Estate Planning and Tax Lawyer Blog

If so, check out a recent poll taken of estate planning attorneys, CPAs and advisors from all over the U.S.

I took part in the poll and agree with the majority of those polled. I believe the estate tax will return at a $1 million exemption with a 55% tax rate for every dollar thereafter. How long it stays there I am not sure about. I think Congress will pass legislation which increases the exemption. However, there is an increasing thought that Congress will do nothing at all. By doing nothing, Congress will increase their income through estate taxes. The money is desperately needed, especially due to the fact that several billionaires have passed away this year with no estate taxes being due.

To learn more about where the estate tax could go, please consult our Jacksonville estate planning attorney.

If you are the parents of a special needs child – and with autism spectrum disorder (ASD) now affecting 1 in 91 American children, that number is growing – then the need to plan for how your child’s needs will be met after you are no longer available to care for them is critical.

A special needs trust – also known as a supplemental needs trust – can be set up to allow a disabled beneficiary to receive assets without losing their eligibility for government programs or benefits.

Currently, federal law prohibits disabled individuals from receiving needs-based assistance if they receive an inheritance of more than $2,000. However, by establishing a special needs trust, assets can be passed on to care for a disabled individual without that person being considered an “owner” of the assets, which would disqualify them for important programs like Medicaid.

In fact, special needs trusts are not for the basic support of the disabled individual, but are for important supplemental support like education, counseling, extra medical care beyond the basics and even recreation. These trusts supplement the basic necessities, much as you do as a parent, to improve the quality of life and ensure the continued comfort of a loved one with special needs.

If you are the parent or guardian of someone with special needs and want to know more about special needs trusts, contact our Jacksonville Florida estate planning law firm.

If there were ever a more compelling reason to see your estate planning attorney to update your estate plan, it would be hard to find, according to a recent column at Forbes.com that says couples who use A-B Trusts could be leaving a surviving spouse with no assets if one of them dies in 2010, the year (thus far) of no estate taxes.

The A-B trust is a common estate planning tool for married couples that splits a trust into two components – the “A” trust is assigned to the first spouse to die, and is funded with the greatest value of assets, which will suffer no federal estate tax on the first to die. The “B” trust is for the surviving spouse, and is funded with the remainder of the couple’s assets.
Upon the death of the surviving spouse, the assets in the “A” Trust go to the heirs with no estate taxes due.

However, according to the Forbes.com column, if one spouse dies in 2010 and the A-B Trust has been created using the traditional language -- "the largest taxable estate on which no federal estate tax is payable"—the “A” trust will contain all of the couple's assets and the survivor's trust will have no assets.

If you are concerned about how the evolving estate tax law could affect your estate this year or in the future, you should consult with an estate planning attorney.

A new study released by the Employee Benefit Research Institute in Washington, D.C., shows that 47 percent of American workers who are currently 56 to 62 years old will not have enough money for retirement. For those who are now 36 to 45 years old, 44 percent are likely to run out of money in their retirement years.

According to EBRI researchers, the length of time someone has been invested in a 401(k) plan is the main factor in determining if they will have enough money for retirement. However, the study also showed that most 401(k) balances are still relatively low, which means that some older workers will likely need to keep working in retirement and adding an extra impetus for younger workers to plan for retirement.

Researchers said that putting an extra five to ten percent of your income toward savings would in many cases solve this problem for younger workers.

The EBRI research also showed that higher income workers are not necessarily immune to future financial troubles in retirement, either. Researchers said that higher earners are adversely affected by nursing home costs later in life, and still face a significant, if smaller, risk of being unable to meet medical expenses and other basic costs in retirement.

Continue reading " Study Shows 47 Percent of Baby Boomers Do Not Have Enough Money for Retirement " »

The world of technology has effected another area of law, estate planning. Your online existence includes your email accounts, usernames, passwords, social networking accounts such as Facebook, MySpace, or LinkedIn, and more. Whether you pay bills online, shop, or even date, today, almost everyone has some sort of online account. What happens to these accounts after your death depends on the actions you take while living.

