Estate Planning and Tax Lawyer Blog

The Manhattan District Attorney has opened an investigation into the handling of reclusive copper heiress Huguette Clark’s financial affairs and the actions of her longtime attorney and accountant.

The 104-year-old daughter of Montana copper magnate and U.S. Senator William A. Clark has been a resident of a Manhattan hospital for over 20 years. It is estimated that her fortune is worth $500 million, which includes a 42-room Park Avenue co-op, a 23-acre Santa Barbara, California, ocean estate she has not visited for more than 50 years, and a 52-acre Connecticut estate that her attorney put on the market last year for $24 million.

Three relatives of Clark’s – two nieces and a nephew – have also filed a petition asking a Manhattan court to appoint a guardian to oversee their aunt’s financial affairs. In a response to that petition, attorney Wallace Bock, who has been Clark’s advisor for more than 20 years, called the relatives “officious interlopers” and said that he has always abided by Clark’s wishes about how her estate is managed.

According to MSNBC investigative reports, the life of Huguette Clark is a mystery. She is said to be almost totally reclusive, and is visited only by Bock and her accountant, Irving Kamsler, who is a registered sex offender. Her relatives say that they have been prevented from visiting her, and charge that Bock has sold assets without her knowledge as well as profited from cash gifts and donations. There is reportedly no record of a will.

The Wall Street Journal’s Wealth Adviser section takes up the great estate tax debate with two points of view in an article entitled, What Should We Do With the Estate Tax?

Michael J. Graetz, co-author of the book, Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth who is currently a Columbia University law professor, is in favor of maintaining the estate tax. His argument is based on fairness – he argues that the estate tax just affects the small number of Americans who can afford it, and they should be willing to let go of some of their “windfall’ to support the government.

Ed McCaffery, author of Fair not Flat: How to Make the Tax System Better and Simpler and a USC law professor, is an advocate of abolishing the estate tax. He argues that estate taxes are nothing more than an incentive for Americans to “die broke”, that that those who work hard to earn their fortunes are being unjustly penalized for being successful. McCaffrey says that allowing people to keep what they earn is a moral issue.

Until Congress votes – which will now not be until November at the earliest, following the elections – the best advice on what to do about the estate tax is to keep informed and be prepared to act. You can also contact our Jacksonville estate planning law firm.

An American millionaire has left $8 million to an Australian wombat awareness organization, and with that bequest, he has undoubtedly raised awareness all over the world about the chubby, nocturnal, burrowing Australian marsupial.

According to a Forbes.com story, the man – whose family has requested anonymity – left his millions to the Wombat Awareness Organization (WAO), a non-profit organization that rescues and rehabilitates the Southern Hairy Nosed Wombat, after visiting the WAO a few years ago and being impressed by the work of the volunteers to save the wombats, which are teetering on the edge of endangerment.

WAO director Brigitte Stevens said she took the American – who was reportedly in the horse racing industry – to see wombats in the wild, many of which had mange, were injured or starving. Stevens said she was “blown away” by the bequest, but hoped that donations from other sources would continue to be made since she does not expect to see the first payment for another year. The bequest was made in eight annual payments of $1 million each.

Making a bequest to benefit a favorite cause is usually not newsworthy – people do it all the time. Charitable contributions both during your lifetime and after your death via a charitable trust can provide you and your heirs with tax breaks.

For more information, contact our Jacksonville estate and tax planning law firm.

If you have been named as a trustee for someone’s living trust, you may be wondering exactly what your duties will entail. If you are just distributing trust assets to the beneficiaries, your job will be different than if you are administering an ongoing trust, where you will be making investment decisions, filing tax returns, transferring assets and other duties that will probably require you to seek the counsel of an estate and tax attorney.

As a trustee, you will need to stay in touch with the executor of the estate (unless, of course, that is you). Following the trust owner’s death, you will need to:

• Obtain certified copies of the death certificate
• File the will with the probate court
• Make death notifications to the state Department of Health and Social Security Administration
• Identify and notify the beneficiaries
• Take an inventory of the trust assets
• Obtain a Taxpayer Identification Number
• Have the property transferred into your name as trustee
• Establish a system for keeping the trust records
• Obtain an appraisal for the assets of the trust
• Pay any outstanding debts

If the trust does not identify beneficiaries by name, but instead refers to them as “issue” or “children”, you should consult with a Florida estate planning attorney to find out exactly how Florida defines those terms.

