Massachusetts Estate Planning & Asset Protection Blog

Times Are Changing, So Are Tax Laws

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Tue, Aug 26, 2014

The Tax Game Has Changed | Massachusetts Estate Planning Attorney


Tax planning, estate tax, trust, congress


The Old Ways Don’t Work Anymore

For years, estate planners have done what is considered traditional estate planning. They drafted plans primarily concerned with minimizing future estate tax liability and gave minimal attention to income tax consequences.

This was perfectly fine years ago when the estate tax was much more severe than the potential for income tax. This was attributable to relatively high estate tax rates, low estate tax exemption that was not indexed for inflation, and comparatively low capital gains rates.

However, Congress has tinkered with the tax system in a huge way. Accordingly, the income tax impact of estate planning is taking on greater significance, especially for Massachusetts residents.


The Tax Man Cometh

More attention shall now be directed toward the importance of income tax basis considerations in estate planning due to the narrowing between the estate tax rates and the income tax rates. In fact, in most estates worth less than $5.34 million, estate taxes are no longer an issue. Now, income taxes loom large, primarily because of the lack of attention on the income tax basis (i.e. cost or adjusted basis) of capital assets. Also state estate taxes have become critically important because of the lower $1 million threshold for estate taxes in states like Massachusetts.


Failing to Update Could Cost You

The bad news for most middle-class taxpayers is that for years they've been fed a steady diet of estate tax minimizing wills and trusts. Worse yet, they hang onto outdated documents for many years, thinking they are done with their estate planning and not wanting to be bothered. Sadly, these old documents will no longer serve their intended purpose of estate tax minimization. A major problem is also created when federal estate tax minimization plans, unless they are updated, will cause a completely avoidable Massachusetts estate tax for a married couple. While there may be no federal estate tax savings with these documents, because very few middle-class taxpayers will ever pay estate tax, the documents will increase income taxes for their heirs upon sale of appreciated assets. Moreover in Massachusetts, there may not only be a completely avoidable estate tax on an additional 1 million dollars, but it may also trigger a large, completely avoidable Massachusetts estate tax on the first death.


What to Do About a Completely Avoidable Massachusetts Estate Tax

Bottom line:  the game starts anew. Let's focus on income tax minimization for most taxpayers and forget about estate tax minimization. Unless your estate is worth more than $5.34 million, your biggest risk is Massachusetts estate tax as well as overpaying income taxes due to inattention to income tax basis planning in your wills and trusts.  Don't make that mistake. Review your documents today so that you eliminate these lurking tax problems


At the Estate Planning & Asset Protection Law Center, we provide a unified education and counseling process which uses a unique 19 Point Trust, Estate and Asset Protection Review to help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones, click here for more information. We provide clients with a unique approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.

Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: Nursing Home Costs, Mistakes, Massacusetts Estate Tax, taxes, social security, massachusetts estate planning strategies, trusts, Nursing Home, tax liability, Massachusetts estate tax, tax exemption, transfer of assets, Tax on IRAs, Tax Savings, tax deductions, tax reform, trust, tax

Massachusetts Estate Planning Lawyer | 2012 Gifts to Lower Your Estate Tax?

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Mon, Nov 26, 2012

Do you have extra assests that you will not need during your lifetime? If so, consider gifting this year because if Congress doesn’t act in the lame-duck session, on Jan. 1, the current $5.12 million per-person exclusion from the federal estate and gift tax will automatically dip to $1 million. Also the tax on transfers above that amount will rise from 35% to up to 55%.

If you have real estate, investments or other assets, in excess of what you and your spouse need to support your lifestyle, you may be a ble to lock in an extra $4 million dollar lifetime exclusion by gifting this year. We recently reviewed an article by by Deborah Jacobs that discusses the timely topic , Will The Estate Tax Boomerang As We Go Over The Fiscal Cliff? which can be accessed here at


Tax2013 forbes estate planning

Now that the election is over, many folks are wondering what will happen with the federal estate tax. This is one of the Bush era tax cuts set to expire at the end of this year, contributing to the fiscal cliff that we are hearing so much about lately.

