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10 Top End-of-Life Financial Planning Blogs

Sunday, December 13th, 2009

Two inevitable things - death and taxes.

Two inevitable things - death and taxes.

Changes in tax laws are inevitable, just like death. But, a few bloggers have focused on changes in those laws and what those changes mean for individuals who need to know about them. The following list includes ten top bloggers in estate law as well as in other end-of-life financial matters that affect individuals who live in the U.S. While changes in federal taxes affects everyone, you might check with your state laws as well, by searching for blogs that pertain to your state.

The blogs listed below are in no particular order, but they all have been updated within the past month.

  1. Wills, Trusts & Estates Prof Blog: Gerry W. Beyer is a Governor Preston E. Smith Regents professor of law at Texas Tech University School of Law. He provides his insights into wills, trusts and estates with this blog.
  2. Death and Taxes: This blog, published by Joel Schoenmeyer, Attorney at Law, offers commentary on estate planning, estate administration and real estate issues from the Chicago area.
  3. Death and Taxes Blog: USLaw.com provides this blog, which is frequently updated with news and opinion about probate law, wills, estate taxes and much more.
  4. Estate Planning Bits: The byline to this blog is, “Everything you don’t think you need to know about estate planning.” Categories in this blog include elder law, Medicaid and Medicare and even pet estate planning.
  5. Elder Law Prof Blog: Kim Dayton, professor of Law and director for the Center for Elder Justice and Policy at the William Mitchell College of Law offers information and new concerning elder law policies on her blog.
  6. The Probate Lawyer Blog: Learn from celebrity errors so you can protect your heirs. A probate attorney and shareholder with Barron, Rosenberg, Mayoras & Mayoras, P.C. in Michigan and co-author of Trial & Heirs: Famous Fortune Fights! provides insights with this blog.
  7. Wills & Estate Planning: Julie Garber is your About guide in this blog about estate planning, taxes and documents you may need for your financial affairs.
  8. Wealth Preservation, Trusts and Estates: Learn more about asset protection, death tax reform, elder law and elder abuse, inheritance tax and much more through this informative blog.
  9. Elder Law Blog: Ronald C. Morton, Attorney at Law, provides insights into estate planning, Medicaid and special needs planning and planning for business as well.
  10. Estate Practice & Elder Law Center: A variety of bloggers offer their information and opinions at this blog, which focuses on elder law, long-term care issues, powers of attorney, wills and other elder concerns.

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Important Papers in Life and in Death

Monday, October 19th, 2009
Save those old photos digitally to extend the life of the photographs.

Save those old photos digitally to extend the life of the photographs.

Are you planning to adopt a child? Or, are you about to have surgery? Maybe you already lost a home to fire or flood, and you now realize how difficult it can be to replace important papers. Some items, such as photographs, may be impossible to replace. Which papers are important to have on hand, and how can you protect your important one-of-a-kind items? The ability to lay your hands on some documents within minutes is as important in life as it is in death.

The ability to find important papers easily can eliminate stress during a time when you do not need that stress. Additionally, the ability for loved ones to find documents they may need after you die can help them grieve with less stress as well.

Take a weekend to gather together your important documents. Make a list of any of the following that may be missing and plan to replace them immediately:

  • Birth certificates or adoption decrees
  • Marriage license
  • Wills
  • Durable Power of Attorney statements
  • Deeds and titles
  • Diplomas and certificates
  • Insurance policies
  • Contracts
  • Social Security cards
  • Military separation papers
  • Visas and passports
  • Income tax returns
  • Medical and other important financial documents
  • All credit card numbers and passwords
  • The VIN and license plate numbers of your vehicles
  • Information about insured valuables, along with images of those valuables

Make a copy of each document and store one copy in a safe deposit box and keep the originals in a fireproof file box at home in a safe place. You may want to store another copy in another state with a trusted friend or an attorney, as many a bank and entire neighborhoods have been destroyed by floods and fire.

One way to save these documents is by scanning them and filing them on a disc. Be aware that software programs can change from year to year, so save the files as .jpg (picture image) or as a PDF (Portable Document Format), as these two types of file formats have been around for years, and may be around for many more years. Both file formats can be opened by a number of software programs, too. Sometimes, scanning and saving photographs to disc is one way to actually preserve older photographs.

This is the answer to one way that you can save family photographs. Digital photos can be copied onto a disk and the disk left with a friend or loved one. They also can be sent by email to anyone who has email. If you still develop your photographs, make a habit of ordering two copies and store one set away from your home.

