Estate Planning and Tax Lawyer Blog

A USA TODAY article notes that the number of unmarried couples who are living together rose 13 percent in 2010. Whether it was because of the bad economy, or because more young people are living together rather than marrying to avoid divorce, there are certain steps unmarrieds should take to protect their interests in case of a split.

If you and your partner decide you want to purchase a house, you should decide beforehand how you want to own it. The house will belong to whomever is listed on the title, even if both of you paid for it. One option that ensures both partners own an equal share is to own the house as joint tenants with right of survivorship, so if one dies, the other owns the home outright. However, if you split, you are both still legally liable for the mortgage. Another option is to draw up a trust or contract that specifies how the property will be handled if a break-up ensues.

If partners plan to be in a committed relationship over time, there are also estate planning issues to consider. Since the law does not recognize living together, unmarried couples should speak with an estate planning attorney to discuss wills, trusts and tax avoidance strategies that will ensure their assets pass as they wish.

Health care is also a consideration for unmarrieds. If your employer allows you to add a domestic partner to your policy, the IRS treats any of your partner’s benefits as taxable income unless your partner is a dependent. If you both have policies from your respective employers, it is probably best to maintain those separately.

It has been said that small business is the engine of the American economy, and even today, many of America’s small businesses are “mom and pop” start-ups – meaning that mom and pop are also husband and wife, which can put the entire business in jeopardy in case of a divorce.

One option to divorce-proof a business is a premarital or post marital agreement that spells out exactly what will happen to the business in case the owners divorce. Another option is a buy-sell agreement that can be triggered by events like a death or divorce. There are also trust instruments available to help business owners – married or not – divorce-proof their businesses.

For proper guidance on protecting business assets, contact our Jacksonville estate planning law firm.

A provision of the Small Business Jobs Act of 2010 that passed in late September will soon allow investors to move savings from a regular 401(k) to a Roth 401(k) if the companies they work for offer it.

With income taxes expected to rise, many financial advisers are encouraging clients to find ways to reduce their tax exposure. Roth plan money – either as a IRA or 401(k) – grows tax-free.

Those who elect to make the move to a Roth 401(k) will pay taxes now instead of later, which had not been available previously with 401(K) plans. Total contribution limits will remain the same, at $16,500 per participant annually, or $21,500 for those over the age of 50. However, the contributions can be divided between regular and Roth 401(k)s.

The law was passed as an incentive to keep employees investing for retirement in their company 401(k) plans. Companies must determine who is eligible to move to a Roth 401(k) under IRS guidelines.

Experts say that the new law will be especially beneficial for high earners who have a million or more dollars in their 401(k) plans, enabling them to stay in the 401(k) system but get the tax advantages of a Roth.

For more information on retirement and tax saving strategies, contact our Jacksonville estate planning law firm.

With the days of arranged marriages far behind us, many parents are concerned about how to protect assets they plan to leave their children from in-laws who may not be around for the long haul.

Suggesting a prenup to your child who is about to get married is usually met with resistance, so most parents don’t even broach the subject. Fortunately, there are a number of ways to shield your estate from those who marry – and may divorce – your children:

Irrevocable trust – this is a common trust instrument to pass assets to children. But married children must be careful not to contaminate the trust with marital funds – for example, paying taxes or insurance with marital assets – or else the trust is a bust.

Preservation trust – this can be used to shield assets from a soon-to-be spouse by having the child place assets they already own into the trust and naming someone other than their spouse as beneficiary.

Post-marital agreement – once the honeymoon period is over, it may be easier to convince a son or daughter to draw up a post-marital agreement to protect the family estate.

According to national studies, more than half of Americans will likely need long-term care sometime during their lives. There is more than a 40 percent chance that those over 65 will spend, on average, 2.5 years in a nursing home or other long-term care facility.

If you are counting on Medicare to pick up the tab, they will...for the first 100 days. After that, you are on your own. Which is why obtaining sufficient long-term care insurance will be important to many of us at the end of our lives.

However, the time to make that purchase is not when you need it, but about two or three decades before. The items that will determine how much you will need to invest in a policy include:

Your age. Experts say the ideal time to buy long-term care insurance is when you are in your early 50s so you have 20-25 years before you will need it. By starting earlier, your premiums will be lower.