From an estate planning perspective, lifetime gifts have always had an advantage over passing assets when you die. Such gifts leave less in your estate for the government to tax, and if the assets increase in value after you have passed them along, you will not owe gift tax on the appreciation. So for the super rich, a drastic drop in the tax-free amount is a huge loss.

Most of us will never come close to using this exemption, however. One reason is that without incurring gift tax or eating into the lifetime exemption, you can give up to $13,000 each year to as many recipients as you like. Couples can combine this annual exclusion to jointly give $26,000. For example, this year a married couple with a child who is married and has two children could make a joint cash gift of $26,000 to the adult child, the child’s spouse and each grandchild – four people – providing the family with $104,000 a year. Starting in 2013, the annual exclusion for gifts goes up to $14,000 ($28,000 per couple).

Feeling flush? Write two checks: one before Dec. 31 for $13,000, and the other on Jan. 1 for $14,000. Just make sure your year-end check is cashed before Dec. 31, or it won’t count for 2012. “To alleviate this problem, wise donors make year-end gifts (usually, anything after Thanksgiving) by way of certified or cashier’s checks,” says Gerry W. Beyer, a professor at Texas Tech University School of Law.

President Obama’s proposed budget for 2013, issued last February, gives us a clear idea of what he would like to do. And it’s not a pretty picture for rich folks or the wealth management industry. The Green Book, as it is called, downloads here as a pdf. For an analysis of its new targets as well as old ones, see my post, “Obama Budget Takes Aim At Rich Folks And Wealth Advisors.”

So should you rush to give away everything to your kids? Not if you might need those assets yourself. But if you and your spouse are worth more than $5 to $10 million together, you might want to check in with your tax advisors–unless, of course, they’ve already called you.

We developed our Unique Self-Guided 19-Point Trust, Estate, & Asset Protection Legal Guide so you can learn where problems may exist in your planning as well as opportunities for improvement and how to implement a plan to protect your spouse, home, family, and life savings. 

Click Here to Download our Trust, Estate, & Asset Protection  Legal Guide

We encourage you to attend one of our free educational workshops to learn more about our process and what you can do to enhance the security of your spouse, home, life savings and legacy. To register for a seat at an upcoming workshop call (800) 964-4295 (24/7) or register online at


Tags: Estate Planning, estate tax, lawyer, Massachusetts estate tax, assets, tax

The Medicaid Time Bomb | Massachusetts Elder Law Attorney

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Fri, Aug 10, 2012

Today we have some extremely important information for you about what NOT to do when you're trying to get your loved one to qualify for VA benefits.

veterans benefits, VA benefits

There are strict rules that govern whether or not your loved one is eligible, and they're put in place so that someone can't just give away his or her money and automatically qualify. You've got to talk to someone who knows the rules, because they will know what sort of penalties you may incur if you take any such action. Make sure you understand what you're doing before you make any changes to someone's assets. Ordinarily, the VA takes a very dim view of individuals transferring their assets to qualify for this benefit.

Another thing you must know is that giving away cash or other things of value can create terrible problems for senior citizens if or when they later need to apply for Medicaid to assist them with skilled nursing home care. Simply giving away assets can create a long penalty period of ineligibility for Medicaid benefits, which we call the Medicaid Time Bomb.

Don't forget, though - if you decide you need help, nobody can charge you a penny for helping you fill out the VA forms! And as we discussed in an earlier blog, many attorneys (even elder law attorneys!) do not know about the VA's benefits or how to get them. In addition, many attorneys may label themselves as elder law attorneys because they can prepare simple things such as wills - but unless they are working with seniors on both Medicaid and VA benefits every day, they are most likely not versed in the complicated and ever-changing maze of laws that surround the benefits that you or your loved one may need - and often our clients need services much sooner than they think! This is dangerous territory. You need a trustworthy guide who has traveled this path before, and travels it on a regular basis!

Today I will also address a frequently asked question by a veteran's family: "Is there anything we can do to qualify for the VA benefit if the veteran has too many assets?”

