Estate Planning and Tax Lawyer Blog

The IRS made an announcement in Revenue Ruling 2011-18 that interest rates will be lowered for the calendar quarter starting October 1, 2011. The rates will be 0.5% for the portion of corporate overpayment exceeding $10,000; 5% for large corporate underpayments; 3% for underpayments; and 3% for overpayments (2% in the case of a corporation). The interest rate is determined each quarter by the Internal Revenue Service using the Internal Revenue Code. The interest rates are calculated from the federal short-term rate during July 2011 based on daily computing.

Continue reading " Interest Rates Decrease for the Fourth Quarter of 2011 " »

While tax returns are the last thing on your mind while you are enjoying your summer, it is a good time to start planning for next year’s tax return. Taking the time to organize your records makes preparing your tax returns easier. It may also help you remember relevant transactions, prepare a reply to an Internal Revenue Service notice, or validate items if you are chosen for an audit. The IRS has a few things they would like to taxpayers to know about their recordkeeping.

Taxpayers do not need to keep records in any particular way. Taxpayers need to keep any and all documents that may be related to your tax return for three years. Some items that may be important to keep are bills; credit card and other receipts; invoices; mileage logs; canceled, imaged or substitute checks or any other proof of payment; and any other records to support deductions or credits you claim on your return. You should also keep records that related to property for at least three years after you sell or dispose of property. Taxpayers who are small business owners must keep all employment tax records for four years after the tax is paid or becomes due, whichever is later.

Publication 552, Recordkeeping for Individuals, Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses all have more information for taxpayers about recordkeeping. All of these can be found at www.IRS.gov.

Continue reading " Keep Good Records Now to Reduce Tax-Time Stress Later " »

For those individuals who are selling or have sold their home, the IRS has some important information to keep in mind. If you have own and used your house as your main residence for two out of the five years before the sale date, you are usually eligible to exclude up to $250,000 of the gain from your income ($500,000 for a joint return in some cases). If you have excluded the gain of another home during the two-year period before the sale of this home, then you do not qualify for the exclusion and the gain is taxable. If you are eligible to exclude the entire gain from the sale of your home, you do not need to include the gain on your tax return. If you are required to report the gain, you must include it on Form 1040, Schedule D, Capital Gains and Losses, but you cannot deduct a loss from the sale of your main home. You can determine the adjusted basis of your house by using worksheets provided in Publication 523. You may only exclude gain from your main home, which is the home you primarily live. You are also required to repay the first-time homebuyer credit if the property you purchased is no longer used as your principal residence within 36 months from purchase. The repayment is due the year the property is no longer your principal residence with your income tax return. Be sure that when you move that you update your address with the Internal Revenue Service and the United State Postal Service.

Continue reading " Ten Tax Tips for Individuals Selling Their Home " »

For those taxpayers who are among those that owe money to the Internal Revenue Service, there are a number of ways to pay with the new policies and programs that the IRS has announced. If you have received a tax bill for late taxes, it is advisable to obtain a loan to pay the balance of the bill rather than make installment payments. The IRS may grant additional time to pay based on your circumstances by filling out the Online Payment Agreement on the IRS website. Because credit card interest is most likely lower than the interest and penalties you will incur by the IRS, you have the option to pay your tax bill with your credit card. You may also pay by check, money order, cashier’s check, cash or electronic funds transfer. Although not advisable, you may work out installment payments with the IRS if you owe $25,000 or less in combined tax, penalties and interest. Even if you owe more than $25,000, you may still qualify; you are required to fill out Form 433F, Collection Information Statement, for the IRS to determine if you may qualify. If you do qualify for an installment agreement, then you will have to pay a one-time user fee. Consider changing your W-4, Employee’s Withholding Allowance Certificate, as well if you have a balance due.

