Estate Planning and Tax Lawyer Blog

Many business owners in Northeast Florida have significant assets but no estate plan in place or no plan on how to exit their businesses. This blog will focus on how to estate plan around your business and how to come up with a way to exit your business.

As far as estate planning for your business goes, a Living Trust is the best way to ensure continuity in your business. A Living Trust is a Grantor Trust for taxation purposes so it will qualify as a shareholder for an S corporation. A Grantor Trust is a trust in which the grantor retains certain powers over the trust (such as the ability to revoke the trust) so that all income is reflected on the grantor’s personal income tax return. For IRS purposes, the trust does not exist since everything tax-wise is reflected personally.

The Living Trust will say who is to take over as Trustee of the trust (owner of the business) should you become disabled or pass away. Once the trust is set-up, you will transfer your ownership of the business into your trust. For a corporation, that would be re-issuing new stock in the name of your Living Trust. If an LLC, you would re-issue your membership interests in the name of your Living Trust.

The reason a Living Trust is better suited for owning your business is for continuity of ownership. If you only have a Will-based estate plan, then your Durable Power of Attorney would control as to who can run the business. However, if your power of attorney is not accepted for any reason, then a guardianship would have to be set up to run the business. A Living Trust avoids all of these problems.

When it comes to leaving your business, there are only two ways: involuntarily or voluntarily. You really need to plan for both! Involuntarily means you leave via disability or death. Voluntarily means you leave when you want to via a sale to a third party, transferring the business to family or to key employees. Again, either way requires planning.

If your business transfer is through involuntary means, you can plan around it through a buy-sell agreement with your partners. What a buy-sell agreement does is if one partner becomes disabled or passes away, it forces the other partners to buy out that partner. This agreement is usually funded with insurance so that there is cash readily available for the transfer. If you do not have a partner, you may want to think about brining one in or training key employees so that if something happened to you, the business would not disappear over night.

If your business transfer is through voluntary means, you should answer the following questions to begin your planning:
1. How long do you want to remain in the business?
2. Who do you want to transfer the business to?
These two questions are vital to be able to plan for your exit of the business. If your answer to “when” is tomorrow, there is not much you can do. If your answer is 5 years, there may be some business restructuring we can do to maximize the value of the business and lessen the tax burden to you because of the sale. The “who” is just as important as the “when”. If to family members, you may want to legally lower the value of the business as much as you can. If to a third party, you will probably want to increase the value of the business as much as you can.

Continue reading "Estate Planning For Business Owners" »

Just as most clients in the Jacksonville Florida area, life insurance can be one of the biggest assets in someone’s taxable estate. Yes, I said the word taxable estate. I want to discuss some ways life insurance can play a role within your estate plan but also some of the general rules regarding life insurance.

The first general rule is that if you are the owner of the life insurance policy, the death benefit of the life insurance will be included in your taxable estate. A lot of clients come in and talk to me about their life insurance and say it passes tax-free upon their death and so they do not worry about it. They are partially right. It passes income tax free. However, it may not pass estate tax free. Since the value of the death benefit is included in your taxable estate, your $2 or $3 million policy, dramatically increases your taxable estate.

To get around this potential estate tax, a lot of clients who have a large life insurance policy transfer ownership of the policy into an irrevocable life insurance trust (“ILIT”) that is run by someone other than the trust creator. By doing this, you are taking the value of the death benefit out of your taxable estate and the value of the death benefit in fact does pass completely tax free. Seems simple does it not? It isn’t.

If the current life insurance policy has any cash value built up within it, the transfer of that policy into the trust is a taxable gift up to the cash value amount. To avoid the gift tax, you will have to fall within one of the five exceptions to the gift tax that I wrote about on Monday. The easiest way to avoid the gift tax is to have enough beneficiaries in the trust to eat up the cash value through the $13,000 per year exemption. For example, if you have $50,000 of cash value in the policy but you have 4 children, you will be fine.

Another way to avoid the gift tax is to just purchase a new life insurance policy. In purchasing a new life insurance policy, you do not have to worry about the cash value because there will be no cash value. The Trustee right from the outset purchases a new policy in the name of the trust. A lot of clients will go this route through the use of a second-to-die life insurance policy. Second-to-die policies are nice because they are cheaper per year since they are based upon 2 lives and not just one.

I wanted to add a few words on the cost of life insurance. If you have policies that are older than 10 years old, it would be a good idea to have your policies reviewed to see if you can get it cheaper. About 10 years ago, they revised the way life insurance was priced because people are now living longer. If you have an old policy, you may be able to get the death benefit cheaper or get more death benefit for the same premium price. Speak to your insurance professional for the review as it is free.

Why am I saying so much about life insurance? Life insurance is a very useful way to leverage your assets to pass more onto your beneficiaries in a tax efficient manner. The life insurance policy must be owned a certain way for it to pass completely tax free.

Continue reading "Life insurance and how it can fit into your estate plan" »

Well the end of the year is only a few days away. Although it may seem like it is too late to do anything from an estate planning standpoint, here are a few things to think about that you may be able to do in the next few days or get the fire started to get taken care of in the new year.

This is a great time of the year to make year-end gifts to your loved ones. Gifts of cash, stocks, bonds, portions of real estate, or forgiving debt on a family loan in an amount that doesn't exceed the annual gift tax exclusion, which is currently $13,000 per year per person. What is the purpose of these gifts? Some give the gifts to reduce their own possible estate tax obligations, others give gifts while they are alive so they can see their loved ones enjoy the gifts. The annual gift tax exclusion will remain at the $13,000 limit for 2012 as well. To explain the “$13,000 per year per person” think of it as you writing a check today to everyone who leaves church as it is clearing out. Then on January 1st, you do the same to the exact same people. The IRS allows this type of a gift without any taxes being owed. However, if you gift portions of real estate, make sure you have a good valuation done to backup the gift should you ever be audited in the future.

