Estate Planning and Tax Lawyer Blog

There are valid reasons to have assets owned jointly between a husband and a wife. In Florida, one of them is for asset protection should one spouse (and one spouse only) be sued. However, it not necessarily a good idea to have a parent or grandparent add their child or grandchild to their account. Although the intentions may be good, the results can be disastrous.

Here are the some of the top reasons why you shouldn't add your child or grandchild as a joint owner on your assets:

1) If your child/grandchild has creditors, their creditors could come after the asset should there ever be any issues with payment.

2) If your child/grandchild gets divorced, then the ex-spouse could get an interest in the asset.

3) The child/grandchild has the right to take money out of the account, even without your permission.

4) If you should pass away, the child/grandchild does not have to share it with other family members. Further, if the asset is very large, the child/grandchild will have gift tax issues to deal with if they do want to share the asset.

5) Joint ownership can cause a fight between other family members. If you want the child/grandchild to get the asset upon your death, other family members may think that you wanted it to be shared and vice versa. It could also cause hurt feelings because one family member was picked over others.

Continue reading " Top Reasons to Avoid Joint Ownership " »

You will be hearing a lot about small businesses and having to give them tax breaks in order to increase the amount of jobs in the U.S. You hear this from both sides of the political aisle.

Recently though, the Treasury Department has redefined its definition of the "small business" and then did some research based upon the new definition. First, the new definition of a "small business" by the Treasury Department is "a firm that has combined income or deduction of at least $10,000 but not more than $10 million and one that operates in a businesslike manner."

Under this new definition, small businesses account for only about 17% of total business income. Further, this new definition would encompass 20 million owners, down from the old definition of 35 million. Of the new 20 million owners, only five million have any employees at all. This is the case with most businesses I set up for clients. Most of them are owner/operators and have no other employees except for a spouse or other co-owners.

Having stated the above, there are other government organizations that define small businesses differently. So when you hear the talk about tax breaks and other benefits for "small businesses" make sure you know what definition they are using.

Continue reading " Small Businesses and Taxes " »

Do you know how much you are worth upon your death? One of the first things I go over with a potential client are their assets. I need to gather all the asset information in order to properly counsel the client on their estate plan. However, it is usually a big surprise when the client finds out how much they are really worth.

Most clients, when you ask them about their net worth, only include their cash, investments and maybe their cars. Clients usually leave out two of their largest assets, their home (at least it was prior to the real estate collapse) and their life insurance. Clients do not add their homes and insurance to their wealth because it isn't a wealth that is readily available to them. The IRS though....they add everything you own to your taxable estate. Whether or not you can liquidate it today or years from now - that includes your life insurance and home(s).

It is important to review all of your assets as the ownership of some of them may be transferred in such a way as to legally decrease your taxable estate.

Continue reading " Do You Know How Much You Are Worth In The Eyes Of The IRS " »

I do a lot of business planning for clients besides setting up their estate plans. The most popular business I create for them is the Florida Limited Liability Company, Florida LLC. In order for the LLC to be respected under Florida law - most importantly by a Florida judge when it comes to a lawsuit, the following documents must be kept:

1) a current list of the full names and last known business, residence or mailing addresses of all members, managers and managing members.

2) a copy of the articles of organization and annual minutes and filings with the State of Florida.

3) copies of all tax returns for the previous 3 years.

4) copies of all financial statements for the previous 3 years.

5) copy of the operating agreement.

6) if no, operating agreement, then a statement showing all contributions made to the LLC with the amount of each contribution and who gave the contribution.

The above 6 items are crucial to prove the LLC is an existing LLC and are specifically called for in the Florida statutes.

Continue reading " Records To Be Kept For A Florida Limited Liability Company " »

I was reading a recent article relating to baby boomers and their estate planning. Right off the bat the article gave a statistic that shocked me. One in eight baby boomers will get Alzheimer’s after they turn 65.

