IN THIS ISSUE

LOST WILL

COINCIDENCE?

TAX DYNAMICS

ARTICLES OF INTEREST

November is truly the month for giving thanks.

THE SIGNED LAST PAGE OF THE ARMISTICE AGREEMENT

Veterans Day was observed a few days ago on November 11th, and is a day dedicated to honoring military veterans who have served in our United States Armed Forces. Did you know that Veterans Day was originally known as Armistice Day, commemorating the end of World War I, which officially concluded on the 11th hour of the 11th day of the 11th month in 1918. On November 11th we pay tribute to the courage, sacrifice, and patriotism of all veterans, living or deceased, who have defended our nation. We must remember those heroes who have selflessly put their lives on the line to protect our freedoms.

Thanksgiving, celebrated on the fourth Thursday of November, is our cherished American holiday. It is a day when families and friends gather around the table, sharing a delicious meal and expressing gratitude for the blessings in our lives. Our tradition of Thanksgiving dates to the early 17th century when Pilgrims and Native Americans joined together to celebrate a successful harvest. Today, Thanksgiving should serve as a reminder to appreciate the love, joy, and abundance in our lives.

I need to give thanks to all who have made 2023, the 15th Anniversary Year for Garden State Trust Company, a success. A special thank you to all our clients who continue to have confidence in our providing trust and financial services today and tomorrow. We know there are a lot of choices out there and are honored and thankful that you choose to work with us. 

We want to thank the attorneys, accountants and financial advisors who have recommended us to their clients. It is the highest of compliments to know that we have your confidence.

Last and certainly not least, I want to thank our entire team at Garden State Trust for providing the quality, caring and personal services our clients have come to expect and deserve. 

ASK GARDEN STATE TRUST COMPANY

I live in Cherry Hill and found out that a close friend of mine recently created a Charitable Remainder Trust. I think I understand how they work. Can you please help me?

Thank you,

Henry H 

Dear Mr. H,

Thank you for your inquiry. A Charitable Remainder Trust (CRT) is exactly as it sounds. It allows you, the trust grantor, to make contributions to a trust and be eligible for a partial tax deduction, based on the CRT's assets that will pass to a charity or charities, the beneficiary, or beneficiaries. CRTs are often referred to as a "split-interest" trust. 

There are two main types of CRTs: 1.) Charitable Remainder Unitrusts (CRUTs), where the annual distribution to you is a fixed percentage of trust assets, re-valued annually and 2.) Charitable Remainder Annuity Trusts (CRATs) where the annual trust distribution is a fixed dollar amount calculated at the beginning of the trust term and does not change each year.

CRTs can be a fantastic tool for those who are both charitably inclined, and for those who wish to provide an income stream for themselves or others. CRTs can also provide significant tax benefits for the grantor, who is contributing the assets into this charitable trust. You should visit our website and read our Charitable remainder Trust brochure at https://gstrustco.com/assets/GST-CRT-brochure.pdf

Should you wish to further discuss the benefits of CRTs, and to determine if one is appropriate for your situation, please do not hesitate to contact me.

Sincerely,

Sean Rice

Senior Vice President & Trust Officer

Regional Manager South Jersey and Philadelphia

(856)-281-1300

srice@gstrustco.com

One Holtec Drive, Suite G101

Marlton, NJ 08053

HAVE A QUESTION ON TRUSTS, WILLS, OR INVESTMENT MANAGEMENT?

For general informational purposes only. This information does not constitute legal advice.

Amazon's Jeff Bezos has announced he is moving to Florida. His reasons for the change of domicile do not include any mention of the new state tax on capital gains in Washington, or the proposals for a wealth tax in that state. It might just be a coincidence. Really? Read about this in our Informational Article, Coincidence? In another Informational Article, Lost Will, the assumption that a lost will was destroyed by its maker can be overcome with clear and convincing evidence.

There are two Of Interest articles in this month's Newsletter I would like to highlight, More Americans Over 75 Are Working Than Ever -- And They're Probably Having More Fun Than You and The Best Courses For Bad Golfers. Yes, I am over seventy-five and yes, I love what I do and continue to have fun working with my clients and team members.

I will not say I am a good golfer, nor will I say I am a bad golfer. My son, Adam, who has recently taken over as President of GSTC, and I have had the privilege of having played the National Golf Links of America in Southampton, NY. Even though the National is highlighted in the article as one of the best courses for bad golfers, the latest issue of Golf Magazine has the National rated the #5 golf course in the World. What a fantastic experience we had!

Allow me to leave you this month with the following quote from Greg Epstein which to me goes hand in hand with giving thanks, "Learning to pay it forward can add a tremendous sense of meaning and dignity to our lives. Simply put, it feels good to give to others, whether we get back or not."

Sincerely,

Having a will is an important step for every responsible person who owns property. Making certain that the will is available after one's death is the next important step, because a will won't do much good if it can't be found. If the signed copy of a will cannot be located, it may be presumed that it was revoked by being destroyed. However, the presumption can be overcome, as shown in this recent case.

As Patricia Lynch-Carbaugh aged, she had trouble keeping her household. She was estranged from her two sons. Patricia had a will executed by attorney Donna Wilson in 2018, and enrolled in a "maintenance program" that allowed for updating her estate planning documents at no additional cost. Patricia updated those plans three times, the last time being in July 2020. She paid for the maintenance program through August 2021, but Patricia died in March 2021. 