It is smart to have passwords to your online accounts only you know. However, this protective measure may pose problems at your death. For example, it depends on the provider of the service as to who owns your account when you die: Yahoo Mail will not divulge the decedent’s account information to their family without serious legal action; Google’s Gmail requires a copy of both the death certificate and power of attorney or birth certificate, as well as a e-mail sent from the decedent’s account – a not so easy task; and MySpace’s terms of agreement state that when you die, your profile dies.

Some steps you can take in order to avoid these types of obstacles:

1. Keep your passwords and usernames on a portable flash drive and pass the device onto a friend or family member at your death.
2. Companies, such as Legacy Locker, serve as a safety deposit box for passwords and other account information. These companies also provide personalized instructions on how to handle your online identity.
3. If you wish for your online identity to dissolve with you at death, an option is to do nothing and some accounts will be deleted by the providers as a result of inactivity on the account.

However, if you would like your online identity to continue after your death, it is important to plan for this as you would any other facet of your life. Planning your estate should include your online existence. An Estate Planning Attorney should be contacted so you can discuss these novel legal issues in order to ensure your interests and wishes are carried out after your death.

One of the estate tax proposals is by independent Vermont Sen. Bernie Sanders and three Democratic senators includes what some are calling a “billionaire’s surtax” of 10 percent as part of a 65 percent estate tax on estates of $500 million or more.

The Sanders proposal imposes a 55 percent tax on estates above $50 million and a 50 percent tax on estates with assets of between $10 million and $50 million. In addition, the 2009 exemptions rates for an individual ($3.5 million) and a couple ($7 million) would be reinstated with anything above that taxed at a rate of 45 percent.

The proposal wants all new estate tax rates to be retroactive to Jan. 1, 2010. The Sanders bill would also put a term limit of ten years on grantor retained annuity trusts and make other changes that impact gifting and estate planning.

The Senate continues to be gridlocked on the estate tax issue, brought about in 2001 by the Bush tax cut legislation that reduced estate taxes slowly before eliminating them altogether in 2010. When those tax cuts expire in 2011, the estate tax will return to its previous level, with only a $1 million exemption per estate and a 55 percent estate tax rate unless Congress acts this year to make changes.

A bi-partisan proposal put forth earlier this year by senators Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) would impose taxes on estates of more than $5 million with a top tax rate of 35 percent.

Keep in touch with your Florida estate planning attorney to learn how evolving estate tax legislation will affect you and your family.

The primary healthcare document in your Estate Plan is a Health Care Power of Attorney, also known as an Advanced Health Care Directive. It is in this document that you record your wishes and instructions for your medical treatment and the people you nominate as your healthcare agents, who will make healthcare decisions for you if you are no longer able to do so. Whenever you have a major change in your health status, your Advanced Health Care Directive should be updated.

You should also have a HIPAA Authorization as part of your Estate Plan. A HIPAA Authorization gives medical institutions and/or staff legal permission to share your health status with the people you’ve designated as your healthcare agents. Be sure to update your HIPAA every time you nominate new agents.

You may also wish to nominate a disability panel and include the information in your Trust. A disability panel is a list of people you have authorized to decide when you should be declared incapable of handling trust accounts. Although a court can make this decision, you can also name a panel of physicians, financial and/or legal professionals, loved ones, or a combination of any of these to determine your ability to make financial decisions relating to the Trust.

Continue reading " Florida Estate Planning: Health Care Documents " »

An auction is scheduled to sell some personal items of the late Lucille Ball and her second husband, Gary Morton. Morton and Ball were married until Ball's death in 1989, Morton later remarried. The items offered at the auction were consigned to Heritage Auction Galleries by Morton's widow, Susie Morton. Susie Morton is now battling the daughter, Lucie Arnaz Luckinbill, of Ball and her first husband and "I Love Lucy" co-star, Desi Arnaz.

Among the items up for sale are the couple's Rolls Royce, photos, sketches, love letters between Morton and Ball as well as some of the actress' awards.

Susie Morton sought a judge's ruling declaring the auction can proceed. Luckinbill stated she will go to court to try and stop the auction if the items she requested are not returned to her. Luckinbill is requesting the return of seven love letters, Ball's address book, some portraits and several lifetime achievement awards.

Cases like this happen all too often because people do not keep their will up to date. It is important after any major lifetime occurrence or event that you update your will to include in property that may be of value to your or your loved ones.

