Estate Planning and Tax Lawyer Blog

Title XLII, Chapter 732 of the Florida Statutes governs intestate estates. Dying intestate means to pass without a will. A decedent's estate may be entirely or partially intestate. An estate is entirely intestate if there is no will declaring how to vest any property belonging to the decedent. An estate is partially intestate if there is a will in place but leaves out some property - this is why it is important to keep your will up to date. Fl. Stat. sec. 732.101-.111 proscribes the ways the decedent's property will vest to his or heirs after death.

If the decedent is survived by a spouse, the intestate share of the surviving spouse depends upon the presence of children, otherwise referred to as "descendants". If the decedent had no surviving descendants, the surviving spouse gets the entire intestate estate. If the decedent did have surviving descendants which are also the lineal descendants of the surviving spouse, the surviving spouse gets the first $60,000 of the intestate estate, plus one-half of the balance of the intestate. If the decedent had surviving descendants who are not lineal descendants of the surviving spouse, the surviving spouse gets one-half the balance of the intestate estate.

To see more on how Florida deals with intestate succession including other surviving heirs, adopted persons or persons born out of wedlock see Title XLII, Estates and Trusts, Chapter 732, Probate Code: Intestate Succession and Wills, ss. 732.101-.111.

It is important to have a will covering all your property because if you die leaving an estate, do not have a will designating how you wish to divest your estate and are not survived by any person entitled to your estate, the estate will escheat to the state - meaning the state will get your property and eventually be sold.

Continue reading " Florida Law Governing Intestate Estates " »

Prior to the 2010 Tax Relief Act, long-term capital gains and qualified dividends have been taxed at a maximum rate of 15%, with taxpayers in the 10 and 15% brackets having a zero person tax rate on this income. With the expiration of the Bush tax cuts, the long-term capital gains would return to a maximum rate of 20% and qualified dividends would vanish and be treated as income subject to a normal tax rate. The 2010 Tax Relief Act extends the 15% maximum tax rate for long-term capital gains and qualified dividends until the end of 2012. The lower capital gains rate will cost $25.9 billion and the lower qualified dividend tax rate will costs $27.3 billion to put in effect.

Due to the 2010 Tax Relief Act, the lower capital gains rate will cause fewer individuals to close deals or sell assets to lock in their rate. There will also be an extension of the 100% gain exclusion for the sale of qualified small business stock acquired at the original issuance between September 27, 2010 and January 1, 2012 and held for more than five years.

Continue reading " Capital Gains/Qualified Dividends " »

The lowest individual income tax bracket of 10% would vanish after the scheduled expiration of the Bush tax cuts. Due to the 2010 Tax Relief Act, the individual tax rates will remain in effect at the current levels for 2011 and 2012. The final act that was passed includes an extension of the lower tax rates for all taxpayers, not just individuals making less than $200,000 or those couples making less than $250,000. The Joint Committee on Taxation estimates that the cost will total $89.3 billion. For the next two years, there is certainty for individual tax rates. However, the tax cuts will be on the agenda again shortly after the 2012 election.

One area of tax planning that has seen a spark of interest is the Roth IRA conversion. Due to the tax rate remaining the same for the next two years, a retirement plan participant has more options available.

Continue reading " Individual Income Tax Rates " »

On December 17, 2010, President Obama signed the 2010 Tax Relief Act, extending the Bush-era tax cuts. With this new law in place, there is an once-in-a-lifetime planning opportunity that ends at the stroke of midnight on December 31st.

Generally, any transfers greater than $13,000 per year to generations younger than children are subject to the generation-skipping tax. The purpose of this tax is to prevent wealthy individuals from transferring assets to younger generations for the purpose of avoiding application of the estate tax at every generation. However, gifts made through December 31, 2010 will not be subject to the generation-skipping transfer tax due to the passage of the new law. Beginning January 1, 2011, this tax rate will increase to 35% and return to 55% in two years.

Continue reading " A Unique Opportunity from the 2010 Tax Relief Act " »

A “compromise” package has been signed by President Obama. The estimation of the 10-year cost of the Act is to be about $858 billion with most of the provisions of the bill sunsetting at the end of 2012. This means there is fuel for the fire already for the 2012 Presidential election.

With the background information provided, we will be posting a closer look at key provisions of the 2010 Tax Relief Act as it pertains to your income taxes.

