Welcome to CPA at Law, helping individuals and small businesses plan for the future and keep what they have.

This is the personal blog of Sterling Olander, a Certified Public Accountant and Utah-licensed attorney. For over nine years, I have assisted clients with estate planning and administration, tax mitigation, tax controversies, small business planning, asset protection, and nonprofit law.

I write about any legal, tax, or technological information that I find interesting or useful in serving my clients. All ideas expressed herein are my own and don't constitute legal or tax advice.

Review of Estate Planning Documents

Reducing Estate Taxes with Annual Exclusion Gifting

Subject to new legislation passed under the Biden administration, United States taxpayers pay an estate tax on death to the extent that the value of their estate exceeds $11,700,000 in 2021; the estate tax is a tax on the right to transfer property upon death. It cannot be avoided by making lifetime gifts to heirs because most such gifts reduce this estate tax lifetime exclusion amount. If the lifetime exclusion amount is exhausted, a gift tax applies in lieu of the estate tax.

In general, any gift is taxable, meaning that the gift will either reduce the lifetime exclusion or require the payment of a gift tax by the donor if the donor's lifetime exclusion has been exhausted. However, there are a number of important exceptions to the rule that any gift is taxable. One such exception is the annual exclusion.

"If a taxpayer makes a gift to another person, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion amount for the year." The annual exclusion is indexed for inflation and is $15,000 in 2021. Under current law, every taxpayer can gift up to $15,000 per year to an unlimited number of donees. Married couples can each make an annual exclusion gift from their own property, essentially doubling the annual exclusion amount. To qualify for the annual exclusion, the gift must be of a "present interest" in property, meaning a gift that the donee can access and use immediately.

An annual exclusion gifting plan can remove significant wealth from a taxpayer's estate over time, thus reducing future gift and estate taxes. For example, a couple with three children and nine grandchildren can potentially gift $360,000 ($15,000 x 2 spouses x 12 heirs) to their family every year without even the need to file a gift tax return. However, there is no requirement that the donee be a family member, meaning that the class of potential donees is only limited by the pool of beneficiaries who the donor wishes to benefit. Annual exclusion gifting should be coordinated with other gifting and tax-mitigation planning but is an important estate and gift tax mitigation tool.

Utah Adult Guardianship Appointment Procedures

Individuals who have executed an advance health care directive and power of attorney are far less likely to need a court-appointed guardian or conservator. However, those who did not execute such forms while they had capacity, and sometimes even those who have executed such forms, may need a guardianship and conservatorship. Below are the minimum requirements in securing a guardianship and conservatorship in a common scenario where a child of an elderly, incapacitated parent seeks guardianship and conservatorship over the parent. The following procedures assume that the parent is unmarried with no living parents, one of their children seeks appointment without objection from a sibling, and the incapacitated person attends the guardianship hearing and requires a full guardianship:

1. The first step is to gather the necessary information and documentation needed for the Petition for Guardianship and Conservatorship. The Utah Courts website provides a form on its website, but the form is for a petition for guardianship only. The Utah Online Court Assistance Program (OCAP) has forms for a guardianship and conservatorship.

2. Individuals who will be subject to a guardianship need to be represented by an attorney, so the next step is to identify such an attorney. Many attorneys in Utah will charge a modest fee to represent an incapacitated person needing a guardianship; alternatively, the Guardianship Signature Program seeks to provide free attorneys for indigent incapacitated persons. To ask the court to appoint an attorney for the incapacitated person, prepare a Request to Appoint, Order Appointing Attorney, and Request to Submit for Decision.

3. All proposed guardians and conservators are required to review the Guidelines for Guardians and Conservators and take the accompanying Pre-Appointment Test. The proposed guardian will then need to sign a Declaration of Completion for filing with the court.

4. Prepare the other necessary court documents, which include an Acceptance of Appointment, whereby the guardian accepts the fiduciary role and subjects themselves to Utah law, a Cover Sheet, a private Information Sheet, a proposed Guardianship Order, and Letters. (Note that the linked Order and Letters do not include a conservatorship; see the OCAP program linked above for more comprehensive forms).

5. File the Cover Sheet, Petition, Acceptance, Declaration of Completion, and appointment forms for the incapacitated person's attorney. A doctor's letter or evaluation of the proposed ward's capacity must also be filed with the court. The court should sign the Order Appointing Attorney to represent the ward, schedule a hearing, and send notices of the hearing to all of the interested persons listed with the Petition. The attorney for the ward can agree to accept service of the Petition on behalf of the ward.