If this statistic is true, then families of those affected will want to make sure that their parents have their estate plan in place. If you do not have your estate plan in place prior to having full Alzheimer's, then your family will have to pay an estate planning attorney to go to court to have a guardianship set up. This is not a fun experience for your family or the attorney. (For me at least they are not enjoyable)

To learn more about having your documents in place, please read "Sign A Healthcare Proxy, Living Will And Power Of Attorney".

Continue reading " Baby Boomers, Sign Your Documents Now! " »

CCH, a tax resource for professionals, released its estimates for inflation adjusted items for 2012. These are estimates only! The IRS will release the final numbers within the next few months.

Having stated that these are estimates - here they are:

Of special interest is that the 2012 Applicable Exclusion Amount for Gift and Estate tax purposes is expected to rise to $5,120,000. Currently they are $5,000,000 per person.

The annual exclusion amount is expected to remain at $13,000 for 2012.

The annual exclusion amount for gifts to noncitizen spouses is expected to go to $139,000 in 2012, up from $136,000 in 2011.

Following is the link to the CCH estimates for 2012:

http://www.cchgroup.com/wordpress/index.php/tax-headlines/federal-tax-headlines/cch-projects-inflation-adjusted-tax-brackets-and-other-amounts-for-2012/

Continue reading " CCH Releases Its Tax Estimates for 2012 " »

As I blogged about earlier, Florida has a new Durable Power of Attorney law that goes into action on October 1, 2011. Florida also has a new intestacy statute that becomes effective October 1, 2011 as well.

As a reminder, intestacy means you have passed away without a last will and testament and the state in which you live in, for me Florida, has therefore, written one for you. Most of the time this is not what you want-so please set up a last will and testament.

However, for those of you who do not, your family composition (spouse only, children only or blended family of some kind) will determine how your assets are passed. A fellow Florida attorney, David Shulman, published a flow chart that you may use to determine how your assets would pass in Florida if you do not leave a last will and testament.

Continue reading " REMINDER: Florida's New Intestacy Law Effective October 1, 2011 " »

Why am I blogging about a bill that reforms the patent system? Because the bill signed by President Obama disallows attorneys from patenting an idea which is deemed to be a "tax strategy".

Last Friday, the President signed a bill which prevents an attorney from patenting a "tax strategy." A "tax strategy" under the bill is defined as any “strategy for reducing, avoiding, or deferring tax liability.” The tax strategy provision applies to “any patent application that is pending on, or filed on or after” Sept. 16, 2011.

In recent years, a lot of attorneys were creating tax strategies and then patenting them in order to license the idea to other attorneys and increasing their own income stream.

Continue reading " President Signs Bill Reforming Patent System " »

For those of you who read my blog and live in Florida, a big change could be coming your way. In May, Florida enacted a new law which set up some new rules in regards to a durable power of attorney in Florida and whether or not it is valid in Florida. This law comes into effect on October 1, 2011.

The good news is that if you have a valid power of attorney prior to October 1, then your power of attorney is grandfathered in under the old rules. The bad news, a bank can now question the validity of your old document, made under the old rules, and make you pay out of pocket for the legal fees to have it reviewed. So please have your durable power of attorney re-executed under the new rules to ensure that it won't cost you more out of pocket in the end than it did in the beginning.

To read more about some of the new rules, go to the Business and Tax Lawyer Blog.

Continue reading " October 1st Durable Power of Attorney Law Approaches " »

The IRS is providing tax relief to the victims of Hurricane Irene. Certain taxpayers in New Jersey, New York, North Carolina and Puerto Rico will receive tax relief and other places may be added to the list after additional damage assessments have been made by the Federal Emergency Management Agency (FEMA). Certain tax filing and payment deadlines will be postponed until October 31, 2011. Corporations and businesses are included, even if they received an extension until September 15, 2011 to file their tax returns from last year. Individuals and businesses that had an extension until October 17 will receive the same extension. The relief also extends to those owing an estimated tax payment for the third quarter of 2011 which is usually due on September 15. Individuals should go to www.disasterassistance.gov for more information on disaster recovery.

