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.

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.

Introduction to Claims Against an Estate

A creditor of an individual who passes away has certain rights but must take affirmative steps to preserve those rights in order to receive payment. In Utah, a creditor wishing to present a claim must deliver or mail a written claim to the personal representative of the estate or the personal representative's attorney of record or file a claim in the court probate proceeding. Practically speaking, this means that a creditor can only bring a claim against an estate after a personal representative has been appointed or a probate matter opened in court.

All claims against a decedent's estate that arise before the death of the decedent must be presented within one year after the decedent's death at the latest. The personal representative has the opportunity to shorten this timeframe by either giving written notice to known creditors that claims must be presented within 60 days or publishing notice to creditors generally that claims must be presented within 90 days. With few exceptions, these time limits are absolute bars to recovery of debts from an estate.

Accordingly, best practices for a creditor include monitoring probate filings to see whether a personal representative has been appointed over a debtor's estate because the creditor may not necessarily receive actual notice of the appointment or a notice to present claims. If the one-year mark from the decedent's death is approaching and no personal representative has been appointed, a creditor in Utah must file its own petition for appointment of a personal representative together with its claim.

Statutory allowances for surviving spouses and children as well as various costs of estate administration, last medical bills, and taxes all have priority for payment over unsecured creditor claims. Moreover, the personal representative has until 60 days after the time for original presentation of the claim has expired to mail the creditor a notice of disallowance. If the creditor's claim is properly disallowed, the creditor must seek a court-ordered allowance by filing a petition for allowance within 60 days after the mailing of the notice of disallowance. If the claim is valid, the estate has sufficient funds, and the creditor complies with the law, its right to be paid will be preserved. 

2020 Filing Deadline for Calendar Year Partnerships

As part of its response to COVID, the IRS issued a series of notices, culminating with IRS Notice 2020-23, 2020-18 IRB (April 9, 2020), which generally extended the deadline to file tax returns and pay taxes to July 15, 2020. Pursuant to the Notice, any person with "a Federal tax return or other form filing obligation specified in this section III.A..., which is due to be performed (originally or pursuant to a valid extension) on or after April 1, 2020, and before July 15, 2020, is affected by the COVID-19 emergency for purposes of the relief described" in that section. Such "affected taxpayers" are entitled to the relief of the extended deadline.

The notice goes on to specify that the "filing obligations specified in this section III.A" include "[c]alendar year... partnership return filings on Form 1065, U.S. Return of Partnership Income...," which absent the Notice would normally be due on March 16, 2020. According, the Notice creates an ambiguity: Is the due date for calendar year partnership returns extended to July 15 because "calendar year partnership return filings" are specifically included on the list of specified federal form filing obligations entitled to relief, or does the due date for such returns remain at March 16 because they are not due on or after April 1, 2020? This ambiguity was noted shortly after the Notice was issued.

Unofficially resolving this ambiguity, the IRS website currently states, "Notice 2020-23 does not postpone any return filings that were due on March 16, 2020. If a fiscal year partnership or S-corporation has a return due to be filed on or after April 1, 2020, and before July 15, 2020, that filing requirement has been postponed to July 15, 2020." The website does not specifically mention "calendar year partnerships" like the Notice does.

As a practical matter, most partnership tax returns would have had extensions filed before March 16, 2020 anyway because the IRS guidance wasn't issued until after that due date. However, if an extension was not filed for your partnership's return, there is a good argument that binding guidance from the IRS granted an automatic extension to July 15, 2020.

What to Do After A Loved One Passes Away

When a loved one passes away, there are a number of legal and financial matters that must be attended to. One of the first steps the family must take is to make funeral and burial arrangements. Consider whether the decedent had a life insurance policy specifically for funeral expenses or a prepaid funeral plan. Death certificates should be ordered, which many funeral homes will help with. Banks, mortgage holders, credit card issuers, employers, government agencies (such as the SSA), utility companies, and the decedent's advisors should be notified of the decedent's passing. Dealing with large estates is beyond the scope of this post, but in those instances, there are a number of critical tax deadlines that should be discussed with an attorney.

An estate is a separate taxable entity recognized by the IRS; accordingly, the personal representative should obtain an employer identification number from the IRS. The personal representative should also file IRS Form 56 in order to notify the IRS of the fiduciary relationship. The benefit of filing this form is that any correspondence the IRS attempts to send to the decedent at the decedent’s address will be instead sent to the fiduciary, which can avoid problems that arise due to missing IRS deadlines. Other mail for the decedent should also be forwarded.