Continue reading " Income Tax Provisions in the 2010 Tax Relief " »

Marriage may be complicated. Not being married is even more complicated.
Unmarried couples are not eligible for many of the same legal protections or advantages as married couples. However, the number of unmarried couples living together has jumped, leaving financial planners with the task to help these couples determine a fair way to share monthly expenses and, sometimes, big-ticket purchases. Also, the lack of legal structure in a breakup for unmarried couples leads those individuals to manage retirement-savings accounts differently.

Financial planning does not only involve the threat of a breakup, but tax and estate planning becomes more difficult for unmarried couples as well. An unmarried couple should make sure to work with a certified accountant and estate-planning attorney who understands the couple’s circumstances. Unmarried couples should also have proper asset titling, have health-care directives, document their wishes for their estates and draft wills.

“Unmarried couples shouldn’t underestimate the importance of documentation.”

To learn more about this article, visit The (Un) Marriage Penalty.

Continue reading " The (Un) Marriage Penalty " »

When you think of a will, most people of a certain age would probably picture a parchment scroll with old English lettering declaring the Last Will and Testament of the departed. And indeed, the will is a legal document with a long history, requiring only paper, writing instrument and witnesses to execute and become legally binding.

So does modern technology have a role to play in the creation of a 21st century will? Should you create a video will for your surviving heirs?

The answer is, it depends. A video will is when the testator – the person whose will it is – reads his or her will on camera. A video will provides the testator with a last forum for explaining their bequests, if such explanations may be necessary.

The main benefit of creating a video will is if the testator’s mental competence could potentially be called into question by heirs. In this way, a video will functions more as evidence of competence should that person’s “sound mind” be called into question in court.

However, you should be aware that a video will cannot replace an official paper copy, drafted by a knowledgeable attorney and signed by you and two witnesses. A video will alone is not sufficient to hold up in probate court.

If you are considering the incorporation of a video will into your estate plan for any reason, consult with your estate planning attorney before you proceed. It is important that your estate planning attorney is present for the taping of your video will, and that you consult with him or her beforehand as to the content of your video will.

Prior to the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation act of 2010, all the talk was that if Congress did pass a bill to deal with the estate tax, that the personal representative would have the choice to choose between the no estate tax/carryover basis rules in place this year or use the 2009 estate tax rules ($3.5 million per estate with a 45% tax rate for everything above and a full step-up in basis).

However, Congress, as always, is unpredictable and passed a law which still gives the personal representative an election. The election is to have the estate be under this year’s estate tax rules (or lack thereof) or be treated under the 2011 rules. The 2011 rules allow a $5 million per person exemption with a 35% tax rate and a full step-up in basis. Further, the 2011 rules allow any unused exemption to be carried over to the surviving spouse to be used upon their death. This allows for more planning to be done upon the second spouse’s death and also gives some flexibility to planning for blended families.

To learn more about the new estate tax rules laid out in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation act of 2010, please contact our Jacksonville estate planning attorney to discuss how these new rules could benefit you and your family.

The IRA Charitable Rollover was reenacted as part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (H.R. 4853).

The bill allows someone, who falls within the rules, to make a charitable donation out of their IRA without it being included as part of their taxable income, plus it counts as their required minimum distribution for the year. For 2010, the charitable rollover may be elected through January 31, 2011. For the 2011 rollover, the election must be made between January 1, 2011 and December 31, 2011.

To qualify, you must be age 70 ½ or older. The rollover election must be made by the dates above. The rollover must come from a traditional IRA, not from a Roth IRA, 403(b), 401(k) or any other retirement plan and cannot exceed $100,000 per year. Any amount over $100,000 will be included in your taxable income.

Who would benefit from this charitable rollover? Those who do not itemize their deductions, those whose Social Security income is taxable or those who have estate subject to estate taxes are just a few classes of people who would benefit from a charitable rollover.

To learn more about the IRA charitable rollover, please consult our Jacksonville estate planning attorney at Wood, Atter & Wolf to see if you would benefit from the IRA charitable rollover.

Last week, in the 11th hour, actually closer to midnight, Congress passed a tax extender bill for the President to sign. I will be blogging a lot over the next few weeks to give more details on the entire tax package as it introduces a few new concepts into the tax code, one of which is the portability of the unused estate tax exemption. So stay tuned….

If you have any questions in the meantime, please call our Jacksonville estate planning attorney to discuss how the recent tax bill will benefit you.

The estate tax was first enacted in 1916. Since then, the rates have varied and slowly faded away. In 2009, the estate tax applied to estates above $3.5 million in value, or $7 million for a couple, at a rate of 45%. The estate tax disappeared entirely this year due to 2001 Bush tax cuts, only to be scheduled to return in January.

