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Death and tax uncertainty

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These days, it feels as though Uncle Sam is laughing at estate planning and wealth transfer attorneys.

The old adage by Benjamin Franklin about death and taxes being the only certainties is no longer certain, thanks to U.S. congressional inactivity about how to handle the federal estate tax that expires at the end of this year and is set to revert to decade-old levels. Effectively, that means a tax increase for people, though Indiana attorneys specializing in this area say they can’t even advise their clients on how to plan for what’s ahead.

“Not knowing what the prediction is going to be has caused a significant hurdle in planning,” said Indianapolis attorney R.J. McConnell at Bose McKinney & Evans. “Many families owning Indiana businesses don’t know how to plan for their estates, and that’s most of my client base. No one wants anything extraordinary here… most families just want to know what the rules are. That is, at a minimum, what Congress owes us.”

Attorneys say that even as we are about a month away from the start of 2011, no one is certain what taxes might be in place, when they’ll apply, and what income levels or rates might be attached. That means that some attorneys are taking a cautious “disclaimer-style” approach to any wills and estate plans, just in case something changes and a client doesn’t want to get stuck with any particular contractual tax reality.

In 2001, lawmakers lowered the estate tax rate and boosted the amount of money exempt from the tax through 2010. The rate gradually went from 55 percent in 2001 to 45 percent in 2009, before the tax evaporated completely this year. The amount of money that could be passed on tax-free also rose steadily, from $1 million to $3.5 million for dying individuals in 2009. This year, heirs have been able to pocket the entire estate without handing anything over to Uncle Sam.

But here’s the kicker: In 2011, the estate tax reverts back to 2001 rules for a 55 percent rate and only $1 million escapes taxation.

The House of Representatives passed a permanent extension to the 2009 rates and exemption last year, but it stalled in the Senate after a contentious debate about tax increases. The bill would have set a top rate of 35 percent on estates worth more than $5 million, but many Republicans pushed for a permanent repeal of the tax. That makes predicting the path this might take uncertain, as many who oppose the tax in principle don’t want the tax to skyrocket because Congress can’t forge an agreement.

Attorneys watching the legislative debate predict the estate tax issue could be tied in with a larger package addressing broader Bush-era income and capital gains tax cuts, but few are willing to place bets on the outcome.

Jeff Adams of Indianapolis, a member of the Indiana State Bar Association’s Estate Planning Section, says that the Republican shift resulting from the recent election goes in favor of those who favor a lower tax rate and higher exemption rate, so the decision could be pushed to the next Congress once that party takes over more control.

“We would have hoped that we’d gotten something at this point, or by the end of the year because of retroactivity concerns, but I’m not as convinced as I’d like to be at this point that anything will happen,” he said.

Adams said questions and concerns about these estate tax issues have been at the forefront of discussion for more than a year, as the federal estate tax has decreased and led up to what was clear would happen all along – a 2010 expiration and 2011 renewal. Because lawmakers haven’t acted on it, more confusion has been created for those trying to advise clients about the best way to plan. Seminars late last year and early this year have faded and there hasn’t been much guidance for attorneys trying to navigate these waters, he said.

For example, some questions about Indiana law exist pertaining to how funding clauses are drafted in documents addressing estate plans and wealth transfer. Some might opt for the maximum exemption amount, but it’s been unclear whether someone must fund these credit shelter trusts with all assets or none of the assets. A state statute trying to address that hasn’t clearly offered guidance on what the impact might truly be, he said.

Another issue has been the reporting requirements for the taxes and exemptions, Adams said. The Internal Revenue Service recently released a new form, but attorneys haven’t had a chance to completely process what it means.

“We will need practitioners who have any deaths this year to look at that and learn how they need to report,” he said.

But even more significant, some attorneys wonder whether Congress will revive the federal estate tax retroactively and how that might apply to deaths that happened this year, such as the case of billionaire New York Yankees owner George Steinbrenner who died in July. The estate of a person who died this year with an estate valued at $1.15 billion saved an estimated $500 million in what would have to be paid.

Proposed changes would seal the 2010 gap retroactively, meaning Steinbrenner and anyone else who died this year and made more than $3.5 million individually would have to pay the 55 percent estate tax.

Adams says he’s been instructing clients that it might be worth holding off on complete distributions from those 2010 deaths until it is clear what will happen. Financial planners can calculate a worst-case scenario tax and distribute whatever the excess amount might be, but then wait to do the entire distribution until Congress makes a decision.