In addition, there are two types of unlimited "gifts" that also do not count against your annual gift tax exclusion:
1. Payments that qualify for the educational exclusion; and
2. Payments that qualify for the medical exclusion.
Types of payments that qualify for the unlimited educational exclusion are payments that are made directly to a qualifying institution as tuition for the education of an individual. What exactly does this mean? It means you can pay your child's college tuition in the amount of $80,000 and also give your child an additional $13,000 by December 31, 2011, and another $13,000 on or after January 1, 2012, without any federal gift tax consequences. You may also pay their tuition bill in 2012 and any successive years. But note that the payment must be made directly to the education provider and not to the individual receiving the education, and the payment must be for tuition, not for books, supplies, room and board, or other types of college expenses, otherwise the payment will be considered a taxable gift. It is very important that the money does not touch the beneficiaries hands and is given directly to the education provider.
Types of payments that qualify for the unlimited medical exclusion are payments that are made directly to a health care provider that provides medical care to an individual or to a company that provides medical insurance to an individual. That means you can pay for your grandchild's emergency surgery in the amount of $50,000 and also give your grandchild an additional $13,000 by December 31, 2011, and another $13,000 on or after January 1, 2012, without any federal gift tax consequences. Again, it is very important that the payment be made directly to the institution providing the medical care or company providing the medical insurance and not to the individual receiving the medical care or insurance benefit. If the payment for education or medical expenses touch the beneficiaries hands, the payment will be a taxable gift and will cause you to have to pay a gift tax.

Finally and most importantly, if you don't have an estate plan, then make it your new year's resolution to get one. Without an estate plan, you and your property will end up in a court-supervised guardianship if you become incapacitated and your property and your loved ones will end up in probate court after you die. Many folks (as high as 70% some polls say) do not have an estate plan. One reason is they do not want to talk about what happens when they die. Estate planning does not just deal with your death but also what happens to you when you are alive as well. Without instructions on how to dispose of your property, you could cause a large family dispute amongst your children because they are unaware of your wishes.

Continue reading "Year End Estate Planning Ideas" »

What happens when the person you were dependant on for every day support passes away?  Will you be left without any assets?  In Florida, the family allowance, discussed in Florida statute 732.403, comes to your rescue.  When your spouse passes away and their estate goes through the probate process, the law allows the surviving spouse and any dependent lineal heirs to claim a family allowance.  The maximum amount that is allowed to be claimed under the family allowance is $18,000.

The purpose of the allowance to ensure that a surviving spouse and any dependant lineal heirs, meaning parents, children and grandchildren, are not left without any resources during the probate process.  The probate process is a long process and the family allowance enables the family to have some money to live off of until the probate is closed.<

Continue reading "What Is The Family Allowance And What Is Its Purpose?" »

Many people wonder what happens to debt after death – not just their own debt, but those of their relatives as well. Will someone else be responsible for paying your debts after you die? And if you are the beneficiary of a parent or spouse’s estate, are you responsible for their debts?

Because debt collectors have become increasingly aggressive and intrusive in recent years, the Federal Trade Commission published a consumer alert last year that advises consumers of their rights regarding the debts of a deceased relative. The FTC has stated that a surviving relative usually has no legal obligation to pay the debts of a deceased family member.

The exception may be in the case of a spouse who co-signed a loan, but even then, a collection agency must go through the probate process to collect the debt. Florida is not a community property state, so debts that were not jointly incurred belong only to the person who incurred them. If that person dies, the debts generally go uncollected. And under Florida’s Tenancy by the Entirety, a married couple’s jointly held property is exempt from creditor action if only one spouse was responsible for the debt.

Continue reading "Debts After Death: Who Pays for Debts of a Decedent under Florida Law?" »

If you’ve experienced – or are about to experience – a big change in your life, chances are that change should also be reflected in your will.

There are two ways to change your will – by modifying it with a codicil, or by drawing up a new will.  It is usually easiest – and helps reduce any potential for confusion – to create a new will when something major happens in your life:

Marriage – both spouses should create new wills after they get married.  If the marriage brings stepchildren into the picture – and you want to include them in your will – you must specifically name them, unless you have legally adopted them.

Divorce – suffice it to say, if you’ve divorced someone, you probably don’t want them getting any (more) of your assets.  While a divorce judgment revokes a gift made to your spouse in your will in most states, you should make a new will after your divorce.  Not to mention to completely redo the beneficiary designations on life insurance and retirement plans.

Birth – you should establish guardianship for a minor child in your will.

Death – if someone you have provided for in your will dies before you do, a new will should be made to redistribute the asset.

In addition, you will need to create a new will if you have disposed of any property that you gifted in your will or if you change your mind about a beneficiary.

Continue reading "When Should You Change Your Will" »

Confused when your estate planner asks if you want the distribution to be per stirpes or per capita?  You are not alone.  Most people, including some attorneys, do not know the difference between a per stirpes distribution pattern and a per capita distribution pattern.  The very best way to explain it is with an example.

Assume Parent 1 has Child A and Child Z.  Child A has two children b and c and Child Z has one child y.  Under either a per capita or per stirpes distrubtion, when Parent 1 dies, Child A and Child Z each get ½ of the property.  Also under each system, if Child A predeceases Parent 1, upon Parent 1’s death, Child Z will still get ½ and children b and c will each get ¼ (sharing in Child A’s ½ share).

The difference between the two distribution patterns is shown if Child A and Child Z both predecease Parent 1.  In a per stirpes distribution pattern, children b and c will each get ¼ (sharing in Child A’s ½ share) and child y would get ½ (Child Z’s share).  In a per capita distribution pattern, children b, c and y each would get a 1/3 share.

Continue reading "Per Stirpes v Per Capita" »

When potential clients come into my office to talk to me about estate planning, some of them have certain goals in mind.  Others have no idea what they want or need while others have one goal but leave with other goals in mind.  This blog hopes to get you thinking about what you really want to accomplish in your estate plan.

Some clients’ goal is to avoid the probate process.  Probate here in Florida is a pain because it costs a lot of money, is public record and takes a long time.  Some clients come in just wanting to save money in estate taxes.  While that is not a big problem this year that will definitely change whether Congress acts this year or not. 

One frequent goal is to pass on a family business or a secondary residence that has been in the family for years.  That can easily be obtained with proper planning.  Finally, and probably the most frequent goal, is to make sure that the assets stay in the family and do not go to the in-laws in a divorce.

One goal that I usually have to bring up with the client is to make sure that they themselves are taken care of.  Clients get so caught up in worrying about everything else that they forget about themselves.  I feel clients need to be focused on the present while they are alive and well, when and if they become disabled and then finally what happens upon their death. No matter what your goals are, a proper estate plan can take care of all of them while taking care of you at the same time. 

Continue reading "Estate Planning Goals to Keep in Mind" »

As the late Al Davis once said about his beloved Raiders "just win baby", Al is still winning after his recent passing. For those of you who do now know who Al Davis was, he was the controlling shareholder of the Oakland Raiders, valued at around $761 million.