President Obama signed a bill to extend the estate tax for two years at a rate of 35% that will be applied to estates above $5 million in value, or $10 million for couples.

To learn more about this article, visit Inheritance and Estate Tax.

Continue reading " Inheritance and Estate Tax " »

Pretermitted heir is a legal term that describes a person who would likely stand to inherit under a will, except that the testator (the person who made the will) did not know, or did not know of, the party at the time he or she made the will. Pretermitted spouses and children are governed under Fl. Stat. §§ 732.301-.302.

Pursuant to Fl. Stat. § 732.301, a surviving pretermitted spouse shall receive a share in the estate of the testator equal in value to which the surviving spouse would have received if the testator would have died intestate. However, there are 3 exceptions:
1. If a pre- or post-nuptial agreement has been made and the spouse has waived this right or a provision has been made in the agreement.
2. If the spouse if provided for in the will.
3. The will discloses an intention not to make provision for the spouse.

Pursuant to Fl. Stat. § 732.302, a child, born or adopted, after the testator made his or her will and the child has not received his or her portion by way of advancement, the child shall receive what he or she would have received had the testator died intestate, unless
1. It appears from the will that the omission was intentional, or
2. The testator had one or more children when the will was executed and divested substantially the entire estate to the surviving parent of the pretermitted child.

Continue reading " Florida Law Governing Pretermitted Heirs - Spouses and Children " »

For most people, ensuring that their assets are distributed according to their wishes is what drives them to visit an estate planning attorney in the first place.

A Trust is the primary document to provide instruction for the distribution of assets. There are, however, three other documents in your estate plan that deserve attention when you are spelling out the distribution of assets:

Your Will – besides your Trust, your Will is probably the most important document when it comes to the distribution of your assets. If you do have a Trust, it is likely that your assets are already owned by that Trust, and your Will simply describes how any assets not included in the Trust should be distributed upon your death. However, if your Will was created prior to the creation of your Trust, it could have conflicting language and you will need to have your estate planning attorney revise it to include a mention of your Trust.

Assignment of Personal Property – this is a document that transfers all your smaller property assets like cars, artwork, furniture and such into the name of your Trust so you avoid probate. You should review this document every few years with your estate planning attorney to update your list of smaller assets with recent purchases.

Personal Property Memorandum -- this is the document for giving specific property to particular people, for example, a particular piece of jewelry to a close friend or a collectible to a specific relative. This document can be handwritten, but it should be kept up to date and stored with your Trust documents. Even better to include it in the Trust itself.

Financial Powers of Attorney are documents that give your trustees the legal power they need to manage your finances in your absence. Usually, once you decide on the person or persons that will manage your money when you cannot, and who will inherit what when you die, you then have to lay out how all that is going to be accomplished.

The Trustees you have chosen will be responsible for administering your trust property exactly as you wish. In addition, there can be a trustee of your trust and an executor of your will -- who can be the same or different people.

Once you are no longer able to tend to your financial affairs, your Trustees are given this power in your Durable Power of Attorney, which essentially states that the people named as your agent have all of the permissions and powers they need to interact with financial institutions and professionals on your behalf. The list of powers in the Durable Power of Attorney document go into effect only when you have been declared incapacitated.

In addition, you may wish to execute a Nomination of Conservator -- a short document that does not give your agent any powers, but does tell a judge who you would like to make financial decisions for you in case you are unable to do so. Rather than expressly giving powers, the Nomination of Conservator is a document that can hasten a court procedure should you ever need a conservator of your estate.

The headlines are full of troubled people who received too much money at too young an age and are spending it in foolish or even self-destructive ways. So how do parents or grandparents ensure that the assets they pass on will be used wisely by young heirs?

One of the most helpful estate planning tools is an incentive trust, which allows benefactors to pass on wealth with some strings attached. For example, if you are a grandparent who wants to pass on wealth to grandchildren but want to be sure they have the benefit of a good education so they know how to invest and grow it wisely, you can set up an incentive trust that defines the circumstances under which your gifts will be distributed.

Perhaps you wish to encourage an entrepreneurial spirit in your children – setting up an incentive trust that distributes assets for starting a new business will help you foster that spirit and pass along your lessons of the benefits of hard work.

An incentive trust can also be used to distribute gifts tied to charitable works if those are values you wish to continue to instill in your heirs. It can be contingent upon anything – even marriage or having children.

Most parents have a desire to not only provide financially for their children, but to also see them enjoy satisfying lives as contributing members of society. An incentive trust can be exactly what a parent or grandparent needs to pass on both an inheritance and a solid set of values.

