by

Transfer Taxes and the Fiscal Non-Cliff

Deborah Jacobs, the house estate-planning expert at Forbes, has a nice roundup of the rules that Congress set to begin in 2013.

When all was said and done, not much changed.

  • The Lifetime Exemption has been now codified at $5 million, plus inflation. This agreement preserved the non-permanent status quo that had existed on the lifetime exemption, and represented a major concession by the Dems, who had sought to lower the transfer tax threshold by about 30%. The outcome will keep the tax bar high enough to avoid imposing liabilities on the vast majority of Americans’ estates — including most large estates.
  • The Unlimited Marital Deduction has been made permanent. So, essentially, a married couple’s lifetime exemption will remain twice that of an individual. Unsurprisingly, we heard nothing about expanding this benefit to include same-sex spouses.
  • Exemption Portability remains. So, a portion of the personal lifetime exemption that is not used at the end of one’s life may be passed along to one’s spouse. Again, nothing new for same-sex spouses.
  • The Top Rate has gone up narrowly, from 35% to 40%.
  • The Annual Exclusion on gifts has risen to $14,000, per recipient.

(Please note that this is not legal advice: Speak with a licensed and qualified attorney in your own jurisdiction about your own unique circumstances before making any important legal decisions.)

by

Transfer Taxes / Fiscal Cliff Update

Here’s how the NYT is reporting tonight’s late Senate deal on the estate tax:

The estate tax would also rise, but considerably less than Democrats had wanted. The value of estates over $5 million would be taxed at 40 percent, up from 35 percent. Democrats had wanted a 45 percent rate on inheritances [sic] over $3.5 million.

The WSJ is on the same page. More details when they emerge.

Happy New Year!

by

New Jersey Land Use Update

Scales and Lamp USSCThere were no published opinions on land use or zoning this month, from the Appellate Division or the Supreme Court. There was one unpublished opinion from the A.D. last week, Montague v. Borough of Deal, which addressed board discretion about variances. The temporary New Jersey Courts link is alive for the moment, but the opinion will be archived at the Rutgers Law Library next week.

by

Transfer Taxes and the Fiscal Cliff, Cont’d.

It’s really going down to the wire, isn’t it? I attended an estate planning conference in New Brunswick last week, and the speakers —  practicing T&E lawyers from around New Jersey — were preoccupied with the uncertainty about this. Nobody seemed to think that the end result would be anything other than a modest lowering of the exemption amount from its present level. But one speaker articulated a growing sense among his colleagues that any deal on transfer taxes would ultimately be an afterthought, and might not be as deliberate as specialists in the practice — or their clients — would like.

by

EHS Settles Fraud Accusations

This caught my eye, and brought back some memories. I stayed in an EHS building for a semester when I was at the New School, back in 2001. The company was a total slumlord. The school had a contract with EHS, so when I signed up for university housing I was given a room in one of their buildings, as if it were a dorm.

The place was in Brooklyn Heights. EHS had recently acquired the building, and the room hadn’t been touched since the acquisition. The previous owners had used the building as an SRO, so, really, it hadn’t been well maintained in a very long time. There was a small private bathroom within the room, and its doorknob was broken. The door itself had a big, black shoe mark squarely in its center, as if a previous tenant had tried to kick it in. This was a plausible theory, at least, given its tendency to trap a party inside, when fully closed. The water was never quite hot. The faucets would come off of the sink, exposing the tops of the valves. The carpeting in the main room had a plate-sized burn mark in the center of the floor. It didn’t seem like they had even thoroughly cleaned the place prior to the beginning of the semester. Other rooms in that part of the building were comparable, but there was another wing where things had at least been painted. It was very random.

I put in a request for a room change, but it went nowhere. I put in work orders to get things painted and repaired, but they went nowhere, either. And as anyone who dealt with the New School in those days knows, complaining to the university would have been an exercise in sheer futility. Then 9/11 happened, and having a shabby dorm room seemed like a very small problem. We actually took on additional roommates in that building — students who had been displaced from a building in Lower Manhattan. What a terrible time.

by

In the Shadows of America

For those who believe that a ‘housing crisis’ means that the price of housing is not going up quickly enough: this is why smaller, less expensive units need to be permitted in our land use codes. Addressing this problem is more important than protecting the ten-fold returns on investment that people are expecting to reap on properties that they purchased when Jimmy Carter was in office. Would a supply of more, cheaper units solve all of the housing problems described in this story? Maybe not. But it would begin to alleviate the stress on the population that is employed in entry-level positions, and whose wages do not overcome the structural failures of bizarrely distorted real estate markets. I mean, seriously, what kind of a society allows this to happen to young people who are just starting out? It’s a disgrace.

by

Transfer Taxes and the Fiscal Cliff

If the various constituencies in Washington can’t reach a Grand Bargain before the end of the year, will federal transfer-tax exemptions go over the fiscal cliff? Maybe, says Forbes‘ Deborah Jacobs. But, chances are, the scheduled automatic drop to $1M (which could, theoretically, ensnare a lot of estates) would be corrected retroactively in any eventual deal. Right now, the individual exemption stands at $5.12M, and when one considers that a married couple typically enjoys twice that amount in combined exemptions, it is clear that estate taxes are a non-issue for the overwhelming majority of Americans. At the end of the day, that probably won’t change.

by

Trees v. Power Lines

On a smaller note, something about the utilities’ storm response in my neighborhood struck a nerve. Whenever I’ve spoken with anyone from any of the utilities, they’ve eventually come around to the same issue: Trees. Almost to a person, every customer service rep, lineman, or technician has pointed out that we have a lot of old trees in this neighborhood, as if this explains why our services are being restored more slowly here than in some neighboring areas. Seriously? So, now the trees are to blame for utility companies’ logistical problems? Just out of curiosity, I compared the outage rates that PSE&G was reporting several days after the storm in two neighboring municipalities: West Orange (where I live, and where most wires are overhead), and East Orange (which is an older city, where most of the utility lines have been buried for over a hundred years). The difference was striking:

Municipality                             Total Customers    Customers Out     Percent Out
ESSEX – EAST ORANGE CITY         30,403                 6,525                21.5%
ESSEX – WEST ORANGE TWP        19,970               11,078                55.5%
Source: Public Service Electric & Gas.

It’s a classic natural experiment, where a sudden event subjects two different scenarios to a comparable set of circumstances, with observable differences between the results. It’s no secret that suburban neighborhoods lose power more frequently, and for longer periods, after storms. And, of course, with a storm of Sandy’s magnitude, one would expect outages to be longer and more widespread. But stop blaming the trees. East Orange has plenty of old trees, too. It also, quite frankly, has a poorer population that enjoys less political clout — leading to an older infrastructure, fewer political favors in a time of crisis, and whatever other indignities such a disadvantage might entail. Yet two days after the storm, the percentage of East Orange households in the dark was approximately one-third of the percentage in suburban West Orange.

Yes, we do have a lot of old trees in this neighborhood. We’re very fortunate, and for the most part they’re great to have around, but sometimes they do come down when there’s a storm. But there’s a practice that’s worked for more than a hundred years to mitigate the effects of storm damage on utilities that transmit by wire: burying the lines. The practice also has the added benefit of creating more attractive neighborhoods by removing one of the most ubiquitous eyesores of the postwar American landscape. It’s not a perfect solution, and in flood zones, it might even do more harm than good. But, in light of the growing frequency of severe weather events, the time has come to start making this investment, again, in the places where doing so would be most effective.

The utilities don’t want to spend the money, and they’ve avoided doing so for a long time. Going forward, that has to change.