6. Five days prior to the hearing, file the proposed Guardianship Order and Letters with the court. Also prior to the hearing, ensure that the proposed ward has had the opportunity to meet with his or her court-appointed attorney. At the hearing, the judge will likely ask to hear from the proposed guardian and conservator, the incapacitated person, and the incapacitated person's attorney. Assuming that no one objects and all of the aforementioned documents have been properly completed and filed, the court is likely to appoint the proposed guardian and conservator. 

Control of Disposition of Remains

Anyone completing an estate plan should consider leaving written instructions regarding their wishes for their funeral and the disposition of their body. Section 3-701 of the Uniform Probate Code states that "a person named executor in a will may carry out written instructions of the decedent relating to the decedent’s body, funeral, and burial arrangements" prior to being actually appointed by a court. Most family disagreements over funeral-related matters that arise when a loved one passes away are resolved by negotiations amongst the family, sometimes with the assistance of experienced funeral directors and clergy. However, some disagreements, such as control over the disposition of the decedent's body, can be more serious and cannot be resolved without court intervention.

There is little uniformity among the states in this area. See generally Shawn Irwin Walker, Over My Dead Body: Preventing and Resolving Disputes Regarding the Disposition of the Dead, 43 ACTEC L.J. 385, 388 (2018). Utah is one of the states that has a "priority of decision" law, which is found in Part 6, Control of Disposition, of the Funeral Services Licensing Act. Section 58-9-601 of the Utah Code confirms the probate code concept that a decedent's written instructions concerning their funeral and manner of burial are enforceable but adds the requirement that such instructions be "acknowledged before a notary public or executed with the same formalities required of a will..."

Another interesting aspect of this law is the fact that the nominated personal representative under the decedent's will, depending on the circumstances, may not have first, or even second, priority to control the disposition of the decedent's body. The person with first priority is whoever is designated "in a written instrument, excluding a power of attorney..., if the written instrument is acknowledged before a Notary Public or executed with the same formalities required of a will..."

The person identified as "personal representative" in the decedent's will may appear to fit this description; however this section is clearly describing a distinct role because section 58-9-602(3) of the Utah Code identifies "the person nominated to serve as the personal representative of the decedent's estate in a will" as the one with third priority. Second in line is "the surviving, legally recognized spouse of the decedent, unless a personal representative was nominated by the decedent subsequent to the marriage, in which case the personal representative shall take priority over the spouse."

A few different measures could be taken in order to prevent disputes over the disposition of a body. First, individuals could specify in their will that they are designating their personal representative as the person with the right and duty to control the disposition of the body under Utah Code 58-9-602. Such designee should be aware of the scenarios under which they could lose their right of disposition and also the process for resolving disputes. Finally, individuals should leave notarized instructions to their next of kin specifying their funeral and burial wishes. 

Submitting Form 2848 to the IRS Online

The IRS now allows taxpayer representatives to submit Forms 2848 and 8821 online. Any taxpayer representative with an IRS e-Services account can use their e-Services credentials to log on to the new online submission portal. If you don't have an e-Services account, you can sign up for the submission portal at this link.

The IRS requires that all 2848 forms mailed or faxed have a wet-ink signature, but now the IRS will accept electronically-signed 2848s, as long as proper procedures are followed and the forms are submitted electronically through the new submission portal. Below is an acceptable process that a taxpayer representative can follow to remotely obtain and submit a Form 2848 online for an individual taxpayer:
1. Request that the taxpayer electronically provide a copy of their photo ID and the first page of their tax return.

2. Complete IRS Form 2848 with the name, address, and social security number you have received and verified and electronically send the Form 2848 to the taxpayer for signature.

3. Schedule a video conference to verify the taxpayer's identity and their receipt of the Form 2848 and coordinate the taxpayer's signing and and electronic return of the Form 2848.

4. Log into the new IRS online submission portal, answer the questions the portal presents, and upload the appropriate form.

The submission portal provides the option of submitting a Form 2848, Form 8821, or a revocation of an existing authorization. On the next screen, you will be asked if the taxpayer electronically signed the form in a remote transaction (meaning anything not in person). You will then be asked to declare that you "have authenticated the identity of the taxpayer on line 1 of the form or have personal knowledge of the taxpayer’s identity." If you click "no" to this question, you will be logged out, so be sure to authenticate the taxpayer's identity before logging in.