If you became incapacitated because of an illness or accident, do you know whom you would choose to make health care decisions for you? More importantly, does this person know what medical decisions you want made for yourself in these circumstances?

If your answer is no, then you should speak with a Florida estate planning attorney to draw up a Florida Living Will and Designation of Health Care Surrogate.

A Living Will is a legal document that spells out your wishes and directives on receiving medical care in case you are no longer able to communicate those wishes. It describes the medical care you do – and do not – want to receive under certain circumstances and must be followed by the medical personnel who are taking care of you.

A Designation of Health Care Surrogate – also known as a Power of Attorney – names a person that you entrust with carrying out your health care wishes. Under Florida law, this person can be anyone except a witness to the Designation of Health Care Surrogate document. Many people choose a spouse, parent, child, sibling or other trusted relative or close friend to act as their surrogate.

What is important to remember in choosing a surrogate is that the person must be reliable and trustworthy, as well as someone who is willing to carry out your instructions, even if they face family opposition. Your surrogate does not need to live in Florida, but should be willing to travel if necessary to fulfill their duties.

With the uncertainty of 2011-2012 income tax rates, many Americans are paying close attention to their tax plans and are making preparations. The current tax rates are set to expire in 2010 and the proposed brackets could range anywhere from 10-39.6 percent beginning in 2011. Only single filers earning more than $200,000 and married couples earning more than $250,000 will be affected. If Congress does nothing, all rates will revert back and range from 15-39.6 percent. This will more than likely affect all taxpayers, even those in the lower brackets, and more of their income will be taxed at a higher rate.

Capital gains taxes are expected to increase in 2011. Currently, those in the 10-15 percent income tax brackets are not taxed on capital gains. Those that fall in the higher tax brackets are taxed at 15 percent. It has been contemplated that taxpayers who earn higher incomes will be taxed at an additional 20 percent on capital gains beginning in 2011. Therefore, taxpayers may want to consider taking any investment gains in 2010 at the lower capital gains tax rate.

In 2010, taxpayers can convert traditional IRAs or other qualified plans into Roth IRAs. Taxpayers have the option of either paying all of the income tax on the converted amount in 2010 or splitting the tax bill over the next two years. However, if the tax rates are higher in 2011-2012, then it may not be wise to spread the payments over the next two years. Also, many taxpayers are contemplating whether to maximize their retirement plan contributions in 2010. Currently, pre-tax dollar contribution limits are set at $16,500 for 401(k) plans and $5,000 for IRA or Roth IRA plans. There are catch up contributions available for each plan as well.

Finally, there is not currently an estate tax in 2010. It was repealed this year but is expected to be brought back in 2011. The 2009 rate was 45% for estates over $3.5 million. Next year, the proposed rate is 55% but will apply to estates of $1 million dollars or more unless Congress steps in and dictates otherwise. If Congress fails to act, many more taxpayers will need estate tax planning.

Continue reading " 2010 Brings Difficult Tax Decisions to the Forefront " »

In early June, we blogged about the new Florida Homestead Law that Governor Crist signed into law regarding the way a homesteaded property may pass to a surviving spouse.

That new law goes into effect on October 1, and will have a dramatic effect on the passing of real property to a surviving spouse and children:

Current Law: Husband with adult children from first marriage is married again to Wife 2. Husband dies without a will or estate plan. Wife 2 gets a life estate in the property (meaning she can live there as long as she lives) with the remainder going to the children. Wife 2 cannot sell the home without the permission of the children. Wife 2 has no ownership rights but is solely responsible for all taxes and upkeep of the property.

New Law: Husband with adult children from first marriage is married again to Wife 2. Husband dies without a will or estate plan. Wife 2 can now decide to take a life estate or 50 percent interest in the homestead as a tenant in common with the children. This must be done within six months of Husband’s death and is irrevocable. If Wife 2 decides she no longer wishes to live in the home, she can force a sale of the property and is entitled to half the proceeds.

If Husband wants to leave the property to his children, he will need to execute the proper estate planning documents to do so through a prenuptial agreement, postnuptial agreement or trust.

Some economics experts warn that Americans – particularly those under the age of 50 – should start preparing now for expected cuts in Social Security benefits, according to a recent New York Times story.

Because of the bad economy, Social Security will pay out more in 2010 than it takes in. According to the latest benefits report from Social Security trustees, it will be able to pay full benefits through 2037. If no changes are made to the program, it will only be able to pay out 75 percent of benefits through 2083.