Continue reading " IRS Provides Tax Relief to Victims of Hurricane Irene " »

It is a possibility that most clients do not want to think about - who would you want to take care of your children should you pass away? There are also two ways to take care of your children, emotionally and financially. Decisions decisions.

The person you choose to take care of your children emotionally should be someone who you trust to raise your children in a nurturing manner. This person does not have to be good with money at all but should be good with your children from an emotional standpoint. A lot of clients automatically want to choose their parents for this role. However, will your parents be able to raise your children? How old are they? Do they live in the same community? Just a few things to think about.

The person you choose to take care of your children financially needs to be a person who you can trust to pay all the bills in a responsible manner for your children. This person should not be a "yes" man necessarily. You want them to say yes to a good education not to a Porsche for a first car. This person can be the same person who will take care of the children emotionally but does not have to be.

Continue reading " Taking Care of Minor Children Upon Your Death " »

While businesses are outsourcing payroll duties, it is important for the businesses to remember that they are responsible for paying federal tax liabilities. This is very important for small businesses employers who do their own payroll. If you do not pay the IRS, they will come after you personally as you are the one responsible for the payment of the taxes.

The Internal Revenue Service has issued reminders due to recent litigation of those who have stolen funds for the payment of employment taxes. Deposit and payment of federal tax liabilities are up to the responsibility of the employer, even though payments are forwarded to a third party. If the IRS receives payment late or not at all, then the penalties and interest will have to be paid by the employer. The IRS recommends not changing the address of record to the third party increasing the employer’s ability to stay informed of tax issues. The IRS also suggests employers to select a payroll service provider that uses the Electronic Federal Tax Payment System (EFTPS). You can visit www.irs.gov for information on outsourcing payroll, payroll providers and EFTPS.

Continue reading " Tips for Employers Outsourcing Their Payroll " »

I've been blogging lately on Trust Protectors, what they are and what they can do. However, once you choose to use one, who should you choose?

Legally, you may choose anyone to serve as the Trust Protector. However, due to the powers given to the Trust Protector, you will most likely want to name someone who has expertise in the areas needed. For instance, if you wanted to modify the trust due to a change in the tax laws, you will most likely want to name a CPA or tax/estate planning attorney. For the Trust Protector to look completely unbiased in the decisions they make, you should probably pick a Trust Protector who is unrelated to you or any of the beneficiaries.

Continue reading " Who Should Serve as a Trust Protector? " »

It is important for students or parents paying tuition or other fees for students attending college to keep receipts for some possible tax benefits that may offset these costs. The benefits can usually apply to you, your spouse or a dependent you claim on your tax return.

The American Opportunity Credit has been extended for the 2011 and 2012 year. This credit is available for the first four years of post secondary education and can be up to $2,500 per eligible student for taxpayers whose modified adjusted gross income is below $80,000. Forty percent of the credit is refundable, which means you can receive up to $1,000. The qualified expenses can be tuition and fees, supplies, equipment, and course related books. You may claim a Lifetime Learning Credit in 2011 of up to $2,000 of the qualified expenses for a student attending an eligible education institution if your modified adjusted gross income is below $60,000. There is no limit on the years that you may claim the Credit for an eligible student. The tuition and fees deduction can reduce the amount of taxable income by up to $4,000 for 2011 even if deductions are not itemized. You can usually deduct tuition and fees for qualified higher education expenses if your modified adjusted gross income is below $80,000. If your modified adjusted gross income is below $75,000, then you may deduct interest that you have paid on a student loan used for higher education. You can reduce the amount of taxable income by up to $2,500 without having to itemize the deduction.

For each individual student you many only claim one of the credits in a tax year. You can choose different credits for different students if you pay college expenses for more than one student in the same year. Visit the Tax Benefits for Education Information Center on the IRS's website for more information.

Continue reading " Back-to-School Tips for Students and Parents Paying College Expenses " »

As I have stated before, a Trust Protector does give your estate plan much more flexibility after you pass away. But there are always drawbacks to giving flexibility to your estate plan.