This truly is the "million dollar question," and I have to tell you that with one wrong move, danger and disaster lurk close by. A veteran and spouse who might be eligible for $1,949 monthly in aid and attendance benefits or $1,510 in housebound benefits might be considering the idea of gifting excess assets to their children. But there are several questions that you must ask before doing that:

1. What is the tax impact of such gifting?

2. What is the net benefit or loss caused by gifting assets?

3. What is the impact to the one who receives the gift?

4. Does the VA impose a penalty against the veteran if they know that the vet has given away excess assets to qualify?

5. How long does it take to get the VA to approve a claim?

6. How likely is it that the VA will approve the claim?

7. What amount will the VA approve?

8. How soon can the veteran get a check?

A much less obvious but important issue is what I call the "Medicaid Time Bomb." The VA does not have a penalty period of ineligibility for VA benefits, even if the veteran were to give away all of his/her excess assets immediately before filing a claim (not that we would recommend this drastic move).

For more information go to, which contains important information on the “Hidden Benefit” available to veterans and their spouses, and the steps you should be taking right now to find out if your loved one qualifies. For useful information on Alzheimer’s disease including care tips and resources please visit You will be given access to the Complete Alzheimer’s Resource Kit, sold nation wide for $197, absolutely free.

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops. Call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.

Tags: Medicaid, Elder Law, seniors, taxes, veterans benefits, Massachusetts estate tax, VA benefit, gifts, gifting

7 Major Errors In Estate Planning

Posted by Wellesley Estate Planning Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Wed, May 16, 2012

As estate planning and asset protection professional we often times help people and their family by reviewing existing planning.   As discussed in a recent Forbes article, the following is a list of major estate omissions and poor choices we see on a consistent basis.  Estate Planning, Asset Protection, Tax Changes, Estate Tax, Gift TaxIt is crucial to have your planning reviewed and updated consistently.  As a result of changes in the law, in health and in personal circumstance an old estate plan may not be working to accomplish your goals.  To learn more about how the Estate Planning & Asset Protection Law Center of Dennis Sullivan & Associates can help you and your family visit or call (800) 964-4295 (24/7). 

1. Not having a plan

In a sense, everyone does have an estate plan; state law makes this point a certainty.  It simply may not be the plan that you had in mind, or that your family would have preferred.  Not having a will means that at your death the distribution of your assets will be dictated by the inheritance laws of the state where you were domiciled when you died.  These “intestacy laws” vary from state to state but, typically, leave percentages of your assets to various family members.  There is always a remote chance that these laws will accomplish what you would have intended – but not likely. It is highly improbable that, by chance, your dispositive intentions as to who gets what, when and in what form will be fulfilled.  This is true even if your estate is below the tax threshold.  Your will applies to the disposition of your “probate assets” – those assets NOT otherwise following a beneficiary designation or the titling of the asset. Non-probate assets will pass by operation of law or contract. For example, whoever the beneficiary designation may have been when you originally began your 401(k) or IRA at the start of your work life will override either your will or the laws of intestacy.  Even a simple plan that is well thought out and results from the identification of your personal objectives will be much more successful than nothing at all.

2. Online or DIY rather than professionals

There has been a noticeable uptick in the number of people who will look to the Internet to prepare their own wills and trusts. There are dozens upon dozens of websites that will profess to offer you just the right discounted estate planning documents.  Even wealthy clients who stand to benefit the most from expert planning advice have been impacted. Unfortunately, relying on web-based, do it yourself solutions is a recipe for disaster.  Estate planning documents should represent the culmination of a well thought out financial and estate plan. An amalgam of stand-alone documents does not a plan make.  Furthermore, those pesky nuanced requirements (i.e. the “formalities”) for a validly written and executed document will vary from state to state.  Internet sites can provide you with documents but no actual advice that fits you in the context of your specific financial and personal life.  What happens when the laws change? Does the document create an unnecessary tax if the state and federal tax laws diverge substantially?  Also, use an experienced estate attorney.  All wills are perfect documents while they are in your desk drawer.  Only when examined post-mortem are the inadequacies revealed.