Recently, House minority leader John Boehner (R-Ohio) proposed raising the age of retirement to 70 for those who are at least 20 years away from retirement. There have also been proposals to raise Social Security payroll taxes, cut cost-of-living increases and reduce initial benefits payments.

What this means for Americans in their 20s, 30s and 40s is that they will probably need to put more money away for retirement than they may have planned to, to offset any cuts in Social Security benefits.

One Boston University economics professor ran the numbers for the Times and found that if the retirement age was raised to 70, this would mean a nearly 20 percent cut in benefits.

If you are interested in developing a retirement plan that minimizes these kinds of potential risks to your financial future, contact our Jacksonville estate planning law firm.

New York Times writer Tara Siegel Bernard wondered how difficult it would be to write her will using an off-the-shelf will writing software program, and in doing so crafted a pretty good column about the do-it-yourself will process.

She tested four of the most popular will writing programs, and then consulted with an estate planning attorney to review her final drafts to see if there were any errors or obvious omissions. What she found was that in each case, there were both.

As we have counseled many times before, just because you can do something does not mean you should. The will writing software programs Bernard tested ranged in price from $19.95 to $91.95, and each featured a different set of bells and whistles to guide the novice through the process.

However, as Bernard notes, you don’t know what you don’t know...and when she consulted with her attorney, she found many potential problems. In one case, she had left it up to the state of New York (where she lives) to decide how she wanted to pay estate taxes because she didn’t know how to answer that question. And the software could only ask the question, not help her answer it.

In another instance, the attorney questioned how the software program defined descendants and pointed out that if Bernard wanted to leave something for grandchildren, there was no way to do that with that particular program.

The attorney also found several potential tax issues among all the programs – issues that a novice would be totally uninformed about unless sitting across from an estate planning attorney.

Her bottom line? To get your will right, get an attorney.

Assistant Secretary of the Treasury Michael Mundaca said that allowing the estates of people who died in 2010 to be taxed as if it was 2009 is “one of the options on the table” in talks between Congress and the Obama administration, according to a Dow Jones newswire story.

As the story notes, this would help some heirs who might have been exempt from the estate tax if the owner had died in 2009, but who now are facing capital gains taxes if they sell the inherited assets. While the no-estate-tax rule was great for some of the families of billionaires who passed this year, it has subjected more heirs of estates worth less than $3.5 million to higher taxes.

Why? Under 2009 estate tax rules, when heirs sold inherited assets, they owed capital gains taxes only on the appreciation of the asset between the dates it was inherited and when it was sold. Under 2010 estate tax rules, capital gains taxes apply to the full appreciation in value from the time it was acquired by the decedent.

While there are some limited exceptions, there are undoubtedly more people who would not have owed estate taxes under the 2009 rules who now face higher capital gains taxes under the 2010 rules.

Mundaca said that providing an option for 2010 heirs to revert to 2009 rules is one possibility lawmakers are looking at to fill the gap period. But, he said, “We have to work through all this stuff with Congress.”

If you have estate planning “stuff” you have to work through, contact our Jacksonville Florida estate planning law firm.

In a recent Forbes.com published article, by Deborah Jacobs, she recommends taking seven steps for coping with the 2010 carryover basis.

The carryover basis, for estate tax purposes, looks to what "basis" should be applied when determining appreciating assets and capital gains tax.

The basis for an appreciating asset used to be the value at the time of the grantor's death. Now, the basis is determined at the time the asset was obtained by the grantor. The change in capital gains tax that an inheritor would have to report on his or her personal income tax could be in the millions.

The seven steps below are recommended by Ms. Jacobs:

1. Have assets appraised.

2. Locate purchase records.

3. Delay selling appreciated assets.

4. Postpone distributions.

5. Extend paperwork deadlines.

6. Apply the basis allowance fairly.

7. Guard against an executor's added risks.

For more information about this article, please visit Future of the Federal Estate Tax.

Continue reading " 7 Recommended Steps When Dealing with Carryover Basis " »

In Florida, married couples enjoy certain protections on real and personal property when they take title in it together. The law actually presumes to hold most property taken out during the marriage as an estate by the entireties, unless the title or instrument states otherwise.

Tenancy by the entirety is only available for married couples and is a fancy way of saying that when one spouse dies, the other gets the property and vice versa. Basically, it says there is a right of surviviorship attached and the property cannot be divided. Each spouse owns the estate as a whole. Right of survivorship is also a feature of joint tenancies, but a joint tenancy can be terminated much easier than an estate by the entireties.