Family law practitioners agree that few things can cause an inheritance fight like a second marriage. So when you consider these statistics:

• 90 percent of Americans marry
• 50 percent of married couples divorce
• 70 percent of the divorced get remarried
• 60 percent of second marriages end in divorce

You can quickly see what that means in term of sheer numbers of families ripe for potential inheritance squabbles.

Financial planners and legal experts both agree that they are seeing more friction between adult children and their parents due to remarriage and mixed families. They also agree that to keep peace in the family requires both good estate planning and open communication

How can you avoid family friction and the potential legal battles that loom if you remarry? Obviously, there is no one solution that will fit every family, but the consideration of legal instruments like prenuptial agreements, postnuptial agreements and other estate planning tools can help you keep the family waters smooth and navigable.

Careful estate planning, however, is just half the equation. You must also be willing to share your estate plans with family members so you can deal with any potential negative reactions in advance. Doing so may save your heirs from spending a lot of time and money in court.

Joint tenancy was never intended to replace a will, but there are some people who believe that if they have a joint tenancy agreement that leaves all their property to a partner, there is no need for a will or further estate planning.

However, even though joint tenancy might help your heirs avoid probate, it also can create a number of other problems and is not a replacement for a will or estate plan.

The fact is that in setting up a joint tenancy agreement, you are giving away part ownership in your property and, once given, it is hard to get back. Many times, joint tenancy is set up by a parent for the benefit of his or her children. But those heirs now have rights that you cannot take back, and may choose to sell that property or lose it in a divorce or lawsuit.

In addition, owning property in joint tenancy with children will not minimize estate taxes—In fact, it could increase your taxes. And if you own property in joint tenancy with more than one child, they cannot leave their share of the property to their own heirs.

For spouses who own property in joint tenancy, there are also drawbacks. If one spouse becomes incapacitated, the other would not be able to sell or mortgage the property – which they may need to do to satisfy medical debt or cope with loss of the other spouse’s income -- without obtaining a conservatorship from the court.

While joint tenancy may be quick and somewhat easy to achieve, it is not the right solution to avoid probate. You should instead consult with an estate planning attorney to create an estate plan to protect your assets and your heirs.

While a properly drafted and executed last will and testament will suffice to transfer assets to your heirs and beneficiaries, it will not resolve problems with probate avoidance, estate taxes, or ensuring your choices are respected in the event of incapacity. To fully protect your lasting legacy, a Florida estate planning attorney can show you how to:

• Transfer assets from your estate while maintaining the control and benefit of the assets during your lifetime, and at the same time avoiding or minimizing the burden and expense of probate;

• Reduce exposure to estate taxes by means of a revocable living trust;

• Make sure that all assets are transferred into the living trust by means of the pour-over will;

• Ensure the guardianship of minor children to avoid the need for a formal guardianship proceeding;

• Prepare a life insurance trust that can either serve as a means of transferring assets outside of probate upon death, or as a fund from which estate taxes can be paid if they cannot be avoided altogether;

• Set up a durable powers of attorney to designate a trusted individual to make financial decisions on your behalf in the event of incapacity;

• Create advance health care directives to cover medical decisions, outlining your preferences for medical treatment and life support under extreme and terminal conditions and organ donation. At the same time, these documents can protect both you and your family from the difficulty and expense of a conservatorship.

The conservatorship process -- where someone is appointed by the probate court to assume responsibility for the property or the personal welfare of an adult -- is both invasive and expensive, and in effect represents the loss of that person's civil rights, usually on the grounds of mental incapacity. While it can be an effective tool for the protection of a vulnerable person's assets or physical well being, it can be one of the most painful legal procedures and should be used only as a last resort.

Fortunately, it is easy to avoid the need for expensive and burdensome conservatorship proceedings through effective estate planning:

• The execution of a durable power of attorney can save the need to appoint a conservator during a period of incapacity;

• The designation of an agent in an advance health care directive will achieve the same purposes as the appointment of a conservator;

• The designation of a successor trustee to serve during a period of incapacity under the terms of a revocable living trust also avoids the need for conservatorship proceedings.

If you have questions about Florida conservatorship proceedings, or would like to avoid the need for a conservator by providing for incapacity in your estate plan, contact a Florida estate planning lawyer.

Quite a few couples that have elected not to wed may well believe that estate planning is exactly the same for them as for married people. Regrettably, it is far from it, and that's why unmarried partners definitely need an estate plan.

