Tag: #estateplanningNY

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Chadwick Boseman

Lack of Estate Planning Turns a Private Life into Public News: Chadwick Boseman

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Chadwick Boseman, the actor known for performances in “Black Panther” and “Ma Rainey’s Black Bottom” was only 43 when he died. Despite knowing he was seriously ill from colon cancer, he did not have a will, so Boseman’s family was tasked with managing his estate in a public manner, the direct opposite of how he lived his life.

The estate had significant expenses and it wasn’t too hard for reporters to find the details because there was no will. Court documents obtained by several news sources reveal the estate was initially valued at $3.8 million before taxes, court fees and funeral expenses. The final amount to be divided between his widow and is parents is $2.5 million.

In October 2020, his widow Taylor Simone Ledward petitioned the court to make her an administrator with limited authority of his estate, and then filed a probate case in Los Angeles.

Chadwick did not have an estate plan with trusts that could have provided the family with privacy, reporters and others were able to access court papers to learn details like the exact amount and breakdown spent on his funeral, moneys used to purchase burial spaces for other family members and the court’s determination on several private matters.

You don’t have to be a celebrity for details of your life to be made public. All probate and administration proceedings are public records, and copies of these documents can be obtained by anyone who shows up at the court. Creditors, family members and anyone who wants to pry into the details of your life can obtain these documents. Having an estate plan with the methods and tools best suited for your estate can keep your life private and minimize estate expenses.

But another lesson from the passing of Chadwick Boseman is that families do have the ability—even celebrity families—to treat each other with kindness and respect. His widow asked the court to divide his estate evenly between herself and Boseman’s parents. Most families facing an estate without a will end up in court, battling for an inheritance. Sadly, this is the exception and not the rule with estates. Having an estate plan can prevent the likelihood of your family facing this situation.

 

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When Can You Use E-Signatures on IRS Forms?

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In the past two years, many traditional processes in the world of taxes and the law have been transformed by necessity, using digital signatures, or e-signatures, for many financial and legal documents. With many offices and courts re-opening and returning to pre-COVID processes, the IRS has recently reported that it will continue to allow taxpayers and representatives to use e-signatures on certain paper forms not eligible for electronic filing electronically.

These forms where an e-signature is allowed must be signed and postmarked from August 28, 2020, to October 31, 2023.

E-signatures gained acceptance to minimize the in-person contact between taxpayers and their representatives. The IRS will continue to accept a wide range of e-signatures, including:

  • A typed name on a signature block;
  • A scanned image of a handwritten signature with an attachment to an electronic record;
  • A handwritten signature from an electronic signature pad;
  • A handwritten signature, mark, or command input on a display screen using a digital stylus;
  • A signature created by a third party software.

Images of signatures will also be accepted formats, including tif, jpg, pdf, jpeg, Microsoft Office Suite, or Zip files.

It is still considered a temporary situation (however, many states have made e-signing permanent) and applies only to specific forms that require paper filing. Among the common returns that allow for e-signing are:

  • Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return,
  • Form 706-A, U.S. Additional Estate Tax Return,
  • Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions,
  • Form 706-GS(D-1), Notification of Distribution From a Generation-Skipping Trust,
  • Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations,
  • Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts,
  • Form 706 Schedule R-1, Generation Skipping Transfer Tax,
  • Form 706-NA, U.S. Estate (and Generation Skipping Transfer) Tax Return,
  • Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return,
  • Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship,
  • Form 1128, Application to Adopt, Change or Retain a Tax Year,
  • Form 2678, Employer/Payer Appointment of Agent,
  • Form 3115, Application for Change in Accounting Method,
  • Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts,
  • Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner,
  • Form 4421, Declaration – Executor’s Commissions and Attorney’s Fees,
  • Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes,
  • Form 8038-GC, Information Return for Small Tax-Exempt Governmental Bond Issues, Leases, and Installment Sales,
  • Form 8283, Noncash Charitable Contributions,
  • Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms,
  • Form 8802, Application for U.S. Residency Certification,
  • Form 8832, Entity Classification Election,
  • Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent, and
  • Tax Elections per Internal Revenue Code Section 83(b).

There are other esoteric forms eligible for electronic signature. Most income tax returns (personal (Form 1040), businesses (Forms 1120 and 1065), and trusts and estates (Form 1041)) cannot use electronic signatures. Documents not eligible must still have handwritten signatures unless the form is electronically signed.

 

Reference: Wolters Kluwer (March 8, 2020) “Taxpayers May Use E-Signatures on Certain Paper-Filed Forms”

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Should You Change Your Estate Plan Because of the SECURE Act?

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Here’s another reason estate planning is not a one-and-done event. For most people, life is constantly changing. But the laws around estate and tax planning are also changing. Starting in 2022, a new rule, part of the SECURE Act of 2019, may affect estate plans from 2022, especially for those beneficiaries of an IRA or qualified plan, such as a 401(k).

IRAs are a significant source of America’s retirement wealth, and it was just a matter of time before Congress figured out a way to hasten their distribution to collect taxes on this asset. As these changes continue to develop, the accelerating taxation of IRAs becomes more attractive to Congress as a source of revenue.

The Setting Every Community Up for Retirement Enhancement Act, a/k/a the “SECURE Act,” became law on January 1, 2020. The intent was to boost retirement options for employees and make it easier for employers to offer retirement plans to their employees. The new law also changed how estates work, and both estate planning attorneys and our clients need to address these changes in estate plans. I’ve written about this in the past. New facets of the law continue to evolve, and this one may be crucial to many of you.

The SECURE Act ended the use of a “Stretch IRA.” The Stretch IRS allowed beneficiaries to take distributions from an inherited IRA based on their life expectancy. It allowed the bulk of the IRA funds to remain in the tax-deferred retirement account for decades.

After the SECURE Act, heirs must empty IRA accounts within ten (10) years of the original owner’s death. The initial universal understanding of the SECURE Act was a beneficiary could withdraw any amount during the ten years or wait until Year 10 and withdraw the entire balance. In either case, the beneficiary paid income tax on any distribution. Two weeks ago, the IRS issued temporary regulations that let us know everything we thought we knew was wrong.

If the IRA owner dies before age 72, the age Required Minimum Distributions (“RMD”) must begin, the ten (10) year distribution rule remains the same. However, had the account owner already turned 72, the beneficiary must take an RMD as if the account holder was still living and empty the account balance by the 10th year.

Our estate planning law firm is now working with many clients who came to us with large IRAs and are concerned about its impact on their heirs. Their tax picture has changed, and it may have changed for you.

We can no longer push back the taxes due on the inherited IRA for ten years if the IRA owner lives after 72. Children and grandchildren will face a significant income tax liability. Our job is to help clients plan properly to mitigate these results.

One way is to convert the IRA to a Roth IRA. With a Roth IRA, the account holder pays the income tax during conversion, so beneficiaries need not worry about the income tax liability of their inheritance. There are other benefits to a Roth conversion. The IRA owner need not take RMDs during their lifetime. Also, if the estate of the IRA owner is taxable, payment of income tax by the IRA owner reduces their taxable estate.

There are other ways to address this change, including the use of trusts. If you have an IRA and anticipate passing it down to the next generation, we invite you to contact our office to discuss how to protect your heirs from these changes and align it with your estate plan.

This new IRS interpretation of the SECURE Act significantly affects how inherited IRAs work. If the person who dies is already 72, the RMD will now apply to the inherited account for ten years. After the ten years have passed, the remaining balance of the IRA and pay the income tax.

Several other options can reduce the estate tax, income tax, or both. Don’t hesitate to contact our office if you wish to explore your options.

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