Yanowitz Law Firm, PLLC proudly announces that our own

Alan J. Yanowitz
Has been named the Best Lawyers®
2016 Trusts and Estates
“Lawyer of the Year”
for the Minneapolis Metropolitan Area!

Alan is honored to receive this coveted award as only a single outstanding lawyer in each practice area in a major metropolitan area is designated as the “Lawyer of the Year”. This award is based on receiving the highest voting averages from Alan’s esteemed estate planning colleagues in the Minneapolis Metropolitan Area.

For the purposes of this award the following cities are included in the Minneapolis Metro Area:

Alexandria, Anoka, Bloomington, Burnsville, Coon Rapids, Cottage Grove, Eagan, Eden Prairie, Edina, Fairfax, Fairmont, Faribault, Forest Lake, Fridley, Golden Valley, Hastings, Lake Elmo, Lakeville, Mankato, Maple Grove, Maplewood, Mendota Heights, Minneapolis, Minnetonka, New Ulm, Oakdale, Plymouth, Red Wing, Rochester, Roseville, Sartell, Shakopee, South St. Paul, St. Cloud, St. Louis Park, St. Paul, Stillwater, Waite Park, Wayzata, White Bear Lake, Willmar, Woodbury, and Worthington.

Furthermore, we would like to congratulate Alan on once again being selected by his peers for inclusion in the 2016 Edition of The Best Lawyers in America© in the practice area of Trusts and Estates. This is Alan’s 20th consecutive year being awarded this recognition.

First published in 1983, Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. For the 2016 Edition of The Best Lawyers in America, 6.7 million votes were analyzed.

In addition, Alan was named a “Super Lawyer” for 2016. Super Lawyers is a division of the multi national Thompson Reuters Corporation. It is a national rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process includes independent research, peer nominations and peer evaluations. Alan has been designated a “Super Lawyer” annually since the listing began in 2003.

Alan extends his gratitude to his colleagues for nominating him to receive these humbling recognitions.

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2014 Minnesota Gift and Estate Tax Update

by admin on March 25, 2014

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Background

On March 21, 2014, HF 1777 was passed by the Minnesota House and Senate, and was signed into law by Governor Mark Dayton. This bill provides tax cuts in a number of areas and provides significant needed changes to the Minnesota gift and estate tax law.

Gift Tax

As part of the Omnibus Tax Bill passed on May 23, 2013, the Minnesota legislature had enacted a gift tax which became effective last summer on July 1, 2013. That gift tax has been retroactively repealed. Anyone who has filed a Minnesota gift tax return and paid a tax will receive a refund. All federal gift tax filing requirements remain unaffected.

However, all federal taxable gifts still need to be reported on a deceased individual’s Minnesota estate tax return if he or she dies within three years of the date of making a gift. Annual exclusion gifts (currently up to $14,000 per person, per year) as well as the direct payment of tuition and medical expenses are still ignored for in adding back prior gifts for Minnesota estate tax purposes.

Estate Tax

The Minnesota estate tax has also been significantly altered.

There are three major changes:

1. Increased Exemption. Minnesota will phase in a higher estate tax exemption amount. For many years before this change in the law, the exemption amount had been $1,000,000. Effective for all deaths in the 2014 calendar year, the Minnesota estate tax exemption amount increases to $1,200,000 per individual. The Minnesota estate tax exemption shall be increased by an additional $200,000 each year for the next four years. A table of the phased estate tax exemption amounts follows:

Year

Minnesota
Exemption Amount

2014

$1,200,000

2015

$1,400,000

2016

$1,600,000

2017

$1,800,000

2018 and beyond

$2,000,000

 

2. Rate Change. State estate tax rates have also been amended to remove the regressive estate tax regime previously in place. Under prior law, the first $100,000 over $1,000,000 was subject to estate tax at the rate of 41%. Tax rates now begin at 9% and gradually increase to 16% as the total value of a decedent’s estate increases.

3. “Pass Through” Entities. In 2013, Minnesota began to impose estate tax on non-resident individuals who owned Minnesota real estate or Minnesota tangible personal property in a “pass through” entity (for example a partnership, a limited liability company or a corporation that elected S status). The estate tax was imposed on (i) the fair market value of Minnesota real property and tangible personal property located in Minnesota, (ii) multiplied by the estate’s percentage ownership in the entity. While this was purportedly passed to tax former residents on cabins located in Minnesota (but owned by pass-through entities), it has a much broader impact. The 2014 legislation modifies the definition of pass through entities to exclude certain publicly traded entities.

