Fairfax County Wills & Estate Planning Attorney - Annandale, Virginia

Federal Estate and Gift Tax Rules for 2013, Including Examples

Scott — Fri, 04 Jan 2013 20:18:25 +0000

By passing the American Taxpayer Relief Act of 2012 (“ATRA”), President Obama and Congress have agreed on a first step towards solving our fiscal cliff problem. While neither Democrats or Republicans seem overly “happy” with the new law, their compromise has created a level of stability in federal transfer taxes unseen in well over a decade. Recall that when an individual transfers assets to another individual or entity, the value of the amount transferred is potentially subject to three federal transfer taxes – the estate tax, the gift tax and the generation-skipping transfer tax. While ATRA contains very little verbiage about these taxes directly, it instead makes its mark by finally making permanent the provisional tax cuts initiated back in 2001 that have often wavered ever since. Let’s celebrate by examining the transfer tax rules for 2013 and beyond in some detail. Estate Taxes 40% Maximum Rate and $5.25 Million Lifetime Exemption The estate tax is charged on transfers made after an individual dies. For deaths occurring after December 31, 2012, an estate tax with graduated rates maximizing at 40% is charged on any amount that exceeds the deceased individual’s available lifetime exemption. ATRA makes permanent the $5 million lifetime [...]

My 21 Favorite Estate Planning Insults and Comebacks

Scott — Mon, 03 Dec 2012 02:11:46 +0000

When you achieve a certain level of success in estate planning law, complaining about the billboards, the yachts, the keys to the cities, the authorized (and unauthorized) documentaries about your life, etc. seems a bit petty. Then again, the naysayers can be quite annoying. You know, the jealous types who seem to thrive on bringing down the super-sensational yet unassuming societal icon. Still, I have to admit that this group can occasionally come up with a funny line or two. Here are 21 of my favorites that I’ve heard during my career travels, be they in the office, around the water cooler, or while waving to throngs of fans standing along the red carpet amidst a sea of flashing cameras just prior to one of my stadium-filling lectures: Yo’ momma is an intentionally defective grantor trust! This estate plan is great – so great I just saw it in a book last week. Now close your mouth, ‘cause you cold busted! Your Pourover Will was a hamster and your trust smelt of elderberries! Your Durable Power of Attorney uses a springing power? How gouche! “Rhett, I don’t know what the lifetime exemption is going to be next year! Where shall [...]

The Fiscal Cliff and Your Estate Planning (Part III): The Impact on You

Scott — Sat, 01 Dec 2012 01:24:46 +0000

In the first post of this series, we discussed the fiscal cliff and its impact on our economy. In the previous post, we covered the proposals most likely to be considered by Congress in the coming weeks. In this final post of the series, we cover the impact of these proposals on you and the surprisingly small effect they have on the fiscal cliff problem in general. Does Any of This Directly Apply to Me? So how does any of this apply to your own situation? Here’s a quick back-of-the-envelope type of calculation to help you figure this out. Step One: Calculate and total the approximate value of your current assets. Repeat for your spouse if you are married. Include the following: Real Estate Bank and Investment Accounts Retirement Plans Vehicles, Furniture, Personal Property Business Interests Money Owed to you Other Assets Step Two: Calculate the value of your debts. Step Three: Total Assets minus Total Debts = your Net Worth. Step Four: Add to your Net Worth the face value of any life insurance owned by you and/or your spouse, regardless of beneficiary. As stated in this post and at 26 U.S. § 2031, the U.S. Tax Code includes [...]

The Fiscal Cliff and Your Estate Planning (Part II): Proposed Laws

Scott — Tue, 27 Nov 2012 22:39:48 +0000

In Part I of this topic, we explained the fiscal cliff and how it will likely result in changes in estate and gift tax law that could affect millions of families in the coming years. In this post, we discuss each of the main proposals regarding these taxes that seem to be under the most serious consideration in Congress. But first, let’s take a brief look at what we’re even talking about. Brief Review of Estate and Gift Taxes Whenever wealth is shifted from one individual to another, the transfer is subject to gift tax (if the donor is alive) or estate tax (if the donor is deceased). All U.S. citizens, as well as certain non-U.S. citizens, are subject to this rule. However, under current law, only about 2 out of every 1,000 (0.2%) people give large enough transfers for these taxes to even apply. This is because every individual’s first $5.12 million is exempt from these transfer taxes, whether it occurs during life or after death. We’ll refer to this as the “lifetime exemption”. If you’re one of the lucky individuals giving away over this $5.12 million (either by gift or as a result of your death), then any [...]

The Fiscal Cliff and Your Estate Planning (Part I): The Basics

Scott — Tue, 20 Nov 2012 03:16:05 +0000

The recent election results combined with the impending “fiscal cliff” means that there will most likely be changes in tax rates in the near future. For example, we are pretty much guaranteed that the federal estate and gift tax rules will change for the 12th time in the last 13 years. In fact, chances are very good that significantly more families will be directly impacted by these specific changes for the first time in the 21st Century. To further understand the motivations behind these proposed changes, let’s first take a “Debt 101” approach in this post to describe the fiscal cliff we’re hearing so much about. Purpose of Debt Like any individual or business, governments earn money and spend money to help accomplish their goals. While individuals and businesses generally earn their money through the sales of goods and services, governments mainly earn their revenue through taxing the populace. When an individual, business, or government spends more than it receives, it goes into debt. In other words, it must borrow money to pay off its existing obligations. While some might object to the notion of spending money that they don’t have, most of our world’s wealth has at least some [...]

