IRS is Claiming Whopping Amount in Taxes on Ex-Pistons Owner's Estate

It's not often you get estate planning news on ESPN.

http://espn.go.com/nba/story/_/id/9409964/irs-ex-pistons-owner-bill-davidson-estate-tax-dispute

The IRS is claiming around $2 billion (yes, with a "B") in unpaid estate taxes on ex-Pistons owner, Bill Davidson's estate. They claim the estate undervalued stock and didn't appropriately report lifetime gifts made to his spouse and daughter.

While you  may never be in a position to owe billions of dollars in tax, you may be surprised to learn that things like life insurance are included in taxable estates. Many people who are not millionaires may have million dollar estates. Particularly in Minnesota, which has, for the most part, a $1 million estate tax exemption, many people may be surprised to learn they might have a taxable estate. There are options to reduce or eliminate your liability, but you need to meet with an attorney before you die.

Minnesota Now Has a Gift Tax

During this legislative session, the DFL House and Senate passed, and the DFL Governor signed into law, a tax on gifts. While estate planners are familiar with federal gift tax, the new state gift tax has some significant differences. For "taxable gifts" transferred after June 30, 2013, Minnesota will impose a tax of 10%. "Taxable gifts" are "transfers by gift which are included in taxable gifts for federal gift tax purposes". While the gifts subject to tax appear to track with the federal gift tax, Minnesota did not change it's estate exclusion amount to be a lifetime transfer exclusion, like the federal estate and gift tax. For federal gift tax, while a gift may be large enough to be reported, tax would not have to be paid as long as total lifetime gifts were lower than the lifetime transfer exclusion, which this year is over 5 million. Unlike the federal estate and gift tax system, Minnesota chose not apply their estate exclusion of between 1 million to 5 million to gifts. Rather, the lifetime credit on gift tax is $100,000.00. That allows for up to 1 million to be gifted in a lifetime without being taxed, but not the additonal 4 million in farm property that is exempt from estate tax. A credit covering the tax on 1 million dollars is significant, but land rich, cash poor farmers looking to transfer to the next generation may still run into a tax bill. If you are small business owner or farmer in Minnesota, you should schedule a meeting with your estate planner immediately.

Look for Me at the 2013 MSBA Probate & Trust Law Section Conference

I'm excited to announce that I'll be presenting on my favorite estate planning topic, estate planning for transnationals, at the 2013 MSBA Probate & Trust Law Section Conference! My session will be a discussion of 13 dangerous assumptions that estate planners can have when dealing with transnational clients.

I've been preparing my class materials, which meant that a few other things, like my monthly blog posting, fell by the wayside. I do plan on giving a little taste of my presentation in future blog posts.

As always, there will be a variety of interesting topics. Take a look at the schedule for details.
http://www.minncle.org/seminardetail.aspx?ID=102901301

What if I have firearms in my estate?

We don’t yet know what changes there will be to State and Federal gun regulations. It does appear, at this time, that a possible expansion of background checks for gun transfers in Minnesota will be limited to person to person sales at gun shows. Even if gun regulations don’t change an iota, there are current regulations you should address in your will. For example, various individuals are prohibited from owning firearms, such as felons or minors. What happens if an heir or the specific person you gift the firearm to in your will becomes ineligible to own it? Your will should give specific direction to your personal representative if that happens. The last thing you want for your estate is confusion if a gift can’t go to a person you wanted it to.  If you plan to have firearms in your estate, be sure to let your attorney know. You should have a will and specifically address the transfer of firearms.

South Carolina Supreme Court Upholds Testator (in this case the Godfather of Soul) Rights

Financial Planning is reporting on a South Carolina Supreme Court case that tells the State Attorney General to respect testator intent.

http://www.financial-planning.com/blogs/Was-the-Godfather-of-Soul-Estate-Hijacked-2683573-1.html?pg=2

James Brown laid out clear intent in his will to provide for the education of the poor in Georgia and South Carolina. However, there was a claim against the estate from a woman who claimed to be legally married to Brown after he made the will and their son, who was also born after the will was made.

After prolonged litigation, the State Attorney General stepped in on the basis of representing the rights of the intended charity, settled the matter. Part of the settlement included removal of the current trustees of the charity. They sued and ultimately the state Supreme Court took a look and determined that the AG overstepped his bounds in removing the trustees and settling with the woman and son.  The Supreme Court stated, “The compromise orchestrated by the AG in this case destroys the estate plan Brown had established in favor of an arrangement overseen virtually exclusively by the AG.” 

This case highlights the high value American jurisdictions place on testator intent. Of course, this case also highlights the need to review your estate planning documents as your circumstances change, such as marriage, divorce, and the birth of children.

Holographic Wills are Causing a Headache in the Kinkade Estate

Forbes is reporting on the strange case of the Thomas Kinkade estate.
http://www.forbes.com/sites/trialandheirs/2012/07/09/did-artist-thomas-kinkade-change-his-will-while-drunk/

The ubiquitous artist died in April 2012, leaving behind an estranged wife, girlfriend, and according to the girlfriend, two handwritten (called "holographic") wills. The wills leave extensive gifts to the girlfriend. In California, where the probate has been commenced, the requirement for witnesses is waived if the entire will is handwritten by the testator. In this case, witnesses would have been really handy to let the court know whether Mr. Kinkade had the capacity to execute these wills. A handwriting expert, hired by The Mercury News expressed the opinion that the writer was likely "three sheets to the wind", which casts great doubt whether he had the capacity to execute these documents.

Minnesota, unlike California, does not allow for holographic wills. If Minnesota law governs the execution, it must be witnessed by two people. If you have wishes you want respected at your death, meet with a licensed attorney to ensure it meets the requirements your state has on a will... and don't be three sheet to the wind when you sign it.

Creditor's Claim in Jackson Estate

TMZ is reporting that Michael Jackson's personal assistant is filing a creditor's, claim against the Jackson estate, three years after the singer's death.
http://www.tmz.com/2013/01/06/michael-jackson-assistant-creditors-claim/

In Minnesota, under Minnesota Statute 524.3-803, most creditors' claims are barred, meaning that the creditor is out of luck regardless of how good the claim is, up to one year after the death of the debtor and in many cases earlier.

Seemingly a catch under Minnesota Statute 524.3-104 , is that creditors' claim can not be brought until a personal representative is appointed. That leaves a small or, in some cases, non-existent window to bring a claim. So what's a responsible creditor in Minnesota to do? A creditor can petition the court to open the probate 45 days after the death of the debtor and be named or request another party to be named as a personal representative, under Minnesota Statute 524.3-203. This can be a viable option in extreme cases. In any case, hoping to get paid back three years after the death isn't the best idea, in Minnesota or anywhere else.