Arizona Estate Planning

Four Important Considerations If You Win the Lottery

On February 14, 2023, California state lottery officials named the winner of the largest lottery prize in United States history: Edwin Castro won an eye-popping $2.04 billion in a November 2022 lottery drawing, choosing a lump sum payment of $997.6 million instead of annual payments over three decades.^[1] A lottery player in Maine recently won the $1.35 billion Mega Millions jackpot—another of the largest prizes ever recorded.^[2] If you are fortunate enough to have purchased a winning lottery ticket, it is important to carefully consider how you want to handle your unexpected windfall to avoid repeating the unfortunate pattern of many lottery winners who quickly squander their new wealth,^[3] even if your prize is much smaller than those mentioned.

Take your time. Lottery winners typically have a specific length of time to claim their winnings, although the deadlines vary by state. For example, under title 8, section 382 of the Maine Revised Statutes, the Maine Mega Millions winner has one year after the drawing to claim the money. If it is never claimed, it will be transferred to the state’s general fund. In North Carolina, however, the prize must be collected within 90 or 180 days of the end of the game or drawing, depending upon the type of lottery prize you have won.^[4] Although it is not wise to delay too long, you should take time to think carefully about what you would like to do with the cash you have won, preferably even before you claim your prize.

Manage expectations. If your lottery winnings have substantially increased your wealth, you may discover that your popularity has also grown. Some family members, acquaintances, and scammers are likely to […]

On the Net2023-04-08T09:20:19-07:00April 24th, 2023|Estate Tax, Peace of Mind|

Goodness Gracious! What Jerry Lee Lewis’ Estate Plan Could Look Like

Famous musician Jerry Lee Lewis passed away in October 2022, leaving behind a long legacy, a large family, and a multimillion-dollar estate.

Celebrities can give us a glimpse into lifestyles beyond our wildest dreams. But celebrities face many of the same estate planning issues that the rest of us do, such as which tax planning strategies to use and how to divvy up assets among loved ones when they die.

Jerry Lee Lewis’s death has prompted thoughtful retrospectives about his life in the spotlight. But on a more practical level, his death raises questions about what will become of his estate. This exercise in estate planning “what ifs” can provide lessons for anyone—celebrity or not.

What Lewis Leaves Behind

Lewis died in his home near Memphis on October 28, 2022, at the age of eighty-seven. He outlived other rock and roll icons of his era such as Elvis Presley and Johnny Cash despite a hard-charging lifestyle that included substance abuse and serious health problems. Vulture, part of New York Magazine, describes him as “the last man standing from the dawn of rock and roll.”^[1]

Arguably best known for his rock song “Great Balls of Fire,” Lewis also had country hits and was a four-time Grammy winner. He is a member of both the Rock & Roll Hall of Fame and the Country Music Hall of Fame who recorded over forty albums during a career that spanned seven decades.

Lewis is survived by Judith Coghlan Lewis, his seventh wife. He also had six children. Four of his children are alive—Jerry Lee Lewis III, Ronnie Lewis, Phoebe Lewis, and Lori Lancaster. In the years before his death, […]

On the Net2023-02-25T13:02:37-08:00January 29th, 2023|Estate Planning, Estate Tax, Rich & Famous|

Can I Give My Kids $15,000 a Year?

Chambliss: “If you have it to give, you certainly can, but there may be consequences should you apply for Medicaid long-term care coverage within five years after each gift. The $15,000 figure is the amount of the current gift tax exclusion (for 2018), meaning that any person who gives away $15,000 or less to any one individual in one particular year does not have to report the gift to the IRS, and you can give this amount to as many people as you like. If you give away more than $15,000 to any one person in a single year (other than your spouse), you will have to file a gift tax return. However, this does not necessarily mean you’ll pay a gift tax. You’ll have to pay a tax only if your reportable gifts total more than $11.18 million (2018 figure) during your lifetime.”

On the Net2018-11-06T14:21:14-08:00November 9th, 2018|Estate Planning, Estate Tax, Gifts, Trusts|

You’ve won the Mega Millions jackpot! Time to hide.