“You can do some planning, but in many ways it’s wait and see,” he said. “I opt for disclaimer planning, where you give everything to a spouse and can then disclaim it to the estate and marital trusts rather than putting a built-in formula. Many of these formulas are out there in documents now, and this allows some flexibility.”

McConnell doesn’t believe that retroactivity would be possible, because it might raise constitutional questions about fairness that lawmakers would have to grapple with, such as whether the rules should have been made up ahead of time or as we go and then tacked on later to events that already happened.

For families, that might be devastating. They have experienced a death and then a year or more later heirs learn that they’re suddenly hit with a new multi-million dollar tax and forced to sell a business or part of their property in a current bad market.

“How is that fair for someone who has played by all the rules in place at the time?” he asked.

After the Nov. 2 election, Congress returned briefly before a weeklong-break for Thanksgiving, and then it was scheduled to return Nov. 29 for any lame-duck action that can be agreed on before the year ends.

If Congress were to opt for another year without an estate tax, McConnell says that would be a mixed blessing – a pro that his clients wouldn’t get slammed with a new tax, but a negative in that it would just extend the confusion. He’d prefer to see a lower exemption implemented with a higher tax rate, than have any tax rate that’s only in place for a year.

“That just continues the uncertainty we’ve had,” he said, “and it doesn’t help anyone.”•

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  1. Am I the only one who sees that the City is essentially giving away the MSA site AND giving millions to build new buildings on the site when this site would be the perfect place for the Justice Complex? Across from City-County, check; keeping it centrally located, check, etc. It's my understanding that the GM site must be purchased by the City from Motors Liquidation Company. STOP WASTING WHAT WE ALREADY HAVE AND OUR TAX DOLLARS! The Ballard Administration has not been known for it's common sense...never voted for him and never will!

  2. This guy sounds like the classic molester/manipulator.

  3. Louis D. Brandeis was born in 1856. At 9 years of age it would have been 1865. The Brandeis family did not own slaves. My source Louis D. Brandeis: A Life, by Melvin L. Urofsky.