Here are a few thoughts regarding the powers that you may give to a Trust Protector:
a. Grantor should be very careful in granting powers to the protector and should always have a complete understanding of the consequences of each power given to the trust protector.
b. Rarely a good idea to give the trust protector very broad powers to deal with every possible change in circumstances that may occur in the future.
c. Should anticipate the powers that will most likely assist in carrying out the trust purposes which would be better in the hands of someone other than the named trustee.
d. There are some powers that would be helpful in most situations that the grantor should consider.
e. Ex) Protector could be given the power to amend the trust to comply with new tax laws or to address any changes in the law or circumstances of a trust or its beneficiaries that would significantly change the tax treatment of the trust or its beneficiaries.
f. Some powers, however, such as the power to grant, expand, reduce or eliminate a power of appointment, the power to change eliminate or add provisions regarding the disposition of income and principal or the power to change beneficiaries should be looked at more closely.
g. Care should be taken to clearly define the purposes of the trust and to give the trust protector ample guidance as to what is expected and allowed and what is not.

Continue reading " Thoughts on the Types of Powers You May Give to a Trust Protector " »

Several clients, when I am reviewing their trust documents prior to signing them, ask me what a Trust Protector is and what is the purpose of them. A Trust Protector is someone who is either named or appointed in a trust documents to provide flexibility for the trust, specifically irrevocable trusts.

An example of where to use a Trust Protector is after your death, your trust becomes irrevocable. The assets are held in trust for your children but Congress passes a law which the trusts violate and causes a significant tax. A Trust Protector can come in and re-write the trust to conform with the new law. This would ensure that the beneficiaries would not have to pay the extra tax but the re-written trusts would still fulfill the grantor's intent.

The advantages of a Trust Protector is the flexibility it gives to the trust. The downside? You give significant power to someone to amend the trust.

Continue reading " What is a Trust Protector? " »

If you are among the many taxpayers that made a donation to a charity this year, then you may be eligible for a deduction for it on your 2011 tax return. The Internal Revenue Service has provided information for taxpayers about deducting charitable donations.

To deduct a charitable donation, the donation must be made to an organization that qualifies. You can check the IRS Publication 78, Cumulative List of Organizations, or simply as the organization if they are a qualified organization. Your charitable contributions may only be deducted if you itemize deductions using Form 1040, Schedule A. you can deduct cash contributions and the fair market value of more property that you donate.

If you received something in return, you are allowed to only deduct the amount that is over the fair market value of the benefit you received. It is very important to keep good records of any and all contributions. Only contributions paid during the taxable year are deductible. If you make a contribution for more than $250, then you need to have a bank record, a written acknowledgement from the organization you contributed to, and must include the cash amount. If you donated items that are over $500, then you must complete a Form 8283, Noncash Charitable Contributions, and include the form with your return. If you donated items worth more than $5,000, then you must have the items appraised and then complete Section B of Form 8283 and include it with your tax return.

Make sure to determine if the organization you donated to is one of the 275,000 organizations that lost their tax-exempt status because they did not file their annual reports for three consecutive years. Check www.IRS.gov to view the list of organizations.

Continue reading " Tips for Charitable Taxpayers " »

There are millions of letters and notices sent to taxpayers by the Internal Revenue Service every year, but do not worry. Many of the notices and letters can be dealt with easily. There are many reasons why the IRS sends notices to taxpayers. The letter will cover a specific issue about your tax return or account and will give specific instructions on what steps you need to take to satisfy the inquiry. When receiving a correction notice, review your return with the information in your letter. If in agreement with the correction stated in your notice, then no reply is necessary unless you are required to make a payment. If you are in disagreement with the correction the IRS made, it is important to respond to the notice. Write to the IRS why you disagree, include any documents you want the IRS to consider, along with the bottom tear-off portion of your letter, and mail it to the IRS address on your notice. If you have questions, you can contact or visit an IRS office. Remember to keep copies of any correspondence for your records.

Continue reading " Tips for Taxpayers Who Receive an IRS Notice " »