Interview: Young Adult With Digital Assets But No Will

Scott — Thu, 13 Sep 2012 22:02:06 +0000

It has been said that young adults without significant assets do not need a will. In response, I present an interview with my friend “F”. F is in her mid-20s. She has full-time employment and also runs a side photography business. She is single and childless, but she has a serious boyfriend. Her divorced parents are alive and well, and each has remarried. F has a natural sibling and two step-siblings on her father’s side. Because F figured that her main assets would be distributed through beneficiary designations, she has no will. F graciously allowed me to share relevant parts of our conversation and my analysis below. It turns out that her situation is not as simple as she thought. Other Personal Data Assets Do you have any bank or investment accounts? Yes, a payable-on-death bank account. My mother is the primary beneficiary, and my sibling is second. Do you have a retirement plan or life insurance? Yes, both through work. Who is the beneficiary? My mother, and if she doesn’t survive, then my sibling. Do you have any other assets? Not really, just my personal effects. Business Information In what form is your side business? Sole proprietorship. Do you [...]

In Appreciation – Second Year

Scott — Fri, 03 Aug 2012 22:03:53 +0000

This is the end of my second year of blogging. Today, I want to thank all of my readers by going through some numbers and then by also giving a special thanks to a special lady. The Numbers First, I’d like to share some of my favorite statistics regarding this website. Increasing Visits When I began this blog back in August 2010, I had virtually nothing (or nothing virtual, as the case may be). Since then, the amount of visits to the site has grown significantly: Total visits, 8/2010: 240 Total visits, 12/2011: 2,021 Total visits, 7/2011: 2,833 Total visits, 12/2011: 2,650 Total visits, 7/2012: 10,584 In 2012, the number of visits each month has exceeded the prior month, culminating in the celebration of the first 10,000-visit month in July. Overall, after two years, 67,666 unique visitors have visited this site 76,172 times. No, this site isn’t Google or Facebook, but I am still very appreciative of every single one of you. Post Popularity The following posts have received about 20% of the visits to this site: What is the Federal Gift Tax: The Rules for 2012 (and Beyond?) Looking Gift Taxes in the Mouth: Upcoming Rules for 2011 What [...]

The Changing Virginia Code: When You’ll Do Nothing And Like It

Scott — Thu, 26 Jul 2012 22:38:32 +0000

Today, we will discuss a fairly unique circumstance that has emerged as a result of the pending changes in the Virginia Code. Many existing Virginia wills and trusts reference specific sections of the current Virginia Code. Since many Code sections will be renumbered this October, will your existing estate documents thereafter be referring to obsolete law? We will use the new Virginia directed trustee statute to illustrate the effects of the pending changes in Virginia law on any existing or new estate documents below. Virginia’s New Directed Trustee Law Revisited The new Virginia Code § 55-548.08 protecting directed trustees became effective on July 1, 2012. For today’s purposes, all you need to know is that the new rule will only apply in trusts that incorporate subsection E of § 55-548.08 into the trust by specific reference. This is most commonly accomplished within the trust itself. So what does all of that mean? Let’s give a hypothetical to explain. Say Phil decides to create a trust for his children because they are too inexperienced to handle the family finances. He names his children as co-trustees, and ABC Bank to serve as “trust director” to oversee the children’s activities. For the new [...]

The New Virginia Title 64.2: A Whole Greater than the Sum of 5 Parts

Scott — Mon, 23 Jul 2012 23:19:52 +0000

In recent years, one’s estate planning considerations are touching upon an increasing range of issues. In Virginia, a thorough estate plan must include consideration of the laws relating not only to wills and trusts, but also to fiduciaries, guardianship of minors, adult guardianships and conservatorships. The fact that these topics are presently covered in no less than five separate titles within the Virginia Code only adds complexity to the process. In 2009, the Virginia Code Commission began an effort to simplify estate planning law for citizens and practitioners. Its efforts eventually culminated in unanimous passage of new legislation in both the Virginia Senate and House early in 2012. In April 2012, Governor Robert McDonnell signed this legislation, passed as Senate Bill 115, into law. Summary and Benefits of Recodification The new law will recodify most, if not all, state law related to wills, trusts and fiduciaries, effective October 1, 2012. On that date, the following titles and sections of the Virginia Code will be repealed, and a new Title 64.2 will absorb them all: Title 26 (Fiduciaries Generally) Title 31 (Guardian and Ward) Portions of Title 37.2 (Behavioral Health and Developmental Services) Portions of Title 55 (Property and Conveyances) Title [...]

One’s a Scum-Sucking Bottom Dweller and the Other’s a Blogger

Scott — Thu, 28 Jun 2012 02:41:53 +0000

In case you were unaware, the title to today’s post is a twist on an old joke: What’s the difference between a catfish and a lawyer? One is a scum-sucking bottom dweller and the other is a fish. Unfortunately, a similar twisting of words is the subject of today’s post. Some of the goals of this blog are to inform, to entertain, and to pretend as much as possible that the author is a nice guy. However, because of the overwhelming kindness of a colleague today, I have finally decided to share an incident that happened regarding this very blog awhile back. Appreciation Posts In the past, I used to post appreciation posts at the end of each month, such as this one, to tell the world about some of the excellent help and support that I had received in the recent past. It was a nice monthly reminder to myself about how any benefits we receive are rarely, if ever, solely the result of our own actions. In most cases, the work of others, while not always apparent, is also an integral part of our own successes and accomplishments. Well, guess what? Some have deemed it appropriate to take [...]