  4. My name is Matthew Lucas Major, I recently went through a jury trial in Bloomington , In. It was the week of Feb 19-21. Although I have been incarcerated since August 5, 2014. The reason I 'am writing to you sir is on the 21 of February the jury came in with a very excessive and wrongful verdict of guilty on 6 child molesting charges against my daughter who was 9 at the time I was accused. I also had 2 other Felonies one of Intimidation and 1 of Sexual Vicarious Gratification. Judge Marc Kellam on the second day of trial gave me a not guilty on those 2 felonies. The jury was sent out during that time and when brought back Judge Kellam told them to not concern themselves with the 2 Felonies that he ruled on them. They were told to not let evidence they had already heard influence there verdicts. I never in my life touched any child sexually and definitely not with my own daughter. When I was arrested Detective Shawn Karr told me I would be convicted guilty just on my daughters word even without evidence. That's just what happened. my public defender did me so wrong he never once proved to the court and jury all the lies the child told, and Jeremy Noel my public defender could of proven the lies easily. The stories in Serenity's depositions and Forensic interview changed and were not consistent as Prosecutor Darcie Fawcett claimed they were. Yet my attorney never mentioned that. The facts that the child accused me of full penetration in her vagina and rectum was proven lies. Doctor Roberta Hibbard of Riley hospital in Indianapolis confirmed Serenity's hymen intact, no scars, no tearing, no signs of rape to her. Yet my attorney didn't use that knowledge . the DNA was all in my favor. I tell you I will spend my entire life in prison going through rape and beatings etc. even Judge Kellam abused his authority by telling the jurors to listen and believe what the prosecutors side in evidence like my daughters testimony. In one interview with the detectives my daughter got flustered with her mom and said on camera " I'm saying what you told me to mom"!! Yet Mr. Noel said nor did anything to even resemble a defense attorney. Judge Kellam allowed edited version of a taped conversation between the child and her mother. Also Judge Kellam allowed the Prosecutor too bring in to my case a knife found under my seat, the knife wasn't part of my case. She was allowed by my attorney and the judge to put a huge picture of it on the screen and huge picture of my naked privates in a full courtroom and open court. Ms. Fawcett says to jury see how easy Mr. Major could reach the knife and cut his Childs throat. Even though I had no weapons charge against these cases. This gave the jurors prejudice thought against me thinking I threatened her with that knife and how scared she would of been knowing i could get it and kill her. On my sentencing court March 19, 2014 my public defender told Judge Kellam he wish to resign from being my attorney and wished for the court to give me outside council to file a error to trial or appeal. We were denied. Now after openly knowing my public defender don't want to represent me he has to. Well when as parents we make our kids clean a room when they really don't wish to, well the child will but don't mean she will do a good job, that's where I'm at with Mr. Noel. please dont ignore mine and my families pleas for your help . we have all the legal proof you could need to prove Im innocent. Please dont make my spend years in prison innocent when you can fix this wrong. Im not saying Im a perfect man or that I was a perfect dad to my 2 children none of us are. Ive made some bad choices in life and I paid for them. But I didnt ever touch or rape my daughter . I love my children with all my heart. And now through needing attention and a ex-wife who told my granny several times she wish she could put me in prison to get me out of their lives. Well my ex finally accomplished her goal. Sad part is she is destroying our daughter with all this horrific lies and things she taught my daughter to say. My daughter will need therapist to ever hope for a chance of a normal life after what she had done to her by her mom and their side of the family. My daughter told everyone even on stand she had a dream months before i supposedly molested her in this dream I was molesting her and when I finally did it matched her dream perfectly. She admitted to watching movies about little girls being molested and watching U-Tube videos about child molesting all before it happened supposedly to her. Doesn't that sound very unusual that a non molested 9 yr old would need to know so much about being molested? The only reason I could think a 9 year old would need so much information is to be prepared to know what to say and be able to say how it felt what took place etc.. So when questioned by authorities she would be prepared. And there again sir if a parent is pre grooming a 9 year old child she would need intimate details . Like telling her daughter about a couple moles on my private area. The child admitted to sneaking my cell and looking many many times at nudes of me and my girlfriend even one where my penis was entering my girlfriends vagina. In that picture my moles are obvious. Yet when prosecutor showed everyone in court my privates and pictures of the moles she said the only way the child would know about them is if she saw them for herself. My attorney once again said nothing about the pictures my child saw. Or could a ex-wife be able to describe my moles to help her case against getting rid of me? I beg you help me. This is my very existence. Ive lost everything , a good job, a wonderful girlfriend, my freedom, but worse thing Ive lost is my children. They were my reason to get up every morning and strive to be better. The wonderful bond I had with my Serenity is gone. After this I would be afraid to even hug her for fear of what next can they do to me. I'm not afraid to tell you I sit here in this cell and try to hold back my tears. Everyone knows you cant show weakness in prison. My life has already been threatened here at Wabash Valley Prison. After only 3 days of arrival. I was tricked into signing a waiver now Im in G Block General Population with 6 child molesting felony charges. Mrs. Hart as a 18 year old I almost died hooked to machines in hospital almost 1 month and now I know that fear was childish compared to this . I cant help but put emotions in this, after all Mrs. Hart Im human and God help Me I never been more afraid in my life. I didnt hurt my little girl I didnt touch her sexually. As much as it shreds me and fills my mind what Im facing I worry more about my mom and granny because of their great love for me mam they are suffering so deeply. I aint done this things but my loved ones suffering right along beside me and If you take my case you will be in essence freeing them also. I sent momma this letter and asked her to email it to you. I'm scared I have been done so unjustly by our legal system and I need you to fix this and give me freedom. I ask you please don't just ignore my pleas. Here in America its nice to be able to trust our legal justice system, well they destroyed my and my loved ones trust in our justice system . And I'm trusting in You !!! My entire family is suffering this nightmare with me. My 77 year old granny had a stroke and isn't doing so well. My single mother that raised 3 kids alone is dying from Lupus and since my arrest has stayed so sick and weary. Our lives torn to peices by a government I was taught I could trust in. my momma has tried so many innocent project and wrongfully accused and cant get anywhere. please please help me. A quote from the late Nelson Mandela: To be free is not merely to cast off ones chains, But to live in a way that respects and enhances The Freedom Of Others. I have Faith in you and your clinic to cast my chains off and give me freedom I do deserve as a wrongfully accused Man, son, brother, father, friend. Matthew Major DOC# 246179 Cause # : 53c02-1308-FA-000779 God Bless you. Please contact me with your decision so I know you made a life changing decision for me , just please at least write me so I know you care enough about your citizens to respond to cries for your help. You can speak openly with my mother Charlotte Spain (828) 476-0406: 71 Lakeview Dr. Canton, NC 28716 Thank You Matthew Major I know yall get thousands of request and inmates claiming innocence, and each person who are innocent deserve to have organizations like yours willing to fight for them and I give yall so much Thanks and I thank God everyday yall are out there caring enough to help free the innocents. Since discovering firsthand how easily lives and families can be destroyed by Poor Defense attorneys not doing their job . And Prosecutors allowed to do as they please in court

  5. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

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