How will the New Supreme Court Decisions Affect Estate Planning?
The Supreme Court has been busy this year. It has handed down many significant decisions in 2015, ranging from traffic stops to same-sex marriage. However, the implications of such decisions stretch beyond the right to marry, but rather how marriage can now affect how you will be taxed, pay for healthcare, and plan your estate. This blog seeks to summarize certain landmark decisions that were handed down this year, which may affect your estate planning.
On May 18, 2015, the Supreme Court in a 5-4 majority handed down a ruling in Comptroller v. Wynne, which held that a state may not double-tax income earned out of the state. This case involved a Maryland couple, the Wynnes, who owned stock in a Maryland S corporation that did business in 39 states. Since income generated by an S corporation is passed through to its shareholders, the Wynnes paid income taxes in Maryland as well as their pro-rata share of taxes on the income the corporation earned in the other states. In Maryland, residents are subject to a state income tax as well as a “local tax” based on the city or county in which they live. Thus, Maryland residents were subject to double taxation. Justice Alito, writing for the majority, held that this scheme violated the dormant commerce clause of the constitution.
As a result, the Wynne decision will potentially affect hundreds of other states. Clients who pay income taxes in multiple states that may be affected by the Wynne decision should seek qualified tax advice regarding filing protective claims.
The majority of estates will always be affected by income taxes. Income earned by an estate or trust is reported on IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, for federal income tax purposes, and the estate or trust may also need to file a state income tax return for estates and trusts.
On June 26, 2015, the Supreme Court in a 5-4 majority legalized same-sex marriage and held that state bans on it violated the 14th Amendment. The Obergefell case involved the consolidation of four cases that challenged state-banned recognition of same sex marriages in Kentucky, Michigan, Ohio and Tennessee.
Now, same-sex couples may file joint income taxes, make unlimited gifts to spouses who are exempt from federal taxes, and hone in on the spousal exclusion in estate planning.
Estate Planning to Meet the Diverse Needs of Our Clients
Estate planning is important, even if the estate will be small. Careful planning allows your investments to be secured, your property to be properly distributed, and your personal wishes carried out. It also allows you to save as much as possible on taxes, court costs and lawyers’ fees. If you have questions about estate planning or need to have estate planning documents drafted, contact an experienced Nashville estate planning lawyer at Calhoun Law, PLC to ensure that your unique estate planning needs are met. Call now at 615-250-8000 for a free consultation or contact us by e-mail to speak directly with our lawyers.