Continue reading " Heirs Argue over Lucille Ball Auction in Los Angeles, California " »

Florida’s unemployment rate in May was 17 percent higher than the national unemployment rate; currently, it stands at 11.7 percent. That’s a lot of Florida residents either looking for a new job or creating their own, not an unusual event in a time of high unemployment.

Being your own boss brings with it a lot of responsibility – including the responsibility to create an estate plan so your heirs are not left with a lot of your business’s unfinished business.

If your business is a sole proprietorship, the assets of the business (and its obligations) are your personal assets and obligations, so you need to plan for how those are dispensed once you are gone.

Obviously, the basics should be in place: a Will, a Living Will, Power of Attorney that appoints someone you trust to look after your affairs and Durable Power of Attorney for Healthcare to appoint someone you trust to look after you if you become incapacitated.

You should also discuss with a Florida estate planning attorney the establishment of a trust to handle your business affairs after you die, even if you’ll only use it for closing the business down and dispensing the assets.

Establishing trusts that will protect what you’re working so hard to build right now for your surviving spouse, children and other beneficiaries is also something you should discuss with an estate planning lawyer.

If you’re starting a new business, you’re doing a lot of planning. Just be sure you do some estate planning as well to protect it all.

George Steinbrenner, who was known to spend money on New York Yankee player contracts, died June 13, 2010 at the age of 80. Although Steinbrenner spent millions, his family just saved millions by passing in 2010. Details of Steinbrenner’s estate plan have yet to be released.

They saved so much money due to the fact that there is no estate tax in place in 2010. Congress tried to get a patch in place by the end of 2009 but were unsuccessful in getting anything passed. Congress will miss out on almost $15 billion this year due to their inactions. Remember though that the estate tax is scheduled to return in 2011 with an exemption of $1 million per person at a tax rate of 55% for anything above the exemption.

Steinbrenner is the fourth billionaire to pass away this year. Mary Janet Cargill (worth approximately $1.6 billion), Dan Duncan (worth approximately $9.8 billion) and Walter Shorenstein (worth approximately $1.1 billion) all passed away earlier this year.

Continue reading " Steinbrenner Family Saves Millions in Estate Taxes " »

A recent article in Forbes magazine rightly noted that, with the prospect of only a $1 million per estate exemption looming as a possibility for 2011, many more Americans need to have an estate plan in place, especially if they have children.

The report gave some good information on simple steps you can take now to protect your assets for your heirs, including:

Don’t die owning life insurance. If you die leaving life insurance to someone who is not your spouse or a charity, money from that policy will be subject to estate tax. Instead, put the policy in the name of the recipient and gift them enough every year to pay the premiums.

Put assets in each spouse’s name. Dividing assets (except retirement accounts) and putting some in each spouse’s name allows a couple to properly fund a bypass trust that will provide more benefits to the surviving spouse and children.

Maximize your gifts. An individual can give up to $13,000 every year to as many beneficiaries as he or she likes; a couple can gift up to $26,000 jointly to anyone every year. But before you give, make sure you have enough for your own retirement.

Pay medical expenses and tuition. You can pay tuition and healthcare expenses for anyone you want as long as you pay the providers directly. Such payments are not calculated toward your $13,000 annual gift limit, either.

Fund a college savings plan. You can fund a Section 529 college savings plan and earnings are exempt from federal and state income taxes as long as the money is used to pay tuition or certain college expenses.

Roth IRA conversion. Converting a traditional IRA or 401(k) to a Roth IRA will allow you to avoid having to take the annual minimum distributions once you hit the age of 70 ½, which can leave more for your beneficiaries. Plus, once you pay any income taxes on pretax contributions or earnings, all future growth is tax-free.

Need more help in preparing for the future? Contact our Jacksonville estate planning law firm.

On June 30th, the Senate passed a bill to extend the homebuyer’s credit which was passed by the House of Representatives the day before. On July 2nd, the bill received the President’s signature making it law.
The bill titled the “Homebuyer Assistance and Improvement Act of 2010” extended the timeline for the bill. Previously, the bill stated that the contract had to be entered into by the end of April 30th with the closing to take place by June 30, 2010. The bill extends the closing date to be prior to October 1, 2010.
The contract still has to have been entered into by the end of April 30, 2010, it just extends the closing date to any date prior to October 1, 2010. To learn more about other tax credits available to you, please consult a tax attorney.