The decedent's final debts should be paid; note that many debts, such as credit card debts, can be negotiated and satisfied for less than face value. Publishing a notice to creditors can provide assurance that no creditors will come forward after the time prescribed by statute.

The most time-consuming process will likely be to gain custody of all of the decedent's assets and arrange to distribute those assets to the beneficiaries. Some entities with custody of the decedent's assets, such as a bank, may grant custody of the asset to the decedent's representative pursuant to a small estate affidavit; otherwise, probate will likely be required. If the decedent established one or more trusts during their lifetime, a process of trust administration will likely be required. Many assets, such as life insurance policies, pass to heirs outside of any will or trust pursuant to beneficiary designation. The decedent's beneficiaries will need to submit claim forms to the financial institution issuing such policies. One oft-omitted step is to see if the decedent has any unclaimed property being held by the state.

Whatever property the decedent did own should be listed in a detailed inventory, together with their fair market values. Tangible assets should be safeguarded until distributed to the rightful recipients. Once all claims against the estate have been paid and provision made for any final taxes or professional fees, the beneficiaries of the estate should sign a "receipt and release" indicating that they agree with the final distribution. Once the estate has been distributed and final expenses paid, the estate can be closed.

Utah Probate Update

In a prior post, I discussed a new law requiring personal representatives to send copies of most probate pleadings to the Office of Recovery Services via certified mail. I predicted that this new law would not remain unchanged for long, and I was correct. Utah H.B. 343 limits the court filings that trigger notice to probate petitions and places the burden on the court to send notice. This is a logical change in the law that reduces unnecessary paperwork and eliminates a pitfall for the unwary.

In addition, two new rules regarding probate contests have been passed. Utah Rules of Civil Procedure 26.4 adds clarity to the process for contested probate proceedings where a party makes an objection to an action arising under the Utah Uniform Probate Code. Most notably, the objector, now the defendant in the matter, must file a written objection with the court setting forth the grounds for the objection and supporting authority and mail the objection to the other interested parties. If the defendant fails to do this, the relief sought by the petitioner can be granted. Estate planning documents must generally be included in initial disclosures and, in the case of a guardianship or conservatorship, an evaluation of less restrictive options is now required.

Finally, Utah Code of Judicial Administration Rule 6-506 provides that "all probate disputes will be automatically referred by the court to the Alternative Dispute Resolution (ADR) Program," unless waived by the court, which has long been the practice in Third District. This new rule also clarifies the procedures for a pre-mediation conference. Probate contests are often complicated matters with difficult family dynamics, and these new rules provide some needed clarity.

Updating Estate Plans for the SECURE Act

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted on December 20, 2019. The Act made a number of changes to how retirement plans function, such as increasing the age at which retirement plan participants need to take required minimum distributions (RMDs) to 72, making it easier for small business owners to set up and maintain retirement plans, and allowing many part-time workers to participate in a retirement plan. However, the SECURE Act made an important change that impacts the see-through trust rules, which will require many individuals to update their revocable living trust agreements and estate plans.

Prior to the SECURE Act, non-spouse beneficiaries who inherited a retirement plan or IRA (i.e., descendants of the IRA owner) could qualify to "stretch" their inherited IRA and take RMDs calculated based on the descendant's life expectancy. This was generally a good thing because it resulted in the maximum deferral of income taxes, and trusts were drafted to help ensure that this stretch opportunity was realized where a trust was named as the beneficiary of an IRA. I discussed how trusts can qualify as beneficiaries of an IRA in a prior post.

The SECURE Act largely eliminated the law that allowed non-spouse IRA beneficiaries to stretch IRA distributions over their life expectancy. Now, most non-spouse beneficiaries must receive (and take into income) the entire IRA account balance within ten years of the death of the account owner, regardless of whether the beneficiary or a trust for the beneficiary's benefit was the named IRA beneficiary. There are good reasons why an account owner would want to name a trust as the beneficiary of their IRA, such as protecting an imprudent beneficiary from squandering an inheritance, including inherited IRA funds. This need still exists, but because of the SECURE Act, many trust provisions describing the trustee's obligations with respect to IRAs need to be changed.

Specifically, many trust agreements drafted before the SECURE Act provided that trust beneficiaries would receive their inheritances in a continuing trust known as as a "conduit trust" for IRA purposes. A conduit trust requires the immediate distribution of all funds withdrawn from the IRA to the individual trust beneficiary. The ten-year rule under the SECURE Act would, therefore, result in trust beneficiaries receiving all of the inherited IRA funds ten years after the account owner's death. A large, mandatory trust distribution at a fixed time during a trust beneficiary's life is inconsistent with what most trustmakers intend in naming trusts as IRA beneficiaries in the first place. Even worse, however, is that trusts that are not amended to function appropriately under the SECURE Act and which are designated as IRA beneficiaries could even result in the ten-year stretch being reduced to five years.