The Washington Post: “First things first: Quadruple-check your ticket after Tuesday’s Mega Millions drawing. Then do it again. Do they match the winning numbers (5-28-62-65-70, with a Mega Ball number of 5)? No? Skip to here. Yes? Lock the deadbolt and read on. Congratulations! So, you’ve done it. Beaten the odds — one in 302,575,350 — and won the largest Mega Millions jackpot in history. And it’s yours alone, so you’re almost certainly about to enjoy an astronomical spike in wealth. Now what? Before you shout from the rooftops or broadcast your excitement on social media, take a deep breath and keep some practical advice in mind. To sign or not to sign the back of the lottery ticket? There are plenty of people who will advise you to sign the back of the lottery ticket right away — including lottery officials in South Carolina, where Tuesday’s winning ticket was sold. After all, what would happen if, heaven forbid, you lost the ticket? Or worse yet, if an unscrupulous person in your life took the unsigned ticket and claimed it as his or hers?”

On the Net2018-10-29T15:20:43-07:00November 1st, 2018|Estate Planning, Estate Planning for Singles, Estate Tax, Gifts|

Soldiers with Fortunes?: Rethinking the Tax Treatment of Fallen Combatants

SSRN: “Section 2201 of the Internal Revenue Code provides a partial estate tax exemption for members of the armed forces who die in, or as a result of, combat operations. In this Article, I explore the origins of this exemption and assess the extent to which it serves three important policy goals: (1) reducing financial and administrative burdens on military families, (2) incentivizing military service, and (3) avoiding the moral hazard of the government being able to “profit” (through increased tax revenues) as a result of combat deaths.”

On the Net2018-03-05T13:34:51-08:00March 6th, 2018|Estate Planning, Estate Tax, Trusts, Veterans Issues, Wills|

More Planning Tips for Individuals Under New Tax Act

JDSupra: “As Shanna Yonke mentioned in her January 22, 2018 Legal Update The New Tax Law Provides Estate Planning Opportunities, President Trump signed the Tax Cuts and Jobs Act into law on December 22, 2017. The Act (officially, Public Law 115-97) is the most sweeping tax legislation to be enacted in decades. It is broad in scope, complicated, and will impact almost every aspect of tax, estate, retirement, and business planning.”

On the Net2018-02-19T08:30:51-08:00February 19th, 2018|Estate Planning, Estate Planning for Singles, Estate Tax, Retirement Planning, Trusts, Wills|

Managing Tax Basis in Estate Planning

Wealth Management : “In what will likely prove to be one of the more memorable presentations at the 2018 Heckerling conference, Paul S. Lee, of The Northern Trust Company, emphasized the importance of managing tax basis as part of the estate planning process.”

On the Net2018-02-05T09:50:40-08:00February 5th, 2018|Estate Planning, Estate Planning for Singles, Estate Tax, Tax Planning, Trusts, Wills|

These 2 States Killed Their Estate Tax in 2018

Yahoo Finance: “The successful passage of the new tax reform laws will make a big difference for Americans across the nation in early 2019 when they file their income tax returns for the 2018 tax year. Among the many provisions of the bill were measures that doubled the exemption amount for the federal estate tax, effectively leaving Americans beyond the reach of the death tax until their net worth hits eight figures.”

On the Net2018-01-30T08:39:45-08:00February 2nd, 2018|Estate Planning, Estate Tax|

This Time Is Different: You Really Do Need to Update Your Will and Durable Power of Attorney

Davis Wright Tremaine LLPP: “With the advent of higher exemptions with respect to the Federal Gift, Estate, and Generation-Skipping Transfer Tax passed last December (referred to as the 2017 Tax Act), it really is necessary to review your estate tax planning and it would also be a good time to review your durable power of attorney in light of the recent adoption of the Washington Uniform Power of Attorney Act, effective January 1, 2017.”

On the Net2018-01-31T08:08:19-08:00January 31st, 2018|Estate Planning, Estate Tax, Gifts, Powers of Attorney, Trusts, Wills|

Estate Planning Opportunities and Considerations Beginning in 2018

Schulte Roth & Zabel LLP: “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (“Act”) was enacted in December 2017 and implements a wide range of changes to existing tax laws. The Act temporarily increases (from Jan. 1, 2018 until Dec. 31, 2025) the federal estate, gift and GST tax exemption amounts from $5.6 million to approximately $11.2 million.”