A financial plan can cover savings for your child's education, purchasing a second home and retirement plans. What happens to your money after your death is also crucial to your financial plan. These are some key issues that should be addressed:

1. Wills. - I cannot be stressed enough, everybody needs one. Wills cover issues such as guardianship and let your decide who will care for children in the unfortunate event that you die while they are still dependent. If you and your spouse die, the state will decide who will care for your children regardless of your wished or intentions. Ever wondered what happened to your money if you died intestate (without a will)? Go to mystatewill.com to see how each state deals with your assets if you die without a will.

2. Living Wills and Medical Directives. - After you have a will in place, you need to consider the issues in the event that you are seriously injured or completely incapacitated. These devices express your wishes if you are placed on life support.

3. Special Needs Trusts. - If you are the parent of a mentally of physically challenged child, special needs trusts are a common and effective way to ensure he or she is cared for.

4. Estate Tax. - The estate tax is in an interesting state this year. If Congress does not act, the previous $3.5 million exemption will be decreased to $1 million when the tax is reinstated. This situation is perplexing to say the least. It is important to get legal representation to ensure the effectiveness of legal documents regarding your estate. An Estate Planning Attorney can also provide the best advice and guidance on these legal uncertainties.

Currently, there is no federal estate tax. Although it is coming back next year, there is great debate over what the tax will look like. Unless Congress acts, the estate tax will only exempt $1 million of a person’s estate—under the previous estate tax $3.5 million was the max amount to be exempt. And you’re not off the hook if you have an heir who passes in 2010, you may still have a federal tax liability on your inheritance. So, how are estate planning attorneys dealing with the legal uncertainties? They try to do as little as possible and when they absolutely have to do something, they just hope you did the right thing, suggests Steve Hartnett, associate director of education at the American Academy of Estate Planning Attorneys.

Estate planning attorneys are also facing equally confusing questions when asked to draft an estate plan for someone who is living now and plans on doing so, at least until 2011. To read more on this topic see Legal uncertainties over the federal estate tax.

With all the confusion over the current state of the federal estate tax it is wise to seek legal counsel. Drafting your own documents could result in some significant problems in the future. If the current legal uncertainties are perplexing attorneys who have been practicing in the field for decades, it is sure to confuse someone who has no legal background whatsoever. Contact an Estate Planning Attorney to ensure you avoid any future problems with your estate.

An article published by U.S. News & World Report reported the pros and cons of DIY estate planning. Obviously, lawyers are opposed to the do-it-yourself approach claiming this type of estate planning breeds mistakes—one size never fits all. Most agree that for people with complicated family or legal situations (e.g., multiple kids, multiple spouses or great wealth), professional health is the preferred route. However, the disagreement seems to occur more often over straightforward cases—a will for a single person without much money.

Chas Rampenthal, general counsel for LegalZoom, a Los Angeles-based company that sells DIY documents over the Internet, says that DIY sites are good for those people who cannot afford legal representation. LegalZoom helps people who would otherwise not seek any help at all—better to have something rather than nothing, according to Rampenthal.

On the other end of the argument, Deborah Jacobs, author of Estate Planning Smarts, gives the main reasons why legal representation is a must. First and foremost, you might not understand the terms. Not fully understanding what you are giving away or divesting could result in giving someone too much power and place that person in an position where they can take advantage of you. Or worse. Another risk is that if you rely on a self-written will to transfer your money to family members after you pass, the will could possibly contain many holes. A person is not likely to prepare to be pre-deceased by children, divorce, or the births of new children. Also, because the federal estate tax is in a present state of limbo, estate planning lawyers are pulling out their hair as they try to come up with strategies for their clients to deal with present uncertainties.

Jacobs also offers some tips to keep costs down: Read up on estate planning before you meet with an attorney. This will keep down the hourly rate by avoiding an introduction to estate planning. Also, tell your lawyer up front that you would like to keep costs down. To read more on this topic see Disadvantages to DIY Estate Planning.