There are also protections in case one spouse tries to convey the property held by tenancy in the entirety to a third party. Tenancy by the entireties can only be terminated or downgraded to tenancies in common if it is mutually agreed upon by both spouses. The "innocent" spouse who was unaware of the conveyance is not bound by or liable to the conveyance.

Common examples where an estate by the entireties will terminate, include, when both spouses agree to co-sign on a mortgage or hold a joint checking account specifically as joint tenants as opposed to tenants in the entirety. Joint tenancies on property can be reduced to a tenancy in common if one spouse conveys his or her interest in the property, even without the other tenant's consent.

Continue reading " Married Couples and Property Conveyances " »

A study by Princeton University has found that the price of happiness for Americans is around $75,000 a year.

The study, which has been published in the Proceedings of the National Academy of Sciences, analyzed more than 450,000 responses to a daily survey from Gallup and the Healthways Corp. of randomly selected adults. It found that positive emotional states rose with annual income, but leveled off after the $75,000 annual income mark. The study also found that negative emotional states increased as income dropped below $75,000 annually.

According to a report on the study at UPI.com, the study’s authors – Angus Deaton and Daniel Kahneman of Princeton – said that, "We conclude that lack of money brings both emotional misery and low life evaluation; similar results were found for anger. Beyond $75,000 in the contemporary United States, however, higher income is neither the road to experienced happiness nor the road to the relief of unhappiness or stress, although higher income continues to improve individuals' life evaluations."

The authors noted that the data also suggests that the pain of illness, death and divorce is made worse by poverty.

To ensure that you have enough income for a happy retirement, contact our Jacksonville estate planning law firm about asset protection and retirement planning.

Statistics show that women clearly have a number of disadvantages when it comes to saving for retirement. Not only do women earn less than men – about 79 cents for every dollar earned by a man in the same job – they also are much more likely to take off time during their peak earning years to care for children.

In fact, studies have shown that women retiring today have 13 years of missed income as well as a $300,000 income loss over the course of their careers due to the disparity in wages paid versus what men earn. Because of this, they receive less in Social Security and other retirement benefits. In fact, a woman’s average monthly Social Security benefit is currently $263 less than a man’s monthly benefit.

Women live longer, too, so their retirement savings must last longer.

Financial experts agree that women need to start financial planning early and stay on top of their finances. A spouse’s illness or divorce can wreak havoc with a woman’s finances, so engaging an estate planning attorney to help you create a plan that will protect and grow your assets is essential to a secure future.

For more information on retirement planning and estate planning for women, contact our Jacksonville estate planning law firm.

While the economy has made it necessary for many Floridians to delay retirement, there are many who are looking for ways to ease into retirement – cutting back on hours or finding a part-time job that will allow them enough time to enjoy some of the activities they have long anticipated enjoying once retired.

A recent U.S. News & World Report article provides the following tips for entering retirement in phases:

Rework your schedule. Some employers actually have a phased retirement schedule for older workers, but most are designed by workers and managers themselves. Talk to your human resources manager about what might be available to you, including mentoring younger workers who can benefit from your experience.

Rework your pay. Fewer hours generally means less pay. Be sure you consult with your estate planning attorney or financial planner to determine how much of a salary cut you can afford and still maintain the retirement lifestyle you want in the future.

Check pensions. If you have a pension, make sure it will not be adversely impacted by cutting back your schedule.

Health insurance. If you do not yet qualify for Medicare, you should check to see if your company’s health insurance policy will still cover you if you work part-time.

Social Security. You can still work and claim Social Security benefits at the same time, but some of those benefits will be withheld if you earn too much. Go here to determine how much of your benefits might be withheld.

If you would like more information on transitioning into retirement, contact our Jacksonville estate planning law firm.

Can you divide your estate in any fashion you choose and leave it to whomever you wish? In Florida, the answer is no.

Florida law places restrictions on a decedent’s right to transfer property to a spouse and children. A surviving spouse has homestead rights as well as a right to an elective share, unless those rights were nullified via a premarital or post marital agreement. A life estate passes to the surviving spouse, with the remainder going to any surviving children.

If a surviving spouse is given less than 30 percent of the estate, he or she can exercise elective share rights to claim 30 percent of the value of the estate. If the decedent marries and fails to change his or her will, and is still married at the time of death, the surviving spouse is what is called a pretermitted spouse, which means they are entitled to at least half the estate.

If the decedent had children that were not the children of the surviving spouse, then those surviving children receive the other half of the estate. If the couple had children together, then the pretermitted spouse also receives an additional $60,000. If there were no children, the pretermitted spouse receives the entire estate.

