What Is the Deceased Spousal Unused Exclusion Portability Deadline?

October 23, 2023

Our tax system is designed to tax the aggregate of property transferred during an individual’s lifetime, commonly referred to as gifts, as well as the property transferred upon death. The total value of taxable gifts and assets transferred at the time of death must surpass a specific threshold before any gift or estate taxes are levied, as explained in the article “Portability of Deceased Spousal Unused Exclusion Extended” from The CPA Journal.

The current federal estate tax exclusion is $12,900,000 for 2023, and within a marriage, each spouse has a unified exclusion amount of $12,900,000. The Unified Exclusion Amount or Unified Transfer Tax Credit for 2023 is $5,113,800.

The portability election allows the estate of a deceased taxpayer whom a spouse survives to apply the decedent’s unused exemption amount to their own transfers during life (gifts) and at the time of their death.

By properly calculating and timely filing the Deceased Spousal Unused Exemption (DSUE), heirs can mitigate their tax liability on the inherited estate. Certain requirements must be met:

The deceased was a spouse.
The deceased died after December 31, 2010.
The deceased was a citizen or resident of the US at the time of their death.
The estate was not required to file an estate tax return based on the gross value of the estate and adjusted taxable gifts.

The portability provisions of the 2010 legislation were set to expire on January 1, 2013, but the American Taxpayer Relief Act of 2012 made the ability to elect portability election permanent. The Revenue Procedure 2022-32 became effective on July 8, 2022, and allowed certain taxpayers an extended amount of time—five years—to make a portability election regarding estate and gift taxes.

When first enacted, the executor of an estate was required to elect portability within nine months of the date of death or on the last day of the period covered by a granted extension. Note Revenue 2022-32 only applies to estates not required to file an estate tax return.

The IRS was swamped by estates requesting an extension to elect portability regarding the DSUE. A high percentage of these requests were determined to come from the estates of taxpayers who died within five years preceding the date of the requests for portability. As a result, the IRS extended the period to five years.

The estate executor must complete and properly prepare Form 706, the United States Estate and Generation-Skipping Transfer Tax Return, within five years of the taxpayer’s death. In addition, the executor of the estate must state at the top of Form 706 that the return is “Filed Pursuant to Revenue Procedure 2022-32 to Elect Portability under Section 201(c)(5)(a)” to fulfill portability requirements.

Executors who have not made the portability election must file Form 706 within five years of the decedent’s death. Speak with your estate planning attorney to be sure this is done in a timely manner. While the federal exemption for estate taxes is currently very high, the law will decrease by half on January 1, 2026, when more estates will need to pay federal estate taxes.

Reference: The CPA Journal (August 2023) “Portability of Deceased Spousal Unused Exclusion Extended”

What is the Best Estate Plan to Keep Family from Killing Each Other?

October 20, 2023

It’s not unusual for families to fight over inheritance, leading to prolonged legal battles and damaged relationships. The Ascent’s recent article, “How to Create a Will That Keeps Your Family From Fighting,” provides some tips on how to create a will that keeps your family from fighting.

Discuss your intentions beforehand. Parents need to discuss the objectives and intentions of their estate plans with their children. This lets them set expectations. You don’t have to reveal dollar figures or investment assets. Instead, the key is ensuring the children understand the rationale behind the will.

Splitting up unique assets. Dividing up unique property can frequently result in fights. You may have sentimental items that multiple family members have expressed interest in, or maybe a piece of property has sentimental value to one family member over the others. You may want to speak to family members beforehand to see if any items are particularly important to them. It’s crucial to be clear in your wishes and make sure that everyone is on the same page. You should also use specific language in your will that outlines who gets what and under what conditions.

Preserving inheritance for blended families. This can be even more complicated for blended families. It’s important to approach the division of your assets with sensitivity and thoughtfulness to avoid potential conflicts among family members. Parents with children from previous marriages should take extra care to protect those children financially because stepchildren can be disinherited once a parent dies. Separate wills for each spouse can add protection. There’s something called a “contractual” will” where each spouse agrees that the surviving spouse doesn’t have the legal right to execute a new will that disinherits the children of the deceased spouse. This is designed to ensure that each spouse’s assets are distributed according to their wishes and prevents the surviving spouse from making changes that cut other family members out of the will.

Creating a will that keeps your family from WWIII is a valuable process. Parents should be open about their estate plans with their children to ensure that they understand their intentions. Communication is vital when it comes to estate planning.