Without any estate planning in place, Al's family could have owed a hefty tax bill causing them to have to sell the team in order to pay the estate tax. Instead, it has been reported that Al did thorough estate planning and will be keeping control of the team within his family. It is unknown what exactly Al did for his estate planning but one could assume that he had one or more trusts in place for tax planning and probate avoidance.

In Al's final game versus the IRS, Al won.

Continue reading "Power of Proper Estate Planning Through the Eyes of Al Davis" »

A study conducted by Harris Interactive for Lawyers.com shows that around half of Americans have no estate planning documents in place.  The biggest reason for that was that many were deterred by the legal cost and erroneously believed that without a large amount of assets, they had no need to plan at all.

First, the legal cost of setting up an estate plan is, in most cases, going to be less than your heirs have to spend in legal costs.  Your heirs will have to hire an attorney to probate their estate.  The legal fees usually end up being much higher to probate the estate than they would have been to have a proper estate plan in place which completely avoids probate.

Second, most mistakenly believe also that your surviving spouse automatically gets all your assets, no matter how much or how little, upon your death.  Actually, only 16 states allow a surviving spouse to inherit everything.  Most states have some sort of split between the surviving spouse and the decedent’s children.  This can get messy with blended families.

Continue reading "Study Shows Most Americans Do Not Have An Estate Plan" »

Do you have a beneficiary that you want to leave something to but it may not be exactly what they are expecting?  If so, you may worry that they may fight their inheritance in court.  To eliminate this worry, many estate planners insert what is a called a "no contest" clause into your will or trust.  

A no contest clause is a statement in your will or trust that states that a beneficiary contesting or objecting to their inheritance will received nothing under the will or trust.  Essentially what you are telling the beneficiary is that if they throw a fit over their inheritance and attempt to fight it in court, they get NOTHING. No contest clauses are completely dependent upon state law.  In Florida, they are not valid.  Florida law specifically states that a no contest clause is unenforceable.

One way to get around this worry is to let your beneficiaries know before you pass away exactly what they are getting and why. This is make it clear to everyone why your estate plan reads the way it does and not cause any surprises to arise upon your death.

Continue reading "No Contest Clauses: What Are They, Are They Valid And If Not, Ways To Get Around That Hurdle" »

In Florida, there are requirements that must be met in order for a last will and testament will to be valid. The person writing the will, also known as the testator,  must be at least 18 years old and competent when he or she signs the will; the will must be written and witnessed by two individuals, both of whom must sign the will in the presence of the testator and each other; and the testator must sign the will at the very end of the will itself and in the presence of the two witnesses.

If a will is not executed according to Florida law, a probate court will not approve the will and the estate will be distributed under the state's intestacy laws, which means that the state has set up a will for you but usually will not distribute the assets according to your wishes. While Florida requires that a will be written, it does not have to be typed and can be handwritten. A handwritten will, sometimes referred to as a holographic will, is valid as long as it is properly executed under Florida law (two witnesses, signed at the end, etc.).

Continue reading "Requirements of a Valid Will in Florida" »

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" »

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!" »

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" »

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" »

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?" »

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?" »

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" »

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" »

For most individuals, there are several documents that make up an elder law estate plan to avoid probate, protect assets from nursing home costs, keep belongings in the family, save estate taxes, and select people to make decisions if you are disabled. The main instruments of a plan are: a revocable living trust or irrevocable Medicaid asset protection trust, inheritance trust, “pour-over will”, power of attorney, health-care proxy. You may also leave funeral and burial instructions and final directives for your family to inform them about all your important information. A memorandum of personal effects asserts which personal effects are passed to beneficiaries. A new deed is created to change title if real property is being transferred to the name of the trust. While having an elder law estate plan is important, it is also important to make sure you have it reviewed at least every three years to maintain accuracy and legality.

To learn more about this article, visit Protecting Your Future: Components of an elder law estate plan.

Continue reading "Make Sure to Create an Elder Law Estate Plan" »

You do not have to be rich or a celebrity to want your pet taken care of after you are gone. Estate planning for your pet has increased and at least 45 states allow for pet trusts. There are also retirement homes for your pets after you have passed away, as well as attorneys that specialize in pet trusts. There are resources available. Several books and websites have been dedicated to educate pet owners about setting up a pet trust. Some veterinary schools offer estate planning options like placement in a home or lifetime care for your pets. It is very important that the pet trust be written so that the funds and pets can be turned over to the designated facility or caregiver because the need is immediate. Some pet owners leave money to the individuals that will be caring for the pet to ensure the animal will not become a financial burden. However, greed sometimes gets in the way when a large amount of money is involved. Be sure to think carefully before deciding who will be the caretaker of your beloved pet.

To learn more about this article, visit Estate planning: Who will care for your pet?

Continue reading "Estate Planning for Your Pet " »

A recent Forbes blog post titled "Where Have All the Estate Planning Lawyers Gone?" seemed to say that a lot of estate planning practices have gone away since the passage of the December 2010 tax bill which raised the estate tax exemption to $5 million per person. However, I have not found that to be the case. The amount of clients I have seen has actually increased since the passage of the bill.
One reason for that I believe is that some clients were in a wait and see approach to see what Congress would do. Another reason is that the new bill allows some clients to do some charitable planning which they've wanted to do for years. Finally, I have never made saving on estate taxes the biggest reason to do estate planning. For me, estate planning is about asset protection and disability planning more than saving on taxes. I want to make sure that a smooth transition takes place upon the disability or death of a loved one.
So where have all the estate planning lawyers gone? The answer is no where...we are here waiting to help you and your family plan for the future.

Continue reading "Estate Planning Lawyers, Where Have They Gone?" »

It is shown by surveys that women still follow men when planning for retirement. It is very important for married couple to make retirement-planning decisions with the purpose of leaving the spouse with the longer lifespan in good shape financially after the other passes away. The surviving spouse usually suffers a permanent decrease in his or her standard of living. But the good news is that couple can take provisions to protect one another and be certain that either spouse is comfortable with managing the finances. However, 40% of married women rely on the husband to plan the retirement finances. One way to increase income for the survivor is to delay claiming Social Security. The longer you wait to collect your benefits, the greater the monthly payments will be which could help the surviving spouse. For those who have an annuity or are entitled to a pension, there are steps that can be taken to ensure the surviving spouse will receive a survivor benefit. Purchasing a life insurance plan is also helpful. It can help the surviving spouse pay down debt, cover medical expenses or help make up for the loss of the spouse’s Social Security benefit.

