January 2011

On December 17, 2010, President Obama signed into law the “Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010” (referred to here as the “Tax Relief Act”).  The Act contains a number of changes to federal income taxes, as well as federal estate, gift, and generation-skipping transfer (“GST”) taxes.  This alert focuses on the changes to the estate, gift and GST taxes.

Prior to the Act, the federal estate and generation-skipping transfer (“GST”) taxes had
been repealed during 2010 by reason of the provisions of the “Economic Growth and Tax Relief Reconciliation Act of 2001” (known as “EGTRRA”), though the gift tax remained.  With that repeal came changes to the federal income tax rules, such that there was to be limited “step-up” in income tax basis upon the death of a taxpayer.  But EGTRRA’s repeal of the federal estate, gift and GST taxes, and corresponding income tax changes, were scheduled to expire on December 31, 2010.  Upon expiration, the federal estate and GST taxes were to return via the revival of pre-EGTRRA law, with a modest exemption from the federal estate and GST tax of $1,000,000 per individual (with the GST tax exemption being adjusted for inflation with 2001 as the base year), and with a top estate, gift and GST tax rate of 55%.

 All of that changed with the enactment of the Tax Relief Act.  The federal estate and GST taxes have been reinstated effective January 1, 2011 (and executors or administrators of estates of decedents dying in 2010 can choose either EGTRRA or the Tax Relief Act) , and the gift tax remains.  However, the estate, gift and GST tax regime under the Tax Relief Act is quite different than it was prior to 2010.  The key components of the new structure are as follows:

• The estate, gift and GST tax rates are reduced to 35%, as compared to a top rate of up to 45% under EGTRRA and 55% under pre-EGTRRA law.

• There is an estate and GST tax exemption amount of $5,000,000 per individual (and up to $10,000,000 for married persons), as compared to $3,5000,000 in 2009 under EGTRRA, and $1,000,000 under pre-EGTRRA law.

• The gift tax exemption is once again “unified” with the estate and GST tax exemption, such that the gift tax exemption is also $5,000,000.  This is in contrast to the $1,000,000 exemption that had been in place under EGTRRA, and now allows for greater gifting of assets during lifetime without incurring gift tax.

• The $5,000,000 estate tax exemption amount is “portable” between spouses, which is in stark contrast to prior law.  Under prior law, the exemption was not portable.  As a result, under prior law, a decedent would need to leave assets in trust for the surviving spouse (a so-called “bypass” or “credit shelter” trust) if he or she wanted to benefit the surviving spouse and get the use of the decedent’s estate tax exemption.  With portability, such trusts are not as necessary to preserve and use a predeceasing spouse’s estate tax exemption, but remain advisable for federal estate tax planning purposes.

• The $5,000,000 GST tax exemption is not portable, so that transfers to trusts or direct transfers to grandchildren will still be necessary to utilize a predeceasing spouse’s GST tax exemption.

• But, all of the foregoing provisions expire on December 31, 2012, and the provisions of EGTRRA return on January 1, 2013.  This would bring a $1,000,000 estate, gift and GST tax exemption, though the GST tax exemption would be adjusted for inflation using 2001 as a base year (to approximately $1,400,000).  It would also bring the return of a top tax estate, gift and GST tax rate of 55%.

Reviewing of Estate Plans –  As a general matter, we believe everyone should consider revisiting their estate plans (i.e., Wills and/or Revocable Trusts) in the face of any new legislation, to be sure that the plan works as originally contemplated.  It is particularly advisable for those whose Wills or Revocable Trusts contain a “formula” division of the estate based on the federal estate tax exemption.  Such formulas are most commonly used with married couples.  Such formulas typically provide that the assets in the predeceasing spouse’s estate, up to the amount of the predeceasing spouse’s estate tax exemption, be directed to a trust for the surviving spouse.  While in most situations it will likely be wise to continue the use of such formula provisions, in certain circumstances it may be preferable for individuals to move to a different format.

Gifting During 2011 and 2012 – The Tax Relief Act opens the door to significant opportunities for making lifetime gifts, at least until December 31, 2012.  With the gift tax exemption being “unified” with the estate and GST tax exemption during 2011 and 2012, individuals may give up to $5,000,000 during lifetime without incurring a gift tax (and thus up to $10,000,000 per married couple).  For those who have a higher net worth, and can afford to relinquish ownership of assets, it is advisable to look at strategies for giving.  In thinking about gifting, it is important to note that the Tax Relief Act does not change the rules relating to valuation discounts, or the use of Grantor Retained Annuity Trusts, which many feared would occur.  Using these strategies in conjunction with the increased gift tax exemption could be extremely valuable.  Since the $5,000,000 gift tax exemption is scheduled to sunset on December 31, 2012, we highly recommend that more affluent individuals strongly consider such strategies during this period.

Charitable Giving – For those who are engaged in charitable giving, the Tax Relief Act includes a provision that had existed during the 2006 through 2009 tax years.  The provision permits the direct rollover of up to $100,000 of IRA funds to a qualified charity during a calendar year, without having to report the amount as a distribution from the IRA.  The Act also provides that gifts made in January of 2011 may be deemed made in 2010, including reducing the 12/31/10 fair market value for determining required minimum distributions. Qualified charities for this purpose are Sec. 501(c)(3) organizations, with the exception of non-operating private foundations and supporting organizations.
 