Reference: The Ascent (Aug. 15, 2023) “How to Create a Will That Keeps Your Family From Fighting”

How Can I Successfully Transfer My Business to My Children?

October 18, 2023

According to ITR Economics, out of the 77 million Baby Boomers in the U.S., an estimated 12 million are privately held business owners.

As ownership of businesses for those born between 1946-1964 is transferred to the next generation, an estimated $10 trillion worth of business assets is expected to be transferred in the coming years.

AZ Big Media’s recent article, “Passing the torch: Considerations for a successful generational business transfer,” explains the best way to have a successful business transfer.

Develop a Strategic Plan. A successful generational business transfer takes time and planning. You should begin the planning process way in advance of the change in leadership. This can give a family time to define what the future of the company looks like. Determine what technology, human resources, and capital requirements the company needs to be successful in the short and long term. Ensure that the current and future owner’s visions are communicated. If both visions aren’t in alignment, discuss what the future for the business may look like. Balancing long-standing business practices with new changes can mean a sustainable and successful business. Begin integrating the future leader into day-to-day business operations before transitioning. Establishing a clear transfer of duties and mapping out a timeline can help with a smooth transfer process.

Get Finances in Order. Preparing business finances in advance of a generational transfer is critical. The current business owner may consider setting up a grantor-retained annuity trust for their successor. An experienced estate planning attorney can help to create this trust, which earns annual income for the beneficiary receiving the funds with minimal or no gift tax liability upon expiration. Family members may also consider transferring their business to the successor through an installment sale, which is a sale of property where at least one payment is received after the tax year in which the sale occurs. Note that an installment sale could mean a tax benefit for the seller because the overall tax liability is spread out over time rather than all at once during the business transfer. Once you decide on the preferred financial path to conduct the transfer, look at the company’s cash flow and other financial projections. List the projected expenses, liabilities and potential taxes owed, and then identify sources of liquidity to pay them.

Work With Financial Partners. If not already in place, look to assemble a team of trusted advisors, including a CPA, attorney, banker, and wealth advisor. This team can work through the financial aspects of any generational business transfer.

Transferring a business is a major family event involving potentially tough conversations and decisions. This can be a complex process. However, with proper planning, it also has the potential to be an opportunity to achieve new growth and elevate long-standing family business goals.

Reference: AZ Big Media (June 8, 2023) “Passing the torch: Considerations for a successful generational business transfer”

Did Media Mogul Pat Robertson Have a Large Estate?

October 16, 2023

Conservative Christian Pat Robertson died in June at the age of 93. He left behind a massive estate that almost certainly entails some special circumstances from a tax and legal standpoint. Robertson founded The Christian Broadcasting Network, Regent University, the American Center for Law and Justice, Operation Blessing, and International Family Entertainment. He was a political force who helped shape modern-day conservatism in the U.S. As longtime televangelist host of “The 700 Club,” he helped expand the influence of religion in today’s Republican Party, and he was known for speaking his mind on numerous social issues.

Robertson was also extremely wealthy, says Investment News’ recent article entitled, “‘700 Club’ founder Pat Robertson’s death raises estate planning questions.” In addition to an estimated hundreds of millions of dollars generated by the initial public offering of Robertson-owned International Family Entertainment in the early ’90s, the televangelist had a sprawling, 11,000-square-foot luxury retreat on 27 acres in rural Virginia, as well as other potential assets that could be part of his estate.

Robertson also may have intellectual property rights, including religious recordings, ancillary interests in the network and maybe even rights of publicity, as his name and image carry value in the evangelical community. Publishing under his name may be profitable, which means it could be an asset of the estate.

If he didn’t have a trust, his estate would be subject to distribution according to Virginia intestacy statutes. This potentially could differ from his intentions as a religious leader. With his dedication to charitable efforts, it’s easy to think that he wanted to perpetuate the work of The 700 Club.

If Robertson did create a trust and included provisions to allocate a considerable portion to The 700 Club or other nonprofit organizations, he would have alleviated concerns regarding estate tax implications.

These types of bequests to nonprofit organizations are deductible against the estate’s value, which reduces the burden of estate taxes. Current tax laws allow an unrestricted number of charitable bequests against an estate, making this a potent strategy for mitigating estate tax liabilities.

Charitable trusts prepared beforehand are a way for religious leaders to extend control of their donated assets beyond their lifetimes.

Reference: Investment News (June 9, 2023) “‘700 Club’ founder Pat Robertson’s death raises estate planning questions”

What to Do Upon Death of a Spouse

October 14, 2023

Forbes’ recent article, “What To Do After The Death Of A Spouse,” provides a thorough list of topics to address when a spouse dies.