To learn more about this article, visit Plan Finances for Surviving Spouse.

Continue reading "Surviving Spouse’s Financial Plan " »

Most individuals believe that by drafting a will or a trust their estate planning is complete. Items that every estate plan should have are: a will/trust, durable power of attorney, beneficiary designations, letter of intent, healthcare power of attorney, and guardianship designations. The main aspect of an estate plan is a will or trust that should be written consistent with the manner you have given assets outside of the will to try and ensure that there will not be a will contest. To ensure that an agent or person can act on your behalf in the event of injury or disability, it is important to draft a durable power of attorney. It is also important to have a beneficiary on retirement accounts, insurance plans, and other accounts to ensure that a court will not be left to decide the fate of your funds. A letter of intent details what you want done with a certain asset after death or incapacitation and may also include details of a funeral. You should choose an individual to make important healthcare decisions for you in the event of incapacity and include this person in a healthcare power of attorney. You should choose a guardian if you have children or are planning to have children to ensure that the court will not become involved and choose a guardian you would not approve of.

To learn more about this article, visit 6 Estate Planning Must-Haves.

Continue reading "Must Haves for Estate Planning " »

Unfortunately, most clients come to me when they learn from the mistakes their parents made in regards to their estate plan. Statistics show that most Americans do not have an estate plan in place. With divorce rates being so high as well, that means more and more people are relying on their state’s intestacy (passing away without an estate plan) statutes with a blended marriage.

Although you may think that your spouse will get all the assets without any issues, most intestacy laws only give the surviving spouse a percentage of the assets in a blended marriage. Passing away without an estate plan in place usually also means that your estate has to go through probate to pass your assets on.

If your spouse relies upon your assets, they could be in deep trouble when you pass away as your assets are frozen until a judge signs an order allowing the bank to unfreeze the accounts. This is a serious problem!

Continue reading "Tough Lesson to Learn" »

The Florida House and Senate have been busy this year passing legislation for Governor Scott’s signature. One bill that is awaiting Governor Scott’s signature is one that amends Florida’s intestacy statute 732.102.

Passing away intestate means you died without an estate plan in place. When you do not have an estate plan in place, the state in which you live will provide a will for you by default. Florida’s new statute, if signed, will be effective as of October 1, 2011.

The new law states that if you pass away with a spouse and children, all of whom are children of your marriage with that spouse and neither spouse has other children, then all of the assets will pass to the spouse. If you pass away with children from a previous marriage, then the surviving spouse gets 50% and the children from the previous marriage gets 50%. If you pass away which children from your marriage but your surviving spouse has children from their first marriage, then the surviving spouse gets 50% and your children get 50%.

Continue reading "Change to Florida's Intestacy Statute" »

As promised, I am going to be doing a series of blogs on planning for clients with a chronic illness. A lot of the information I am using and have received is from a seminar given by Martin Shenkmen, a New Jersey attorney, who is touring the U.S. giving presentations about caring and planning for clients with chronic illnesses. More information can be found at www.RV4TheCause.org.

Currently, over 120 million Americans are living with some sort of illness or disability. 96% of those affected show no signs that they have a chronic illness. Most attorneys instantly think of creating a special needs trust for a client who has a chronic illness. A special needs trust is appropriate for clients whose illness has progressed enough to limit their mobility and who are on some sort of government benefits. A special needs trust is not appropriate for someone who is newly diagnosed and shows no real signs of being affected by a chronic illness.

For the initial meeting with a client, make sure you keep in mind the clients needs. For instance, if they are diabetic, make sure you have food and/or juice available just in case their blood sugar levels would go low during the meeting. You may need to plan frequent breaks for those clients who are not able to concentrate for long periods of time. Also, make sure that a friend or family member accompanies the client so that there are others present to go over what was said in the meeting should the client forget. I always take a lot of notes and write down everything and give it to the client so they have my notes as well from the meeting.

Continue reading "Planning for a Family Member with a Chronic Illness Cont." »

Do you or anyone in your family have a chronic illness? If so, you may want to check out the website www.RV4TheCause.org. Martin Shenkman, an attorney from New Jersey, is currently touring the country with his wife and dog giving out free advice to the public and professionals about estate and financial planning for those with a chronic illness. I will soon be blogging a series of blogs that deal specifically on issues of planning for clients with a chronic illness. It is a subject that is near and dear to me as I have Type 1 diabetes.

Continue reading "Planning for a Family Member with a Chronic Illness" »

It is that time of year when your children are getting ready to graduate from high school and head off to college. One thing that is always left off the list of to-dos is a Last Will and Testament, Living Will, Health Care Surrogate and Durable Power of Attorney for your child.
Your child is going to start accumulating assets from this point forward by setting up a checking account, if they do not already have one, and probably getting some sort of a job to supplement their spending habits in college. Without a Last Will and Testament naming someone to take ownership of their assets upon their untimely death, the State of Florida (or whatever state you live) has made a Last Will and Testament for them.
Unfortunately, accidents tend to happen while children are away at college and medical decisions need to be made for their benefit. Without a Health Care Surrogate or Living Will in place, you will not be able to have a say in how your child is taken care of.

Continue reading "Its Graduation Time, Now Time for a Will" »

This is the last of a series of blog posts that are relating to Gun Trusts and all the issues that surround them. My goal is to answer many common questions regarding Gun Trusts. Here are the last few questions:

9) Why use a Gun Trust to purchase the firearm instead of a Corporation of LLC?
A Gun Trust does not require an annual filing fee to your Secretary of State, a corporation or LLC does, thereby saving you money annually.

10) What happens if you violate the NFA?
You can be sentenced up to 10 years in federal prison, forfeit all of your firearms, forfeit your right to own or possess firearms in the future and be subject to fines up to $250,000.

11) Who may use the firearm if it is owned by the Gun Trust?
NFA items owned by trusts are legal possessions of the Trustee (or Trustees if more than one Trustee is serving). Each Trustee may use the firearm as well as any beneficiary in the presence or under the authority of the Trustee.

12)Does a Gun Trust allow criminals to obtain firearms?
No. You cannot buy a short barreled shotgun, machine gun or any other firearm without a background check by using the Gun Trust. The benefit is that you do not have to have the local authorities sign off on the purchase. A criminal will use other means to get the firearms as the purchase can easily be traced back to the buyer with a Gun Trust.

13)Where can I find information on Florida’s gun laws?
Florida’s gun laws are codified in Chapter 790 of the Florida statutes titled “Weapons and Firearms”.

