March 2013 Archives

Are Wills made during marriage binding on the surviving spouse (cont'd)?

March 28, 2013, by

two guys arguing.jpg In its 2012 decision In Re Estate of Kazmark, the Washington Court of Appeals resolved the question whether Earle Sr. was bound by agreement with his predeceased spouse Barbara, to keep his Will in place that benefited her family as well as his.

Barbara's son Shane first had to rebut Earle Jr.'s assertion that Earle Sr. and Barbara's Community Property Agreement superseded their Wills and any agreement under which the Wills were made. The Community Property Agreement did override the Wills in a sense. It was used upon Barbara's death to transfer the whole estate to Earle Sr. without the necessity of probating or otherwise using Barbara's Will at all. But the Court didn't have much trouble refusing Earle Jr. on this one. The Community Property Agreement was entirely consistent with the Wills, accomplishing more easily what Barbara's Will would have done upon her death. Because it only supported the work of the 2005 Wills, the Community Property didn't supersede or otherwise negate them or any agreement they represented.

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Are Wills made during marriage binding on the surviving spouse?

March 21, 2013, by

widower at funeral.jpgWhen Earle Sr. died in July of 2009, Earle Jr. sought to probate the nine-day-old Will that left the residue of his father's estate to him. Earle Sr. had become wealthy by most people's standards, by marrying Barbara in 1985 and then surviving her in 2009. This turn of events was not pleasing to Barbara's son Shane, who would have received half the estate under her 2005 Will had Barbara had survived Earle Sr.

Earle Sr. had actually done a Will just like Barbara's in 2005. It and a Community Property Agreement gave all to the surviving spouse, and then, after both of their lifetimes, half to his family and half to Shane. Then a flurry of events in 2009 threatened Shane's share. Barbara died and Earle Sr. got all her estate. Then he changed his Will to favor Earle Jr. and cut Shane out. This is a risk in any case where each spouse has his or her own children, and the estate plan puts all in the hands of whichever spouse survives.

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Reflections on the tax law changes: gifts are still good.

March 14, 2013, by

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Lars has seen a lot in his three decades as a CPA. One thing he's learned is that in taxes, investments, and estate planning, the most dangerous clients aren't the ones who need a lot of guidance, but rather the ones who don't need any. The ones who know it all. It tends to run in certain occupations.

Take the subject of tax-saving gifts, for instance. There are a lot of untruths and one big favorable set of truths, more so now with the new law. Here are some of the assertions he hears:

"I can only give $10,000 a year." This is the annual gift tax exclusion (actually $14,000 now), the amount one person can give any other person each year without using any lifetime gift tax exemption. But it's not really the limit. One still doesn't pay any tax as one uses the lifetime exemption (now $5,250,000 for each giver).

"OK, but I don't want to use my lifetime exemption. I want to save it for my estate." Well, it would save it not to make gifts, but once you have given away those stocks or that real estate, all future income and appreciation on the gift occurs out of your taxable estate. So it pays to use it as one can afford to.

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Reflections on the tax law changes: moving is a late-game option.

March 7, 2013, by

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Our CPA friend Lars and his rich Uncle Nils are having one of their regular dinners at the oddly named restaurant Guy. Nils has heard that the State of Washington's legislature, desperate for funds, is talking about doubling the already-high estate tax rate for its residents. He's thinking about moving.

Nils has been on the internet and describes some of his findings to Lars. A minority of states impose an estate tax. Washington's tax starts at 10% on estates over $2 million, and goes up to 19% for larger amounts. It's one of the highest in the nation.

Nils knows a couple of guys who have already declared other states their home now. Some states are better than others. California has an income tax that significantly undermines the benefit of moving, unless one manages to do it just before one dies. Nevada is better, with neither an income tax nor an estate tax, but few people seem to be talking about moving there.

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