Paying Bills. See how the bills are being paid from joint bank accounts, your spouse’s, or your own account. The funeral home will usually inform the Social Security Administration. It is also important to notify current/former employers, since it is common to have employer-provided life insurance, stock options and other benefits that may require your attention.

Asset Titling, Beneficiary Elections, and Probate. Your spouse hopefully had a will. Assets owned by your spouse individually that don’t pass through a beneficiary designation, like on a retirement account or life insurance policy or through a transfer-on-death or payable-on-death arrangement, will likely go through probate. Get help from an experienced elder law attorney.

Retirement Accounts. If you’re the primary beneficiary of an IRA, 401(k), or other type of retirement account, work with your attorney to discuss your options. Surviving spouses have many choices after inheriting a retirement account.

Social Security. A surviving widow(er) who is at least full retirement age will typically receive 100% of the highest benefit you or your spouse was receiving. If you were both receiving Social Security, you’ll only get one check going forward (the highest one). You should also remove your spouse’s social security number from joint accounts and close any of their spouse’s individual accounts to avoid income tax complications in the future.

Consider Your Housing Options. Look at housing options, like whether to sell or keep the home, or downsize. Mortgages aren’t transferable, even if both your names are on the loan, so you’ll need to pay the mortgage off or refinance into a new loan supported by your assets and income as a widow(er). If you decide to sell your marital home, you’ll have two years from the date of death to sell and keep the full $500,000 federal gain exclusion for married couples.

Filing Taxes For The Year of Death. When a spouse dies, the surviving spouse may need to file taxes for both them and their deceased spouse for that tax year (by April 15^th of the following year). Ask your attorney if you need to file a federal or state estate tax return (due nine months after death). Note that some non-retirement assets owned by your spouse will also be eligible for a step-up in basis to the fair market value at the date of death.

Reference: Forbes (April 20, 2023) “What To Do After The Death Of A Spouse”

Start Planning Now for Coming Changes in Estate Tax Exemption Levels

July 7, 2023

The historically high federal estate tax exemption will sunset on December 31, 2025. It may sound like there’s plenty of time to change your estate plan, but according to an article from Think Advisor, “Act Now to Avoid Estate Planning Logjam in 2025,” the time to start planning is now.

Your estate planning attorney will be in high demand over the next two years as more and more people realize their estate may be subject to the new lowered levels of the federal estate tax. Estate planning is a complex process; any strategy may take years to implement fully.

The 2017 Tax Cuts and Jobs Act delivered some of the most sweeping changes in federal tax law in nearly three decades. At the time, the exclusion amount for estate, gift and generation-skipping transfer tax purposes increased from $5 million to $10 million and was indexed for cost-of-life adjustments starting in 2010.

For anyone who dies in 2023, the exemption amount is nearly $13 million, or a combined exemption of a little less than $26 million for married couples.

The increase in the exclusion only applies to estates of decedents dying after December 31, 2017, before January 1, 2026, and to gifts made during that period. On January 1, 2026, the exemption returns to $5 million per person, indexed for cost of living.

You don’t have to die to take advantage of these generous exemptions. However, you still need to enact some of the various strategies to move wealth out of your estate and be sure that such strategies are appropriately supported legally.

Start by realistically assessing your entire net worth, looking beyond your investment portfolio. Include the value of any assets included in your taxable estate. You’ll also need to know how much exemption remains if you’ve already engaged in some legacy planning.

Consider gifting assets to a qualified charity as one of the most effective ways to reduce the size of your estate.

If your focus is keeping wealth in the family, there are several strategies to pass wealth to the next generation while living and after you have died. Some are relatively straightforward, such as making annual gifts, while others are complex, including transferring assets to trusts or creating generation-skipping trusts.

Now is the time to meet with your estate planning attorney to determine which strategies could be used to reduce your taxable estate in light of the lowered exemptions.

Reference: Think Advisor (May 22, 2023) “Act Now to Avoid Estate Planning Logjam in 2025”

Did Jerry Springer Really Leave His Fortune to Two Teens?

July 5, 2023

Twitter was buzzing recently as a clip made the rounds showing the late television personality – buried in a ‘small’ private ceremony – reading a last will.

However, it was quickly discovered that it was actually from a 2020 virtual play called Blood Money, where the talk show host had a cameo role.

The Daily Mail’s recent article, “Jerry Springer viral for will giving large portion to two Black kids,” reports that in the clip, Jerry could be seen addressing five people, including two who happened to be Black.

