We don’t have a full bill yet, but a summary of Obama’s tax compromise has been released.   It includes several interesting items that have not received much media coverage:

1. Although Democratic opposition to the Estate Tax provisions of a $5 million exemption per person has been trumpeted, a close reading reveals a married couple has a $10 million exemption that can be moved around after the death of one spouse so that any unused portion can be used by the second to die.
2. Perhaps more importantly, the proposal adopts the Unified approach to combining lifetime gifts with property passing at death.  This approach was abandoned by the 2001 Tax Act.  From the released summary, it is not emphatically clear, however the implication could be that whereas lifetime gifts until now had a $1 million exemption from tax; under this proposal that could rise to $5 million per person leaving tax to be paid upon the person’s death.  If this proposal is adopted and if this reading of the summary holds, there will be significant planning regarding “freezing” asset values during lifetime by gifting to avoid taxation at death.
3. A lesser revelation is the proposal’s retroactive date for the new estate tax rules being January 1st of this year, 2010.  An election can be made to be taxed under the 2010 prevailing system of no estate tax and consequently no step up in basis.

Whether or not these provisions will survive the review of the House and Senate, to say nothing of the President’s pen, remains to be seen and much can change before anything becomes law.  These provisions would have profound implications on estate planning if they were enacted.

For more on this or other estate planning concerns contact the Chicago estate lawyers at Horowitz & Weinstein.

Legal Disclaimer.

A trip to an estate planner is almost certain to involve a series of questions, information the planner needs to determine how best to ensure your wishes are carried out.  For sake of convenience these questions often take the form of a questionnaire.  Most of these forms are pretty much identical, with the same basic questions asked.  They’ll include all the pertinent personal information: date of birth, social security number, children, spouse information, etc.  And they’ll also ask about your financial position.

All of this is very important information, of course, but there are considerations to estate planning that go beyond these basics that can be very illuminating.  In a series of posts to appear over the coming weeks, this blog will present a few of these estate questions you might not have thought of before.

The basics are important.  Your financials, your personal information, and your family are all integral parts of any estate plan.  Here’s one question, however, that might not immediately come to mind.

Question: “What does ‘wealthy’ mean to you?”

The textbook definition of wealth, especially within the context of estate planning, is something you can put a dollar sign in front of.  And this definition may suffice for some, but for others, certain considerations may trump monetary affluence.  Perhaps you consider influence or effect of money to be worth more than its numerical value, so your estate planning might prioritize charitable interests over avoiding taxes.

Next time we’ll look at values and goals.

For more on estate planning, contact the Chicago estate attorneys at Horowitz & Weinstein.

Legal Disclaimer.

Circuit Court of Cook County Chief Judge Timothy C. Evans has announced the creation of a new division within the Circuit Court of Cook County to be focused on elder law cases.  The announcement came along with a number of appointments and replacements.  How exactly this will affect current and future elder law cases remains to be seen.

For more information on elder law, estate planning, or probate matters, contact the Chicago attorneys at Horowitz & Weinstein.

Legal Disclaimer.

The Illinois Religious  Freedom Protection and Civil Unions Act has passed both houses of the General Assembly and has now gone to Governor Quinn who is expected to sign it into law.  The act will allow both same and opposite sex couples to apply for civil unions. A civil union will grant couples many but not all the rights of a marriage.

The act says that members of a civil union will, legally, acquire the status of spouse in the eyes of the State of Illinois. This means a couple with a civil union will have hospital visitation rights, the right to make medical decisions for their partners and the right to sue for wrongful death as a spouse among others.  In addition, members of a civil union will be able to inherit from their partner in cases of intestacy and to receive state pension benefits.

Essentially, to the State a couple with a civil union will not be different from a couple with a marriage.  The Defense of Marriage Act, however, means the Federal government will not recognize the union and thus a couple with a civil union but without a marriage will not receive Federal benefits such as the right to inherit from each other without paying estate tax, or to jointly file Federal tax returns.  In addition, unlike a marriage, other states are not required to recognize an Illinois civil union.

The Illinois act also specifies that a couple that has a civil union, a marriage, or a similar arrangement from another state, will be treated in Illinois as if they had a civil union.  So if a same sex couple got married in Iowa, where same sex marriage is legal, in Illinois that marriage would be treated as a civil union.

Civil unions will otherwise operate very similarly to marriages.  To enter into a civil union both individuals must be over the age of eighteen, not related, and any prior marriages or civil unions must be dissolved.  A civil union can be performed/certified by the same public officials and religious who have the power to solemnize marriages, such as judges or priests.  Civil unions will also require a form from the Department of Public Health and a fee, neither of which have been established yet.

For more information on civil unions and estate planning, or for other estate planning concerns, contact the Chicago estate and probate attorneys at Horowitz & Weinstein.

Legal Disclaimer.

Income tax is getting most of the buzz as the current lame duck session of Congress takes up the soon to expire Bush tax cuts, but the future of the estate tax is also up in the air at the moment.

The estate tax has changed a lot over the last few years.  Beginning in 2001, under provisions of the Economic Growth and Tax Relief Reconciliation act, one of the two acts that together comprise the Bush tax cuts, the estate tax rate gradually declined and the universal exemption gradually increased.  In 2009 the estate tax rate was 45% and the exemption was $3.5 million.  In 2010, however, the estate tax completely disappeared, obeying the plan laid out in the Bush tax cuts.

By the laws currently on the books, the Bush tax cuts will expire at the end of 2010, and the tax laws will be determined as if the 2001 and 2003 Tax Acts had never existed. This means that if legislation is not passed that says otherwise, effective January 1, 2011, the estate tax will return at a rate of 55% in the highest bracket and with an exemption amount of $1 million.

In the Senate, three factions have emerged with three different approaches to estate tax.  None of the factions has the 60 votes likely needed to enact their proposal.  The first faction, most publicly represented by Senator Jim DeMint (R-SC) advocates total repeal of the estate tax, a general continuation of the current system.  A second group, headed by Senate Majority Leader Harry Reid (D-NV) proposes a top rate of 45% with a $3.5 million exemption.  The final group, a middle-of-the-road-option between Reid and DeMint, proposes a 35% top rate and a $5 million exemption.

Estate tax is a notoriously difficult issue for opposing sides to find common ground.  Opponents see it as an unfair tax that destroys small businesses and family farms, whereas its defenders say it helps fight income inequality.  Both sides tend to hold passionately to their positions and consensus is a word rarely heard whenever estate tax is the topic of conversation.

For more information on the uncertain future of the estate tax, or for other estate planning concerns, contact the Chicago attorneys of Horowitz & Weinstein.

Legal Disclaimer.

Welcome to the launch of the Chicago Illinois Estate planning legal blog. Brought to you by the Estate lawyers at the Chicago law firm of Horowitz and Weinstein.