New Uniform Probate Code May Provide Good Reason To Revise Your Will Regarding Instructions on Last Wishes
The Uniform Probate Code passed earlier this year provides that executors may carry out written instructions of the decedent relating to the decedent's body, funeral and burial arrangements before they are even appointed by a probate court. This is a significant change from prior law and will result in some changes in practice when the law goes into effect in July of 2011. We have always advised that a will was usually a poor choice of place to outline such instructions because for the most part, no one would get around to sitting down to go over the will until after the funeral. Moreover, there was never any provision in the law to authorize someone who is merely a named but as yet unappointed executor to carry out such instructions. In cases of dispute, the law came down to issues of ownership of the decedent’s remains and standing as heirs and next of kin. From a practical standpoint, prepaid funeral arrangements have always been and will continue to be effective ways to have one’s wishes carried out and serve other purposes as well for Medicaid long term care eligibility. Nevertheless, this new provision does open up an opportunity for those who have unusually specific or controversial plans or whose plans may be expected to run into serious opposition from family members. Such instructions can be inserted into wills written now and will be enforceable if death occurs on or after July 1, 2011.
Supreme Judicial Court of Massachusetts Rules Retirement Does Not End Alimony Obligations
In a case decided on November 9, 2009 the Massachusetts Supreme Judicial Court has held that the voluntary retirement of an individual under an obligation to pay alimony at or after the normal retirement age of 65 does NOT enjoy a rebuttable presumption that the obligation to pay alimony should terminate. Instead, he or she must file a petition for modification and the trial judge is to make a determination based on the same multitude of factors to be considered under the law in deciding an initial alimony award. The Court does go on to state: "We agree that, generally, a supporting spouse's wish to retire at a customary retirement age will justify a reduction of the alimony award, even if the consequence is that the recipient spouse may be unable to sustain a lifestyle equal to that enjoyed during the marriage." In Massachusetts lawyers and litigants alike have been frustrated by the lack of clarity in the law of alimony. Although some probate judges may have their own propensities for applying the statutory factors in a rule of thumb fashion, there is no uniformity throughout the probate and family court department of the trial court. In significant litigated cases the issue can be a vast quagmire even more uncertain of result than the issue of child custody. There have been some efforts to reform the system including calls for a presumption such as was sought in this case. (Pierce v Pierce). The highest Court in the state has now weighed in and supports keeping the decision within the discretion of the trial judges subject to the application of the vague statutory mandates of section 34 of Chapter 208 of our General Laws. It is interesting to note that the following organizations advocated their positions on the issue to the Court by filing amicus briefs: the American Academy of Matrimonial Lawyers, Massachusetts Chapter; the Legal Assistance Corporation of Central Massachusetts; and the Women's Bar Association of Massachusetts and the Women's Bar Foundation of Massachusetts. If there is to be simplicity and uniformity in the law of alimony in Massachusetts similar to the situation obtained with the adoption of child support guidelines, it appears that it is going to take an act of the legislature to get there.
Future of Federal Estate Tax Is Still Up In the Air as One Deadline Approaches
President O'Bama's budget proposal for fiscal year 2010 would have kept the Federal Estate Tax at the 2009 levels under existing law rather than let the tax expire in 2010 as it is scheduled to do at this time. That is the first deadline under the law. That would have meant that the Federal Estate Tax exemption amount would remain at $3.5 Million. The Gift Tax exemption would have remained at $1.0 Million as under current law. Unfortunately this issue has still not been resolved legislatively as all efforts seem to have been focused on health care/insurance reform. This issue has been on and off the radar screen for nearly a decade and it is incredible that it is coming down to the wire getting legislation passed to avoid the complete repeal of the estate tax just for the year 2010. Due to a sunset provision in the 2001 legislation giving rise to this mess, the entire 2001 piece of legislation itself expires at the end of 2010. That is the second deadline. This will mean a return to an estate tax exemption amount of only $1 Million for years 2011 and following. The latest word is that the House is now likely to propose continuing the 2009 status for one year to buy additional time to act . Congress only has two months left to act on this.
Get Ready for the End of Stepped Up Capital Gain Basis at Death, or Not?
Another piece of the 2001 legislation which will go into effect in 2010, unless Congress acts, will eliminate the step up in basis rules under section 1014 of the Internal Revenue Code. Under existing law, any property included in the decedent’s estate for estate tax purposes gets its cost basis for purposes of calculating the capital gain stepped up to the fair market value of the property at the date of death, thereby eliminating much built in capital gain on this property. When originally passed in 2001, the trade off in the law for loss of revenue from the estate tax was to be an increase in income tax on capital gains by eliminating the step up basis provisions of section 1014. On the other hand, that law also provides that the executor an allocate up to $3.0 Million in step up basis to property received by a surviving spouse and up to $1.3 Million in other property. The executor thus can substantially affect the income tax results to the recipients of property and provided that the executor complies with the reporting requirements for the allocation. In addition there is a provision allowing the period of ownership of the decedent of his residence to be tacked on to the period of ownership of the recipient of the residence for purposes of determining eligibility for the $250,000 exclusion of capital gain on a personal residence. This will of course only be of assistance to those who have resided on the property for the required time. These new income tax rules will apply to all estates of persons dying on and after January 1, 2010 regardless of whether they are taxable or not. The allocation of step up basis provisions will actually mean no additional income taxes for estates of under $3.0 Million or ( $4.3 Million where there is a surviving spouse) so long as the estate complies with the reporting and allocation rules.
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