3. Failure to Review Beneficiary Designations and Titling of Assets

One of the most basic and most overlooked items on every estate-planning checklist is the review of beneficiary designations and the proper titling of accounts. Unwittingly, many people will often let beneficiary designations and asset titling determine their estate plans for them, contrary to their intentions. Why? Regardless of what your well developed wills and trusts say, your beneficiary designations and the title of your assets will control the ultimate distribution of those assets. Most investment accounts allow for the designation of a beneficiary (IRAs, 401(k)s, company plans, etc.).  More recently, many states have enacted legislation to convert even otherwise ordinary brokerage accounts into accounts with beneficiary designations via Payable/Transfer Upon Death Registrations. All of these beneficiary designations absolutely control who gets the asset at your death.  The titling of assets is a property law concept with estate implications. An account that is held jointly with right of survivorship will pass automatically to the survivor of the joint owners.  Why does this matter?  Assets can flow to the wrong people due to old, wrong and/or out-of-date designations, often with unintended estate and income tax implications.

4. Failure to Consider the Estate and Gift Tax Consequences of Life Insurance

Life insurance proceeds are included in the estate when owned by the insured at death. However, the insured may choose to transfer all incidence of ownership during his/her lifetime thereby avoiding any potential estate tax inclusion. Notwithstanding this accessible planning fix (usually via trust), relinquishing ownership and control is not necessarily an automatic decision. In some instances, large sums of available, tax-advantaged and asset-protected cash has accumulated in permanent life insurance policies (i.e. whole life).  Accordingly, the decision as to how an insurance policy should be owned and, as importantly, controlled, can be complex and is highly individualized. In the right fact patterns, especially when tax is not the only important consideration, credible arguments can be made for both trust ownership and direct ownership. As in most estate planning, it is very much dependent on individual circumstances: family dynamics, net worth, financial / liquidity position, personal preferences and, even, your philosophy on the transfer of assets to future generations.

5. Maximizing annual gifts

Gifting is, probably, the oldest and best way to minimize future estate taxes. The entire universe of exemptions and deductions available for the reduction of estate taxes consist of:  the lifetime exemption ($5.12 million in 2012), the marital deduction (for gifts to citizen spouses during life or at death), the gift and estate tax charitable deduction, annual exclusion gifts ($13,000 in 2012) and direct transfers (not to be treated as gifts) for education (tuition) and medical care (both theoretically unlimited). For the wealthy, maximizing all of these is smart planning. Making annual exclusion gifts every year to as many family members (this includes anyone close to you) as is financially prudent (given your financial situation) is good planning. Over the long run, you can transfer significant sums of money out of your estate along with any appreciation, thereby reducing the tax. Even better planning would be to use your annual exclusion gifts, strategically,  so that each annual gift can be leveraged into larger sums being transferred out of your estate. Strategies such as sales/gifts to defective grantor trusts, the use of LLCs/FLPs in the case of hard to value assets and life insurance are just a few ways to leverage the annual exclusion gifts. In the case of gifting, leverage is a very good thing and strategies that allow you to leverage this scarce resource – tax-free gifts – are crucial to successful estate planning.

6. Failure to Take Advantage of the Estate Tax Exemption in 2012

As every estate and financial planning practitioner will tell you (and probably already has told you), making lifetime gifts is a simple and effective estate tax minimization strategy.  Simply giving away assets at no gift tax cost will allow both the corpus and its appreciation to escape the Federal estate tax on the passing of the donor.  Using the exemption equivalent amount during your life is better than leaving it for use at death.  The urgency is to act now to take advantage of the current estate tax regime that it is set to expire at the end of 2012.  Above and beyond the annual exclusion gift limit of $13,000, the federal applicable exemption amount for transfers during life (gifts) and death (estates) has increased (by indexing) to $5,120,000 per person for 2012 — by far the highest it has ever been since the establishment of the estate tax. Wealthy individuals who have both the means and desire to do so, should plan on making these gifts during 2012.

