Michigan Estate Planning Blog

ESTATE TAX FILING FOR 2010 – DEADLINE EXTENDED

If your last name is “Steinbrenner,” or you also are the heir to the estate of a decedent who passed in 2010, then you likely know that your assets stand at a crossroads and that the estate executor has a huge choice: to file for the estate tax or not to file? That, is the question. Formerly, the deadline was November 15, 2011, only a couple weeks out. Good news: Now, the deadline has been extended out to January 17, 2012. So, why is there even a choice to file an estate tax return anyway and why might it be a difficult choice? It exists, as you may know, because last December’s budget compromise created an estate tax for the year in which there wasn’t any estate tax. The move was to offer a “retroactive” estate tax to cover up the hole Congress had previously left open by allowing the 2010 tax to lapse. Of course, practically speaking anyway, it still doesn’t sound like a choice was created because, well, who would choose the estate tax? Indeed, there is a reason to choose the estate tax, but it depends entirely on the nature of the assets in the estate because of the “carryover basis” versus the “stepped-up basis” dilemma. If you choose not to pay the estate tax, then it catches up to you in the form of capital gains taxes upon the eventual sale of those assets. This is because the IRS will use the “carryover basis” or the original cost of the assets when determining capital gains. Assets that have significantly appreciated, or assets for which you cannot prove an original value, can become liabilities if you also plan to sell them. On the other hand, if you chose to pay the tax (35% on assets in excess of $5 million) then the IRS will use the “stepped-up basis” or current market value when determining the capital gains tax owed. More advice and information can be found in Deborah Jacobs’s recent article (as well as in an earlier New York Times piece), but so much depends on the particular assets and record-keeping abilities of the estate. Bottom line: As with any estate tax planning, make sure you consult with competent legal counsel, especially well before the clock runs out on January 17, 2012. In such instances, it may be prudent to file the estate tax return since you won’t pay taxes, but the rest involve a difficult calculation.

Reference: Forbes (September 13, 2011) “IRS Extends Key Deadline for 2010 Heirs”

ESTATE TAX FILING FOR 2010 – DEADLINE EXTENDED

If your last name is “Steinbrenner,” or you also are the heir to the estate of a decedent who passed in 2010, then you likely know that your assets stand at a crossroads and that the estate executor has a huge choice: to file for the estate tax or not to file? That, is the question. Formerly, the deadline was November 15, 2011, only a couple weeks out. Good news: Now, the deadline has been extended out to January 17, 2012. So, why is there even a choice to file an estate tax return anyway and why might it be a difficult choice? It exists, as you may know, because last December’s budget compromise created an estate tax for the year in which there wasn’t any estate tax. The move was to offer a “retroactive” estate tax to cover up the hole Congress had previously left open by allowing the 2010 tax to lapse. Of course, practically speaking anyway, it still doesn’t sound like a choice was created because, well, who would choose the estate tax? Indeed, there is a reason to choose the estate tax, but it depends entirely on the nature of the assets in the estate because of the “carryover basis” versus the “stepped-up basis” dilemma. If you choose not to pay the estate tax, then it catches up to you in the form of capital gains taxes upon the eventual sale of those assets. This is because the IRS will use the “carryover basis” or the original cost of the assets when determining capital gains. Assets that have significantly appreciated, or assets for which you cannot prove an original value, can become liabilities if you also plan to sell them. On the other hand, if you chose to pay the tax (35% on assets in excess of $5 million) then the IRS will use the “stepped-up basis” or current market value when determining the capital gains tax owed. More advice and information can be found in Deborah Jacobs’s recent article (as well as in an earlier New York Times piece), but so much depends on the particular assets and record-keeping abilities of the estate. Bottom line: As with any estate tax planning, make sure you consult with competent legal counsel, especially well before the clock runs out on January 17, 2012. In such instances, it may be prudent to file the estate tax return since you won’t pay taxes, but the rest involve a difficult calculation. You can learn more about estate taxes on the Estate Tax Practice Center on our website.

