Yesterday an article written by Jessica Toonkel Marquez for InvestmentNews.com caught my eye - States breathe life into death tax. Apparently the Virginia legislature is working quickly to fix all of the estate plans of its residents that were drafted to minimize federal estate taxes through the use of AB Trusts which have now become ambiguous due to the repeal of the federal estate tax. House Bill No. 755, which was introduced on January 12 in the House of Delegates by William R. Janis, provides that for deaths occurring in 2010, the Personal Representatives and Trustees of estates and trusts that use a formula clause to fund the A and B Trusts must apply the federal estate tax laws to the estate or trust that were in effect on December 31, 2009. The bill also provides that it will be retroactive to December 31, 2009, and if Congress does act to bring the federal estate tax back in 2010 then the bill will only be effective through the date that the new federal estate tax law goes into effect.
After reading this article I became concerned about those estate plans out there that did fully contemplate repeal of the federal estate tax (mine drafted in 2004 or later do) - what will happen to them? But a quick read of the actual text of the bill has revealed that this proposed law will not apply to any will or trust that "manifests an intent that a contrary rule shall apply if the decedent dies on a date on which there is no then-applicable federal estate or generation-skipping transfer tax." That's better. There is also what I refer to as an "opt out" provision - a Personal Representative or any affected beneficiary under the will or trust can file a legal proceeding to determine whether the deceased person intended that the formula clause of the will or trust should be construed under the laws in effect after December 31, 2009. Good luck proving that.
House Bill No. 755 is expected to pass in the Virginia legislature by the end of February, and the article points out that both Georgia and Maryland legislators are considering similar measures. Hey other 47 states and D.C., wake up!
- Yes, Federal Estate Taxes Will Die on January 1!
- What is an AB Trust?
- Welcome to 2010 - The Year of No Federal Estate Taxes?
- Estate Planning Tips for 2010 - Get an Estate Plan Review Now!
- What is the Future of the Federal Estate Tax?
- Feb. 3, 2010 - Maryland Legislation in the Works to Fix Glitch Created by Federal Estate Tax Repeal
- Feb. 5, 2010 - Other States Jump on Bandwagon to Fix Glitch Created by Repeal of Federal Estate Tax