Whether gay or heterosexual, unmarried couples don't have identical rights as married couples. Should you pass away with no will or trust, your assets will not be dispersed to your significant other, regardless of how long your relationship.

If you're unwed and your partner sustains an injury that requires someone to execute medical care choices, you will not be able to do this for them. Likewise, you do not have the right to obtain your partner’s healthcare information. If financial decisions are necessary during a time of incapacity, you lack the authority to do that without having a power of attorney authorized by your significant other identifying you as the agent.

Additional methods for you to provide for disposition of property on your death would be to have your significant other as the named beneficiary of a life insurance policy. Employee benefits and other retirement accounts like IRAs may be challenging because a number of companies do not permit you to specify a partner. You might have to identify your trust as the beneficiary and your partner as the named beneficiary of that trust. It is also possible to leave payable upon death accounts like bank accounts or investment accounts for a partner.

Having a living trust and all of the associated documents like Health Care Directives, Durable Powers of Attorney, and Guardians for the minor children make it possible to ensure that your partner gets your estate and that your children will be taken care of if anything should happen to you both.

Through proper estate planning, single partners can protect one another and still provide for the children they have together.

A good post a while back at CBS Moneywatch.com states that, typically, wives outlive their husbands by up to a decade. Sadly, the incidence of poverty for women older than 65 is over 12 percent, considerably more than for men within the same age group.

The key reason is that most of the couples’ financial resources will likely be spent during the last few years of the husband’s life on healthcare costs as well as long-term care.

What do you do? Follow this advice in the article:

Ascertain how much you will need to save for retirement in order to produce a dependable life-long income.

The person who has the larger salary history (generally the husband) will be able to maximize their Social Security benefits by not taking them until age 70 or beyond.

Plan for your 401(k) accounts and retirement savings to last until both of you are gone.

Have a good system for dealing with long-term health care expenses.

If one of you has a considerable benefit from a pension plan and you have a choice to elect a joint and survivor annuity, take it -- the majority of retired people outlive a lump sum payment.

Attempt to keep in top shape through employing healthy and balanced habits.

Make an effort to retire without having lots of debt – specifically, try to pay off your mortgage loan prior to retirement.

And finally, see an estate planning attorney to ensure all your plans are executed properly.

In these tough economic times, those elderly parents who have buttoned up their estate plan to leave everything to their children and grandchildren upon their deaths may want to think about loosening the strings a little before they go and receive the added benefit of saving on estate taxes as well.

A married couple can provide a gift of $26,000 per year to a child or grandchild with no gift tax due. In 2010, the number of gifts you can give as a couple is unlimited, but it is restricted to no more than $26,000 per calendar year per married couple, or $13,000 per year per spouse.

Generally speaking, the recipient of your gift will not have to pay any federal gift tax or income tax. And it shouldn’t affect your federal income tax either.

With many adults jobless and their children struggling as well, this could be a financial lifesaver for family members who need the help now, not when you’re gone. Even if the recipient is not jobless, the extra money can help fund retirement accounts or pay off debt that will result in a much better financial life for your loved ones.

Consult a Florida estate planning attorney for more strategies on helping your family through careful estate planning.

There are a variety of “Best Places to Retire” lists and websites, and CBS Moneywatch.com studied them all to compile a “Best of the Best” list when it comes to choosing where you want to live when you retire.

However, as the article notes, where you spend your retirement years depends on a lot more than just whether you like the ocean or the mountains. It depends on how well you have planned for your retirement and several other factors, including:

How many kids you have and when you have them. Older parents will spend more on raising kids today than those who started young, with college expenses conceivably carrying over into the retirement years. Those with large families also spend more rather than being able to sock money away for retirement.

When you begin saving for retirement. The earlier, the better is the guideline for retirement saving. Those who begin saving at 25 rather than 45 have 20 more years of growth to enjoy in retirement.

What you spend your money on now. If you like to spend your money on big-ticket items like expensive cars, boats or luxury vacations, that is less you could be saving for retirement. People who keep their debt low and bargain shop are statistically better prepared for retirement.

Your occupation. Chances are that higher earning professionals like doctors and lawyers can afford to put more money away for retirement in later years.

So what places make the Top 10 Best Places to Retire lists consistently? They are: Tucson, Arizona; Sarasota, Florida; Traverse City, Michigan; Ann Arbor, Michigan; Fairhope, Alabama; Kansas City, Missouri; Loveland, Colorado; Madison, Wisconsin; Portland, Oregon; Port Charlotte, Florida; Richmond, Virginia and Winston-Salem, North Carolina.