Continue reading "Do you have questions regarding Gun Trusts? (continued)" »

This is a continuation of a series of blog posts that are relating to Gun Trusts and all the issues that surround them. My goal is to answer many common questions regarding Gun Trusts. Here are a few additional questions:

6) Can any Revocable Living Trust hold firearms?
The answer is no. The Trustee of a Gun Trust must be given special powers and instructions on how to deal with beneficiaries, what happens when the Grantor becomes mentally disabled or passes away. The Trustee must examine each beneficiary under federal, state and local laws to determine whether or not they, individually, may own and possess a firearm. The flexibility needed to allow the Trustee to property oversee the trust can conflict with the normal language within a Revocable Living Trust and can cause an “accidental felony”.

7) What are the benefits of a Gun Trust?
A Gun Trust allows someone to own the guns in a private manner while not having to get the written approval of the Chief Law Enforcement Offer where you live. The Gun Trust takes local politics out of the purchase and leaves it in the hands of the federal government.
A Gun Trust can also be amended to include additional beneficiary or take out beneficiaries. This is important as it allows you to have full control over who can and cannot use your firearms.

8) What won’t a Gun Trust do?
A Gun Trust will not allow you to bypass the required background check when purchasing a firearm.

Continue reading "Do you have questions regarding Gun Trusts? (continued)" »

This is a continuation of a series of blog posts that are relating to Gun Trusts and all the issues that surround them. My goal is to answer many common questions regarding Gun Trusts. Here are a few additional questions:

3) NFA Firearms – How Long Does It Take to Register or Transfer my Firearm?
The registration or transfer process takes approximately 1 to 3 months to complete.

4) What laws must a Gun Trust comply with?
A Gun Trust must comply with federal, state and local laws for firearms not to mention state trust laws.

5) What is all involved in purchasing a Title II firearm?
The purchase must be approved by the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE), you must obtain the signature of the Chief Law Enforcement Officer (unless you purchase through a corporation or a trust), pass an extensive background check to include submitting a photograph and fingerprints, fully register the firearm with BATFE, receive BATFE’s written permission before moving the firearm across state lines, and pay a related tax.

Continue reading "Do you have questions regarding Gun Trusts? (continued)" »

A Family Limited Partnership (FLP) provides four considerable advantages that are unavailable through any other asset protection vehicle.  These advantages are:

Asset Shield – a FLP can be used to protect business and personal assets from creditor judgment since a creditor of a partner cannot seize assets of the partnership to satisfy a debt.

Deter Litigation – a judgment creditor cannot seize the assets that are protected in a FLP, so having an FLP in place discourages creditors from filing a lawsuit since they will not be able to collect on any judgment.

Reduce Income Taxes – a FLP can be used to reduce income faxes by shifting income to lower bracket family members through gifting of partnership interests.  Gifting can be done to children or grandchildren over the age of 14.  A nonprofit organization can also be included as a partner in the FLP to further reduce taxes.

Reduce Estate Taxes – by gifting limited partnership interests valued at $10,000 or less to children or other family members each year, you can realize significant estate tax savings since these gifts will not be included in your estate for tax purposes nor subject to gift tax.

If you need more information on a Family Limited Partnership or other asset protection vehicles, contact our Jacksonville Florida estate planning law firm.

An asset protection trust protects your assets against creditor attack, and there are a number of different methods to protect different categories of assets.

Typically, asset protection trusts are used 1) to keep asset ownership confidential, 2) to discourage litigation, 3) to protect otherwise unprotectable assets, 4) as an alternative to a pre-nuptial agreement, and 5) as a way to diversify investment.

An asset protection trust is usually established outside the U.S., although the assets themselves will normally remain in the U.S. under the indirect control of the person who has established the trust.

An asset protection trust is generally irrevocable for a set period of time.  Once that time period has elapsed, the assets are returned to the owner of the trust or their heirs.

Recently, several states have enacted asset protection legislation in an effort to compete with offshore trusts.  These include Alaska, Delaware, Nevada, Utah and Rhode Island.  However, since the legislation is so recent, the courts have not yet tested the true scope of this protection, so domestic asset protection trusts should be considered with that in mind.

Continue reading "Do You Need an Asset Protection Trust?" »

The new tax laws enacted in December 2010 will be good through 2012. They inculde tax breaks regarding income, estate, and gift taxes. When preparing your estate plan, it is imperative to have your plan drafted to accomadate flexibility.

That means plan for what the law is now and anticipate what may or will occur in 2013. One of the biggest changes in estate tax has to do with the maximum amount that can be passed on to heirs.

Congress enacted an increase in the amount that can be passed tax-free from $1 million before death to $5 million. There were many changes to the tax laws enacted in December. Make sure you speak with an experienced estate planning attorney about planning for now and the future.

Continue reading "The Importance of Being Flexibe in your Estate Plan" »

Change is a part of life – unfortunately, it is also a factor in derailing many estate plans that have not been updated to account for new circumstances.

The most common mistakes that effect estate plans of any size include:

Heir Designation – estate plans should be reviewed annually to ensure that the proper beneficiaries are designated.  Too often ex-spouses or even those who have already pre-deceased the benefactor are listed as beneficiaries in estate plans that have not been updated for years.

Titling Assets – failure to properly title assets in the name of the trust has resulted in the unnecessary payment of additional estate taxes that the trust was established to prevent in the first place.  Failing to designate the proper beneficiaries on retirement account plans has also brought about many unpleasant and unintended consequences.

Heirs Cannot Pay Taxes – many times the heirs to a wealthy estate cannot afford to pay the taxes on their inheritance, which is due nine months after a benefactor’s death.  The assets left to them may be illiquid, leaving them to sell at a loss or borrow to pay the taxes.  Purchasing life insurance to cover the taxes is a simple solution to this problem.

Wrong Executor – unless a family member is a skilled legal or financial advisor, it’s usually best to name someone with those skills as your executor, especially for a large estate.

For more information on asset protection trusts as well as retirement and estate planning, contact our Jacksonville Florida estate planning law firm.

The death of child actor Gary Coleman should serve as a reminder to us all of the importance of having an advance medical directive.

After suffering a major brain hemorrhage sustained in a bad fall, Coleman was placed on life support at a Utah hospital while doctors consulted with the woman they believed to be his wife – but who, it turns out, had been divorced from Coleman in 2008.  She was no longer legally able to provide direction for his care.