Elimination period. This is the period of time you elect to wait until your benefits begin after you start receiving care. Most people choose to begin once Medicare is exhausted, but you can delay the start of benefits for as long as you want.

Benefit period. Since the average nursing home stay is 2.5 years, most people purchasing long-term care insurance choose to have a five-year benefit period. The length of time you choose will determine how high your premium will be.

Benefit amount. According to a 2009 MetLife survey, the average daily cost of a nursing home is $200-$220. When you purchase your policy, you will choose the daily benefits amount you elect to receive.

Inflation rider. Long-term care insurance policies have an inflation protection feature that helps your benefits keep pace with inflation. You want to be sure your policy provides enough coverage to make your daily benefits relevant 20-30 years from now.

For more information on long-term care planning, contact our Jacksonville estate planning law firm.

Many people have two mistaken beliefs when it comes to estate planning: first, that it is only for the wealthy; and second, that it is only important if you want to reduce estate taxes.

However, estate planning is much more than simple tax reduction. There are four essential pillars – or goals – to the estate planning process:

Financial Security. A secure financial future for you and your heirs is one of the major priorities of estate planning. The first priority is to ensure your own financial security, or there would be nothing to pass on to heirs.

Estate Management. Those who will benefit most from your estate may not be the ones who are the best equipped to manage it. Therefore, it is essential to utilize estate planning tools like trusts to ensure that the estate is managed properly for the generations to follow.

Estate Protection. Protecting the estate from creditors, lawsuits or even ex-family members can be accomplished through a variety of estate planning strategies, including limited partnerships, trusts, IRAs, annuities and liability insurance for businesses.

Estate Tax Reduction. Estate planning allows you to pass along estate assets with the lowest possible tax consequences to heirs. Most people do not realize the unintended tax burdens they may be passing along with inherited IRAs or other retirement accounts. An estate planning attorney is the best defense against unintended tax consequences.

A U.S. News & World Report article has outlined some of the biggest mistakes that couples make with their money and how to avoid them:

Not discussing finances. Probably one of the most common mistakes that couples make before living together is not discussing how they will handle their money. If you plan to live together, you should discuss how you will share household expenses – will the person with the bigger income contribute more? – as well as sharing a bank account, credit card accounts, etc. You should also lay out your current debt picture.

Pooling money too soon. It is usually best to wait until you are married before you mingle your finances in a joint account, or make large purchases like a home or car together. If you break up, you will have none of the protections that are afforded married couples when it comes to splitting assets.

Sharing debt. Adding someone’s name to a mortgage, car loan or credit card account also makes them legally liable for that debt. You should discuss how you would treat debt responsibilities if you break up prior to making a commitment to share debt.

Ignoring the “what if”. While you probably don’t intend to break up, it is a good idea to discuss the money “what if’s” in case you do.

For more information on asset protection strategies, contact our Jacksonville estate planning law firm.

The Department of Labor announced new regulations that will require companies providing 401(k) plans to employees to provide information on all fees and charges in plain language beginning in 2012.

Secretary of Labor Hilda Solis announced the new regulations, which she says will affect approximately 483,000 retirement plans of 72 million American workers. Solis said that currently, employees do not have access to enough information that would allow them to make informed decisions about their investment options.

Beginning Jan. 1, 2012, quarterly and online 401(k) statements must include information on plan administration expenses, including accounting and record keeping fees, as well as the charges that apply to the investment decisions made by the plan holder, including fees charged for loans. The fees and expenses must be expressed as a percentage of the assets held as well as a dollar amount for each $1,000 invested.

Performance data must also be provided on mutual funds, including one-, five- and 10-year returns. Individuals must be provided with benchmarks for each period so they can see how their funds are performing.

Plan owners must be provided with a glossary of common terms and their meanings so they can more easily understand their investment options and the fees and charges involved for each.

For help with understanding your best options for retirement, contact our Jacksonville estate planning law firm.

Victoria Duffy Hopper, the ex-wife of actor and director Dennis Hopper who recently passed away from prostate cancer, has filed a $45 million claim against his estate. At the time of Hopper’s death last May, he was involved in a bitter divorce battle and had reportedly drawn up a new will last January to exclude her from his estate.