If you have already finalized a will and you have a power of attorney, you could use this person as a trusted resource for your important papers. Two safety deposit boxes, located in two different towns or cities, is one solution to saving your important papers and disks. You also can register with an online storage business that allows you to save data on their servers.

Pulling together important papers and photographs is one way you can rest easy when it comes to important events in your life. After all, unless you can find your passport, there’s little chance you can take advantage of last-minute airfare specials on flights to overseas countries. And, you can replace furniture you might lose in a fire or flood, but there’s little chance to replace those one-of-a-kind items such as photographs.

Finally, unless your loved ones know where to find your will, there might be a chance that they will not let you rest in peace.

Once again, safety is stressed in how you store these important papers and documents. Although there is some logic in knowing that a thief cannot find those papers if you can’t find them, you might enjoy the peace of mind in knowing that you can put your hands on important documents within minutes if needed.

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Divorce and Your Estate

Friday, October 9th, 2009
Before you remove that ring...

Before you remove that ring...

Have you ever been divorced? If you are married, you can pat yourself on the back, as you belong to the successful side of the “50 Percent Club,” or the half of all marriages that succeed. A full 50 percent of all marriages fail, so you have to wonder at times if your marriage glass is half empty or half full. This thought may cross your mind, especially when you encounter bumps on that marriage road.

If you and your partner have not created a prenuptial or postnuptial agreement, and if your marriage truly is heading south, you need to make plans now to change your estate-planning documents.  You can change these documents even before the divorce is final. Months or years later, when that divorce does become final, depending upon your state’s laws, those divorce or annulment agreements revoke either the entire will or those provisions that favor the former spouse.

But, while you are separated pending a divorce, a change in your will and other estate or death-care documents will help you rest assured that your current wishes will be respected if you should die before that divorce is final.

You also need to remember to change the provisions that relate to your former spouse’s family, especially if your documents contain a residuary clause. Even if your state laws revoke that part of your will pertaining to your former spouse, it may overlook or ignore entirely those portions of your will that pertain to any member of your spouse’s family. This includes any positions you’ve granted to family members (especially if you designated her brother as executor of your will).

According to the book, Guide to Wills and Estates, third edition (pg 160):

Under recent revisions of the Uniform Probate Code, your state may also automatically revoke provisions of other estate documents, such as life insurance policies, in which the proceeds previously would have gone to the ex-spouse. But the odds are against this. Few states have adopted all the provisions of the UPC. It’s best to change any such documents, including IRAs, living wills, and survivorships, or have your lawyer do it. If your spouse is the beneficiary on your employer’s retirement plan, federal law prohibits you from removing him or her until the divorce is final. But be sure to make this change (if permitted by the divorce settlement) as soon as tihngs have been finalized.

Be sure to amend your trusts if needed, too, as well as any documents that declare your spouse as a power of attorney.

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The Pitfalls of Joint Tenancy

Thursday, September 24th, 2009
Do not give away your goods until you understand your state laws.

Do not give away your goods until you understand your state laws.

One way many people use to try to avoid probate after death is joint tenancy, which is a way to own property with someone else. Joint tenancy – also known as survivorship – is a legal term that means, basically, co-ownership. If you and your spouse buy a house or automobile in both names and one of you dies, the property then automatically falls into the hands of the survivor who has the name on the property.

Although joint tenancy has its advantages, it also has some pitfalls that are wise to consider before developing this legal relationship.

First, it may be expensive to create a joint tenancy. In some jurisdictions, if one of the owners dies, jointly-held property might defeat the claims of creditors of the deceased co-tenant, or at least make that person’s life more difficult. Additionally, in some cases, the creation of a joint tenancy may create a taxable gift. For smaller estates, however, this tax situation does not apply.

But, other situations can apply to all joint tenants. For instance:

  • If you’re in a shaky marriage, it would not be wise to enter into a joint tenancy. In most states, your individual property becomes marital property once transferred into joint names and could impact your rights during a divorce. If you live in a “community property” state, however, this situation would not affect you.
  • If you do not want to lose control of your possessions, don’t share them. When you give someone co-ownership, you also give them co-control.
  • If your co-owner becomes legally incompeltent to make decisions, part of the property may go into a guardianship, making it difficult to sell a house or a portion of a portfolio.
  • If your partner in co-ownership is in debt, creditors can lay claim to a portion of that property that is co-owned. A lien on a portion of a home would make it very difficult to sell.
  • If you grant part ownership in any property to your spouse or friend and later part because of disagreements, you cannot take back their portion of a property. Regardless who paid for either half of the property, the property belongs to two people.
  • If you plan to use joint tenancy to avoid probate, this means that everything you own would need to be jointly owned. Basically, there is no way to avoid probate with joint tenancy as a sole means.
  • Some states automatically freeze jointly-owned accounts upon the death of one owner until the tax collector can examine them. So, don’t count on the ability to gain access to, or to sell, certain jointly-owned properties until you know about your limitations.
  • If you plan to develop a trust, a joint tenancy may limit your tax saving capabilities. Always talk with a resident state attorney before developing a joint tenancy.