Luckily, Coleman had drafted an advance medical directive, no doubt because of his long history of health problems.  Medical authorities followed his wishes as laid out in that directive, and he was removed from life support and died shortly thereafter.

Advance medical directives include:

Living Will – a document that specifies what kind of medical treatments should take place in case you are incapacitated.

Health Care Proxy – a document that designates a person who can make health care decisions for you in cases where you cannot.

Durable Power of Attorney – a document that gives the power of attorney to others to make financial transactions for you in case you are medically incapacitated.

For more information on advance medical directives and Florida estate planning, contact our Jacksonville Florida estate planning law firm.

A local Jacksonville state lawmaker is proposing just that. Rep. Charles McBurney has proposed a law imposing a retaliatory estate tax on non-residents who inherit property which is located in Florida.

The estate tax rate would be equal to what a Florida resident would have to pay in another state if the Florida resident inherited property located in that state.

Rep. McBurney’s intent is to try and protect Florida residents from taxation in a state which imposes a state estate tax. He feels it may discourage states from imposing their own separate estate tax. It is unclear however if the bill would ever make it through the legislative process or survive a court challenge.

To read more on this proposed bill, read Jacksonville representative Proposes Retalitory Estate Tax.

Continue reading "Could Florida Impose a Retaliatory Estate Tax?" »

Dynasty trusts are long-term trusts that are created to benefit generations of descendants – some can last as long as a century.

Usually funded utilizing a benefactor’s estate tax credit ($2 million per individual, $4 million per couple), a dynasty trust allows assets to accumulate for years free from federal gift and estate taxes.

While the dynasty trust is in force, distributions can be made to the benefactor and his or her heirs with no federal taxes due.  Since estate taxes are applied to each generation, the savings can be tremendous over multiple generations.

Another benefit of a dynasty trust is “spendthrift clauses” which can restrict a beneficiary’s access to the trust income or principal.  This is usually put in force by wealthy parents whose children or grandchildren might not be financially responsible or where access to great wealth might be a negative influence on their lives.  Having a spendthrift clause still allows the parent or grandparent to provide for those heirs in a reasonable way.  It can also prevent creditors from attacking trust assets for debts of the beneficiaries, and prevent an heir’s ex-spouse from laying claim to the assets of the trust.

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

The world of technology has effected another area of law, estate planning. Your online existence includes your email accounts, usernames, passwords, social networking accounts such as Facebook, MySpace, or LinkedIn, and more. Whether you pay bills online, shop, or even date, today, almost everyone has some sort of online account. What happens to these accounts after your death depends on the actions you take while living.

It is smart to have passwords to your online accounts only you know. However, this protective measure may pose problems at your death. For example, it depends on the provider of the service as to who owns your account when you die: Yahoo Mail will not divulge the decedent’s account information to their family without serious legal action; Google’s Gmail requires a copy of both the death certificate and power of attorney or birth certificate, as well as a e-mail sent from the decedent’s account – a not so easy task; and MySpace’s terms of agreement state that when you die, your profile dies.

Some steps you can take in order to avoid these types of obstacles:

1. Keep your passwords and usernames on a portable flash drive and pass the device onto a friend or family member at your death.
2. Companies, such as Legacy Locker, serve as a safety deposit box for passwords and other account information. These companies also provide personalized instructions on how to handle your online identity.
3. If you wish for your online identity to dissolve with you at death, an option is to do nothing and some accounts will be deleted by the providers as a result of inactivity on the account.

However, if you would like your online identity to continue after your death, it is important to plan for this as you would any other facet of your life. Planning your estate should include your online existence. An Estate Planning Attorney should be contacted so you can discuss these novel legal issues in order to ensure your interests and wishes are carried out after your death.

The IRS’ marital deduction allows a spouse to pass on his or her assets to a surviving spouse without those assets being taxed.

A marital deduction trust is created to protect the assets of both spouses from federal estate taxes when they die.  So how does a marital trust work?

When the first spouse dies – let’s say the husband – his assets pass not to his surviving wife but to the marital deduction trust and no federal estate taxes are due.  While the wife is still living, the trust generates income for her.  When she dies, the assets in the marital deduction trust are not part of her estate, so are therefore not subject to federal estate taxes.

To qualify for a marital deduction trust:

• The surviving spouse must be the only beneficiary of the trust during his or her lifetime


• The surviving spouse must have unrestricted power over how the trust assets are bestowed upon his or her death


• All trust income must be given to the surviving spouse on an annual basis during his or her lifetime


• The trust must specify who will receive the trust assets upon the death of the surviving spouse

A trustee must also be appointed, and all the assets in the trust must be specified in the trust document.

For more information on marital deduction trusts and Florida estate planning, contact our Jacksonville Florida estate planning law firm.

If you started and/or own a family business, chances are that you spend a lot more time thinking about running the business than you do about leaving it.  However, having a business exit strategy in place – whether you plan to retire or go out feet first – is an essential part of estate planning.

A business exit strategy usually involves the transfer of ownership interest to other family members or key employees, or the sale of the business.  As part of your business exit planning, you will need to prepare a list of assets and have the business valued by conducting a professional appraisal or valuation.

You will then need to confer with your estate planning attorney to examine all the potential alternatives available and the legal and tax consequences of each for your estate.  Once a business exit plan has been designed, it must be implemented carefully following the proper legal and business steps to accomplish your end goals.

Having a documented business exit strategy in place ensures that you protect the business you’ve spent years building, as well as a secure future for your heirs.

If you need more information about business exit strategy planning, contact our Jacksonville Florida estate planning law firm.

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" »

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" »

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.

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.

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.

On July 1, 2010, Florida adopted and passed legislation (§ 736.0902) that statutorily protects “qualified” trustees when handling irrevocable life insurance trusts (“ILIT”). The statute was passed because of a going concern that trustees were hesitant to fulfill investing fiduciary duties in fear of being liable to the trust or its beneficiaries.

The statute specifically addresses two major concerns and provides a checklist of which trustees are and are not “qualified” for liability protection. The two areas of concern are: insurable interests and the prudent investor rule.

The statute does not protect a trustee from every situation. For example, when insurance is purchased through an affiliate of the trustee and either party receives a commission, the trustee is not protected under the statute. Another example, but which pertains to the insurable interest section of the statute, will not protect a trustee who has knowledge that the beneficiaries lacked an insurable interest when the insurance policy was issued.