7. Leaving assets outright to Adult Children

In recent years, there has been a growing opinion among advisors for wealthy families that assets should remain in trust, even for adult children, for as long as possible for the asset protection and other benefits that a trust can offer. For a wealthy couple with adult children, the question may no longer be a one of legal capacity or maturity (although those issues may still remain). The bigger questions may, more accurately, become: who should really benefit from the fruits of my labor and how do I protect those assets from creditors, potential creditors and ex-spouses.  Depending on your perspective, dictating from the grave may or may not be a pejorative expression. For as long as trusts have been in existence (800+ years), the idea of controlling assets for as long as allowed with a set of instructions has been considered acceptable and often sought after planning.  In fact, centuries ago, keeping assets in trust forever was, more likely than not, the goal; hence the genesis of the “rule against perpetuities.” This rule was law in all 50 states to prevent perpetual or “dynasty” trusts. Over the last several years, many states have been modifying this rule to allow for longer trusts or have outright abolished the rule. Whether or not to leave assets in trust for adult children depends on many factors; not the least of which is personal preference. However, in our litigious society of high divorce rates, leaving some assets in trust with fairly liberal access is certainly worth consideration.

For more information on how you can avoid major errors in your estate planning register to attend an educational workshop hosted by our team of estate planning professionals by going to or by calling (800) 964-4295 (24/7).  You can also access several free guides and reports on our website by clicking HERE

We look forward to helping you and your family.


Tags: asset protection, Estate Planning, Estate Planning, GST tax, gift tax, estate tax, estate tax savings, Massacusetts Estate Tax, 401(k), Massachusetts estate tax, Estate Planning Tip, estate, gifts

Avoiding Massachusetts Estate Taxes, NOT Just for the Rich

Posted by Wellesley Estate Planning Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Fri, Aug 19, 2011

When you pass away, who do you want as the primary beneficary of your estate, your loved ones or the government?

Estate Tax Facts

Many people, as you may guess, do not want their life savings and legacy to be swallowed by estate taxes.  What most people are not aware of however, is the fact that if they passed away today their heirs would be forced to pay state and federal estate taxes, even if the deceased is far from what most would consider "wealthy".  They also do not realize that an experienced estate planning attorney can help them AVOID taxes ENTIRELY.  

Massacusetts Estate Tax

Massachusetts taxes every dollar in an estate above the $2 million threshold, recently increased from $1 million.  What Estate Tax this means is in an estate worth $2.5 million dollars, $500,000 will be subject to a Massachusetts estate tax.  Many are concerned with budget cuts and sweeping reform that state legislators will consider dropping the tax exempt amount, thus subjecting more estate to a tax.  within the last 10 years, the federal estate tax exemption, which now stands at $5 million, has been as low as $675,000.  

If your current estate exceeds the state and federal tax exempt amount, without proper planning you can expect to lose 50 cents of every dollar to the government. 

You may be reading this, thinking that your estate is not in jeopardy of being destroyed by taxes because you are well under the exemption amount.  You may think your estate is well under, but there are several catagories of non-obvious wealth you need to include in your estate valuation.  The most common of these are life insurance death benefits and retirement accounts such as 401(k)'s and IRA's.

An Example on the Impact of Estate Taxes

Person A is married, has 2 college age children and belives his estate to be worth $700,000.  Person A failed to take into consideration his IRAs and life insurance policies.  Believing their net worth to be well below the $2 million Person A and his wife executed simple wills with no consideration paid to tax planning. 

Tragedy stirkes and Person A dies.  After his death his wife collects a $2 million life insurance benefit and his $500,000 IRA.  In another tragic turn, Person A's wife dies shortly after him.  Their estate, which they believed to be under the Massachusetts exempt amount, is now worth $3.2 million, leaving $1.2 million subject to estate tax, even if the state and federal thresholds are not lowered.

Avoid Massachusetts Estate Tax

Luckily, many people like Person A and his family can completely avoid paying any estate taxes.  To take steps to protect your life savings from the reach of state and federal estate taxes, register online to attend a free educational workshop hosted by Dennis B. Sullivan, Esq, CPA, LLM or by calling 800-964-4295 (24 hours a day).  You can also check out Free Elder Law Guides developed by the team of professional at Dennis Sullivan & Associates.  By planning now you can save you and your family the stress of having to worry about the future. 