Reference: Forbes (September 13, 2011) “IRS Extends Key Deadline for 2010 Heirs”

The Joys Of Giving (Privately Or Publically?)

The recent passing of Steve Jobs has, for many admirers, raised anew the question of anonymous giving: is it better to give without taking credit? As a recent Reuter’s article points out, whether for Jobs or for the average donor, there are some important considerations to bear in mind. Jobs was famous for a great many accomplishments, not the least of which was being a self-made entrepreneur who transformed a garage-sized company into a titanic icon. As a result, he was a powerful force in business and popular culture alike. He also is famous for not being a charitable giver, quite unlike his Microsoft foil, Bill Gates. However, that raises the very real possibility that he did give to charity, perhaps in death, if not also in life… but he did so in secret. Indeed, it wouldn’t have been terribly hard, especially for one who has proven himself to be a private person. But why would Jobs (or you) elect to give anonymously? There are multiple sentiments supporting “quiet” giving. Whether you are bashful and wish to avoid undue accolades, or you simply want to avoid further solicitation, privacy is of considerable importance to many donors. Another basis supporting anonymous giving is religious tradition, as evident in traditions as disparate as Judaism and Buddhism. In the end, giving without recognition and fanfare holds an undeniably powerful pull and is the right choice for many. Nevertheless, there remains at least one consideration favoring the public giver, as pointed out in the article. Although giving privately provides an opportunity to do good in the world, giving publicly provides an opportunity for others to witness good being done in the world. In short, it provides a generous role model to the world. Either way, private or public, it’s clear that thinking about how to give can be as important as thinking about to whom. Whether Jobs gave privately is his own business. If he gave privately it’s because he wanted it that way. The question remains, however, how do you want to give?

Reference: Reuters (October 10, 2011) “Steve Jobs and Giving Anonymously”

ESTATE TAX FILING FOR 2010 – DEADLINE EXTENDED

If your last name is “Steinbrenner,” or you also are the heir to the estate of a decedent who passed in 2010, then you likely know that your assets stand at a crossroads and that the estate executor has a huge choice: to file for the estate tax or not to file? That, is the question. Formerly, the deadline was November 15, 2011, only a couple weeks out. Good news: Now, the deadline has been extended out to January 17, 2012. So, why is there even a choice to file an estate tax return anyway and why might it be a difficult choice? It exists, as you may know, because last December’s budget compromise created an estate tax for the year in which there wasn’t any estate tax. The move was to offer a “retroactive” estate tax to cover up the hole Congress had previously left open by allowing the 2010 tax to lapse. Of course, practically speaking anyway, it still doesn’t sound like a choice was created because, well, who would choose the estate tax? Indeed, there is a reason to choose the estate tax, but it depends entirely on the nature of the assets in the estate because of the “carryover basis” versus the “stepped-up basis” dilemma. If you choose not to pay the estate tax, then it catches up to you in the form of capital gains taxes upon the eventual sale of those assets. This is because the IRS will use the “carryover basis” or the original cost of the assets when determining capital gains. Assets that have significantly appreciated, or assets for which you cannot prove an original value, can become liabilities if you also plan to sell them. On the other hand, if you chose to pay the tax (35% on assets in excess of $5 million) then the IRS will use the “stepped-up basis” or current market value when determining the capital gains tax owed. More advice and information can be found in Deborah Jacobs’s recent article (as well as in an earlier New York Times piece), but so much depends on the particular assets and record-keeping abilities of the estate. Bottom line: As with any estate tax planning, make sure you consult with competent legal counsel, especially well before the clock runs out on January 17, 2012. In such instances, it may be prudent to file the estate tax return since you won’t pay taxes, but the rest involve a difficult calculation. You can learn more about estate taxes on the Estate Tax Practice Center on our website.

Reference: Forbes (September 13, 2011) “IRS Extends Key Deadline for 2010 Heirs