Most post-SECURE Act trust agreements will have beneficiary's continuing trusts qualify as "accumulation trusts," as opposed to conduit trusts, for IRAs paid to such trust, which would not require the immediate distribution of IRA funds. Post-SECURE Act trust agreements will also be drafted consistent with the SECURE ACT's exception to the ten-year IRA payout rule for individual beneficiaries less than ten years younger than the account owner and disabled and chronically ill individuals, who can continue to take distributions over their their life expectancy. Disabled beneficiaries in particular may benefit from inheriting an IRA through a continuing trust, but it is critical that such a trust be calibrated to the SECURE Act to ensure the lifetime stretch opportunity is preserved. In sum, now is the time to update your estate plan so that it functions properly under the SECURE Act.

SBA Loans for Small Businesses Impacted by COVID-19

According to the Small Business Administration, small business owners "in all U.S. states and territories" are currently eligible to apply for a low-interest rate loan if the business has suffered substantial economic injury due to coronavirus.

These loans are available through the SBA’s Economic Injury Disaster Loan Program. The loan amount can be for up to $2 million at a 3.75% interest rate for businesses and 2.75% for nonprofits with a term of up to 30 years, depending on the borrower’s ability to repay. These loans can be used to pay for debts, payroll, accounts payable, and other bills that can’t be paid because of coronavirus. Detailed information and online application forms are available on the SBA's website.

UPDATE: Since I published this post, information about the CARES Act has become available. Among other things, this act creates a new "Paycheck Protection Program," which authorizes forgivable SBA loans to eligible businesses. More information is located at this link.

Tax Credits for Paid Leave under FFCRA

The Families First Coronavirus Response Act (FFCRA) generally requires employers to provide up to two weeks of paid leave at regular pay rates for employees who can't work due to being sick with coronavirus, up to two weeks of paid leave at two-thirds of regular pay rates for employees who can't work due to a family member being sick with coronavirus, and up to ten weeks of paid leave at two-thirds of regular pay rates for employees who can't work because a child's school or child care provider is unavailable. Fortunately, all of an employer's costs for this qualified sick leave is designed to be offset by payroll tax credits.

By way of background, employers are required to withhold estimated employees' income taxes and payroll taxes (Social Security and Medicaid) from employees' paychecks and then match the payroll tax withholding and remit all of such funds to the IRS on (usually) a quarterly basis. The credit for paid leave under the FFCRA offsets the employer's portion of payroll taxes. However, the credits are refundable, meaning that if the qualified sick leave paid in respect of employees impacted by coronavirus exceeds the employer's portion of payroll tax for all employees, the employer will receive a refund from the IRS.

Regulations and forms for these new tax credits will be forthcoming. The most interesting aspect of these tax credits is that employers will apparently be able to retain income taxes withheld and both the employer's and the employees' share of payroll taxes up to the amount of qualified sick leave, rather than deposit such withholdings with the IRS and seek a refund. As I discussed in a prior post, these withholdings are considered to be held in trust for the IRS, and individuals who do not remit such taxes to the IRS will be personally liable for the entirety of such taxes. As such, employers should not utilize this method of reimbursement for qualified sick leave they pay without maintaining very careful records and waiting until final guidance is issued by the IRS. Trust fund taxes must never be used to cover any other expense.

Free, Simple Last Will and Testament Form

Below is a very simple form for a last will and testament that you are welcome to use for free, subject to this disclaimer and to the following: Executing a will does not guarantee that all, or even most, of your property will be subject to the will. A last will and testament will have no impact on property held in joint tenancy with a surviving tenant; retirement plans, brokerage accounts, and life insurance policies that have a valid beneficiary designation; pay-on-death bank accounts; and property titled in trust. A will alone will not allow your estate to avoid probate, and a will is only one component of a complete estate plan.

This will form is not appropriate for every circumstance, and only a competent estate planning attorney can provide advice regarding your particular situation. Under Utah law, this will form will be unenforceable unless it is (1) completed and signed by you and signed by two adults who witnessed you sign the will or (2) entirely handwritten and signed by the you. While witnessed wills are preferred, I have kept this will form short enough that it can be handwritten, in which case no witnesses are required. Once complete, you will need to deposit your will in a secure location or with someone you trust to carry out your will.