Continue reading " Ten Tips for Taxpayers Who Owe Money to the IRS " »

The Internal Revenue Service has advice for soon-to-be-married and just-married individuals are rarely focusing on taxes after the wedding. First, it is important to notify any name change to the Social Security Administration so that when filing your next tax return the information will be correct. It is also important to report to the IRS if you have a new address by filling out Form 8822, Change of Address. Make sure to change your address with the United State Postal Service and report your name and address changes to your employer. Check the IRS Withholding Calculator to determine if you and your spouse will be placed in a higher income bracket. Be sure to select the correct tax form and choose the filing status that is best for you and your spouse to help save money.

Continue reading " Seven Tax Tips for Recently Married Taxpayers " »

While moving can be expensive, the Internal Revenue Service has tips on deducting some expenses if your relocation is due to new employment or a new job location. To deduct your moving expenses, the move have occurred within one year from the date you started work at a new location and the job location is at least 50 miles farther from your previous residence than your former job location. You are required to work full time for 39 weeks during the first twelve months after you have moved to the area of your new employment location, or 78 weeks during the first 24 months if you are self-employed. You may deduct your expenses before you have fully satisfied the requirement if your income tax return is due. You may deduct the expenses for lodging while moving to your new residence, as well as transportation expenses, the cost of packing, crating and transporting your personal property, along with the expenses of disconnecting or connecting utilities. Use Form 3903, Moving Expenses, to determine your deduction for moving expenses. You will also most likely have to include any reimbursement your employer may provide for moving expenses. Be sure that when you move that you update your address with the Internal Revenue Service and the United State Postal Service.

Continue reading " Ten Tax Tips for Individuals Who Are Moving This Summer " »

The Internal Revenue Service has provided free services and products to assist Spanish-speaking taxpayers at IRS.gov/expanol. Some features that you will be able to find this summer will be answers 24 hours a day, seven days a week. Tax forms and publications are available on the website to download at any time. Information on how to electronic file, as well as the status of a taxpayer’s tax refund, are available on the website. You can find eligibility for the Earned Income Tax Credit on the website. Getting assistance during financial difficulties can be found in “Centro Tributario para Asistir a Contribuyentes Desempleados” or by entering different keywords for your specific circumstance in the search box. Staying up to date on tax laws is easy by accessing the website, or even by using Twitter @IRSenEspanol.

Continue reading " Nine Cool Reasons to visit IRS.gov/espanol this Summer " »

If the headline does not get you, what will. I've blogged in the past about the term "portability" of the estate tax that was introduced in the 2010 tax bill passed last year.

The portability concept really is an estate tax break for married couples, especially second, third and fourth marriages. The reason is that married couples won't have to split their assets evenly amongst themselves to ensure they fully use both estate tax credits available. Prior to this year, a proper estate plan evenly divided a couple's assets between them so that they each would utilize the estate tax credits. The downside to this was that clients had to continuously monitor the value of their assets and redistribute their assets should one spouse's asset increase faster than the others. This task is much easier said than done as most clients do not review their estate plans on a regular basis.

With portability in place, you no longer have to divide assets, you just have to file a 706 upon a client's death. The 706 return is the estate tax return. Although no estate tax is required, the return puts the IRS on notice that the unused estate tax credit from the first spouse is being "transferred" to the surviving spouse so that they may use it upon their death.

To read more on portability, please read "How To Use The New Tax Break For Married Couples."

Continue reading " Exciting Tax Break for Married Couples " »

I just read an article talking about the best places to retire. This article focused on the cost of living and tax impact. There are many reasons why people retire in the locations they do. Weather, cost of living, health care availability and asset protection being a few of them.

When it comes down to it, it is a personal decision why you live where you live. Growing up in Ohio, a lot of Ohioans move to Florida due to the weather being better in the winter. It is as simple as that. Other clients though have built significant weather over their working years and have tax considerations and asset protection considerations to think of. I spoke with a client yesterday who was thinking of retiring and their biggest concern was asset protection - which is a state by state determination.

If taxes and cost of living are important to you and where you may retire, read Forbes' article "The Best Retirement Places."

Continue reading " Best Places for Retiring " »

It seems more and more individuals are filing income tax extensions on April 15th so that they do not have to file their income tax returns until October 15th. The October 15th deadline will be here before you know it.