Tags: Estate Planning, Estate Planning, Baby Boomers, 2011, elder care, budget cuts, Debt Ceiling, estate tax, Massacusetts Estate Tax, taxes, trusts, tax liability, Massachusetts estate tax, tax exemption, will, Tax Savings, legacy, tax deductions, tax reform, estate reduction, estate

Estate Planning and A Unique Opportunity for Small Business Owners

Posted by Dennis Sullivan & Associates on Fri, Apr 22, 2011

The new estate tax law, in effect this year and next, offers a unique opportunity to family business owners who want to pass their business on to the next generation. As a recent Wall Street Journal Article points out, taking advantage of the low gift tax levels (while you still can) could save your family business a hefty amount in potential estate taxes. But transferring ownership can raise complicated succession and estate planning issues that you should consider carefully before giving away any stock.

The recent tax law changes brought the gift tax threshold up to $5 million for an individual and to $10 million for couples in 2011 and 2012. Yes, that means you can give away that much now, without incurring a penny in gift tax. But, since this law is in effect for only two years, you’ll have a narrow window of opportunity and difficult decisions to make quickly.

While you can transfer ownership without necessarily giving up control, you will have to make some difficult decisions, including: who will eventually lead the business, how to treat non-business family members fairly, and how to fund your own retirement.

The answers to those questions will help determine which estate planning techniques make the most sense for your family, and your family business. Whatever your ultimate goals, now is the time to start exploring your options. There are large sums of money at stake, and only a short time to seize this opportunity.

To learn more about business succession issues, register online for one of our free Trust, Estate & Asset Protection workshop.  While you’re there, be sure to  watch our estate planning video series.


Tags: asset protection, Estate Planning, estate tax, Massachusetts estate tax

Advice to Baby Boomers on Their $8.4 Trillion Inheritence

Posted by Dennis Sullivan & Associates on Mon, Apr 04, 2011

According to recent research from The Center for Retirement Research at Boston College, 70% of baby-boomer households will receive inheritances worth a total of $8.4 Trillion. With an average of $300,000 for most inheriting households, and an average of $1.5 million for the wealthiest inheritors, the better part of a generation is expected to see a nice bump in their assets. The question, then, is what to do about it.

Ashlea Ebeling of Forbes recently approached the topic with a number of considerations, from warnings to ideas.

Consider Keeping it Separate. The first thing to take stock of is how your state handles inheritances. Most states consider an inheritance the separate property of the person who received it, as long as they keep it separate. So think carefully before you put the money into a joint account – or use it to make major improvements on a jointly owned home, for example. Keeping an inheritance separate can provide a level of asset protection -- by keeping it eparate you also shield it from loss due to your spouse’s debts and/or lawsuits.

Special Treatment for Retirement Assets. If the inheritance is an IRA then you can use it to stretch out the withdrawals over your own life expectancy and in this way maximize the tax benefit on those funds. Don’t try to take the money out and redeposit in your own IRA. That’s not allowed. Instead, the IRA should be renamed. If you want to move it from one custodian to another, do so in a “trustee-to-trustee” transfer. In certain circumstances, you may even want to “disclaim” the account and give it to your children if you don’t need it.

Review Your Own Estate Plan. Whatever the inheritance, it is now part of your estate. A sizable inheritance could push you into estate tax territory. Even if you aren’t in danger of estate taxes, you will still want to review your current plan to account for the inheritance assets.

In the final analysis, receipt of an inheritance is one of those lifetime events that calls for proper assessment and planning. You can learn more about the estate plan review process on our website. You also can learn more by attending a free Trust, Estate and Asset Protection workshop.

Tags: asset protection, Estate Planning, Estate Planning, Baby Boomers, Massacusetts Estate Tax, Massachusetts estate tax, Metro West Estate Plan

Obama's Estate Tax Budget Proposals

Posted by Dennis Sullivan & Associates on Tue, Mar 22, 2011


We all should realize that the federal estate tax is in a state of flux. The current rules, with the generous $5 million individual exemption ($10 million for a couple), expire at the end of 2012. Last month, the Treasury Department released the “General Explanations of the Administration's Fiscal Year 2012 Revenue Proposals,” also known as the “Greenbook.” The Greenbook reveals that the Obama Administration intends to make some big estate tax changes.

