Who would have thought that we'd develop a following for wills of the rich and famous. 

We display these wills whenever we can because (1) people are just plain curious about them and (2) they provide good examples of different types of provisions that are often used in wills to accomplish certain objectives.

Now, we're happy to announce that we've obtained a copy of Katharine Hepburn's will, dated January 27, 1992, and a codicil to that will, dated March 24, 1994.  The will is now live in our Information Center - you can take a look at it here.  We'll have the codicil up live shortly.

Katharine Hepburn died on June 29, 2003 in Old Saybrook, Connecticut.

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As you know, the federal estate tax was repealed as of December 31st of last year and Congress has yet to do anything about it.

Now, however, there is movement afoot among Senate Republicans and Democrats to put an estate tax deal together in an effort to pass a bipartisan jobs bill. 

Here's the current thinking among Senate leaders.  Democrats want to pass a jobs bill but need at least one Republican vote.  Republicans don't want the estate tax to revert to pre-2001 levels that levied estates over $1 million with a 55% tax.  That would happen automatically beginning in 2011 if Congress fails to pass a new estate tax law before then.   Instead, Republicans would love to see a federal estate tax of 35% on amounts over $5 million.  However, they do appear to be willing to accept an estate tax similar to the one that expired last year; i.e., an estate tax of 45% on amounts over $3.5 million.

So, there's plenty of incentive for Republicans and Democrats to work together to accomplish what each wants.  Democrats want a jobs bill that would likely offer tax credits to employers for hiring unemployed workers.  It would also renew certain tax benefits that expired last year, including the research and development tax credit.

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The IRS has released its Statistics of Income (SOI) Bulletin for the fall of 2009.  While this Bulletin may not have great appeal to the average consumer, there are a couple of interesting facts regarding the impact of recent estate tax law changes.

First, the Bulletin shows that the total number of estate tax returns filed between 2001 and 2007 fell significantly - from 108,071 in 2001 to just 38,031 in 2007.  This drop in the number of estate tax returns filed is attributed primarily to the increases in the estate tax exemption occurring during those years.  For example, in 2001, the estate tax exemption was $60,000.  By 2007, the exemption grew to $2 million.  Although the Bulletin does not cover years after 2007, we can anticipate that the number of estate tax returns filed in 2008 and 2009 will continue to decline significantly simply because the exemption has continued to increase.  For 2009, the exemption amount is $3.5 million.

These statistics support the intended goal of Congress in enacting the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001.  In enacting EGTRRA, it was widely anticipated that less than one percent (1%) of the population would be subject to the estate tax.  It appears that the passage of that legislation has had the intended effect.

Second, while there has been a significant reduction in the number of estate tax returns being filed between 2001 and 2007, the number of returns filed for wealthy decedents - those with estates in excess of $3.5 million - increased significantly, from 9,440 in 2001 to 14,281 in 2007.  It is interesting to note, too, that the greatest percentage of increase occurred between 2005 and 2007 - 33.7%.

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Today, I read an article from the New York Times that was written by Tim Grant.  The article is entitled, "Upon death, what happens to your digital assets?"  

This is a relatively new issue in estate planning, but one that will surely grow in importance as more people turn to the internet for business and pleasure.  As the article points out, many of the digital assets that people are accumulating on the internet do not have much monetary value - they consist of emails, photos, and the like.  But, even those assets may have significant sentimental value to the survivors. 

And, it's likely, too, that more people dying over the coming years will have bank accounts and other financial instruments that exist only in digital form somewhere in cyber space.  I'm reminded of my own PayPal account that I'm using more and more as a vehicle to make on-line purchases and sales from ebay and other websites.  On any given day, that PayPal account might have a fair amount of money in it.  Yet, if something happened to me, I doubt that anyone would ever know that it exists. 

Gone are the days when you could just walk to the few banks in town and ask if so and so had any accounts there.  You can't even locate a safe deposit box and check for stock certificates anymore - they're all in digital format these days.  

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There was a time when the IRS insisted that the annual gift-tax exclusion (currently $13,000) would not apply to gifts made directly from a revocable living trust.  The theory was that the annual gift-tax exclusion was available only to individuals, and a trust was not an individual.

As a result, many professionals advised their clients to take the property back from their revocable living trust before gifting it to the intended beneficiary, thereby insuring that the annual gift-tax exclusion would apply to the gift.

Some people would question why it would make a difference one way or the other, since the unified credit would shelter the gift from gift taxes in any event.  For many people, that's true.  However, for those individuals with large estates, once the current unified credit against gift taxes has been exhausted (currently $1 million), the loss of each annual gift-tax exclusion represented a potential tax of roughly 45% of the value of the gift.

Even if the unified credit against gift taxes is not exhausted during the grantor's lifetime, if the gift was made within three years of the grantor's death, the IRS insisted that the value of the gift be brought back into the grantor's estate for estate tax purposes.  At that time, the value of the gift was included with all other assets of the grantor and taxed at the appropriate estate tax rate.

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