DOMA and Estate Tax Planning

On Wednesday June 26th, the United States Supreme Court ruled five to four that the Defense of Marriage Act is unconstitutional.  The definition of marriage will now change to reflect the diversity of human life.  There will also be far reaching affects concerning married couples when they plan their estates.

The first change concerns the tax break afforded to married couples which was the issue in the United States v. Windsor case.  This is defined as the marital deduction which lets spouses that are US citizens transfer assets to each other without paying gift taxes or other federal taxes.  But that was not the case for same sex couples because they could not be married under federal law.  That is because under section three of DOMA, marriage is defined as the "legal union between one man and one woman" while a spouse is defined as a "person of the opposite sex who is a husband or a wife".

In 2009, Edith Windsor lost her spouse of 44 years Thea Spyer.  The couple was married in Canada but it was not recognized by the United States.  When Windsor's inheritance was above the gifting limit of $3.5 million at the 45 percent tax rate, the inheritance was taxed over $350,000.

In New York, Windsor filed a lawsuit seeking a refund of that taxation.  She believed that DOMA's definition of "marriage" and "spouse" violated the Constitution.  Specifically, the Equal Protection clause or 14th amendment provides that "no state shall…deny any person within its jurisdiction the equal protection of the laws".  This opinion was held by lower courts, appeals court and now the Supreme Court of the United States.

Now the marital deduction is available for same-sex couples along with other estate planning benefits.  This includes portability of unused tax exclusions, gift-splitting, and  rollover rights.  If you want more information about these tax planning tools or how to plan your estate, contact an experienced estate planning attorney in Wheaton today.

image courtesy of  Stuart Miles /

Protecting Your Identity Even After Death

The Internet puts knowledge at the tips of your fingers.  But unfortunately it also allows thieves to gain access to Social Security numbers and other private information.  But in recent years, this practice does not only target the living, but the deceased have become the preferred victims.

The thieves gain access to this information from obituary notices and other files online.  Some reports confirmed that for as little as ten dollars, anyone can buy the Social Security number of a departed person.  With that info, they can apply for loans, collect tax refunds, open up credit cards, and other things which require a Social Security number.  Current research suggests that each year 2.5 million deceased individuals have their identities stolen.

There are tips to protect your family as part of your estate plan, which can be provided to the executor of your will.  The first step is to limit the information which is included on the obituary.  Without date of birth, middle name, address, or other information, it will considerably harder to steal the deceased's financial information.

Another piece of advice is to notify credit reporting bureaus, banks, and other government agencies about the passing of a loved one.  Mailing an official death certificate to all financial institutions can stop thieves from receiving new lines of credit of a deceased person.  Another good idea is to cancel the driver’s license and to put the deceased person on the “Do Not Call” list.

It will be important to locate and protect financial documents that are left behind by the deceased.  This can include ID cards in wallets or purses, old hospital records, or bank statements.  Also be aware of information that may be saved on computers before reusing them or getting rid of them.

If you have any other questions about protecting yourself or providing for your family members after you can’t anymore, then please contact an experienced estate planning attorney in Wheaton today.

image courtesy of  digitalart /

Changes to Estate Planning in 2013

At the end of 2012, people were worried that the fiscal cliff would bring a lot of tax increases to investments, income, and will see the end to unemployment benefits extensions for people who have been hit the hardest by the economic downturn.  The reason that the issues have not been rectified is because the US states government has been running a deficit.  A little talked about aspect of the fiscal cliff is the changes to estate tax and how that will affect estate planning in years to come.

Current estate taxes until the end of 2012 take 35 percent of the assets which are passed onto successors.   That is after a limit of $5 million for individuals or $10 million for couples is met as the current exemption.  If Republicans and Democrats are unable to agree to new measures, then that rate will increase up to 55 percent after the first million.  Obama has proposed a tax of 45 percent and a middle ground of a $3.5 million exemption.

At the 11th hour, Republicans and Democrats agreed to a partial fix to the massive tax increases of the New Year.  The estate tax rate will rise from 35 percent as it was in 2012 up to 40 percent in 2013 and on.  That increase is tempered to a degree by allowing the exemptions to rise over the years with inflation.  The exemption level is still $5 million for individuals and $10 million for couples before the increases.

When planning for your estate, it is imperative to know the current tax laws which can decrease your legacy.  The best way to ensure the safety of your assets is by working with a legal professional.  Contact a knowledgeable estate planning attorney in DuPage County who can help you understand the effects of new tax rules.