of the federal estate tax exemption between spouses.
This brings the total number of bills that deal with estate tax reform in front of Congress up to 19. Will somebody please make a decision on the future of the estate tax soon so that I can advise my clients what to do in 2010 and beyond?
- What is the Federal Estate Tax?
- Overview of Current Federal Estate Tax Laws
- What Does Portability of the Federal Estate Tax Exemption Mean?
- One Year Patch Likely to End Estate Tax Repeal in 2010
- Update on Predictions About the New Federal Estate Tax Law
- Future of the Federal Estate Tax Website Covers it All
Future of the Federal Estate Tax Website Covers it All
Recently I came across a terrific website that summarizes it all when it comes to collecting and organizing the latest information about whether the federal estate tax will stay or go in 2010: Future of the Federal Estate Tax.
One section of the website lists all of the estate tax bills actively in front of Congress and provides a useful summary of the contents of each bill: Federal Estate Tax Bills in Front of Congress. A quick review of this section reveals that there are currently 16 bills that address estate tax reform in some shape or form circulating in the House and three circulating in the Senate. Stay tuned for a review of S. 2784 - "A bill to amend the Internal Revenue Code of 1986 to permanently extend the estate tax as in effect in 2009, and for other purposes" - it was just introduced in the Senate on November 17 by Sen. Thomas R. Carper (D-DE) and Sen. George V. Voinovich (R-OH) .
Last but not least another section of the website provides links to the latest news on the status of federal estate tax repeal, or not: Progress in Congress. When I reviewed this section at the beginning of the week there was an article which speculated that there was a very good chance that the estate tax debate would reach the floor of the House sometime this week, but yesterday there was an update stating that "House Democrats are likely to delay consideration of estate tax legislation until after the Thanksgiving recess." Or maybe after the new year.
If you want to keep up to speed on the latest estate tax news through the website, you can subscribe to updates via email or through an RSS reader.
Estate Planning Term of the Week - Power of Attorney
Sticking with the theme of the past two estate planning terms of the week, Living Will and Living Trust, this week's estate planning term is another type of estate planning document - Power of Attorney.
A Power of Attorney is a special type of legal document that is essential to making a comprehensive mental disability plan and allows you appoint someone to act on your behalf to manage your finances. A Power of Attorney can be "durable," meaning that it goes into effect immediately and continues to be legally binding even if you become mentally incapacitated; or a Power of Attorney can be "springing," meaning that it does not go into effect until after you have been declared to be mentally incapacitated. The person or entity named to act on your behalf in a Power of Attorney is called your "Attorney in Fact" or simply your "Agent."
Contents of Farrah Fawcett's Revocable Living Trust Revealed
Things were all quiet on the Farrah Fawcett estate front until yesterday when the contents of Fawcett's Revocable Living Trust were revealed. Somehow the website RadarOnline.com obtained a copy of The Third Amendment to and Complete Restatement of the Fawcett Living Trust dated December 5, 1991 which was signed by Farrah Fawcett on August 9, 2007. A complete review of the 54-page document reveals the following:
- All of Fawcett's art work has been left to the University of Texas at Austin.
- All of Fawcett's other personal items have been left to her nephew, Greg Walls.
- $100,000 has been left outright to ex-boyfriend Gregory Lawrence Lott.
- $500,000 has also been left outright to Greg Walls.
- $4,500,000 has been left in a lifetime trust for the benefit of Fawcett's son, Redmond. Producer Richard Francis is named as the Trustee of this trust.
- $500,000 has been left in a lifetime trust for the benefit of Fawcett's father, James Fawcett, who is still living. Producer Richard Francis is also named as the Trustee of this trust.
- The balance of Fawcett's estate has been left to The Farrah Fawcett Foundation, a private foundation founded by Fawcett in 2007 that is dedicated to funding cancer research.
- Two interesting twists - when Redmond dies the balance of his trust will be distributed to The Farrah Fawcett Foundation instead of to Redmond's children and when James dies the balance of his trust will be added to Redmond's trust.
- As previously reported, Fawcett's longtime lover and the father of Redmond, Ryan O'Neal, is not a beneficiary of the trust.
In the end not too exciting but perhaps quite revealing as to Fawcett's true feelings towards Ryan O'Neal vs. Greg Lott. And please, for those websites and TV shows that have reported on the contents of Farrah Fawcett's will take note - a Revocable Living Trust is NOT the same thing as a Last Will and Testament.