After stating whether the taxpayer is domestic or international, you will input the social security number of the taxpayer and upload the signed Form 2848. Once the file is attached, click "submit." You will receive an email confirming that the form will be processed in the order it was received and recommending that you not submit a duplicate form via mail or fax. The IRS's new online form submission portal is an appropriate and helpful development for a social-distanced world.

What Happens When the Estate Tax Exclusion Goes Down?

The Internal Revenue Code imposes a tax on the value of wealthier estates that is payable after the owner passes away. In 2017, an individual could bequeath $5,490,000 to his or her heirs, free of estate tax, while wealth passed in excess of this exclusion amount was subject to an estate tax of 40%. The Tax Cuts and Jobs Act increased the estate tax exclusion to $11,180,000 in 2018, which exclusion amount increases for inflation each year.

The estate tax cannot be avoided by making lifetime gifts to heirs; such gifts must be reported on IRS Form 709 and reduce the giftmaker's estate tax exclusion amount. If the exclusion amount is exhausted, a gift tax applies in lieu of the estate tax. Upon death, the personal representative of the decedent's estate will file IRS Form 706 and add all prior gifts back to the value of the estate owned by the decedent on death as part of the completion of the estate tax return and calculation of the estate tax.

Under the Tax Cuts and Jobs Act, the estate tax exclusion reverts to approximately $5,500,000 in 2026. This reversion could have "retroactively [denied] taxpayers who die after 2025 the full benefit of the higher exclusion amount applied to previous gifts." This possibility arose because the estate tax exclusion amount has never gone down before, and the credit against the estate tax for gifts made when the exclusion amount was high could have been calculated based upon the lower exclusion amount upon death.

Treasury Regulation Section 20.2010-1(c) resolved this uncertainty. In summary, individuals maintain the benefit of having made gifts utilizing the estate tax exclusion in a year when the exclusion was higher than it is at death. One of the examples in the regulations assumes that a never-married individual made lifetime taxable gifts of $9 million and paid no gift tax at the time because the gifts were made when the exclusion was $11.4 million. Upon death, the exclusion amount was $6.8 million. The example concludes, "Because the total of the amounts allowable as a credit in computing the gift tax payable on [the] gifts (based on the $9 million of basic exclusion amount used to determine those credits) exceeds the credit based on the $6.8 million basic exclusion amount allowable [on death, the credit] is based on a basic exclusion amount of $9 million..."

In other words, taxes are saved by making gifts during a time when the exclusion amount is high, as it is now, if death ultimately occurs when the exclusion is low. The exclusion amount will go down at the end of 2025 but could go down more than it is scheduled to, and sooner, under the Biden administration. Accordingly, for many wealthier taxpayers, the time to make gifts is before the end of this year.

Utah Adopts Uniform Electronic Wills Act

Beginning August 31, 2020, pursuant to the Uniform Electronic Wills Act, Utahns have the option of executing a last will and testament without the traditional paper and ink and physical presence of witnesses. Before the adoption of the Electronic Wills Act, wills in Utah were generally required to (i) be in writing, (b) signed by the testator, and (c) signed by at least two individuals, each of whom signed within a reasonable time after witnessing the signing of the will. The Electronic Wills Act keeps each of these requirements but adapts them for a modern world.

An electronic will must still be "in writing," or more particularly, in "a record that is readable as text at the time of signing." A "record" includes electronically-stored information "retrievable in perceivable form." Importantly, a video or audio recording of the testator's last wishes does not constitute a will because the electronic files would not be "readable as text."

An electronic will must still be signed by the testator, but under the Electronic Wills Act, "signing" includes executing or adopting a tangible symbol or logically associating with the record a symbol or process with the intent of authenticating or adopting the record as the last will. The Electronic Wills Act is designed to be flexible enough so that no particular software or application is needed to adopt a will.

Finally, an electronic will must still be signed by two individual witnesses who observed the testator sign the electronic will, but such individuals need not be in the physical presence of the testator; electronic presence is sufficient. Under the Electronic Wills Act, "electronic presence" requires that the witnesses be "communicating in real time to the same extent as if the individuals were physically present." An electronic will may be simultaneously executed, attested, and made self-proving with the help of a notary public as described in Utah Code 75-2-1408.  This section expressly supersedes the Notaries Public Act, meaning that remote notarization appears to be permitted in the context of an electronic will.

Estate planning practitioners have resisted laws permitting electronic wills for many years, fearing that electronic wills would be more likely to result in contests and other estate controversy. While these concerns will likely persist, the current pandemic has clearly illustrated the need for an electronic wills option. Currently, Utah is one of only a handful of states have adopted an electronic will statute, but more states are sure to follow.