Springer looks at a document and says: “Joan kept me away from you with the threat of exposure. She did not keep me from providing for you. You see I told her that if I had to accept the life without you she would not get a red cent of my fortune and that you would be named equally on my will in the event of my passing.”

“But with everything going on in the world right now, I realize that I have to go a step further. Jordan, Megan, I leave our home here in New Orleans to you to do whatever you want. The rest of the estate, my properties in Mississippi, Georgia, South Carolina, my bank accounts, investment portfolios, all liquid and intangible assets everything all of it will go to my children John and Misha.”

Springer goes on to say, “Girls all of your life I’ve been telling you to make your millions and I hope you have. If not, you could always sell the house and split the profit but my entire estate.”

Many who believed the clip was legit took to Twitter to react.

One person wrote, “The best Jerry Springer episode ever is Jerry reading his own will [two red exclamation point emojis] He had two black children out of wedlock, wife threatens to expose, so he keeps it under wraps until he dies, then leaves all his money to the children he never met. What a legend [two red exclamation point and mind blown emojis]”

Another posted, “Wow, Jerry Springer really went out with a bang. This is his will and final testament on this earth.”

Meanwhile, weeks ago, Springer got emotional as he talked about his family perishing in the Holocaust. He also revealed that his daughter seeing him perform The Waltz on Dancing with The Stars was his ‘single happiest moment in television’ in a wide-ranging final interview before dying at 79.

Reference: Daily Mail (May 16, 2023) “Jerry Springer viral for will giving large portion to two Black kids”

What Should I Do Now for a Successful Business Succession?

July 3, 2023

According to the Conway Center for Family Business, family businesses account for 64% of the U.S. Gross Domestic Product (GDP), yet 57% of those businesses have no formal succession plan.

Twin Cities Business’s recent article, “Don’t Wait for the Future,” notes that many businesses are founded on a high degree of personal trust and loyalty, often a simple handshake agreement. However, these informal agreements aren’t enough to protect you against disagreements and damaged relationships, which can be costly. A lack of business succession planning can negatively impact business owners, as well as their heirs and employees.

There are two key reasons business owners should think about a business succession structure sooner rather than later. One is taxes. Under the current laws, the estate tax exemption is scheduled to sunset in 2025. This leaves business owners with a small window to take advantage of the planning opportunities around this exemption. Second, the absence of a succession structure may result in business disruption at a very emotional time for owners and employees.

The reason why so many business owners are unprepared is that many of them find it uncomfortable or daunting to discuss succession planning or enacting formal agreements. Others don’t truly see the importance of such discussions. And, in other cases, it can be seen as a sign of disloyalty.

The good news is that partnerships can be strengthened if you address this process the right way, with respect for everyone’s point of view and a willingness to listen. The result will be that you’re totally confident that everyone’s interests are secured. This lets you focus on your business, instead of being distracted by unspoken concerns.

Formal contingency plans help business partners clarify their vision for the future. Many are so busy with personal lives, families, and work that they frequently fail to consider the impact of events outside their control. However, these conversations help us think clearly about what we want in the future and what it will take to get there.

If the process is handled correctly, guided by an experienced attorney, the result should be peace of mind and a higher degree of protection for partners and their families.

Reference: Twin Cities Business (April 10, 2023) “Don’t Wait for the Future”

Prepare Now for Coming Estate Tax Changes

June 30, 2023

The TCJA nearly doubled the lifetime estate and gift tax exemption from $5.6 million for individuals (and $11.18 million for married couples) to $11.18 million and $22.36 million for married couples), indexed for inflation after 2018. Right now, the exemption stands at $12.92 million per person and $22.84 million for couples, as reported in a recent article, “How To Prepare Clients Now For Looming Estate Tax Changes” from Financial Advisor.

All this changes on January 1, 2026, resulting in a roughly 50% reduction over the next few years. Individuals could see their federal estate tax exemption dipping to approximately $7 million, while couples could see a decrease to $14 million.

In anticipation of this drastic change, estate planning attorneys are reviewing plans now with clients to implement an appropriate course of action in less than three years. This is especially important for clients who might not have been impacted by estate tax laws in the past but who will be in 2026 because of a combination of the lowered amount and any growth in their assets.