Although there is disagreement on DIY estate planning, both sides agree on one thing: keep your will up-to-date. It is suggested to revisit your will at least once a year, whether it be a fill-in-the-blank form or an attorney-drafted document. Contact Wood, Atter & Wolf, P.A. to speak to an Estate Planning Attorney.

Purchasing long-term care insurance is a daunting task, even deciding to purchase long-term insurance can be scary. However, statistics show that 70 percent of us will need some sort of long-term care after we turn age 65. A percentage which will probably increase as we begin to live longer due to scientific improvements. Below is a list of things to think about when purchasing your long-term care insurance policy:

1) Make sure that the coverage includes assisted living, nursing home and even home care. Most clients these days wish to stay at home and long-term care insurance should cover this. Certain policies can even pay for training of a family member who you have designated as a caregiver.

2) Buy a flexible policy that allows you to have a choice of dollar benefits to fit your budget.

3) Make sure that you policy includes inflation adjustments. A policy that gives you benefits at X dollars today may not be sufficient simply due to the inflation of medical costs.

4) Make sure the policy calculates the waiting period in calendar days and not service days. A policy that calculates the waiting period in service days may cause you to wait longer for policy benefits if you do not need daily care.

5) Make sure your policy does not include a lot of red tape and legal hoops to jump through before the policy benefits kick in.

6) Seek out a policy that includes a cash benefit. This is especially important if you have a family caregiver as it will allow the family member to use policy benefits to pay for the small day-to-day things associated with your care.

7) See if the policy calculates its maximum using a monthly number rather than a daily number. Some days cost more than others and you will want a policy that uses a monthly maximum that will average out the more expensive days.

8) Seek professional advice. This is the most important item in this list. Seek out someone whom you trust and has a proven track record in dealing with long-term care policies.

To learn more about long-term care insurance, contact our Jacksonville estate planning attorney.

Houston billionaire Dan L. Duncan became the unwitting poster child for the 2010 estate tax lapse when he died in March, allowing his $9 billion fortune to pass to his children and grandchildren tax-free.

Had he died three months earlier, his estate would have been poorer by 45 percent – in other words, that’s $4 billion the U.S. Treasury did not collect because of no estate tax in 2010.

This year is the first since 1916 when there has been no estate tax. The estate of America’s first billionaire, John D. Rockefeller, was taxed at a rate of 70 percent upon his death in 1937.

The history of estate taxes in the U.S. goes back to the Stamp Act of 1797, which required a federal stamp on wills in probate. Revenues were used to pay off war debts. The Stamp Act was repealed in 1802, but several more sporadic estate tax laws were enacted over the next century to help finance wars. When the wars ended, the acts were repealed.

The Senate Finance Committee is currently working on a compromise to reinstate the federal estate tax, and it still remains clear whether or not it will be made retroactive and applied to estates like Duncan’s.

One thing most estate planning attorneys agree on: the Duncan family has a vast war chest to fund a constitutional challenge to any retroactive tax.

If you need more information about business exit strategy planning, contact our Jacksonville Florida estate planning law firm.

A Family Limited Partnership (FLP) provides four considerable advantages that are unavailable through any other asset protection vehicle. These advantages are:

Asset Shield – a FLP can be used to protect business and personal assets from creditor judgment since a creditor of a partner cannot seize assets of the partnership to satisfy a debt.

Deter Litigation – a judgment creditor cannot seize the assets that are protected in a FLP, so having an FLP in place discourages creditors from filing a lawsuit since they will not be able to collect on any judgment.

Reduce Income Taxes – a FLP can be used to reduce income faxes by shifting income to lower bracket family members through gifting of partnership interests. Gifting can be done to children or grandchildren over the age of 14. A nonprofit organization can also be included as a partner in the FLP to further reduce taxes.

Reduce Estate Taxes – by gifting limited partnership interests valued at $10,000 or less to children or other family members each year, you can realize significant estate tax savings since these gifts will not be included in your estate for tax purposes nor subject to gift tax.

If you need more information on a Family Limited Partnership or other asset protection vehicles, contact our Jacksonville Florida estate planning law firm.

The recent death of child actor Gary Coleman should serve as a reminder to us all of the importance of having an advance medical directive.