If you would like to discuss how the new legislation may affect your estate planning, please do not hesitate to contact a member of our Tax & Estates practice group.

On December 17, 2010, President Obama signed into law the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.”   The Act is an expansive tax package that includes an extension of the Bush-era tax cuts through 2012, Federal Estate Tax modifications until the end of 2012, a fix of the alternative minimum tax (AMT) through 2012, a 2% reduction of employee payroll taxes and the self-employment tax for 2011, new incentives to invest in machinery and equipment, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses.

 Joanne M. Murray, Esq., was elected to serve as Secretary of the Bucks County Bar Association at its annual meeting in December.
Murray concentrates her practice in the areas of business law, business transactions, contracts, banking and finance.  She is an active member of the Bucks County Bar Association, serving as Chair of its Women Lawyers Division and on various of its other committees.  She is co-founder and past chair of its Business Law Section.  Murray is also a member of the American Bar Association, Pennsylvania Bar Association, and Philadelphia Bar Association.  She serves on the boards of the Bucks County Symphony and the Bucks County Children’s Museum.

 

 

 

 

 

 

 

 

 

November 11, 2010:  Susan Maslow & Patricia Collins gave a presentation to the Family Practice and Emergency Medical Residents at Aria Health in Langhorne, PA on Consent & Confidentiality Issues that arise in treating minors. 

Susan Maslow, a partner of the Firm, was Moderator of the 2010 Bucks Fever FilmFest's panel discussion regarding "Social Media and the Independent Film Community on October 10, 2010.

The Bucks Fever FilmFest is an annual, juried, short (30 minutes and under) film competition. Winning  films submitted by high school, college and emerging filmmakers are screened at the County Theater in Doylestown, Pa. The FilmFest encourages and supports the growth of the local filmmaking community by providing networking and educational opportunities to area filmmakers and a venue   for the community to view their work.

 Joanne M. Murray, Esq., along with Francis J. Sullivan, Esq., will present at the Bucks County Bar Association Annual Bench Bar Conference this Friday, September 24th.  The program, entitled “Protecting the Attorney Client Privilege or Things that Go Bump in the Night: Metadata and Other Horror Stories,” will give an overview of the ethical duties which attorneys have when sending or receiving electronic documents that may contain metadata, or information beyond what is in the visible text. The Bench Bar Conference is being held this year at Grand Cascades Lodge at Crystal Springs, Hamburg, NJ from September 23 – 25.

 Sue Maslow, a Partner of the Firm, and Associate Tim White published an Article in the April, 2010 issue of "New Jersey Lawyer" Magazine.  The Article, entitled "Enlightened Capitalism & L3Cs" highlights the beneifits of the newly authorized low profit limited liability companies (L3Cs) and advocates for the adoption of L3C entities in New Jersey. 

This article was originally published in the April 2010 issue of "New Jersey Lawyer" Magazine, a publicaiton of the New Jersey State Bar Association, and is reprinted here with permission. 

 

 

To read the full article:  Enlightened Capitalism and L3Cs

Congress Passes "Patient Protection & Affordable Care Act"
 
After much debate and public discussion, Congress passed the "Patient Protection and Affordable Care Act of 2010" on March 23, 2010, with some changes made through the reconciliation process on March 26, 2010.  Businesses and individuals need to be aware of how the Act will affect healthcare coverage.  This Client Alert will focus on some of the more significant changes in the Act.   You are encouraged to consult with your attorney to determine how the Act affects you or your business.  
 
Changes Effective in 2010:  

-Small employers will receive a tax credit for contributions to health insurance for their employees where the employer offers health insurance to its employees and contributes at least half the total premium cost.  The business must have no more than 25 full-time equivalent employees and the average annual full-time wages must be no more than $50,000.  The credit phases out as average wages increase from $25,000 to $50,000 and as the number of full time employees increases from 10 to 25.  The credit can be worth as much as 35% of premiums paid by the employer.  (Note that, in 2014, the credit can be worth as much as 50% of premiums paid by the employer.)  The IRS has stated that the credit is available for premiums paid in 2010, prior to enactment of the Act.  Owners are ignored in both the number of employees and the calculation of the average wage for purposes of this provision.

-Insurance companies can no longer deny coverage based on pre-existing conditions in children.

-Families can include their adult children, up to the time a child attains the age of 27, in their coverage.

-Insurance companies can no longer impose lifetime caps on coverage.

-There are limits on the ability of insurance companies to impose annual caps on coverage.

-Early retiree health benefits:  Effective June 23, 2010 and expiring on January 1, 2014 (or when the $5 billion set aside to cover the cost is depleted), payments will be made to employer-sponsored health plans on behalf of an early retiree.  An early retiree is an individual aged 55 and older who is neither an active employee nor eligible for Medicare.