Duffy filed the claim to cover expenses for raising the couple’s 7-year-old daughter, legal fees and a portion of the property owned by Hopper. She claims that she suffered a loss of over $2 million in earnings while she was married to Hopper, and she also wants $10 million for alleged defamation of character.

In turn, the late actor’s estate is suing Duffy for allegedly stealing valuable artwork from Hopper’s home during his last days. Hopper had filed an affidavit just prior to his death, saying that Duffy had taken paintings and sculptures worth more than $1.5 million from his home. The Hopper Trust has asked a Los Angeles judge to determine title to the artwork, and require the transfer of personal property back to the co-trustees.

According to the court filing, the Hopper’s pre-nuptial agreement stipulates “any assets purchased or acquired by the Decedent during the marriage are his separate property." The Hopper Trust filing says, "The Decedent funded his Trust with separate property assets, including those pieces of art and other personal property that has been misappropriated by Respondent as set forth herein."

If you need help to ensure your estate doesn't fall victim to lawsuits, contact our Jacksonville estate planning law firm.

To keep Social Security benefits intact for the next generation, President Obama said recently that he favors raising more revenue rather than cutting benefits or raising the age of retirement.

In a town hall meeting, the President said that he thought increasing the amount of income subject to Social Security taxes above the current level of $106,800 might be the best approach, although he did not rule out other options.

A report issued two months ago said that Social Security would likely exhaust its reserves by 2037. President Obama appointed a fiscal commission to weigh options for Social Security, including limiting benefits or raising the age of retirement. The bipartisan commission is supposed to make its recommendations in December on Social Security reform as well as reducing the federal budget deficit.

The Social Security Administration has announced that for the second year in a row there will be no cost-of-living increase for benefits in 2011. This is primarily due to the current low rate of inflation.

President Obama said he would ask Congress to approve a $250 rebate for those currently on Social Security as an “economic recovery payment.” Seniors, veterans and those with disabilities would be eligible for the one-time payment if it is approved.

In today’s litigious society, it is almost a certainty that doctors and surgeons will face a medical malpractice lawsuit at some time during their professional lives. The high cost of malpractice insurance alone attests to this fact.

What doctors and surgeons need to know is that even if you have outstanding malpractice insurance, if your personal assets are not protected, you may still be vulnerable. Structuring your business and protecting personal assets properly is the only sure safeguard for keeping your personal wealth and assets protected from a malpractice lawsuit.

Statistics show that a physician facing a frivolous malpractice suit has a one in four chance of losing. If personal assets are not protected, a plaintiff can go after them. This is why asset protection for doctors and surgeons, especially those who have a high net worth, is essential.

Some insurance may not cover certain malpractice lawsuits. If a legal judgment against a surgeon or physician results, the plaintiff in the suit can pursue both personal and business assets. Executed properly, asset protection plans can give doctors control over their personal and business assets while making them invulnerable to seizure.

However, the time to implement an asset protection plan is before a former patient files suit. If you are a doctor or surgeon, a Florida asset protection lawyer can help shield your assets from malpractice.

One of the most common mistakes that we as Florida estate planning attorneys see is incorrect beneficiary designation.  This is at the root of many unintended consequences that often lead to legendary family disputes.

An area where you need to be sure you get it right is for beneficiaries of qualified plans.  Qualified plans include IRAs, life insurance policies, annuities, 401(k)s and any other plan that qualifies for income tax benefits.  You need to be sure you have the proper beneficiary designations in place so these assets go where you intended.

For example, if you leave assets to your “living children” and one of your children pre-deceases you, their children will be cut out of any inheritance that may have eventually come to them through the deceased parent.  Most people would want the grandchildren to benefit, so the language must be very specific.

In addition, if you name your children as beneficiaries and they have not reached legal age to own those assets at the time you die and you have not named a guardian, the assets would then have to be administered by a court-appointed guardian, which is an expensive process and may not follow your wishes.  The solution would be to set up a trust, naming a trustee to take over until the children are at the age you designate to receive their inheritance.

For more information on beneficiary designation and Florida estate planning, contact our Jacksonville Florida estate planning law firm.

2010 not only ushered in the death of the estate tax, it also gave us the opportunity to take tax-free withdrawals on IRA investments by converting traditional IRA assets to Roth IRAs.