I have spoken to several CPAs and they all agree that clients really should have all of their information to their CPAs within the next few weeks to give their CPAs time to create and edit the tax return. With children going back to school now, the tax return can easily get put onto the back burner. Make sure it does not as penalties and additional interest will start to accrue if nothing is filed by October 15th.

Continue reading " Time is ticking for taxpayers who filed for an extension " »

Teaching your children and grandchildren about money is one of the greatest gifts you can give.

And that instruction should go well beyond simply telling them that “money doesn’t grow on trees."

An article in the Wall Street Journal provides some good guidelines with The 15 Money Rules Kids Should Learn:

1. Spending money happens only after you earn it.
2. When kids start asking parents to drive to the toy store to buy some plastic whatnot, it’s time to consider an allowance.
3. The size of an allowance shouldn’t be so meager that your child is a pauper among peers, nor so generous that your child can easily afford all wants with little financial planning.
4. Good grades are expected and help around the house is simply the price of family life.
5. While 16 is generally the legal age of employment, encourage kids starting around age 13 to think of ways they can earn an income.
6. Guide and advise your kids about money, but don’t dictate.
7. Failure to balance the debit-card bank account monthly means losing access to the debit card for a week or more; failure to repay an entire month’s credit card balance means the loss of the card until the balance is fully paid off, plus one additional month.
8. Only 50% of the money put into a piggybank can be taken out to buy something.  At least half must remain inside the pig.
9. Children should have the right to screw up financially so they can learn from their mistakes.
10. When it comes to investing in stocks, kids should understand a company at such a basic level that they can draw a picture of the business model with a crayon.
11. You don’t need to be wealthy to begin teaching your children about the stock market.
12. If a child’s charitable interests lie outside your special interests, so be it.
13. Parents don’t have to save every last dime a child will need for college expenses.  You only have to save up to your ability or desire to pay.
14. One of the greatest gifts you can give your child is your own financial self-sufficiency when you’re old.
15. At some point, you have to tell your kids that the Bank of Mom & Dad is officially closed.

I have started using some of the above tips at home with my 10 year old.  He has an envelope that he keeps in his room which he puts his allowance into and any gifted money into and several times a year he will count it to see if he has saved enough money to buy something that he really wants.  Its a small step to take in teaching him responsibility. Afterall, before I know it he will be in college and then it will be too late to teach him.

Need to learn some of these lessons yourself? 

Continue reading " Teaching Kids About Money " »

I recently had a potential client ask me what "tenancy by the entirety" means. The answer is pretty simple. In Florida, if you own property jointly with rights of survivorship with your spouse, then you own it as tenancy by the entirety. There are several important points in the previous sentence.

First, I said "in Florida". Not every state allows tenancy by the entirety. Ohio, for instance, does not. Next, I said "jointly with rights of survivorship". You can own something as tenants in common with your spouse and own it as tenancy by the entirety. Finally and most importantly, I said "spouse." You must be married to own something as tenancy by the entirety. If you get divorced, then the tenancy by the entirety goes away.

Why is tenancy by the entirety so important? In Florida, it is important because if you are sued for anything but your spouse is not, then any asset owned as tenancy by the entirety cannot be taken from you because of the innocent spouse rule. Florida has decided that an asset cannot be taken from an innocent spouse. Maybe that is why so many Ohioans move to Florida?

Continue reading " What Does Tenancy By The Entirety Mean? " »

One of the biggest worries that some clients have is how to give their tangible personal property (jewelry and collectibles) to their children upon their death. Sometimes it is the personal property which causes family conflict upon death as those items have sentimental value to the family. Here are several solutions:

a) In Florida, you may leave a letter that states that certain personal property is to pass to a certain person upon your death. As long as the letter has 1) what the item is; 2) who it goes to; 3) dated at the bottom and 4) signed by the owner of the property. This letter may be changed at any time and does not have to be notarized or witnessed. However, your estate planning document must allow the letter to pass the property.

b) If you feel that your beneficiaries may fight over your property, give them each different colored sticky notes the next time they come over. Items that have several different colors on them, you know that could be an item that is fought over and deal with it now so that everyone understands who is to receive the property upon your death.

c) Do nothing and hope all goes well. (This option is chosen often unfortunately because "I'll be dead anyway")

Continue reading " How To Give Away Your Personal Property Upon Your Death? " »

When I sit down with a client to discuss and design their estate plan, one of the questions I ask is "Who would you like to be the personal representative for your Will?" Most of the time, the answer comes quickly. They usually name a spouse, child, parent or sibling.