After suffering a major brain hemorrhage sustained in a bad fall, Coleman was placed on life support at a Utah hospital while doctors consulted with the woman they believed to be his wife – but who, it turns out, had been divorced from Coleman in 2008. She was no longer legally able to provide direction for his care.

Luckily, Coleman had drafted an advance medical directive, no doubt because of his long history of health problems. Medical authorities followed his wishes as laid out in that directive, and he was removed from life support and died shortly thereafter.

Advance medical directives include:

Living Will – a document that specifies what kind of medical treatments should take place in case you are incapacitated.

Health Care Proxy – a document that designates a person who can make health care decisions for you in cases where you cannot.

Durable Power of Attorney – a document that gives the power of attorney to others to make financial transactions for you in case you are medically incapacitated.

For more information on advance medical directives and Florida estate planning, contact our Jacksonville Florida estate planning law firm.

An Equity Reduction Plan (ERP) is designed to protect real estate or business assets, and can be a highly effective form of asset protection for those who have significant real estate holdings or own their business or professional practice (doctors, attorneys, etc).

Within the structure of an ERP, a practice called “equity stripping” can be utilized to move the equity or value of an asset to a protected position while still retaining original ownership. The advantages of this include:

• Avoids transfer of real estate ownership and the attendant property and transfer taxes
• Multiple properties can be protected without the need to create separate LLCs
• Protection of equity in a property from an inside liability claim
• Protection of cash flow
• Protection of assets used to run the business
• Leverage of asset equity to generate business or investment income

When creating an ERP, it is important to accurately valuate the underlying assets and to keep that valuation current through a regular review process. In the event of a claim or lawsuit, the lien of the ERP is superior to the claim of any creditor; any judgment proceeds go first to the ERP and only excess proceeds are made available to satisfy any judgment claim.

Need to learn more about protecting your assets through careful estate planning? Contact our Jacksonville Florida estate planning law firm.

An asset protection trust protects your assets against creditor attack, and there are a number of different methods to protect different categories of assets.

Typically, asset protection trusts are used:

• To keep asset ownership confidential
• To discourage litigation
• To protect otherwise unprotectable assets
• As an alternative to a pre-nuptial agreement
• As a way to diversify investment

An asset protection trust is usually established outside the U.S., although the assets themselves will normally remain in the U.S. under the indirect control of the person who has established the trust.

An asset protection trust is generally irrevocable for a set period of time. Once that time period has elapsed, the assets are returned to the owner of the trust or their heirs.

Several states have enacted asset protection legislation in an effort to compete with offshore trusts. These include Alaska, Delaware, Nevada, Utah and Rhode Island. However, since the legislation is so recent, the courts have not yet tested the true scope of this protection, so domestic asset protection trusts should be considered with that in mind.

For more information on asset protection trusts as well as retirement and estate planning, contact our Jacksonville Florida estate planning law firm.

As I’ve stated in previous blogs, the federal bankruptcy courts have been very inconsistent as to whether or not an inherited IRA is asset protected when the beneficiary files for bankruptcy. Two cases that came out earlier this year came out with two different answers.

In re Chilton, a Texas bankruptcy case, the court decided that an inherited IRA is not asset protected because of the different tax treatment of IRAs and inherited IRAs. In re Nessa, a Minnesota case, the court decided that an inherited IRA is asset protected because the account is exempt from taxation under one of the provisions of the IRS code specified in the bankruptcy code. Although the courts were deciding the same issue, they took different paths to get to different results.

On June 18, 2010, a bankruptcy court in Pennsylvania decided as the court did in Nessa and found that an inherited IRA is asset protected in bankruptcy. In re Tabor is the case. Tabor agreed with Nessa and also stated that Pennsylvania law also protects an inherited IRA for state court purposes.

There is no easy way to determine whether or not an inherited IRA is asset protected in bankruptcy due to the different results bankruptcy courts are reaching. Hopefully Congress can either amend the statute to make it clearer whether or not an inherited IRA is asset protected (right, get in line behind all of the tax reform, immigration reform and other items on their agendas) or the U.S. Supreme Court comes out, hears a case and gives a final ruling on the asset protection of inherited IRAs.

Until then, keep checking back to my blog as cases are published. To learn more about inherited IRAs, please consult with our Jacksonville estate planning attorney.