Personal Wealth Law News

In recent years, several tax laws have reduced federal income tax rates and added to the ability to set aside amounts for retirement in a tax-advantaged way. At the same time, other changes in tax law, by limiting deductions, for example, have actually increased tax burdens. And, the inattention to the growth of the alternative minimum tax has resulted in millions of people having to pay that additional tax. A tax bill just passed by Congress, that will shortly be signed by the President, provides another example of this. The kiddie tax, which taxes children, up to a certain age, at the same rates paid by their parents on much higher income, has been amended to increase the age at which the higher tax rates apply to age 18, and to age 24 if the child is a student. So tax benefits for others are paid for by increasing taxes on children, most of whom won’t be able to vote out the politicians who increased their taxes.   

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     A recent article in the Financial Times reports that over the last few years there has been an increase in the use of postnuptial agreements to protect assets and plan for the orderly distribution of property in the case of divorce.  Interestingly, the article focuses on a growing trend among hedge funds where partners are required to sign these agreements to protect the fund from claims by ex-spouses.

      Although the article questions the validity of postnuptial agreements in various jurisdictions around the United States, these agreements have long been accepted in Pennsylvania.  They are generally subject to the same requirements as any other contract, but do require a full and fair disclosure of the parties’ financial positions in order to be enforceable.  To read the article, click here.

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There is no single answer to this question, of course. It varies depending on your current and hoped for lifestyle.  An investment adviser named Bill Landberg sent me a book on the subject that’s worth a look. It’s called “The Number” and it’s written by Lee Eisenberg. It doesn’t tell you the answer, but it helps you to start thinking about your own Number. In future blogs, we’ll discuss some tools that you can use to do your own calculations.

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      Congress passed a law in 2001, which the President signed, that creates a fabulous tax benefit for those who die in 2010.  If you’re lucky enough to pass on during that year, your heirs will pay zero federal estate tax.  By contrast, if you die in 2009, the tax rate is 45% and, if you stay with us until 2011, you could pay as much as 55%.  What aim of tax policy is satisfied by this crazy quilt tax system?  None, of course, it’s just a product of budgetary rules. continue reading

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