However, that is not always the case in a small family. In that case, who can they turn to? The answer must fall within one of these two parameters: 1) The person named must be a family member or 2) Must live or do business in the State of Florida.

So can you name your mom who lives in California - Yes. Can you name you next door neighbor - Yes. Can you name your bank - Yes. Can you name your best friend who lives in Georgia - No.

Continue reading " Who May Serve As A Personal Representative In Florida For A Probate? " »

I have a lot of clients come in and say they have a Will. When I ask them to show me, they end up handing me their Living Will and vice versa. Why is there such confusion and what are they really?

Well first off, I believe the confusion comes from the fact they both have "Will" in their names. Some attorneys prepare estate planning documents for clients without really ever meeting with the client. Without the education of an estate plan and what each document does, the client will not know the difference between the documents.

A Will, also known as a Last Will and Testament, is a legal document that states how you want your assets to pass upon your death and who you want to be responsible for passing on the assets. The Will does not have any effect until you pass away. Whereas, a Living Will, is a legal document which says that if you are in a persistent vegetative state, do you want any life saving measures to be taken to keep you alive and whether or not you want nutrition and hydration to be withheld. Essentially, to allow you to die naturally. This document comes into play while you are alive but being kept alive purely by artificial means. A Living Will allows you to let others know what you want to have done in that situation so that you do not have to put the burden of the decision on someone else. In some instances, the lack of a Living Will can cause a legal battle, aka Terri Schiavo.

Continue reading " What is the Difference Between a Will and a Living Will? " »

You hear a lot about wills these days, even on radio commercials saying that you can create a will yourself online. I have seen several online wills come through my office and a lot of them are not valid here in Florida. So how do you create a valid will in Florida?

First, the will must be in writing. A will cannot be oral. The person creating the will must be 18 years of age when they create the will. The person, when they sign the will, must have the mental capacity to do so. A rule of thumb regarding capacity is that if the person knows who they are, who their heirs are and what they have, they are competent to sign the will.

A valid will must also have 2 witnesses to it. Without a witness, a will is not valid in Florida. Finally, although it is not a legal requirement, a will should be notarized so that when it is probated, the witnesses do not need to come testify that the person did in fact sign the will in their presence. The notarized statement is called a self-proving affidavit. Again, this is not required but it does help.

Continue reading " How to Create A Valid Will In Florida " »

Probate is a word that gets thrown around a lot by estate planning attorneys but do you really know what probate is?

Probate is the process by which your assets pass to your heirs with the court's oversight. To start a probate, you file a petition, a death certificate and the will with your local court. If you do not have a will then the state in which you live will provide one for you. HINT: set up a will, the state's will probably doesn't pass your assets the way you want them to pass.

Once the probate is opened, then the court oversees the payment of all debts and expenses relating to the estate and then the final distribution of assets. Depending on state law and complexity of the estate, this process can take anywhere from one month to several years. Probate, however, is expensive and public record.

Continue reading " What is Probate? " »

Although this time of year, kids maybe starting to get excited for school, it is also a time of the year some parents dread. Time to send your child off to college. You may have their books paid for, furniture bought, refrigerator stocked, do you really have everything they may need?

What is often overlooked is that your children are now legally adults. Once you turn 18, you legally are on your own. One of the side effects of becoming an adult, is that you are the only one allowed to make a decision for yourself unless you have set it up for other to make decisions for you. Although your child may not have a lot of assets, they still will have a bank account. Further, if they should become ill, they still will have to make health care decisions - assuming they are able to do so. Are these worries you have?

Continue reading " Reminder: College Kids Need Estate Plans Too " »