This year, income limits on conversions were lifted to allow anyone to convert from a traditional IRA to a Roth IRA and spread the associated taxes over two years (2011-12).

The benefits to converting:

You can take tax-free withdrawals in retirement from a Roth IRA; withdrawals from a traditional IRA are taxed as ordinary income;

You are not required to take retirement distributions with a Roth, and can let the money accumulate for your heirs.

Generally, the younger you are, the more it makes sense to make the conversion.  Seniors who are already in retirement need to examine if they will have enough time and resources to recover from the tax hit.

You can roll your 401(k) into a Roth IRA as long as you are no longer employed by the company where your 401(k) resides.  You will owe taxes on the deductible contributions and investment earnings when you convert.

To get all the facts and understand the tax consequences of converting from a traditional to a Roth IRA, you should speak with an estate planning attorney.

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

A new report by the American Institute for Economics Research (AIER) says baby boomers that apply for Medicare next year will pay more than those already in the system.

This disparity is the result of the little-known “hold-harmless provision” which says that those receiving Social Security benefits cannot be charged higher Medicare premiums if their benefits do not increase. And in 2011, they will not increase. But Medicare costs will. And under the law, Part B premiums must cover 25 percent of the program’s cost.

Those enrolling in Medicare for the first time in 2011 will reportedly pay a minimum of $24 a month more for Part B premiums than those who enrolled in 2009 or earlier. Higher income enrollees – individuals with annual incomes of $85,000 or more and couples that earn more than $170,000 a year – will pay even more.

AIER president Charles Murray said that he believes it is unfair for 2011 enrollees to pay more for the same coverage, especially at a time when older Americans are under great financial stress. He said, “Charging new enrollees higher Part B premiums for the same coverage raises serious ethical and legal questions.”

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

Barclays Wealth, a British wealth management firm, has issued a report entitled, How the Wealthy Are Redefining Their Retirement that provides retirement planning insights from interviews with 2,000 high net worth individuals around the world. Among the findings:

Many do not plan to stop working. Even with little or no financial reason to do so, many of the wealthy individuals interviewed plan to keep on working. This group – which Barclays calls the “nevertirees” – simply do not envision a future without tending to business, either part time or full time. Stopping is almost unthinkable.

Many think estate planning is challenging yet essential. The challenging economy and unpredictability of investments have conspired to make most of us – including the wealthy – look at our “golden years” in different ways. But however their plans for later life may vary, the wealthy believe in getting a firm grasp on their financial needs and how to fund them through careful estate planning.

A shift in attitudes. The report says that attitudes and expectations of the working older wealthy have not caught up with the fact that they are still economically productive – creating jobs, companies and tax revenues. While they should be regarded as a valuable resource, getting the “nevertirees” to eventually step down may be a source of concern by the corporate sector.

The United States Supreme Court has agreed to hear the appeal from the estate of Anna Nicole Smith in the latest dispute over the late celebrity’s inheritance from Texas billionaire Howard Marshall, who died in 1994 at the age of 89. Smith was then 26, and they had been married for 14 months.

Smith and Marshall’s adult son, Pierce Marshall, were in litigation over the inheritance for over a decade. Pierce Marshall died in 2006 and Smith died in 2007. Heirs of both estates continue to wrangle over Howard Marshall’s estate, which is worth over $1.6 billion. Smith has one legal heir, a three-year-old daughter.

Howard Marshall did not leave anything to Smith in his will or a trust. She claimed it was because of undue influence from his son, Pierce, and testified that Howard had promised her a share of his assets earned during their marriage. Results from ensuing court battles include:

• A Texas probate court denied Smith any money from the estate;
• A U.S. bankruptcy court awarded Smith $474 million;
• A federal appeals court in California dismissed the $474 million award;
• The U.S. Supreme Court ordered the Federal Appeals Panel in California to reconsider its ruling in 2006;
• The California federal appeals court ruled in March this year that Smith’s estate was not entitled to the $300 million it claimed was intended as a gift from Marshall.

In Manhattan, the United States Court of Appeals for the Second Circuit will hear oral arguments in early October in a suit brought by famous American novelist John Steinbeck’s son Thom and granddaughter against the estate of his late wife Elaine Steinbeck claiming that she engaged in a 30-year conspiracy to cheat Steinbeck’s blood heirs of royalties and copyright control of his famous works.