There are other situations that the statute does not protect. However, the overall effect of the statute is designed to assure trustees invest in a prudent matter, continue seeking returns for the benefit of the trust, but invest with confidence that investment decisions will not subject the trustee to liability.

Continue reading "Florida Tries to Strike a Balance between Trustee Liability and Beneficiary Rights" »

Self-Settled spendthrift trusts have been hotly debated over the last few years and for good reason.

Florida recently considered enacting legislation that would allow a settlor to setup an irrevocable trust, include a spendthrift provision that protects settlor assets in the trust from creditors, AND the settlor could receive the same beneficiary protection as third party beneficiaries from subsequent creditors.

The common law only allowed a settlor to setup this type of trust for the benefit of third parties and creditors could not reach the trust assets until the funds were distributed to the beneficiary.

However, as to date, 13 states have reversed the common law and enacted laws that would allow the settlor to include himself as a beneficiary of the irrevocale trust and receive the same asset protection from creditors with certain exceptions.

Before a settlor could setup this type of trust, Florida's proposed law required the settlor to sign an affidavit indicating that settlor is not trying to hinder, delay or defraud any creditor. Also, any creditor of the settlor that existed prior to the transfer of assets into the irrevocable trust could not be affected.

These are key clauses that would protect preexisting creditor rights and protect against fraud, but the law again has not been codified. Only time will tell if this mindset will change and new law will come into effect. For more information, visit Executive Summary.

Continue reading "Self-Settled Spendthrift Trust Legislation Shot Down" »

An estate planning attorney sees a number of common estate planning mistakes made over and over again, and while some of these may seem small, they can have a big impact on your heirs.

Usually, these mistakes are made by people who use “do-it-yourself” estate planning websites or forms in an effort to save money. Without professional guidance, going this route usually causes more problems than it solves.

Here are some of the most common estate planning mistakes that you should avoid:

• Selecting a guardian or guardians for minor children who live far away, and not providing any instruction for a temporary guardian;
• Putting your estate planning and other important financial documents in a “safe place” and neglecting to inform anyone of where they are;
• Not leaving any written documentation of your assets;
• Neglecting to leave a list of your online accounts and passwords;
• Not naming recipients of heirlooms and mementos and just letting the family figure it out after you are gone;
• Not designating beneficiaries by name on retirement accounts, life insurance policies, and other similar assets;
• Never reviewing or updating your estate plan or trusts;
• Neglecting to name contingent beneficiaries;
• Designating just one trustee or agent, without any alternates;
• Neglecting to fund your trust properly;
• Not doing any estate planning, thereby leaving it up to the state to decide how to distribute your assets.

Change is a part of life – unfortunately, it is also a factor in derailing many estate plans that have not been updated to account for new circumstances.

The most common mistakes that effect estate plans of any size include:

Incorrect Heir Designation – estate plans should be reviewed annually to ensure that the proper beneficiaries are designated. Too often ex-spouses or even those who have already pre-deceased the benefactor are listed as beneficiaries in estate plans that have not been updated for years.

Not Properly Titling Assets – failure to properly title assets in the name of the trust has resulted in the unnecessary payment of additional estate taxes that the trust was established to prevent in the first place. Failing to designate the proper beneficiaries on retirement account plans has also brought about unpleasant and unintended consequences.

Heirs Cannot Pay Taxes – many times heirs cannot afford to pay the taxes on their inheritance, which is due nine months after a benefactor’s death. The assets left to them may not be convertible to cash to pay taxes, leaving them to sell at a loss or borrow to pay the taxes. Purchasing life insurance to cover the taxes is a simple solution to this problem.

Wrong Executor – unless a family member is a skilled legal or financial advisor, it’s usually best to name someone with those skills as your executor, especially for a large estate.

For more information on asset protection trusts as well as retirement and estate planning, contact our Jacksonville Florida estate planning law firm.

With divorces and remarriages now very much a fact of American life, keeping peace in the extended family often requires astute and careful estate planning to avoid potential inheritance disputes.

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 use of proper estate planning tools can help you keep the family waters smooth.

For example, many people in blended families utilize trusts to provide for a surviving spouse and to leave property to children, as well as save on estate taxes. It is often a good idea to make specific designations of family heirlooms and other personal property to children in writing, as part of a will or trust.

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.

While a properly drafted and executed last will and testament can transfer assets to your heirs, it will not help you avoid probate, estate taxes, or ensure that your choices are respected in the event of incapacity.

To fully protect your 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.

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.

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.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The seven steps below are recommended by Ms. Jacobs:

1. Have assets appraised.

2. Locate purchase records.

3. Delay selling appreciated assets.

4. Postpone distributions.

5. Extend paperwork deadlines.

6. Apply the basis allowance fairly.

7. Guard against an executor's added risks.

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

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

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

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

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

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

Continue reading "Married Couples and Property Conveyances" »

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

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

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

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

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

The will of Yankees owner George Steinbrenner, made public a few weeks ago by the New York Post, provides insight into how estate planning tools were utilized to minimize the impact of estate taxes on Steinbrenner’s estimated $1.1 billion estate.

Of course, none of us knows when or plans to die in a year where there are currently no estate taxes. But contingency planning for the “what ifs” is what ensures as many as your assets as possible pass on to your beneficiaries.

Steinbrenner’s will placed an undisclosed amount of his assets into a trust for his widow, Joan. It also provided his attorney and trustee with the power to decide exactly when that trust will pay federal estate taxes – either this year, or after Mrs. Steinbrenner dies.

The trustee has nine months in which to make that decision, and another six months on top of that to make the move permanent. The decision likely rides on whether or not the estate tax is enacted retroactively for 2010. If 2010 goes down in history as the year of no estate tax, then Steinbrenner’s estate wins big – to the tune of around $500 million. If the estate tax is enacted retroactively, the trustee may elect to defer payment until Mrs. Steinbrenner goes, at which time there may be a more favorable rate.

The benefit for now is time – to see how things play out in Congress and to have some breathing room to make the right decision for the Steinbrenner heirs. That is what savvy estate planning is all about.

Every parent has at one time or another expressed amazement by how quickly children seen to grow. One day you are helping them tie their tiny shoes and the next day you are tripping over their size 12 Air Jordans.

And just as you make sure that once they outgrow their clothing they have new clothes that fit, so should you ensure that your estate planning fits them as they mature.

When children are young, there are estate planning instruments to protect them should something happen to you: guardianships to ensure that minor children and their assets are protected, life insurance and trusts to provide for their care and so on.

