Estate Tax: Senate Bill 722

The 2010 Congressional Budget Resolution recommends a personal estate tax exemption allowance of $3.5 million. The value of estates above that would be taxed at 45%. However, the language in the Budget Resolution does not provide for the “portability” of the $3.5 million allowance to a surviving spouse. Without “portability”, the proposed estate tax laws extend the existing married couple estate tax trap.

Existing estate tax rules

What is the existing married couple estate tax trap? Assume a husband and a wife each have property worth $2.5 million. The wife dies first and her will leaves $2.5 million of her assets to her surviving husband. When the husband dies, his estate now includes assets he owns and assets given him when his wife died. The estate tax value of the second spouse to die is $5 million. However, under existing tax laws, the second spouse to die can only claim his $3.5 million exemption. The estate would owe taxes on $1.5 million.

To avoid the married couple estate tax trap, many married couples spend time and money establishing an AB trust. The AB trust enables both couples to claim their $3.5 million tax exemption allowance, and exempts a total of $7 million from estate taxes.

Senate Bill 722

On March 26, 2009, Senator Max Baucus introduced the Taxpayer Certainty and Relief Act of 2009 (S. 722).

Senate Bill 722 provides “portability” of the estate-tax exemption allowance to the surviving spouse. Let’s take the same example. Assume a husband and a wife each have property worth $2.5 million. The wife dies first and her will leaves $2.5 million of assets to the surviving husband. When the husband dies, his estate now includes assets he owns and assets given him when his wife died. The estate tax value of the second spouse to die is $5 million. The “portability” of the estate tax exemption allowance would allow the surviving spouse to claim the $3.5 million exemption allowance available to the first spouse to die and his own $3.5 million exemption allowance.

The “portability” clause would exempt $7 million of the estate of a married couple from any taxation. The value of estates above $7 million would be taxed at 45%. This portability would eliminate the need for married couples to set up an AB trust in order for each couple to claim their individual estate tax exemption allowance.

Long Term Health Care–“..Number 1 issue…over the next decade.””

David Pitt of the Associated Press submitted an eye opening article for the San Jose Mercury News today–4/2/09. It was a very clear warning about how the long term care costs will negatively impact the lives of most every retired American over the next decade. It’s great and easy reading. You’ll find the article at: http://www.mercurynews.com/ci_12051617?IADID=Search-www.mercurynews.com-www.mercurynews.com

What is a Medallion Signature on a Power of Attorney?

Brokerage accounts have special rules for your attorney-in-fact. If your attorney-in-fact needs to buy or sell stocks held in physical form or held in a brokerage account, your attorney-in-fact will need to add a medallion signature “guarantee” to your power of attorney form.

The Medallion Signature is a stamp provided by a financial institution guaranteeing to a transfer agent that the signature of your attorney-in-fact signature is actually his or her signature. Requests to buy or sell stocks are reviewed by someone referred to as a Transfer Agent. The Transfer Agent cannot authorize transactions requested by your attorney-in-fact without the Medallion Signature guarantee evident on the power of attorney form.

Your attorney-in-fact may need to locate a bank participating in the Medallion Signature program. The bank should be one the attorney-in-fact does business with that is willing to guarantee their signature. The bank will place the medallion stamp on the power of attorney form.

70% OF ALL PEOPLE DIE DUMB!

ARE YOU ONE OF THEM?

Welcome to DieSmart

My name is Kathy Lane and I am one of the founders of DieSmart. I am also a mother, wife, grandmother and, until my mother died last year at the age of 95, a caretaker. And I thought I was retired.

My partner and I are not attorneys; not doctors; not grief counselors. We are people who have started and managed businesses, raised families and nurtured friends. We became caretakers for our aging parents, and then acted as executors of their estate.

We found it hard to believe that educated people like ourselves did not understand the paperwork or the legal and financial aspects of dying. We realized that no one teaches someone how to die smart in school. Or explain why a lack of knowing or doing means someone pays later.

We discovered that dying is not just an emotional event in life, but a major financial one as well. An event where “dying dumb” can cost 4 to 8% of your net worth and, if long term care is involved, perhaps all of it.