New Tax Basis Reporting Requirement for Estates

The IRS has just published a new form designed to complicate life for executors. It requires that the executor report the tax basis for inherited assets to the inheritors … and to the IRS. For example, suppose John bought his house for $40,000 thirty years ago. He just died when his house was worth $300,000. The good news is that is children owe no capital gains tax if they turn around and sell it for the $300,000. But that value is now reported to the children and the IRS on the new Form 8971. If the house is later sold for more than the $300,000 then capital gains tax will be owed by the children on the addition profit above the $300,000.

Will My Health Care Documents Work Out Of State?

We often get this question  from clients: “I travel; will my Maryland health care documents work in other states if I am sick or injured?” Several years ago our family had a tragic car accident far from home, so this topic is very real to us.

The simple answer is “probably.”

In Maryland, our advance directives (living wills) and health care powers of attorneys are signed in front of two witnesses. According to a recent survey of state laws, this is adequate in 48 states. The two exceptions are geographically close to us: West Virginia and North Carolina. They require both witnesses AND a Notary block. So if you are a Marylander who spends time in either of these states, it may be wise to update your documents to a format that is both witnessed and notarized. Otherwise, you can be confident that crossing state lines won’t make your health care documents invalid.

Annual LEAP Meeting Wed., Oct. 26

We are very proud of our Lifelong Estate and Asset Protection (“LEAP”) program. Just as we change the oil in our vehicles on a regular schedule, our estate plans are much more likely to work as intended when we keep our education and our documents up to date. This year’s annual educational meeting for those of our clients who are enrolled in the LEAP program will be on Wednesday, October 26th. We will have a 90 minute afternoon session at 1 pm for those who prefer daytime, and an alternate 7 pm session for those who prefer evenings. Both will be at our home office location in Ellicott City. For those who can’t make it either time, we will put the meeting discussion on YouTube. PLEASE call or email to RSVP.

Estate Tax Update

Congress has now passed new estate tax legislation, and the President has signed it. In 2011 and 2012, each citizen will have a $5 million Federal estate tax exemption, and the tax rate on assets beyond that will be 35%. This is a larger exemption and lower rate than was in effect before 2010. Maryland residents should remember, though, that Maryland only has a $1 million exemption, so many Marylanders will owe a state estate tax, but not a Federal estate tax. Though the Maryland calculation is complex, the tax is usually in the area of 10% or so.

Powers Of Attorney

Both Maryland and Virginia have new laws governing powers of attorney. We’ll focus on Maryland because most of our clients are Marylanders. The law took effect on October 1, 2011. The law clearly says that old documents remain in effect. However, new ones will require 2 witnesses and notarization. The law creates several suggested forms. In our opinion, the best thing about the law is that it requires institutions to accept the power of attorney, regardless of its age. Until now, many institutions had rejected documents that were as fresh as one year old!

Brain Activity In Vegetative State?

Are some people who are thought to be in a persistent vegetative state more aware than we realized?

Yes, according to February 3, 2010 article in the Washington Post which referenced a recent article in the New England Journal of Medicine.

Powerful brain scanning techniques allowed the researchers to describe such things as a tennis match or a tour of the person’s home, and to detect brain activity that is consistent with conscious thought.

If you are a client and have trouble finding the article, please contact us and we’ll try to get a copy to you.

Still On The Internet Forever…

The Washington Post featured an article on January 25, 2010 about how to keep your family informed about your web presence, including passwords and emails, if you become sick or pass away. It makes the valid point that for so many of us, a lot of life is online. Years ago, your family could go into your house and find a paper trail, but now that trail may be online.

It mentions a service called Legacy Locker, as well as Bcelebrated.com , DataInherit, Entrustnet, Parting Wishes, VitaLock, My Last Email, IfI Die, and Deathswitch.com. I haven’t tried any of the products or sites so I can’t endorse any particular ones.

This is somewhat personal to me. I try to decide when to take down the Facebook page of my wife, who passed away suddenly in a car accident in summer of 2009. We knew each other’s passwords, but if something had happened to both of us, our children would not have known all of them.

Any of our clients who can’t access the article online can contact us and we’ll try to make it available to you.