Although joint tenancy may provide a cozy solution for many people, in many cases this co-ownership situation is not productive tax-wise nor does it offer an alternative to a will. Learn the laws of your resident state first, before you make plans to give away half of your property, even if you plan to give it to a trusted relative. Learn about all the pitfalls before you sign your name to joint tenancy, as you may be walking into a situation that could hurt more than help.

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What is a Living Will?

Friday, September 11th, 2009
A living will is part and parcel of estate planning.

A living will is part and parcel of estate planning.

A living will is a written document that you can create that allows you to state your wishes in advance about the use of life-prolonging medical care if you become seriously ill or incapacitated. While many people think this document is about authorizing abandonment by the medical system, a living will also can be used to state a desire to receive medical treatment that will sustain life. In all cases, the living will comes into effect only when you would die without life-sustaining medical treatment.

All states recognize living wills, which sometimes are called “medical directives.” But, there are two types of living wills, and it might behoove you to check with the laws in your state before you decide which route you want to take:

  • Statutory: Statutory living wills are thought to provide medical providers with more immunity from liability of they comply with your wishes. These living wills generally address only terminal illness and permanent unconsciousness. Depending upon your resident state, these documents may or may not be able to address advanced illnesses, such as late-stage Alzheimer’s disease, in which death is not yet imminent. Detailed witnessing and notarization of this document may be necessary. Although some states may require mandatory forms, you can expand on your options and individualize the living will by stating your preferences.
  • Non-Statutory: These living wills do not comply with any one state’s specific instructions for this document. The only problem with this type of document is that, while doctors and hospitals may abide by your wishes, in some cases they may make an effort to transfer you to another provider if they cannot go along with your wishes through either a conscience decision or with a decision based upon fear of litigation and lack of immunity from criminal or civil law.

The main problem behind either type of living will is the language. Living wills can either be too vague or too specific. If you decide you want to institute a living will, try to utilize the help of a health-care power of attorney (HCPA), or a person who can make a decision for you if you are incapacitated and your living will is too vague. Additionally, you should update your living will every few years – just as you would update your will. Your values and wishes may change over time and the law itself may change.

For more help and advice about your living will, contact the National Hospice and Palliative Care Organization.

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Non-Traditional Kids and Your Will

Monday, August 24th, 2009
Adopted family of Mr. Clark Griffith 1925.

Adopted family of Mr. Clark Griffith 1925.

If you are making a will, or if you made one so long ago that you don’t remember what it contains, you may want to change that will to reflect your current conditions both financially and in the growth or diminishing rate of your family. If your family has grown, you may have included what are known as “nontraditional” children. These children would include children from previous marriages, adopted children and even illegitimate children. How can you provide for them in your will if you desire?

In most states, adopted children are treated as equals to your blood-related children unless you indicate otherwise in your will. To avoid problems, you might specify in your will that words such as “child,” “children,” “sons,” or “daughters” include (or exclude) any adopted children. If you simply state in your will that gifts will got to your children, without indicating which children, children from all your marriages may be included with that terminology.

If you marry someone with children from a previous marriage and you do not formally adopt these stepchildren as your own, they may not be included in your bequest to your children unless you specify this information. If you’re a male, most states may consider a bequest to children to include only legitimate children. In the case of a mother, a bequest to children usually may include illegitimate children.

Additionally, if you leave bequests to your beneficiaries’ children, the same rules would determine who is and who is not included in your request.

You may not like to think about what would happen to your children if you and/or your spouse or partner would die, you should construct your estate plans to account for that possibility. You can use a guardianship, trusts and other legal devices to ensure your children are cared for if the worst should happen. Accordingly, it is important that the adopted child understand his or her origins when the time is right, otherwise your death may be the harbinger of unpleasant surprises.

To learn more, you might visit any one of the following sites:

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Types of Trusts

Sunday, July 26th, 2009
Many trusts are not that scary - they serve as a way to save money on taxes in many cases.