-Medicare beneficiaries will receive a rebate check to account for the Medicare Part D coverage gap, otherwise known as the "donut hole."

-Tax credits are available for investments in new therapies to prevent, diagnose and treat acute and chronic diseases.

Changes Effective in 2014:

-Insurance Exchanges:  States are required to establish Insurance Exchanges to facilitate the purchase of qualified health plans by individuals and small group markets.  Individuals will be able to enroll in plans through the Insurance Exchange.

-Employers with more than 50 employees will pay penalties if they do not provide coverage.  Employers with less than 50 employees will be exempt from this penalty.

-Insurance companies may no longer deny coverage for pre-existing conditions in adults.

-Insurance companies may no longer impose annual caps on coverage.

-Individuals will be eligible for tax credits for health insurance premiums paid through Insurance Exchanges where the individual's income is above Medicaid eligibility and below four times the federal poverty level, and where they are not eligible for other coverage.  Individuals who do not qualify for this credit may, under certain circumstances, be able to use their employer premium contribution ("vouchers") to obtain insurance through an Insurance Exchange.

-Individuals are required to obtain acceptable health insurance or pay a penalty.  Individuals will not have to pay the penalty if affordable coverage is not available.

-Insurance companies may not impose a waiting period in excess of 90 days.

-Insurance companies may not drop coverage because an individual chose to participate in a clinical trial.

Coming Attractions (changes after 2014):

-States may allow large employers to offer coverage to employees through the Insurance Exchanges.

-Tax on "Cadillac plans":  Where the annual premium exceeds $10,200 for single coverage and $27,500 for family coverage, the Act imposes a 40% tax on insurance companies and plan administrators.

-The Medicare Part D "donut hole" will be eliminated. 

 Antheil Maslow & MacMinn, LLP can provide guidance to our business clients and individual clients with respect to reviewing their  healthcare coverage needs in light of recent legislative changes.  Please contact Patricia Collins, Esquire at (215) 230-7500 to discuss any questions you have regarding the above issue or to schedule an appointment.
 

 

John D. Trainer, Of Counsel for the Firm, has again been tapped to teach a five-week seminar on Estate Planning & Administration at Delaware Valley College’s Center for Learning in Retirement (“CLR”), beginning March 25, 2010 in Doylestown, Pennsylvania.  Trainer’s annual class provides presentations and discussions focusing on what criteria are considered necessary to prepare estate documents, in order to minimize federal and state death taxes.  Also covered are: recent repeal of the Federal Estate Tax and how this will impact estate planning; powers of attorney; the benefits of living wills; and processes involved in the administration of a decedent’s estate.  Partner Michael W. Mills and Paralegal Sheila Kyle, also of Antheil Maslow and MacMinn, LLP, will instruct during the course.

Trainer, Of Counsel for Antheil Maslow & MacMinn, LLP, concentrates his practice in estate planning, estate administration, and elder law, and is a member and past president of the Bucks County Bar Association, a former member of the Disciplinary Board and Pennsylvania Bar Association House of Delegates, and serves on the Bucks County Estate Planning Committee.  He received a Bachelor of Arts from Bucknell University, and his Law Degree from Villanova Law School.

Michael Mills, a member of the American and Pennsylvania Bar Associations, serves as a Partner for Antheil Maslow & MacMinn, LLP, specializing in the areas of taxation, estate planning and administration, estate and trust litigation, family wealth preservation, business succession planning, and the tax aspects of business formation, financing, reorganization, and acquisition transactions.  He received a B.S. in Business & Economics from Lehigh University, and also obtained a J.D. from Rutgers University School of Law, and an LL.M. in Taxation from the New York University School of Law.  Additionally, Mills is a Certified Public Accountant, and is a member of the AICPA and PICPA.

Celebrating over 15 years in business, Antheil Maslow & MacMinn, LLP is a full-service law firm with practice areas in Business & Finance; Death & Serious Injury;  Estates & Trusts; Health Care; Labor & Employment; Litigation; Nonprofits; Real Estate & Land Use; and Tax.  The Firm works with high net worth individuals, small to mid-sized, privately-held companies, nonprofits and heath care organizations in the Greater Philadelphia and New Jersey areas.  Antheil Maslow & MacMinn, LLP is headquartered in Doylestown, Pennsylvania.

February, 2010:  Bill Antheil and Joanne Murray attended the Toy Industry Association annual Toy Fair in NYC.  Toy Fair is the industry’s biggest event, featuring manufacturers, testing companies and other stakeholders in the field of children’s products, as well as educational seminars on toy safety and other topics.

In addition, Joanne Murray participated in the 17th Annual Meeting and Training Symposium of the International Consumer Product Health and Safety Organization (ICPHSO).  The event offered the opportunity to keep up to date on the latest developments in federal and state product safety laws and regulatory activities.  Speakers included CPSC Chair Inez Tenenbaum, CPSC General Counsel Cheryl A. Falvey, Esquire, and other top-level CPSC policy-makers.  Joanne found this Symposium to be a wealth of information which keeps her abreast of the CPSC's new initiatives including, of course, enacting new regulations under the CPSIA.