  • Return the Gift, Estate, and Generation-Skipping Transfer (GST) taxes to 2009 levels. The Greenbook proposes that in 2013 the exemptions return to $3.5 million for the estate tax, $1 million for the gift tax, and slightly over $1 million (reflecting inflation adjustments since 1999) for the generation skipping transfer (“GST”) tax.
  • Make portability permanent. Portability is the ability of the first spouse’s estate exemptions to be passed on to the surviving spouse, essentially doubling the estate exemptions for couples while cutting down on the stress of so many trusts.
  • Limitations on the use of valuation discounts. Although the IRS has long had defenses in place against attempts to reduce the value of the taxable portion of an estate, Chapter 14 of the tax code, the effectiveness of these defenses have been challenged in a number of ways and part of the proposal is to strengthen Chapter 14 by significantly hampering any effort to receive a valuation discount.
  • Impose a ten-year minimum term on GRATs. Grantor retained annuity trusts (“GRATs”) have become extremely popular estate planning vehicles over the past several years.  Among other reasons, they are relatively low cost to implement, are fairly low risk, and can transfer significant amounts of wealth to lower generations with virtually no estate or gift tax, often without using any of the transferor’s exemption. One requirement for a successful GRAT, however, is that the grantor must survive the term, otherwise the trust “fails.” To minimize risk, estate lawyers usually use a series of short-term (e.g., three-year) GRATs in their planning. The proposal is to require a term of no less than 10 years. This proposal would apply to GRATs created after the date of enactment, and has been made several times in the past.
  • Limiting the capacity of Dynasty Trusts. Under current law in many states, a Dynasty Trust can be established to transfer wealth across generations and exist for that purpose “in perpetuity.” The Obama proposal would provide that, on the 90th anniversary of the creation of a trust, the Generation-Skipping Tax (GST) exclusion allotted to the trust would terminate. This proposal would apply to trusts created after enactment, and to the portion of a pre-existing trust attributable to additions made after the date.


Many of these proposals have been made before, and most arelikely to face stiff opposition.

In addition, Massachusetts will assess a state tax on estates over $1 million. Without proper planning a married couple will have only $1 million between them.  See a lawer to be sure that you and your spouse get the $2 million exemption available to you.

Also, Massachusetts clients and taxpayers need to watch out for estate plans created based on maximum federal applicable exclusion planning, common for many estate plans prior to 2003. Now with the $5 million federal exempt amount, there could be a COMPLETELY AVOIDABLE Massachusetts estate tax triggered at the first death. The cost to your spouse and family could be as much as $400,000 in unnecessary estate taxes.

The point of all of this is that the “death tax” is not dead. The current law, with its generous exemptions, could be the calm before the storm. A wise planner would move sooner rather than later to preserve estate assets for future generations.

You can learn more about comprehensive estate planning by attending one of our Trust, Estate & Asset Protection Workshops and also by downloading our Unique Self-Guided 19-Point Trust, Estate & Asset Protection Legal Guide on our website.  Once you become a client, we have a Lifetime Protection Program to ensure that your planning stays up to date with the changes in law, fincial, health and family situations.


Tags: Estate Planning, Estate Planning, GST tax, gift tax, estate tax, Massacusetts Estate Tax, massachusetts estate planning strategies, Massachusetts estate tax, tax exemption, New estate tax law, GRATs, IRS, gifts

Reasons to Consider Keeping your Life Insurance

Posted by Dennis Sullivan & Associates on Mon, Mar 21, 2011

Purchasing life insurance in an amount sufficient to cover an estate tax liability has long been a staple of estate planning strategy. But with so many escaping federal estate taxes under the new tax law, families are starting to re-examine their need for life insurance obtained to help heirs pay the tax.

Faced with continuing premium payments, many are asking whether they need to keep the insurance. You should think twice, though (and get some professional advice) before giving up your policy. The Wall Street Journal recently advised readers to consider keeping life insurance.