Estate Planning Mistakes Revisited - Do it Yourself Wills Don't Work!
I was surprised to read an article that appeared in the "Cranky Consumer" section of The Wall Street Journal last week touting the usefulness of "do it yourself wills" - Before It's Too Late: A Test of Online Wills. A quick internet search about the writer, Jane Hodges, reveals that she is a Seattle-based freelancer who writes about business and finance topics for newspapers and magazines. In other words, she is not an attorney and in fact she admits in the article that she is not going to hire one to review the documents she created using several different online programs including Suze Orman's Wills & Trust Kit (cost - $13.50 - are you kidding me?), LegacyWriter (cost - $35), LegalZoom (cost - a whopping $377.95), and BuildaWill (cost not mentioned). So how can Ms. Hodges be sure that any of the documents she created will work when they are really needed if she does not have them reviewed by a qualified estate planning attorney? Well Ms. Hodges, here's some free legal advice - you will never know if the estate planning documents you created will work when they are needed because you will either be mentally incapacitated or dead! And your husband or other family members will be left to foot the legal bills that will inevitably be incurred to clean up the mess that you created.
In the article Ms. Hodges states that she is married without children, she and her husband co-own their home and they have general savings that they keep separate as well as life insurance and retirement accounts. She states "Our needs, we figured, were simple." How did she figure that one out? And she goes on to complain that she had a heck of a time figuring out how to deal with the jointly owned home in the context of a will and revocable living trust. Well, Ms. Hodges, here's some more free legal advice - since the house is in joint names it won't even come into play at all in a will or revocable living trust! Apparently her online programs could not effectively explain this and she also complains that with all four services she had to "back up and re-start, or exit and make revisions." Why? Because she had no clue what she was doing! And to top if off Ms. Hodges does not even mention Washington state estate taxes - apparently all of the programs failed to mention the estate tax exemption gap of $1.5 million between the Washington estate tax exemption and the federal estate tax exemption, which could lead to a huge wrinkle in Ms. Hodges' estate plan.
In the end Ms. Hodges wonders which program actually produced the "superior will," but she will never know since she goes on to state that while each online program "purports to yield documents that clearly outline our intentions in the event of our demise or death," she did not (and apparently will not at any time in the future) hire an estate planning attorney to review them. In defense of her actions she states: "We're hoping that we - and our heirs - won't have to worry about it any time soon." What a naive statement! Here's one last piece of free legal advice Ms. Hodges - while you may not become mentally incapacitated, you will die and if you do not ever have the documents that you created reviewed by a qualified estate planning attorney, then your plan will fail when it is needed and your loved ones will curse the day that you decided to leave some of the most important decisions that you will have to make in your life up to a computer program that cost $13.50.
As Attorney David Shulman wrote over at his South Florida Estate Planning Law blog, The Wall Street Journal Totally Blows it on Online Wills. Instead of "Cranky Consumer" Attorney Shulman suggests that the section should be titled "Idiot Consumer." I agree 100%.
- Should You Write Your Own Will?
- Does Do It Yourself Estate Planning Work?
- Estate Planning Don'ts - Don't Write Your Own Will
- Do You Need to Hire an Estate Planning Attorney?
- Will Your Estate Plan Work When It's Needed?
Join the discussion in the Wills & Estate Planning Forum:
Estate Taxes by State - Does Mississippi Have an Estate Tax?
Does Mississippi have an estate tax? The answer is no, Mississippi currently does not collect an estate tax, although things were different a few years ago before major changes took effect with regard to federal estate tax laws. Prior to January 1, 2005, Mississippi, like many other states, collected a separate state estate tax, called a "pick up tax," that was actually equal to a portion of the overall federal estate tax bill.
On January 1, 2005, the pick up tax was officially phased out under the provisions of the Economic Growth and Tax Relief Reconciliation Act ("EGTRRA"). In response to these changes in federal law, 18 states and the District of Columbia chose to enact laws that allow the assessment of a local estate tax. But the Mississippi legislature did nothing and as a result Mississippi no longer collects a state estate tax.
