Boston Estate Tax Lawyer | Tax Planning, Wills, Trusts

“In this world nothing can be said to be certain, except death and taxes”

- Benjamin Franklin 1789

Generally, upon death, there is an estate that may be large enough to have exposure to the federal and/or state systems of estate (as opposed to income) taxation. A huge industry has grown up around the notion of “tax planning” for estates. More often than not, this planning involves creating “shelter” from estate taxes to the extent of the credit available to all estates. The shelter is created by setting up a trust for the benefit of a surviving spouse, funding it with money or property titled in the deceased spouse at death, paying out all income from the trust fund so set up during the life of the surviving spouse, and, upon the death of the surviving spouse, paying the principal to the beneficiaries of the trust, who are, more often than not, but need not be, the children of the spouses who are now (upon distribution) both deceased. Of course, estate planning is much more than this. It is a confirmation of the certainty that we shall all leave this life and will not be taking anything with us. So, if there is money that can be left to loved ones, where it might otherwise be seen as passing to the government, it is appropriate and perfectly legal to plan for the receipt of wealth passing at death by loved ones, rather than by the government, to the extent possible.

Schedule a consultation: Contact Boston Estate Tax Lawyer Theodore L. Craft.

The Internal Revenue Code does not provide for corrections to estate plans (wills and trusts) after death. A will “speaks at death” and cannot be altered after death. A trust created during and for the benefit of its creator during that person’s lifetime, over which its creator continues to maintain “strings” of control over property in the trust, becomes irrevocable at death. Its provisions carry on in effect after the event of death.

Testamentary Capacity to Create a Will

A person who makes a will must have “testamentary capacity.” Awareness is the ordinary meaning of capacity, but an orderly desire as to the disposition of property known to the “testator” is the operative principle upon which a legally sound will is based. A person may be under an undue influence in making a will. Often, dissatisfied beneficiaries (heirs) resort to litigation to attempt to overturn a decedent’s testamentary plan.

Attorney-Client Privilege During Will Drafting and Execution

Typically, no privilege attaches to communications between lawyer and client in the drafting and execution of a will, so the testator’s desires can often be introduced through the estate planning lawyer for the decedent in any trial context. This is so because courts generally allow into evidence declarations and events leading up to the execution of the will in order to best determine the intent of the will’s maker.

Gross Estate • Federal Estate Taxation • Massachusetts Estate Taxation

An estate is taxed at the federal and state level over certain threshold valuation amounts includable in the “gross estate.” Any trust created during the lifetime of a “settlor” (a person making a trust) which is changeable in any way by the settlor during his or her lifetime causes property in the trust to become included in the estate of the decedent for tax purposes. Any trust created for the lifetime of an individual which is revocable by the individual during his or her lifetime, in other words, is included in that individual’s gross estate for tax purposes. Such a trust becomes irrevocable at death and its provisions carry on to beneficiaries under the trust.

The Drafting of Proper Documents is Essential to any Estate Plan

It is virtually impossible to have a working estate plan without first having a tax professional with a working knowledge of the complex statutory interrelationships regarding estate taxation to draft its documents. The management, preservation and distribution of wealth is the primary goal in planning for a person’s estate to pass at death in the manner consistent with the person’s objectives.

Federal Estate Tax Threshold. If an estate exceeds the “threshold” value for federal estate tax purposes, a federal estate tax is imposed on the event of a transfer of property at death based upon its values.
Progressive Estate Tax Rate. The estate tax is imposed at progressive rates. It extends to transfers of economic value inside or outside the scope of the probate administration system.
Taxable Estate versus Probate Estate. It is important to distinguish a taxable estate from a probate estate. The former includes all property or rights to property that has/have been given away during the decedent’s lifetime (gifts) as well as property owned by the decedent at the time of death. As mentioned earlier, property transferred to trusts during a decedent’s lifetime with “strings attached” will be part of (includable) in a decedent’s gross estate. Inclusions in a decedent’s gross estate generally are beyond the scope of this topical overview.
Gifts between Spouses, the Marital Deduction. When a gift is made by one spouse to the other through his or her estate, the donor spouse may claim marital deduction on a federal estate tax return.
Unified Credit. A unified credit against an estate’s estate tax liability is provided by statute. Currently, the unified credit is the equivalent of an exclusion of value from the decedent’s estate of $2,000,000 against estate tax otherwise imposed (for decedents dying in taxable years 2006, 2007 and 2008; in 2009 the exclusion amount (excluded value) increases to $3,500,000).

Valuation of Family Owned Business Interests

For family owned business interests, valuation is an extremely important aspect in the transfer of wealth from one generation to another. Often, discounts may be available on value transferred where less than an entire interest is passed to an heir. Similarly, gifts during a person’s lifetime may be subject to a discount for purposes for computing the gift tax. The gift tax is a tax deferred in favor of a unified credit for gift and estate taxes upon the death of a decedent, up to the maximum amount of that exclusion at death.

Experienced Boston Estate Tax Law Firm

Our firm experience with Estate Taxation runs to Form 706 and M.706 preparation, resolving estate questions with IRS and the Massachusetts DOR, will and estate share contests in Probate Court, appeals of and litigation towards settlement of valuation issues. One phone call is all you need to establish whether we are the right firm for the matter for which you need estate tax compliance resolution or other estate-related representation.