Here are some strategies for preparing for the new lowered levels:

Review the complete estate plan with an estate planning attorney. Without a proper estate plan, it’s easy to lose sight of the value of all assets and may be entirely in the dark concerning estate tax liabilities. For instance, a boomer who hasn’t reviewed their estate plan in twenty years could see an enormous change in the size of their assets, possibly bringing them across the $7 million estate tax exemption threshold. Failing to address this could risk financial security in retirement and significantly impact their heirs.

Create a strategy with the information you have now. First, review your estate plan with an eye to moving assets out of the estate. You should then consider the overall goals and time horizons to determine the best way forward. There are several optimal strategies, including using annual gift tax exclusion, which as of 2023, is up to $17,000 per person.

The use of trusts is a well-known facet of estate planning. Which type of trust is used depends upon your specific situation. Trusts generate income and protect access to assets used for living expenses, reduce taxation on the estate, protect assets from creditors and keep a family’s financial assets and affairs private upon death.

Other strategies to consider:

Allocating assets to a 529 education plan, allows you to put money aside for the education of loved ones. It can be used for education from kindergarten to college, graduate coursework and more. There is also an option of accelerating gifting by giving up to five years of contributions in one year per individual.

Suppose you wish to pass assets to grandchildren, instead of gifting them during their lifetimes. Consider generation-skipping trusts, which allow you to create a separate fund for grandchildren under age 37.

There is no one-size-fits-all approach to estate planning. However, a discussion with your estate planning attorney will clarify your wishes and allow you to plan for the future.

Reference: Financial Advisor (May 8, 2023) “How To Prepare Clients Now For Looming Estate Tax Changes”

Do We Know What Was in Jerry Springer’s Will?

June 28, 2023

Legendary talk show host Jerry Springer died at age 79 last month. According to a statement from his family, he died peacefully in his home in suburban Chicago.

Talk show host Jerry Springer had been diagnosed with cancer several months ago and lost his battle. He’s survived by his daughter, Katie Springer, 47, whom he had with his ex-wife Micki Velton. Springer was married to Velton between 1973 and 1994.

The New York Post’s recent article, “Jerry Springer’s net worth: The fortune the legendary host left behind,” says that he leaves behind a fortune –estimated to be from $60 million to $75 million.

His fortune was amassed over a long and storied career. Before becoming a colorful and controversial talk show host, Springer was a politician who served on Cincinnati’s City Council in 1971. He was elected as the city’s mayor in 1977, serving just one term.

After politics, he went into television and became a news anchor and commentator at WLWT in Ohio City before taking on his most iconic role as a TV host when he launched his famous “Jerry Springer” show, which ran from 1991 to 2018.

He was also known for the “Judge Jerry” show, which aired three seasons, the Springer on the Radio Show, Baggage, and the Jerry Springer Podcast, and he even had a ‘60s folk music radio show in Cincinnati.

During a podcast interview in November of 2022, Springer said, “I’m just a schlub who got lucky.”

“Jerry’s ability to connect with people was at the heart of his success in everything he tried whether that was politics, broadcasting, or just joking with people on the street who wanted a photo or a word,” family spokesperson Jene Galvin said in a statement.

“He’s irreplaceable, and his loss hurts immensely, but memories of his intellect, heart and humor will live on.”

Reference: New York Post (April 27, 2023) “Jerry Springer’s net worth: The fortune the legendary host left behind”

Estate Planning Blog

Serving Clients Throughout North Central Missouri

What Is the Deceased Spousal Unused Exclusion Portability Deadline?

What is the Best Estate Plan to Keep Family from Killing Each Other?

How Can I Successfully Transfer My Business to My Children?

Did Media Mogul Pat Robertson Have a Large Estate?

What to Do Upon Death of a Spouse

Start Planning Now for Coming Changes in Estate Tax Exemption Levels

Did Jerry Springer Really Leave His Fortune to Two Teens?

What Should I Do Now for a Successful Business Succession?

Prepare Now for Coming Estate Tax Changes

Do We Know What Was in Jerry Springer’s Will?

SUBSCRIBE!

RECENT POSTS

What Is the Deceased Spousal Unused Exclusion Portability Deadline?

What is the Best Estate Plan to Keep Family from Killing Each Other?

How Can I Successfully Transfer My Business to My Children?

Did Media Mogul Pat Robertson Have a Large Estate?

What to Do Upon Death of a Spouse

Start Planning Now for Coming Changes in Estate Tax Exemption Levels

Did Jerry Springer Really Leave His Fortune to Two Teens?

What Should I Do Now for a Successful Business Succession?

Prepare Now for Coming Estate Tax Changes

Do We Know What Was in Jerry Springer’s Will?

Categories

Contact Us