Last Will of
[your name]

1. This is my Will. I revoke all prior Wills and codicils.

2. I nominate [name of person you want to be in charge of your estate] as my personal representative. If they do not serve, I nominate [name of alternate] to serve in their place.

3. I might prepare a separate written list of items of tangible personal property and designate who I want to receive such items. If I complete such a list, I give such items to the persons designated therein as the recipient of each such item.
This tangible property list is an optional document that is separate from your will; if signed, the list becomes incorporated into your will upon your death. It is a flexible option because if you change your mind about who you would like to receive a tangible item, you need not execute a whole new will, just update your list.

4. I give the balance of my assets as follows: Only chose one option
Option One: All to my surviving spouse; otherwise, to my descendants, by right of representation.
Option Two: All to my descendants, by right of representation.
Option Three: Equally to the following persons who survive me: [insert names of the beneficiaries of your estate]

Paragraphs 5 and 6 are only necessary if you have minor children
5. I nominate [name of person you want to be guardian of your minor children] as guardian of any minor children of mine. If they do not serve, I nominate [name of alternate] to serve in their place.

6. I nominate [name of person you want to be in charge your minor children's assets] as conservator of the estate of any minor children of mine. If they do not serve, I nominate [name of alternate] to serve in their place.

I execute this document as my Will on the _____ day of _______________, 20____, at _______________, Utah.

[Your Signature]

Unless your will is entirely handwritten, two adults who witnessed you sign your will must also sign.


[Witness Signature]
[Witness Printed Name]

[Witness Signature]
[Witness Printed Name]

Higher FDIC Protection for Trust Accounts

As most people know, the Federal Deposit Insurance Corporation (FDIC) is a federal government agency that insures customers of insured banks so that even if the bank fails, the depositors do not lose their money. The basic FDIC insurance amount is $250,000 per depositor per insured bank per account category.

The account categories include single-owner accounts, joint accounts, revocable trust accounts, and entity accounts. In other words, a single depositor can multiply their FDIC coverage by spreading their deposits across a single-owner account, joint account, etc. Of course, coverage can be multiplied by spreading deposits across multiple banks as well.

One benefit of establishing a revocable trust and opening a bank account in the name of the trust is that the maximum FDIC coverage for a revocable trust account at a single bank is $250,000 multiplied by the number of unique beneficiaries of the trust. To qualify for this increased coverage, the account name must indicate trust ownership, the trust beneficiaries must be identified in the trust agreement, and the beneficiaries must be living persons or qualified charitable organizations.

Of course, such a trust account will also have the benefit of never needing probate to administer, and the successor trustee will easily be able to manage the account upon the death or incapacity of the grantor of the trust. Increased FDIC insurance coverage is one more benefit of establishing a revocable trust.

Real Property Transfer on Death

In a prior post, I referenced the trend in probate law of testamentary contractual arrangements becoming more common. One such arrangement that can be used to transfer real property is a transfer-on-death deed, which is available in any state that has adopted the Uniform Real Property Transfer on Death Act or a similar statute.

The URPTODA allows real property to be transferred almost like a brokerage account would be transferred pursuant to a beneficiary designation.  The law permits a property owner to execute a transfer-on-death deed naming another individual or entity that will take title to the property upon the owner's death. Such a deed is revocable during the owner's life, meaning that the designated beneficiary has no rights with respect to the property until the owner's death. To be enforceable at such time, the deed must otherwise qualify as a recordable, inter vivos deed, must state that the transfer occur upon death, and must in fact be recorded with the county recorder's office.

Under the URPTODA, a designated beneficiary may disclaim the real property that would otherwise pass to them under a transfer-on-death deed but need not take any affirmative action in order to succeed to ownership of the property. However, individual state laws vary on this point; in at least one state (Oklahoma), the designated beneficiary must affirmatively record an affidavit accepting such interest or the property will revert back to the decedent's estate.

The URPTODA offers a solution that is preferable to other informal mechanisms for avoiding probate, such as executing but not recording a deed (a "sleeping deed") or naming a non-spouse beneficiary as a joint owner of a real property. However, utilizing a transfer-on-death deed is inferior in almost every way to executing and recording a traditional deed to a revocable living trust. For a good summary of these relative drawbacks, see page 34 of a recent issue of the Utah Bar Journal, located here.  In short, the URPTODA provides a new alternative for transferring real property to an heir outside of probate, but it will rarely be the best alternative.