Many trusts are not that scary - they serve as a way to save money on taxes in many cases.

Are you working on an estate plan or a will? You might have wondered about using a trust, but the types of trusts may seem confusing. Additionally, a trust involves at least three people – the grantor (the trust creator who also is known as the settlor or donor), the trustee (the person who holds and manages the property for the benefit of the grantor and others) and the beneficiary or beneficiaries, depending upon the type of trust you use.

The property within a trust can consists of real or personal property such as money, real estate, stocks, bonds, collections, business interests, personal possessions and automobiles. Putting this property in trust transfers it from the grantor’s personal ownership to the trustee, who holds the property for the grantor. The trustee, then, has legal title to the trust property and the law looks at these assets as if the trustee owned them even though trustees are not full owners of the property.

Trustees have legal duty to use the property as defined in the trust agreement and permitted by law. The beneficiaries then retain what is known as equitable or beneficial title, which is the right to benefit from the property as defined in the trust. But, you, as the donor, may retain control of the property and, in certain trusts, you retain the rights of ownership as if the property still was in your name.

You can make a revocable trust, or a trust that can be changed or terminated at any time by the donor. Or, you can make an irrevocable trust, or a trust that cannot be changed or terminated before the time specified in the trust. Other specific trusts include:

  • Charitable Trusts: Created to support a charitable cause with annual gifts.
  • Discretionary Trusts: Allows the trustee to distribute income and principal among beneficiaries.
  • Dynasty Trusts: This type of trust can last for generations to help people with great fortunes control the distribution of wealth over a long period of time.
  • Generation-skipping Trusts: This is a tax-saving move that benefits several generations of descendants.
  • Insurance Trusts: Another tax-saving trust where assets are used to buy a life insurance policy. The proceeds benefit the settlor’s beneficiaries.
  • Living Trusts: Put your assets into a trust and wear all hats – donor, trustee and beneficiary – or be the donor and choose a trustee and beneficiaries.
  • Special Needs Trusts: Established for people with disabilities and who want to keep their government benefits.
  • Spendthrift Trusts: A trust established for a person who the grantor believes is a spendthrift! This type of trust also can be used for a beneficiary who needs protection from creditors.
  • Split-interest Trusts: This type of trust makes it possible for either a charity or an individual to have an interest in the trusts for a period of time.
  • Support trusts: The trustee can spend only as much income and principal as may be needed for the education and support of beneficiaries.
  • Testamentary Trusts: Trusts set up in wills.
  • Totten Trusts: This is not really a trust. It is a bank account(s) that pass to beneficiaries immediately upon your death.

If you decide you’d like some tax-saving benefits that trusts do provide, talk with an attorney to learn which type of trust might be best for you, your beneficiaries and your lifestyle. Make sure that attorney is willing to work with you to tailor the trust to fit your needs, otherwise the flexibility benefit of trusts becomes moot. Finally, make sure you choose a lawyer who is familiar with estate planning, trusts and tax laws.

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Online Asset Management before Death

Monday, March 16th, 2009

What happens to Web assets when you die?

Many topics about death care cover tangible items such as hospice, health, burials and funerals. And, almost everyone concerned with a death also is concerned with wills and asset management. Tangible assets include homes, property and other things you can touch and see. But, what happens to a person’s Web assets when they die?The BBC touched on this subject in 2004, Forbes in 2006, and TechRadar picked it up in 2008. Another blogger touched on the subject of email last year as well. They all ask the questions, ”What happens to all this Web stuff when you die?”

If you purchased domain names, Web hosting and other online “properties” such as memberships, then you have assets that may be worth money. If you own an online business, or if you have integrated an online presence with a bricks-and-mortar business, then you should take these assets into account. Don’t leave a mess for your loved ones, especially if your online information is private or worth some cash.

Things change over time, and these changes include laws that pertain to copyright, online information and access to that information if you do not own it. So, we’ve compiled a list that we hope will remain pertinent for a few years. If you own online assets and you follow the tips listed below, then your successors might appreciate you even more after death. Even better, this list might help you organize your life for better efficiency now:

