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Welcome to the third quarter edition of our newsletter!
This issue contains updates about the firm, discusses the increase to the DC estate tax exemption and more.
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REMINDERS
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No Delivery, No Deed
A recent Maryland court case demonstrates that one should never cut corners when it comes to the deed to your house. James Daniels married Lana after his first wife's death, and he wanted Lana to have his house after his own death. He properly executed a deed transferring ownership from himself alone to both Lana and himself as tenants by the entirety, but he did not have the deed recorded. Instead, he put it in the bedroom filing cabinet where he and Lana kept their important papers, and he informed Lana that he had added her name to the deed.
What's the problem? He needed to deliver the deed to Lana in order to complete the transfer. Lana had complete access to the filing cabinet where the deed was stored, but neither of them took any steps demonstrating that James had ever relinquished control or that Lana had ever assumed exclusive control over the deed. After James' death, Lana came across the deed and had it recorded.
James died without a will, and his daughter (from his first marriage) became personal representative of his estate. She pursued and obtained a court order that the deed was inoperative due to lack of delivery during James' lifetime, and that order was affirmed on appeal. As a result, the house did not pass to Lana but became part of James' general probate estate, and Lana, as the surviving spouse, was entitled to just half of the house.
To avoid such pitfalls, remember the short summary of property law devised by the great legal theorist Stevie Wonder: "Signed, sealed, delivered, I'm yours."
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ESTATE PLANNING NEWS
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DC Estate Tax Update
The estate tax exemption amount for the District of Columbia estate tax will increase from $1 million to $2 million next year, maybe.
In June, the DC Council passed a bill containing a broad array of tax reductions and reforms affecting several local taxes, including the income tax and the estate tax. In order to avoid a budget deficit, however, the Council took the unusual step of making the tax cuts contingent upon collecting more revenue than projected. This means that, if DC collects only as much revenue as expected this year, there will be no new tax cuts. The same holds true for future years.
If DC collects more revenue than expected, however, the amount of that surplus revenue will determine which tax cuts take effect. The Council divided up the tax cuts into 17 different pieces and prioritized the pieces. (Highest priority went to lowering the income tax rate in the $40,000 to $60,000 tax bracket from 7% to 6.75%.) As new surplus funds become available this year or in any future year, new pieces of the tax cuts will automatically take effect.
Number 6 on that list of tax cuts is an increase in the DC estate tax exemption from $1 million to $2 million, which would mean that a married couple with combined assets of less than $2 million would not be subject to the DC estate tax. And number 13 of the list is a second increase in the exemption from $2 million to whatever the federal exemption may then be (currently $5,340,000, indexed for inflation).
How will we know which tax cuts take effect each year? The new law references a revenue report that comes out each February, so presumably DC will announce each February or March which new tax cuts (if any) are in effect for that calendar year.
Will we ever really see these tax cuts? Your guess is as good as ours. Presumably, revenue estimates are based on past collections to some degree, so exceeding expectations in one year may lead to higher expectations for the next year. It seems unlikely that revenue collections could outperform expectations for several years in a row, so we may be in for a long wait before we see all 17 pieces of the tax cuts take effect.
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FIRM NEWS
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Managing Partner Jane Frankel Sims is now a member of the Arizona Bar (in addition to Maryland, D.C. and New York).
Cristina Flores Lujan, our paralegal who is also licensed to practice law in in Mexico, just started the LLM program at University of Baltimore Law School. Soon she will be a lawyer!
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THANK YOU
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We thank you for your business and support for our firm. Feel free to call us at 410-828-7775 with any estate planning questions or concerns, and as always we are most grateful for your referrals.
Thank you,
Founder/Managing Attorney
The Law Office of Jane Frankel Sims
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