One thing to keep in mind is that the pick up tax is scheduled to come back in 2011 due to the sunset of EGTRRA, and if this happens then the Mississippi estate tax will come back. Of course, no one really believes that Congress and President Obama will allow EGTRRA to sunset. Instead, it is anticipated that at the very least a one year patch will be enacted that will keep the federal estate tax in place and possibly bring back the pick up tax, which has already been proposed by H.R. 2023, introduced by Rep. Jim McDermott (D-WA) in April 2009.
- What's the Difference Between an Estate Tax and an Inheritance Tax?
- What is the Pick Up Tax?
- Which States Still Collect a State Estate Tax?
- Which States Collect a State Inheritance Tax?
- What is the Future of the Federal Estate Tax?
- One Year Patch Likely to End Federal Estate Tax Repeal
- Mississippi Tax Commission Website - Estate General Information
Estate Planning Myth vs. Reality #7 - Does Your Spouse or Other Beneficiary Need a Co-Trustee?
Estate planning myth: A Co-Trustee provides checks and balances while administering a trust and will prevent your spouse or other beneficiary from making bad decisions and squandering their inheritance.
Estate planning reality: In the real world I'm really not a big fan of naming Co-Trustees. Why? Because two or more of anything adds multiple layers of complexity and in the case of two Trustees it adds different personalities, experiences and overall goals. The end result is often a lawsuit waiting to happen.
The recommendation: Co-Trustees should only be used under the following limited circumstances:
- When state law requires it. In some states a Co-Trustee is necessary to insure that the asset protection benefits of a lifetime trust will work if needed.
- When you only have two children and they get along. Of course this will only work if your children really do get along.
- When you have a blended family and want to control what happens to your estate if you predecease your spouse. In this situation a Co-Trustee can insure that your estate goes where it's supposed to go.
And when should Co-Trustees be avoided?
- When you leave everything to your first and only spouse. If you're afraid that your spouse won't be able to handle administering the AB Trusts or ABC Trusts after you die, then don't be. In my experience they all figure it out just fine. In fact, I had one client who was so upset that her husband of over 40 years named a bank as her Co-Trustee that she spent thousands of dollars to go to court and get the bank removed and her children supported her the entire way because they couldn't believe it either.
- When you only have two children and they don't get along. This is a definite lawsuit waiting to happen. In my experience if the children didn't get along while the parents were alive, then they will absolutely despise each other after the parents are gone.
- When you're concerned that a beneficiary really will squander away their inheritance. Then don't name the beneficiary as a Co-Trustee with their sibling or name the sibling as the sole Trustee. Instead, designate an outside third party such as a friend, attorney, bank or trust company, or a more distant relative as the sole Trustee.
The Latest on Michael Jackson's Estate - Executors Branca & McClain vs. Joe Jackson
There were some surprising twists this week in the ongoing saga that is the probate of Michael Jackson's estate. While Jackson's mother, Katherine Jackson, dropped her objections to the appointment of attorney John Branca and music executive John McClain as the permanent executors of the estate, Michael's father, Joe Jackson, filed a 60-page petition wherein he asked for a $20,000 per month allowance from his son's estate and voiced his objections to the appointment of Branca and McClain.
In the end Judge Mitchell Beckloff named Branca and McClain as the permanent executors because this was exactly what Michael stated in his Last Will and Testament:
"That was a decision his son made," Beckloff said in court. "I don't see how (Joe Jackson's) affected by the appointment of Branca or McClain as executors."
The hearing on Joe Jackson's request for an allowance has been set for Thursday, December 10. Of course, since Joe Jackson was not named as a beneficiary of his son's revocable living trust (according to the petition for probate that was filed along with Jackson's 2002 Pour Over Will to open the estate, Michael's three children, his mother and several children's charities were named as the beneficiaries of the Michael Jackson Family Trust), Joe Jackson will have an uphill battle proving that he is entitled to receive even one penny from his son's estate.
Estate Planning Term of the Week - Living Trust
This week's estate planning term - Living Trust.
The term Living Trust has two distinct meanings:
- An abbreviated name for a Revocable Trust or a Revocable Living Trust.
- A type of revocable or irrevocable trust that is created and funded during the Trustmaker's lifetime. Contrast this with a Testamentary Trust, which is a type of irrevocable trust that is created and funded after the Trustmaker's death.
Also not to be confused with a Living Will - the estate planning term from last week - which is a legal document that deals with end of life decisions.