The Key Property Planning Developments of 2021

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With a brand new president and uncertainty nonetheless swirling round COVID-19 and its long-term results, state legislatures have been very busy to say the least. The updates and adjustments have been regular on the trusts-and-estates-related entrance as properly. Right here’s an replace on some key planning developments throughout the nation, by way of Nov. 30, 2021.

Digital Wills and Execution

Even earlier than the pandemic, in as we speak’s technologically pushed society, courts have more and more been referred to as on to adjudicate the validity of digital writings purporting to be wills. Whereas a controversial subject, jurisdictions had begun to advance their legal guidelines to enter the digital world, with COVID-19 accelerating the motion.

Nevada was the primary state to enact laws permitting digital wills in 2001, which was amended in 2017. Indiana handed laws allowing digital wills in 2018. Arizona enacted laws allowing digital wills, efficient on June 30, 2019. Florida enacted an Digital Paperwork Act in June 2019, which grew to become efficient Jan. 1, 2020, and consists of digital wills.

In July 2019, the Uniform Legislation Fee promulgated the Uniform Digital Wills Act (UEWA), which supplies a testator the power to electronically execute a will supplied that the desire exists within the digital equal of textual content (no audio or video wills) and the requisite variety of witnesses are bodily current or, in jurisdictions that can permit it, just about current for the signing of the digital will. The UEWA additionally gives that digital wills will be revoked the identical manner as conventional ones, together with by a subsequent will or codicil or a revocatory act. Moreover, the UEWA requires that the self-proving affidavit be executed similtaneously an digital will so the affidavit is a part of the digital will. An digital will needs to be acknowledged as legitimate if it’s legitimate beneath the regulation of the jurisdiction the place the testator was bodily positioned on the time of signing. The UEWA doesn’t embrace necessities relating to the storage of digital wills, though particular person states can add necessities of their statutes.

Utah was the primary state to enact the UEWA in August 2020. Idaho, Virginia and the District of Columbia launched UEWA laws in 2021. Colorado, North Dakota, Washington, Kansas, Maine, Massachusetts, Missouri, New Jersey, Rhode Island, South Carolina and Vermont additionally enacted some form of digital will laws in 2021.

SALT Deduction Workaround

The Tax Cuts and Jobs Act of 2017 restricted the deduction for state and native taxes (SALT) to $10,000. In response, some high-tax states tried to avoid the SALT cap by creating state-operated charitable funds, basically permitting people to make charitable donations to offset their actual property taxes. The Inner Income Service was fast to quash this workaround. On Nov. 9, 2020, the IRS issued Discover 2020-75, permitting partnerships and S firms (S corps) to elect yearly to pay SALT by way of the entity in alternate for the companions or shareholders receiving a private revenue tax credit score equal to the pass-through entity (PTE) tax, in impact allowing the partnerships and S corps a workaround to the SALT limitation. In essence, as a result of the SALT cap applies solely to people, SALT assessed on the entity stage needs to be absolutely deductible for federal tax functions with out regard to the person SALT cap.

Previous to the IRS steerage, Connecticut and Wisconsin have been the primary states to enact PTE laws efficient for the 2018 tax 12 months, adopted by Louisiana, Oklahoma and Rhode Island enacting laws that was efficient for the 2019 tax 12 months. In response to the IRS steerage, Connecticut and Rhode Island have launched legislative amendments, and Michigan, North Carolina, Ohio and Pennsylvania have launched PTE tax laws.

The states which have not too long ago enacted PTE laws are Alabama, Arizona, Arkansas, California, Colorado, Georgia, Idaho, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon and South Carolina.

Publish-Mortem Proper of Publicity

The fitting of publicity (ROP) is a person’s proper to regulate and revenue from the business use of their title, picture or likeness and to forestall others from exploiting their persona for business achieve. The ROP is ruled by state regulation, both by way of statute or widespread regulation. The autopsy ROP extends the ROP past a person’s lifetime, sometimes prohibiting the unauthorized use of a person’s likeness for business functions for some interval after dying, and permitting an executor or inheritor to implement the protections supplied by regulation.

Within the high-profile 2021 case of Property of Michael J. Jackson, the Tax Court docket instantly addressed the taxability of picture and likeness. The property initially valued Jackson’s picture and likeness at $2,105 on his property tax return, the IRS’ preliminary valuation on audit was about $434 million and, in a surprising victory for the property, the court docket decided the worth was round $4 million. This case, which concerned California’s autopsy ROP statute, put squarely within the highlight the large {dollars} probably at situation in valuing these intangible rights for property tax functions. About half the states within the nation have some type of autopsy ROP. States range by way of what triggers the autopsy ROP.

Property and Present Tax

Regardless of proposals that threatened to scale back the federal exemption quantity, the present federal $11.7 million exemption is presently slated to stay in place till Dec. 31, 2025, when it should revert to $5 million, listed for inflation. There are 13 jurisdictions (Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington and D.C.) that impose an property tax, and 6 (Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania) with an inheritance tax, together with one state (Maryland) that imposes each units of taxes.

 

*The complete size model of this text, “The State of the States: 2021,” seems within the January 2022 situation of Trusts & Estates.

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