First – realize that the “death tax” is not dead. We are seeing an unexpectedly generous exemption this year and next ($5 million per individual, $10 million for a married couple), but don’t forget that the exemption was a mere $675,000 in 2001. As government coffers continue to run dry, a “more robust” estate tax could be very tempting way to raise funds. At any rate, current law expires at the end of 2012, and we don’t know yet what happens next. If you relinquish a policy now, you may find it more expensive – or even impossible – to replace it later. Remember, life insurance is purchased with your good health, cash just pays the premiums.

Second – that life insurance policy could solve a number of other thorny problems, regardless the state of the estate tax. If you have spent more of your savings and investments, life insurance can provide the inheritance you had hoped for your heirs. Life insurance also can help equalize an estate – especially for business owners who have some children participating in the family business and some who do not.

If you’re having trouble keeping up with those premiums, there may be cost-effective options that still allow you to keep some coverage. If you have a whole or universal life policy, you can ask the insurer to reduce the death benefit to a level at which you can afford to make payments. You also may ask your heirs to cover all or a portion of the costs. As long as the policy is owned by a trust for their benefit, there are ways to do this with no gift-tax consequences.

A sale or surrender of your policy has tax consequences, so be sure to consult an advisor before making any decisions about your policy.

For more information on estate planning with life insurance, check out our website.

Tags: estate tax, Massacusetts Estate Tax, massachusetts estate planning strategies, Massachusetts estate tax, New estate tax law, life insurance

How To Craft, Revise and Maintain A Well-Thought-Out Estate Plan

Posted by Dennis Sullivan & Associates on Wed, Mar 09, 2011

"Because there is no April 15th for Estate Planning and Asset Protection, many people try to procrastinate or avoid it.  However, there can be grave consequences to neglecting it." --Dennis Sullivan, Esq. CPA, LLM

It certainly is understandable that no one enjoys a conversation about death – especially their own! And, with the estate tax exemption now set at $5 million for an individual and $10 million for a couple, many people may believe they have no reason to consult an attorney about their estate planning.

Massachusetts will assess a tax on estates over $1 million. Without proper planning a married couple will have only $1 million between them.  See a lawer to be sure that you and your spouse get the $2 million exemption available to you.

Also, Massachusetts clients and taxpayers need to watch out for estate plans created based on maximum federal applicable exclusion planning, common for many estate plans prior to 2003. Now with the $5 million federal exempt amount, there could be a COMPLETELY AVOIDABLE Massachusetts estate tax triggered at the first death. The cost to your spouse and family could be as much as $400,000 in unnecessary estate taxes.

But avoiding the topic of estate planning can mean unnecessary expense, confusion and conflict.  Why do you need an estate plan? A comprehensive estate plan ensures that your estate is distributed according to your wishes, provides protection for you in the event of your own disability, and allows you to plan for your family. 

Can I write my own will? You certainly can; however, improperly drafted or last-minute,wills frequently are contested and invalidated in court. Massachusetts does NOT recognize handwritten wills. If you don’t know what you’re doing, the outcome could be much different than you expect. 

What should every estate plan have?  The list should include a will, powers of attorney for financial affairs and for health care, and a living will along with appropriate trusts.  Trusts not only reduce estate taxes, but they also help their heirs to avoid probate. Trusts also can shield assets from nursing home and medical expenses, loss due to unforeseen circumstances, such as bankruptcy, divorce or lawsuits of your heirs.

Two common mistakes people make in their estate planning: failure to plan for their personal effects and failure to review and update their plans over time. You can learn more about comprehensive estate planning by attending one of our Trust, Estate & Asset Protection Workshops and also by downloading our Unique Self-Guided 19-Point Trust, Estate & Asset Protection Legal Guide on our website.  Once you become a client, we have a Lifetime Protection Program to ensure that your planning stays up to date with the changes in law, fincial, health and family situations.

Tags: Protective Trusts, Estate Planning, Estate Planning, Mistakes, HIPAA, health care proxy, estate tax, estate tax savings, Massacusetts Estate Tax, living will, massachusetts estate planning strategies, trusts, power of attorney, Massachusetts estate tax, will, New estate tax law

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