We’re reaching out to you, our clients, colleagues, and friends, to share some of the rapidly developing matters affecting estate and tax planning that are demanding our attention and action at this extraordinary time of the COVID-19 pandemic.
Document Signing. Under normal circumstances, state statutes require that some combination of signer, witness and notary all be physically present together, in the same room and able to see and hear each other, when wills, trust, deeds and similar legal documents are signed. Seemingly overnight, distancing protocols and health protections have presented roadblocks to the execution of these and other witnessed and notarized documents necessary to finalize estate plans and property transfers. In response, several states, including New Hampshire, have adopted measures to allow signers, witnesses and notaries to execute documents effectively without being physically present together, using videoconferencing. Florida previously adopted such measures, prior to the COVID-19 pandemic. As we write this, proposals are pending in Maine, Massachusetts, and other states to permit similar “remote” notarization.
Even absent such measures, we urge you to discuss with us arrangements for completing your estate planning updates. Many of you, for peace of mind, are updating your advance health care directives and financial powers of attorney to reflect your current wishes. Updates to wills and trusts can sometimes be accomplished with simple amendments. We are here to advise you and to prepare these documents correctly and legally. And we urge you, please, to resist any temptation to mark existing documents with handwritten edits, which tend to create ambiguities prompting expensive litigation.
Tax Extension. On March 21, 2020, the federal income tax deadline was extended from April 15, 2020, to July 15, 2020. Taxpayers, including individuals, trusts, estates, corporations and other non-corporate tax filers, are not required to file their 2019 federal income tax returns until July 15, 2020. Also, taxpayers may defer federal income tax payments otherwise due on April 15 (including estimated tax payments) to July 15 without penalties and interest accruing. The deadline for making contributions to Individual Retirement Accounts and Roth Retirement Accounts also is extended to July 15, 2020. Maine has announced it will follow the lead of the IRS and has extended the deadline for filing and paying state income tax to July 15, 2020. Massachusetts has extended its deadlines to July 15, 2020, but only for personal income tax returns. As of this writing, it remains unclear to what degree other states will adjust deadlines to conform to the federal extension.
Gift Opportunities. Whether current historically low interest rates are healthy for the economy will continue to be discussed, but while interest rates remain low, the time may be right for those wishing to make important gifts to family members or to others. We fully recognize the substantial pain and economic uncertainty the current situation has wrought on our neighbors and on our communities.
But in the service of you, our clients, we’d be remiss not to inform you of certain estate and gift-tax planning techniques that work exceptionally well in a low-interest-rate, low-valuation environment. These include trusts designed to freeze the value of assets in the donor’s own taxable estate while pushing out the future appreciation in the value of the trust assets to desired recipients such as the family’s next generation – all while allowing the donor to retain a term interest in the property for some period.
Such techniques are commonly used to accomplish lifetime transfers of appreciating stock, real estate, closely held business interests, and other assets that could otherwise be heavily taxed at the owner’s death. With real flux surrounding the future of the markets, interest rate policies and estate tax laws, now may be the best time to discuss employing such techniques.
Additional developments are expected soon in the foregoing areas, with further updates likely in the coming days and weeks. Our primary message is that we are here for you, and encourage you to seek our advice and guidance during this unsettling time.
For more information on any trusts and estates planning matters, please contact your Pierce Atwood Trusts & Estates attorney.