John Steinbeck died in 1968, leaving the bulk of his then-estimated $1 million estate to his third wife, Elaine. He left $50,000 to each of his two sons. His will directed that the future profits from his works go to his wife and an attorney. The will did not mention copyrights.

Under 1968 copyright law, a writer’s children and spouses had interests in the renewal of copyrights. Steinbeck’s sons sued Elaine in 1981, claiming she had renewed the copyrights in their name but kept the royalties. The suit was later settled.

When Elaine Steinbeck died in 2003, she left her estate – which included her copyrights for her late husband’s novels and screenplays – to her two sisters, her daughter from a previous marriage, and several grandchildren.

In 2004, Thom Steinbeck and his niece, Blake Smyle, sued the estate of Elaine Steinbeck, questioning whether she had exercised renewal rights for her late husband’s work properly and whether or not the heirs had been properly informed of their interests.

The suit alleged that Steinbeck “was an author who cared little for business matters, including his intellectual property,” which is why he did not make provisions for how it should pass. That suit was dismissed in 2009, and is currently the subject of the Manhattan appeal.

A Johnstown, Ohio woman wrote her own last will and testament in a fashion that made it hard to miss – on a large piece of plywood.

Marilyn Rhodeback, who died at age 73 last April, first wrote her will on the piece of wood in 1996. She was living in Florida at the time, and her husband had recently died without a will. Inspired by his oversight, she took a piece of shelving left over from a shelf she had built for a microwave oven and scribbled her last will and testament.

Over the years, she made a few changes, which she dated and had her sisters witness. The final version was witnessed in early 2010. Prior to her death on April 7, she asked her daughter to bring her will to the hospital. The daughter, Debra McHugh-Clark, called her mother when she couldn’t find the will. "Never in my wildest dreams did I think that an actual piece of wood was what she was talking about," McHugh-Clark said.

Probate attorney Larry Shafer took the plywood will to the Licking County (Ohio) Courthouse for probate. He noted that, “It was a first for all of us, but it was an original, in her handwriting, and the court considers it a legal document.”

If you are interested in taking a more conventional approach to writing your will, contact our Jacksonville estate planning law firm.

A Forbes.com personal finance columnist writes that October may be the best month to set up a GRAT (grantor retained annuity trust) or to loan money to a member of your family.

Why October? Because this month, the hurdle rate for a GRAT is just two percent, and the short-term loan rate for a family member loan is a measly 0.4 percent.

The purpose of a GRAT is to take an asset that is expected to appreciate and place it in a trust for a defined number of years. After those years are up, the beneficiaries of the GRAT receive the amount of the appreciation minus the hurdle rate, free of estate or gift tax. The timing is also right to fund a GRAT because Congress is considering various types of legislation that would put new restrictions GRATs – including a 10-year minimum and a 10 percent gift tax that comes due when the GRAT is established.

The October rate of 0.4 percent is for a family loan of less than three years. For family loans of more than nine years, the rate is still low at 3.3 percent. So if there is a family member out of work who could use a short-term loan, October is a good time to bestow one.

For more strategies to save on taxes, contact our Jacksonville estate planning law firm.

A study that researched the life-cycle patterns of financial mistakes found that we reach our best financial decision-making powers around the age of 53. Using a database measuring ten types of credit behavior, the study discovered middle-aged people make the fewest financial mistakes as compared with those older and younger.

According to the study profiled at Investopedia.com, the ability to make good financial decisions rises when we are in our 20s and 30s, peaks when we reach our 50s, and then falls sharply once we hit our 70s and 80s.

However, the study also says that by maintaining cognitive function, you can better your chances for continuing to make good financial decisions as you age, since it is declining cognitive function that robs us of our financial decision making abilities.

Maintaining cognitive function can be achieved through keeping physically fit, engaging in mentally stimulating activities, eating a healthy diet and staying socially active, according to researchers. Smoking, drinking, eating a high fat diet and lack of sleep all contributes to a decline in cognitive function.

Early financial planning also helps you make good financial decisions as you age. Engaging a trusted estate planning attorney to assist you with executing a will and other estate planning documents as well as implementing asset protection strategies can offset any of the negative effects of aging on making good financial decisions for you and your family.