  • The BBC article listed three Websites that might have helped folks with death care management back in 2004. However, only one of those three Web sites mentioned in that article remain viable today. If you want to use online mediums to account for your Web presence, you might also include actual paperwork in a will in case that Web site dies and takes your information with it.
  • The key word above is “will.” If you don’t have a will, make one now. And, if your online assets change over time, then you can either change your will or add a codicil, or supplement, to that will.
  • Name an executor and make sure that person has total access to your death documents, including online access (user names and passwords), once you die. Some sites may remain online forever until they are deleted. Other sites may shut down the site as soon as a monthly or weekly payment has not been met. It’s important to point to those latter sites so the executor can pay to attend to them immediately upon your death.
  • Pay attention to terms of service (TOS) for each site, hosting service or memberhips, as they may change. Additionally, you may learn that, even though your executor has your information, it may be illegal for that person to enter your site. When possible, print out the TOS and attach your user name and password to that TOS along with any special instructions. You can alter these items at any time, as long as you include them with your will and other death care documents.
  • Clean up your life…if you don’t want certain emails or documents read after your death, then why are you holding on to them? If it’s a matter of legal liability, then print them out, back them up on a disk, and forward them to an email address that will hold personal or sensitive items.
  • Social media sites, for all intents and purposes, are you – and few people will want those sites once you’re gone (unless you’re famous). With that said, if you have photographs, videos or other personal assets on those sites, then think about using other sites to hold that information. Then, your assets will be organized for easier handling once you’re gone.
  • You also can create a ‘plan of action’ for your social media sites if you die. In some cases, those sites contain many people you’d want to notify about your death. If legally possible, your executor can manage this plan.
  • In many cases, hosting services will eliminate your account upon your death unless an executor notifies that hosting service and transfers your domain within a year. This time frame barely provides enough time for probate and a sale or transfer, but it must be done if that Web site or blog needs to be maintained as part of a business or other venture.
  • If you want your online ‘goods’ such as photos, content and more, to be sold or transferred upon your death, then you might pick a beneficiary who will benefit from that sale or transfer. If you own an online business, think about finding someone who can carry on that business after you die.
  • In keeping with “keeping your ducks in a row,” you might include information about traffic, online income and other pertinent information about your sites so that your sites will be ready for sale when you die. You can learn more about what people want when they purchase a site at Sitepoint.com.
  • Finally, read the other articles mentioned above. Other than the viability of Web sites in those articles, the information is valuable. Some information is contradictory between articles, so that should give you a heads up that information does change over time. Use that information, this list and your knowledge and intuition to lead you down the path that’s right for you and your loved ones.

You may learn that your online assets are worth more than your tangible assets with this exercise. If so, seek the advice of a knowledgeable attorney to guide you through a legacy process. While professional advice may cost you some money on the front end, the money your successors may save (or make) could be worth your efforts.

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Four Common Incapacity Documents

Thursday, December 11th, 2008

No matter your age, at any time you may become mentally or physically incapacitated through an accident or sickness. Age, however, does play a role in incapacity, as does alcohol or drug abuse. If you or a family member becomes incapacitated, who would handle financial matters, answer questions about health, or conduct normal or everyday affairs?

One way to take care of a case of incapacity is to prepare for the possibility in advance. If you can designate one or more individuals to act in your behalf if you become incapacitated, you can be assured that they will follow your wishes. Otherwise, a court may appoint a guardian for you upon request of a friend or relative. But, what type of documents do you need to protect your wishes if you become incapacitated?

The following list may help you wade through the list of common incapacity documents. In all cases, you might want to talk with an attorney to rest assured that you wishes will be followed even if you move across state lines or to another country.

  1. Durable Power of Attorney for Health Care (DPAHC) or Health-Care Proxy: A durable power of attorney for health care (known as a health-care proxy in some states) allows you to appoint a representative to make medical decisions for you. You decide how much power your representative will have. This option is flexible, as it allows your representative to act on your behalf and make medical decisions based upon current circumstances. But, it’s not practical in an emergency, as your representative may not be available to act in your behalf. And, this representation may not be permitted in some states.
  2. Living Will: A living will allows you to approve or decline certain types of medical care, even if you die as a result of your choice. However, in most states, living wills take effect only under certain circumstances, such as terminal injury or illness. Generally, one can be used only to decline
    medical treatment that “serves only to postpone the moment of death.” In states that do not allow living wills, you may have one to serve as an expression of your wishes. A living will also allows your health-care proxy to carry out your wishes when possible.
  3. DNR (Do Not Resuscitate) Order: A ‘Do Not Resuscitate’ order (DNR) is a doctor’s order that tells all other medical personnel not to perform CPR if you go into cardiac arrest. There are two types of DNRs. One is effective only while you are hospitalized. The other is used while you are outside the hospital. In some states, the DNR is effective during an emergency. Use an ID bracelet, MedicAlert necklace or wallet cards so emergency personnel will know your wishes. In some states, DNR orders are allowed only for hospitalized patients, or the DNR is used to decline CPR in case of cardiac or respiratory arrest.
  4. Durable Power of Attorney (DPOA): If you don’t prepare someone to look after your financial affairs when you can’t, your property may be wasted, abused, or lost. A durable power of attorney (DPOA) allows you to authorize someone else to act on your behalf at very little cost and to avoid court intervention should you become incapacitated. There are two types of DPOAs: you can appoint a standby DPOA, a person who is effective immediately, and a “springing” DPOA, or a person or individuals who cannot take over your affairs until you have become incapacitated. A DPOA
    should be fairly simple and inexpensive tool to implement, and it ends at your death. A springing DPOA is not permitted in some states, so you’ll want to check with an attorney.