That final update to the will included a specific disinheritance of the sons "for reasons personal to [Lynch-Carbaugh] and known to them." After Patricia died, her executor was unable to locate the final will in the mess that her house had become. There was evidence of rodent infestation, and documents littered all over the home. The disarray was documented with photographic evidence. The executor produced a copy of the last will for probate. 

The estranged sons objected that there is a presumption that, when a will cannot be located, it has been revoked by the testator through destruction. True, ruled the court, but the presumption may be overcome by clear and convincing evidence. Here, the condition of the house provided an explanation for the failure to locate the document. Given her subscription to the maintenance program, it was unlikely that Patricia would have revoked her will without consulting the attorney she had prepaid for services. There was no such consultation, nor any other indication from others that Patricia had entertained second thoughts about the July 2020 draft of the will. 

The sons were evidently hoping that if the will were tossed, they would inherit Patricia's estate by intestacy. But the court observed that "the explicit exclusions of her sons in her will indicated a clear desire that her estate not pass by intestacy; indeed, her lawyer testified that she was consistent that she wanted charities to inherit her estate." Taken as a whole, the evidence overcame the presumption, and the sons lost.

(November 2023)

© 2023 M.A. Co. All rights reserved.

The state constitution of Washington has long been interpreted to effectively bar an income tax in that state. Efforts over the years to amend the constitution to permit an income tax failed. Nevertheless, effective beginning in 2022, the state legislature instituted a 7% tax on capital gains in excess of $250,000. Capital gains are income for federal tax purposes, so how could they be taxed in a state with a constitutional bar on income taxation? The legislature called the new tax an excise tax, not an income tax. The Washington Supreme Court upheld this unusual use of language as meeting state constitutional constraints. That decision is on appeal to the U.S. Supreme Court.

One is reminded that Abraham Lincoln once said, "If you call a tail a leg, how many legs does a dog have? Four, because calling a tail a leg does not make it a leg."

In a possibly related development, Amazon's Jeff Bezos has now announced that he is moving from Seattle to Miami. Although he regrets leaving Washington, the reason given for the move was to stay near his parents, who are also moving to Florida. He will also be closer to Blue Origin operations near Cape Canaveral. Bezos said nothing about tax motivations.

Observations on the tax effects of the move came from other sources. According to a blog post at the Tax Foundation [https://taxfoundation.org/blog/jeff-bezos-move-taxes/] Bezos sold $15.7 billion worth of Amazon stock in 2020 and 2021, before the new tax took effect. That saved him an estimated $1.1 billion of state tax payments. The Wall Street Journal reports that Bezos' remaining stake in Amazon is worth $136.7 billion. Any sales of his shares after the change of domicile will avoid state taxes, as Florida has no income taxes, including no taxes on capital gains.

There are other Washington state taxes to concern billionaires who reside there. The state already has the highest estate tax in the nation, at 20%. Legislators have been discussing the idea of imposing a wealth tax in the state. The idea is to have a 1% tax on tradeable wealth in excess of $250 million. Such a tax was projected by the state's economists to raise $3.2 billion per year from an estimated 700 Washington taxpayers. But some 44% of that would have come from just one man--Jeff Bezos. His annual tax bill would have been $1.44 billion. To raise that money, he likely would have to sell some Amazon shares, which would trigger state and federal taxes on the capital gains, which would require still more stock sales for money to pay the taxes.

The move to Miami removes that tax cloud for Mr. Bezos. The Tax Foundation blogger concludes: "But it's funny how, whatever reasons billionaires give for their moves, they almost always seem to wind up in low-tax states."

(November 2023)

© 2023 M.A. Co. All rights reserved.

One important aspect of the federal tax reform in 2017 (Tax Cuts and Jobs Act, or TCJA) was bringing the corporate tax regime in the U.S. into closer harmony with the rest of the world. To that end, the corporate tax rate fell from 35% to 21%, among many other reforms. The tax writers hoped that the lowered tax rate would make U.S. companies more competitive, that it would reduce the number of companies moving out of the U.S. for tax reasons, and that the economic growth engendered by the changes would offset the lost tax revenue over time.

A team of economists from Harvard, Princeton, the University of Chicago, and the U.S. Treasury have published a new study of the effects of TCJA for the National Bureau of Economic Research [https://conference.nber.org/conf_papers/f191672.pdf]. Among their conclusions:

Corporate tax reform can be credited with a 20% increase in domestic investment for firms affected by the changes, compared to those not so affected.

Foreign investment increased as well.

Investment growth caused higher labor tax revenues from wage growth and offsetting corporate revenue declines from more depreciation deductions. In short, the corporate tax reform paid for itself. The Wall Street Journal reports that the new study has been warmly received by other economists, as the evidence and the economic models are quite credible.

A bit of context is in order. TCJA did not reduce the total tax dollars collected by the IRS. Here is the record:

Corporate tax collections did decline in the early years, but have now more than recovered.

Source: U.S. Bureau of Economic Analysis

In fact, corporate income tax payments set a new record in 2022, notwithstanding the lower tax rate.

The corporate tax reforms of TCJA were permanent, while the individual tax changes—such as the doubled standard deduction and $10,000 limit on the deduction for state and local taxes—are set to expire in 2026.  

(November 2023)

© 2023 M.A. Co. All rights reserved.

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