On the Net2018-01-16T15:13:39-08:00January 16th, 2018|Beneficiaries, Estate Planning, Estate Planning for Singles, Estate Tax, Gifts, Trusts, Wills|

AICPA Asks IRS for Portability Relief for Surviving Spouses

Journal of Accountancy: “In a letter to IRS Commissioner John Koskinen and other IRS officials on March 19, Troy Lewis, chair of the AICPA Tax Executive Committee, requested that the IRS provide relief to surviving spouses who want to elect portability of the deceased spouse’s unused estate tax exemption (DSUE) amount. Sec. 2010(c) allows the surviving spouse of a decedent who dies after Dec. 31, 2010, to elect to use any amount of the deceased spouse’s estate tax exemption that was unused by the deceased spouse. This is commonly referred to as the portability election. The election must be made on a timely filed Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and must be made by the executor of the deceased spouse’s estate.”

On the Net2016-12-13T20:33:26-08:00March 25th, 2015|Estate Tax|

Why The Estate Tax Is Stupid

This is a great article from Estate of Denial discussing why the estate tax is a dumb tax and is a fail in terms of both social and fiscal policy. According to the article, the estate tax actually reduces total federal tax revenue, fails to reduce income inequality and has little to no effect on wealth inequality.

“This study confirms that the cost of the estate tax far exceeds any benefits it produces.”

So begins “Cost and Consequences of the Federal Estate Tax” published last week by the Republican Staff of the Joint Economic Committee, whose vice chairman, Representative Kevin Brady of Texas, continues to make his mark as a leader of the pro-growth wing of the House GOP. The report’s documentation of how the death tax fails as both fiscal and social policy stands as a timely rebuttal to the politics of envy promulgated by President Barack Obama and the leadership of the Democratic Party.

My conclusion: the death tax deserves the sobriquet: the “dumb tax.”

On the Net2012-09-22T11:24:41-07:00August 8th, 2012|Estate Tax|

Be Ready For Tax Cuts To End

Newsobserver.com: “The end is near. The end of the Bush tax cuts that is. Are you ready?

The current tax code allows an estate to pass $5 million per person, $10 million per married couple, tax free. Over that the tax rate is 35 percent. The last time the tax rate was this low was 1931, and moved to 45 percent the next year as a means of coping with the Great Depression, and was as high as 77 percent from 1942 until 1976. But on Dec. 31, 2012, the Bush tax cuts automatically revert back to 2001 levels of $1 million exemption and 55 percent for anything above that.

Yes, the government can change this law. And it may seem more likely with a Republican in office. But House Republican Scott Rigell is actually looking to increase total tax revenues from 16.9 percent to 20 percent of GDP if coupled with a spending reduction from 24 percent to 20 percent, according to Joel Klein at Time Magazine. With the current U.S. debt-to-GDP ratio at 93.2 percent, higher than it has been since World War II when an extraordinary amount of money was being spent, and also on the rise, do you think the exemption will remain so generous and the tax rates so low? Are you willing to bet the gridlock in Washington will end? Are you willing to bet your family business?”

On the Net2017-10-07T11:15:26-07:00July 9th, 2012|Estate Tax, Gifts|

Estate Tax Win For LGBT Couples

JD Supra reported on a big win for same sex couples as it relates to the estate tax. A recent New York judge held that same sex couples who reside in states that recognize same sex marriage may take advantage of the estate tax marital deduction. According to JD Supra:

Earlier this month, U.S. District Judge Barbara Jones granted a summary judgement in an estate tax case that, according to law firm Duane Morris “created a precedent that is likely to positively affect same-sex married couples for years to come.”

The case involved a same-sex couple (Thea Spyer and Edith Windsor) who were legally married in Canada and recognized in New York because “New York affords legal recognition to civil marriages that are lawful in the jurisdiction where they are performed.”

On the Net2012-06-21T10:16:55-07:00June 21st, 2012|Estate Tax, LGBT Planning|

Wealthy Americans Must Act Now To Take Advantage Of Gift Tax Exemption

CNBC: “If you're a wealthy American who's planning to hire an estate or trust attorney later this year, here's a thought: Good luck. You're going to need it.

That's because the transit of Venus of estate planning is passing through, and by the New Year it is likely to be gone.