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Federal Gift and Estate Taxes

Monday, December 1st, 2008

Gift and Estate TaxesThe money or property that you own when you die (also known as your “estate” or “gross estate”), may be subject to federal estate taxes and some form of state death taxes. It’s wise to understand these taxes and how they might apply to your situation. This is more true since the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001, or the 2001 Tax Act. As with any new tax laws, this law may make life more complicated and uncertain.

Prior to the 2001 Tax Act, no gift or estate taxes were imposed on the first $675,000 of combined transfers of capital during life or at death. At that time, the tax rate tables were simple, as the same rates applied to gifts made and property owned by persons who died in 2001. And, like income tax rates, the gift and estate taxes were graduated according to the amount of gifts offered. Under this system, the recipient(s) of a lifetime gift received a carry-over basis in the property received and the recipient of a bequest got a step-up in basis based upon fair market value of that property on the date of the death of the person who made the bequest – not necessarily what that the person paid for them or what their values were when you acquire them.

When the 2001 Tax Act was enacted, it increased the applicable exclusion amount for gift tax purposes to $1 million. The top gift tax rate is 45 percent in 2007 through 2009, and 35 percent in 2010. The 2010 rate is the highest tax rate under the 2001 Tax Act, and the carry-over basis rules remain in effect throughout this time frame.

Despite this increase, many gifts can be made tax free, including gifts to a U.S. citizen spouse or up to $128,000 in 2008 tax free to a noncitizen spouse. Gifts to qualified charities also are tax free as are gifts totaling up to $12,000 to any one person or entity during the tax year or $24,000 if the gift is made by both spouses (if U.S. citizens).

Gifts also can be paid on behalf of any individual as tuition to an educational organization, such as a grandparent paying a portion of a grandchild’s college tuition. Also, tax-free gifts can be made to any person who provides medical care for an individual. Other items that can reduce an estate tax include:

  1. Marital Deduction: One of the primary deductions for married decedents is the Marital Deduction. All property that is included in the gross estate and passes to the surviving spouse is eligible for the marital deduction. The property must pass “outright.” In some cases, certain life estates also qualify for the marital deduction.
  2. Charitable Deduction: If the decedent leaves property to a qualifying charity, it is deductible from the gross estate.
  3. Mortgages and Debt.
  4. Administration expenses of the estate.
  5. Losses during estate administration.

Under the 2001 Tax Act, the applicable exclusion amount for estate tax purposes increases in steps until it reaches $3.5 million in 2009; however, the applicable exclusion amount for gift tax purposes remains fixed at $1 million. Top estate tax rates are 45 percent in 2007 through 2009. The estate tax (but not the gift tax) is repealed in 2010, but the estate tax applicable exclusion amount and rates revert to pre-2001 Tax Act levels in 2011. So, if you want to save money on taxes, then 2011 would be a great year to die.

When the estate tax is repealed in 2010, the basis rules will be changed to those similar to the gift tax basis rules. The step-up in basis rules return in 2011.

Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004 – 2005; $2,000,000 in 2006 – 2008; and $3,500,000 effective for decedents dying on or after January 1, 2009.

Finally, the federal generation-skipping transfer tax (GSTT) taxes transfers of property you make, either during life or at death, to someone who is two or more generations below you, such as a grandchild. The GSTT is imposed in addition to, not instead of, federal gift tax or federal estate tax. You need to be aware of the GSTT if you make cumulative generation-skipping transfers in excess of the GSTT exemption, which is $2 million (through 2008). A flat tax equal to the highest estate tax bracket in effect in the year you make the transfer is imposed on every transfer you make after your exemption has been exhausted.

For more information, visit the IRS site and look through the various topics listed under estate and gift taxes.

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