If you would like more information on Florida’s inheritance laws, contact our Jacksonville estate planning law firm.

8. Dependents. Will you still be caring for aging parents in your retirement, or helping children who are not yet financially on their feet? If so, you will need to figure these expenses into your retirement plan. In addition, an estate planning attorney can advise you about the establishment of tax-saving trusts that may help you meet these needs.

9. Your estate plan. As 2010 has so aptly demonstrated, estate tax laws change and so engaging an estate planning attorney to assist you with keep your estate plan up to date and in line with your wishes is an important part of the retirement planning process. Creating a will, setting up advanced directives for healthcare and/or financial matters, establishing trusts to benefit heirs (or even pets!) while avoiding estate taxes can all be handled by an estate planning attorney.

10. Your retirement budget. Most of us would not embark upon an important journey without a road map, and a retirement budget is an essential road map for meeting your retirement goals. Consulting with your estate planning attorney and/or a financial planner to establish a budget that aligns with your retirement income and how you want to live in retirement will go a long way to ensuring a more healthy, stress-free retirement.

For more information on successful retirement planning, contact our Jacksonville Florida estate planning law firm.10 Things You Need to Know Before Retiring – Part 3 of 3

4. Plan for staying healthy. Baby boomers are changing the face of retirement, making it a more active and engaging time of life than ever before. Most of us know that for a retirement to be enjoyable, you need to stay healthy so planning for a healthy and fit lifestyle throughout retirement should be a goal as well.

5. Insurance needs. Unplanned – and uncovered – insurance expenses can totally derail your retirement plan, so you need to examine all your policies – homeowners’, auto, life, health, etc. – to be sure they dovetail with your retirement plans. If you plan to retire before you qualify for Medicare at age 65, you will need to have an individual health insurance policy in place and finding an affordable alternative can be difficult and, at the very least, take time. Plan for your insurance needs in retirement well in advance.

6. Know what Medicare covers. Visit www.medicare.gov to learn about Medicare benefits, what your monthly premium will be and any extra coverage you may need for the things that Medicare does not cover.

7. Social Security benefits. Visit www.ssa.gov/retire2/ to access the Social Security Retirement Planner. This tool will walk you through several scenarios so you can make an informed decision about the best time to apply for benefits. The longer you wait to apply, the larger monthly check you will receive, so it may be to your benefit to wait a few years to receive the maximum payout.

For more information on successful retirement planning, contact our Jacksonville Florida estate planning law firm.

With unemployment in Florida still in the double digits, some older workers who have lost their jobs during the economic crisis may be thinking more about retirement rather than finding a new job. Even those still too young to exit the workforce should think about retirement now – not just doing it, but planning for it.

The fact is, most Americans have no idea when or even if they can retire. In this three-part post, we’ll look at what you should be thinking about when it comes to planning your retirement:

1. How much money you will need to live on in retirement. In general, most experts agree that you should plan on using 70-80 percent of your current annual income for living expenses when you retire. To others, this figure seems high. The right answer is hardly the same for everyone, and depends on when and where you retire, what you plan to do in retirement, and other variables. Consulting an estate planning attorney to develop a comprehensive estate plan will enable you to come up with the figure that fits for you.

2. Sources of income. Once you figure out how much income you will need in retirement, you will need to identify the sources of that income – i.e., Social Security, IRAs, 401(k)s, pension plans, annuities, and so on.

3. Retirement quality of life goals. Most of us look forward to retirement as a time to enrich our lives, whether it is through spending more time with a spouse or other family, traveling, pursuing a sports passion, engaging in new hobbies and more. Write down all your personal goals for your retirement so you can be sure the funds are there to finance them.

For more information on successful retirement planning, contact our Jacksonville Florida estate planning law firm.

Abigail Disney, a great niece of Walt Disney, is speaking out on estate taxes. And believe it or not, she is all for it!

Estate taxes only affect 1% of American estates. They are reserved for the extremely wealthy class of Americans and those that inherit from these lucrative estates.

Ms. Disney has been to other countries where estate taxes are not enforced. She explains that these governments suffer extreme financial hardship and are not able to provide the common necessities to its citizens that we as Americans take for granted.

Although the estate tax is currently not in effect, she hopes Congress will reconsider and impose the tax as soon as possible. To check out more from this article, visit Mickey Mouse, the Estate Tax and Me.

Continue reading " Disney Heir Favors Estate Taxes " »