Lahti, Lahti & O'Neill, P.C. Blog

By Michael T. Lahti

As part of our goal of keeping you informed of breaking news in Estate Planning and Elder Law, Lahti, Lahti & O’Neill, P.C. will be sending you occasional blogs via email.  As we hear of the changes in federal and state laws, we will send you notices of areas of law that we think you may find relevant or interesting.

Below I have provided excerpts from President Obama's fiscal 2016 budget proposal that have to do with estate and gift taxation.  Personally, I feel that considering the turbulence among lawmakers at this point, the chance of these being implemented in their presented form is extremely remote.  Nevertheless, if they were to pass, the proposals would have a profound effect on the taxes some estates would pay.  And, even if the proposals do not go anywhere, these excerpts show us what some lawmakers are thinking at this point.

Modify Estate and Gift Tax Provisions

Restore the estate, gift, and generation-skipping transfer (GST) tax parameters in effect in 2009. -- Under current law, estates, gifts, and GSTs are taxed at a maximum tax rate of 40 percent with a lifetime exclusion of $5 million, indexed for inflation after 2011. The Administration proposes to restore and permanently extend estate, gift, and GST tax parameters as they applied for calendar year 2009. Under those parameters, estates and GSTs would be taxed at a maximum tax rate of 45 percent with a life-time exclusion of $3.5 million. Gifts would be taxed at a maximum tax rate of 45 percent with a lifetime exclusion of $1 million. These parameters would be effective for the estates of decedents dying and transfers made after December 31, 2015, and would not be indexed for inflation.

By Michael T. Lahti 

Comprehensive proposed changes to the Veterans Administration (“VA”) laws were published on January 23, 2015.  The changes would affect how the VA covers net worth, asset transfers and income exclusions for needs-based benefits.   The rules were issue to “maintain the integrity of the pension program and to implement recent statutory changes” and to “respond to recent recommendations made by the Government Accountability Office (GAO), to maintain the integrity of VA’s needs- based benefit programs, and to clarify and address issues necessary for the consistent adjudication of pension and parents’ dependency and indemnity compensation claims.”

By Michael T. Lahti 

As reported in Tax Notes Today, the Internal Revenue Service recently claimed that avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the "Dirty Dozen," for the 2015 filing season.

By Stephen T. O’Neill

Most of Lahti, Lahti & O'Neill, P.C.’s clients are pretty well situated in terms of having saved enough for retirement. But even if you count yourselves as part of that group, you may still be uncertain about the following:

• How to optimize tax-deferred stretch-out of retirement plan distributions for yourself and your loved ones.

• Whether your IRA and Qualified Retirement Plan beneficiary designations are set up in a way that optimally achieves the unfortunately often conflicting goals of income tax deferral and estate tax minimization.
• Whether IRA and Qualified Retirement Plan death benefits should be made payable outright to your beneficiaries, or instead be left in trust for one or more, or perhaps even all of such beneficiaries.

By Michael T. Lahti

Tax Notes Today reported that President Obama has backed off a recent proposal to tax any earnings accumulated on new contributions to section 529 qualified tuition plans.  The controversial proposal was part of the broader tax plan that the White House outlined before Obama delivered his State of the Union address on January 20. Under the president's original plan, several education saving tax incentives, including the very popular 529 plans enacted in 2001 and tax incentives for Coverdell education plans, would have been repealed or redirected into a new, expanded version of the American opportunity tax credit.

This proposal drew swift backlash from lawmakers on both the right and the left, and since, the president has apparently decided to leave the 529 proposal out of his fiscal 2016 budget plan, scheduled for release February 2.  "Given it has become such a distraction, we're not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief that has bipartisan support, as well as the President's broader package of tax relief for child care and working families," The New York Times quoted a White House official as saying on January 27.

By Michael T. Lahti 

As reported in a recent article (the LISI Estate Planning Newsletter #2268 (January 9, 2015 discussing the court decision in Brenner et. al. v. Scott et. al. and Grimsley et. al. v. Scott et. al. (“Brenner/Grimsley”)), Florida became the 35th state plus the District of Columbia in which same-sex marriage is legal. With this victory, many have asked whether this now ends the long battle for same-sex marriage in Florida, and with it all of the complications of being a ‘non-recognition state.’   Unfortunately not.  In actuality, this is only the beginning of the issues that need to be unraveled in Florida subsequent to the decision.  The article raised several issues concerning the effect of retroactivity after the decision.

By Michael T. Lahti

Many clients for many reasons move to Florida.  Some typical reasons include better weather, better taxes, and better asset protection.  We provide counsel to our clients on the right way to do this.  Some clients inquire about having one spouse reside “north,” while the other resides in Florida.  I have always preached caution when clients want to do this, and a recent Rhode Island administrative hearing decision shows why.

By Michael T. Lahti 

While professional athletes are famous for squandering their fortunes after retiring, the sad story of former baseball player Darryl Strawberry stand out as an example of what can happen when estate and financial planning is disregarded.

On January 20, 2015 taxpayers can join in an auction for the "right to receive on-going monthly payments" under the contract Mr. Strawberry signed with the New York Mets in 1985, according to a notice of judicial sale posted online by the IRS and Treasury. The minimum bid will be $550,000.

By Michael T. Lahti, Esq.

Senate Retroactively Renews Tax “Extenders” and Votes in “Able Act”

The Senate, on December 16, 2014, passed legislation to retroactively renew expired tax extenders through the end of 2014, and to authorize disabled individuals to set up section 529 savings accounts for living expenses such as housing and education. The Tax Increase Prevention Act of 2014 (H.R. 5771) now goes to President Obama for his signature. The bill includes the text of the Achieving a Better Life Experience (ABLE) Act. The Achieving a Better Life Experience Act (“ABLE Act”) would allow states to establish and operate an ABLE program under which idividuals who suffered a "significant disability" before the age of 26 would be able to open a section 529 savings account. This will enable them make annual contributions up to the gift tax exclusion limit, which is $14,000 for 2014 but is adjusted for inflation each year.