State-Only QTIP Trusts

For many years, the federal estate tax has permitted a marital deduction for property that passes into a trust that has come to be known as a Qualified Terminable Interest Property Trust, frequently referred to by the acronym of QTIP Trust. This trust allows a grantor the ability to provide for a surviving spouse during the surviving spouse’s lifetime, while retaining the ability to control how the trust’s remaining assets are distributed after the surviving spouse dies. The trust only qualifies for the federal estate tax marital deduction if the decedent’s personal representative elects to deduct it on his or her federal estate tax return. As a result of the election, the fair market value of the property in this trust remaining on the death of the second spouse is taxed as part of his or her estate.

Historically, Minnesota has permitted a QTIP election only if the election was filed on a federal return. However, this became problematic as the difference between the federal and state exemptions from estate tax became larger. For example, in 2014 the federal exemption is $5,340,000 versus the $1,200,000 Minnesota exemption.

Previously, the personal representatives of many estates would want to use the full federal exemption so that any future appreciation on this sum would not be subject to federal estate taxes at the death of the surviving spouse. However, to do so would trigger a Minnesota estate tax at the first spouse’s death, and the estate tax due could be more than $400,000. As a result, in order to avoid paying a tax at the first spouse’s death, many Minnesotans would not use the full federal exemption.

The state only QTIP enables an estate to take advantage of the full federal exemption at the first spouse’s death without paying an estate tax to Minnesota. In essence, an amount not in excess of the difference between the federal and Minnesota exemption can now be transferred into a trust in which the marital deduction is elected for Minnesota purposes, but not for federal purposes. At the second spouse’s death, appreciated assets in the QTIP trust will not be subject to federal estate tax.

The use of the state QTIP should be considered by married couples whose estates may appreciate to the point that a federal estate tax could be imposed on the death of the second spouse. It should also be considered by clients who are using their “generation-skipping” exemptions to protect funds being inherited by their descendants. It also increases the benefits of leaving the marital share in trust, rather than outright.

Conclusion

If you have any additional questions, or if you would like to speak with us further about this topic, please do not hesitate to contact us at (507) 252-8997.

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IRS Will Now Recognize Same Sex Marriages For All Tax Purposes

August 30, 2013

On August 29, 2013, the Internal Revenue Service and the U.S. Department of the Treasury jointly released a ruling intended to clarify the tax effects of the June 26th ruling in United States v. Windsor. In Windsor, the Supreme Court struck down section 3 of the Defense of Marriage Act (DOMA) which limited the word […]

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Does Your Farm Qualify You For A Minnesota Estate Tax Deduction Of $4,000,000?

August 15, 2013

Background On May 23, 2013, the Omnibus Tax Bill was signed into law by Governor Dayton.  We have previously written about the creation of a new Minnesota Gift Tax and several significant changes to the Minnesota Estate Tax. There are 2 other significant changes we would like to discuss.  These substantive changes and clarifications to […]

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2013 Minnesota Gift and Estate Tax Update

June 6, 2013

The Minnesota Senate and House have approved an Omnibus Tax Bill, which was signed into law by Governor Mark Dayton on May 23, 2013.  This Bill enacts a new Minnesota Gift Tax, and makes major changes to the Minnesota Estate Tax. Gift Tax This Bill enacts a Minnesota tax on gifts made after June 30th, […]

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Planning for Your Pets in Case of Your Incapacity or Death

December 19, 2011

Few of us want to think about what might happen to our pets in the event of our incapacity or untimely death, but with over 62% of households owning a pet, providing for our pets becomes an important piece of estate planning. In fact, more people in the United States have companion animals than children! […]

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Tax Tips for Charitable Givers

November 30, 2011

With the Holiday Season upon us, it is now the time of year when many people are making their year-end charitable contributions. If you make a donation to a charity this year, you may be able to take a deduction for it on your 2011 tax return. Here is a brief summary of several “Tax […]

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Federal Estate Tax – 2012 Inflation Adjustment

November 2, 2011

By law, the IRS periodically adjusts the amount of many Federal tax deductions, exemptions and credits to reflect increases in the cost of living. The IRS has recently announced 2012 adjustments. With respect to the estate and gift tax: The Federal Estate Tax Exemption increases from $5,000,000 (the 2011 exemption) to $5,120,000 for persons who […]

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Update from the Elder Law Institute – October 2011

October 24, 2011

On October 6th and 7th, Billi M. Ellingson and Claire Langton-Yanowitz, who joined our office in October as an Associate Attorney, attended the Minnesota State Bar Association’s Elder Law Institute. Here are some highlights of the conference: • New long-term care consultation requirement: Starting this October 2011, consultations must be offered to all those signing […]

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Alan J. Yanowitz recognized as a Minnesota Super Lawyer

September 22, 2011

Alan J. Yanowitz recognized as a Minnesota SuperLawyer. Alan Yanowitz has been notified that he was again elected a Minnesota Super Lawyer.  Alan has been elected a Super Lawyer every year since 2003.  On its website, Super Lawyers describes its selection process as follows: “Super Lawyers selects attorneys using a rigorous, multiphase rating process. Peer […]

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