It's the lifetime gift-tax exemption of $5.12 million, paired with a similar estate-tax exemption. And it means that through the rest of this year, parents can pass along assets valued up to that amount to their heirs – maybe a house, maybe a stock portfolio, maybe part of the family business – without paying a single penny to Uncle Sam.”

On the Net2017-10-07T11:14:47-07:00June 13th, 2012|Estate Planning, Estate Tax, Gifts, Tax Planning|

Be Proactive, Not Reactive With Your Estate

JD Supra: “Estate planning should be focused on anticipating possible outcomes and structuring your affairs for the tax-efficient disposition of your assets to your loved ones. However, all too frequently we estate-planning practitioners find ourselves working with clients in a reactive situation, trying to salvage an acceptable outcome out of some missed opportunity. Obviously, better outcomes are achieved when planning, rather than when reacting.”

On the Net2016-12-13T20:33:29-08:00May 24th, 2012|Common Problems, Estate Planning, Estate Tax|

GOP Freshman Urge Boehner to Repeal Estate Tax

Estate of Denial: “The House Republican freshman class has ratcheted up pressure on Speaker John Boehner to draw a sharp contrast with Democratic progressives and bring full repeal of the federal estate tax — popularly derided as the “death tax” — to a vote on the House floor.

Congressional Republicans, GOP freshman class president Rep. Austin Scott wrote in a public letter to the speaker, ‘are eager to present a clear cut choice to voters: Support the Republican plan to bury the death tax or support Democrats’ plan to hike the death tax to a crushing 45 percent rate, or higher.'”

On the Net2016-12-13T20:33:30-08:00May 8th, 2012|Estate Tax|

Myths and Truths About the Estate Tax

The Wealth Channel: “Now that the initial shock and surprise resulting from the long-overdue estate tax reform has subsided, there’s been some time to pause and reflect. At first glance, the immediate reaction of many estate planners that I spoke with was that Armageddon had arrived. This certainly is not the case, but paralysis or procrastination will result in lost opportunity. In the discussion that follows, I’ll try to debunk some of the myths that have been offered in the immediate aftermath of the new estate tax rules. The implications of the law will be viewed prospectively and I will, by design, ignore 2010’s rather interesting situation where the compromise bill provided a choice to be made by executors on whether to elect the federal estate tax with the basis stepup or no federal estate tax with a modified carryover basis for assets left to heirs.

Myth: The increase in the exemption amount to $5 million and the reduction in the estate tax rate to 35 percent were the biggest surprises in the estate tax compromise.

Reality: The attempts by some in Congress to reach a more timely compromise in the 2008 to 2010 interval revealed that there would not be enough votes in the Senate to fix the federal estate tax at the 2009 levels of a $3.5 million exemption and a 45 percent tax rate. In fact, the Senate had previously agreed in principle to these critical components of the law as finally enacted.

The biggest surprise in the new legislation was the reunification of the estate and gift tax systems with the increase in the gift tax exemption to $5 million. This presents many tax-saving opportunities.”

On the Net2017-10-07T11:14:46-07:00April 25th, 2012|Estate Tax|

Estate Tax Portability May Be In Jeopardy

Examiner.com: “If you are currently married with significant assets, you and your spouse have a very limited time to save a lot of money, because after that it’s very likely that Congress will change the rules now in existence and make dying much tougher on your loved ones in terms of federal estate taxes. That is, of course, unless you take this moment – right now — to do some very creative planning that will lock in what’s called spousal portability.

What is Spousal Portability?

Portability is the ability to pass one’s unused estate tax exemption to his or her spouse upon death. It works like this:

The current estate tax exemption (at least until 2013) is $5 million. That means that if you die with less than $5 million, you pay no estate taxes. Five million is a pretty high number, so this exemption is very favorable. It gets even better. Since each spouse in a marriage has a $5 million exemption, the total exemption available to the couple is $10 million. If one spouse dies and has an estate valued at only $3 million, the unused exemption ($5 million – $3 million = $2 million) “ports” to the surviving spouse. He or she can now leave an estate of up to $7 million without incurring any estate taxes.”

On the Net2016-12-13T20:33:31-08:00April 18th, 2012|Estate Planning, Estate Tax|