As your children reach their teens, it may be important for you to set up education trusts, and as they reach their 20s you will likely need to add asset protection plans to keep their inheritance safe from divorce, creditors or other risks.

And as your family grows, you should revisit your estate plans with an estate planning attorney to be sure each child or new family member is represented as you wish in your will and other financial documentation.

Having children means having a plan for their future; keeping your estate plan up to date will ensure you’ve planned for that future, and not for the past.

Identifying the individuals who will carry out your wishes once you are gone or disabled is an important part of estate planning.  There are several different roles to fill, including:

Executor – this is the person who takes charge of all your assets and ensures they are distributed in accordance with your wishes as spelled out in your will.  Some people choose a responsible family member to fill this role, while others may prefer a professional.

Guardian – this is the person who is designated to care for your minor children in case you and your spouse die before they come of legal age.  While this is usually a family member, careful consideration needs to be given to a guardian’s financial and emotional capabilities as well as their willingness to care for your chlld(ren).  Sometimes, two guardians are appointed – one to look after the children and one to manage the children’s financial assets.

Durable Power of Attorney – this is the person who would make financial decisions for you if you become disabled or otherwise unable to manage your financial affairs.

Power of Attorney for Healthcare – this is the person who would make healthcare decisions for you if you are unable to make them for yourself.

If you need help with ensuring your wishes are respected after you’re gone, contact our Jacksonville Florida estate planning law firm.

If you die in Florida without a will (the terminology is “dying intestate”), all your assets will be divided among your immediate family (spouse and children).

If you are married without any children, your entire estate will go to your spouse.

If you are married with at least one child, the first $60,000 of your estate (above and beyond any homestead entitlements) plus 50 percent of the remainder of your estate will go to your spouse.   The rest will be divided among your children.

If you have no spouse or children, your assets will pass to your parents.  If your parents are no longer living, your estate will go to your siblings.

If you have no family whatsoever, your assets will go to the state.

Anyone who is over the age of 18 and of sound mind can execute a valid will, which must be in writing and signed in front of witnesses who are not named in the will as a beneficiary.

However, to ensure that your wishes are carried out as you intend them, you should consult with a Florida estate planning attorney, who can help you prepare a will as well as advise you about the many estate planning tools available to help you protect your assets and your heirs.

If you need more information on a Family Limited Partnership or other asset protection vehicles, contact our Jacksonville Florida estate planning law firm.

If your phone contact list includes both a pediatrician and a gerontologist, welcome to the sandwich generation, that growing demographic segment of the population who are taking care of their parents and their kids at the same time.

Besides healthcare, many of us are also taking on more responsibility for helping older parents manage their finances.  If you are currently tasked with that responsibility – or will be at some point – here are some things to put on your checklist:

Prescription drug coverage. Is the Medicare drug program your parents chose a year or two ago still the right one for them?  Most seniors find the plethora of choices confusing, so defer making any changes they might need.  Mark Nov. 15 on your calendar, which is the start date for Medicare’s open enrollment program (it ends on Dec. 31).  Visit www.medicare.gov and use the online prescription drug plan finder to find the best plan for them.

Retirement account distributions. If you have parents over the age of 70 ½, they must take the required minimum distributions from their qualified retirement accounts by the end of each year.  If they don’t, whatever is left over on Dec. 31 is subject to a 50 percent penalty.  You can set up automatic deductions to solve this problem as well.

Estate planning.  If they have not done so already, your parents need to visit with an estate planning attorney.  Estate planning laws change constantly, so even if they do have an estate plan in place but haven’t updated it in awhile, they need to do so.

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

Of all the milestones that parents experience, the birth (or adoption) of their children and becoming empty nesters are two of the most memorable. It just so happens that these are also two life-changing moments when estate planning should be high on your to-do list.

The one shared experience of good parents is that as soon as children enter our lives, our own desires and needs are no longer of paramount importance. In fact, we see many new parents who are justifiably concerned about planning for the future of their children, especially if something happens and the parents will no longer be around to care for their children.

The needs of children are very different when they are young than when they reach adulthood, and parents’ estate plans should reflect this. When children are young, estate planning should focus on guardianship and asset protection issues. Once they reach adulthood and leave home, your estate plan will most likely reflect your own need to prepare for retirement and health care management issues.

Your estate plan should always reflect your priorities at each stage of your life. Since these change, updating your estate plan should be one of those priorities each time you reach a milestone.

If you need more information about estate planning for every stage of life, contact our Jacksonville Florida estate planning law firm.

For most people, their personal financial information is just that: personal. Older parents with wealth were usually brought up believing it is wrong to discuss money with their children, no matter how old those children might be.

But by keeping your estate plan a “secret,” you may be doing unintentional harm to your heirs, especially if your plans will come as a big surprise to them.

Whether they admit it or not, most children think that your money will eventually become their money. With the recent economic upheaval we have experienced, probably more adult children than ever are counting on their parents’ wealth to be a major portion of their retirement savings.

In addition, your children may assume – rightly or wrongly – that your assets will be divided equally among them. If that is not to be the case, you may be unintentionally creating a permanent rift in their relationship with each other by not telling them in advance why you have made the distribution choices you have made.

Sharing your estate plan with your heirs may not be an easy thing to do, but it is something that responsible parents should consider. While some parents may have a very good reason to keep their plans unknown until they pass, open communication is usually one of the best ways to ensure your final wishes are respected and that a tight lid is kept on that potential can of worms.

Continue reading "Sharing Your Estate Plan With Your Heirs" »

Thinking about death is never easy. However, refusing to plan for your death and create a will or trust, will only leave your heirs a costly mess to figure out. According to a survey by Lawyers.com only 65% of Amercians do not have a will. Having a simple will can avoid numerous expenses. For example, if you die intestate, without a will, the state will appoint a conservator and possibly lawyers to determine who will inherit your assets - a simple will can avoid these costs, leaving more to your family and loved ones. It is also crucial to keep your will up to date - this should be done every 5 years or after any major life event. Here are some important documents that should be looked at:

1. The beneficiary designation form. - This form determines who will inherit your insurance and retirement policies. These are called contract assets as opposed to financial assets. This form can also override a will.

2. Health care proxies and guardianship. - These are two high priority documents because they address the issue of incapacitation and who will care for your children after your death.

3. Balance sheet. - Do not waste your efforts on making it impossible for your family to find the documents you prepared. Draw up a balance sheet that lists the basic information about your assets. It may also be useful to file a letter of intent. Although the letter has no legal standing, it can provide some guidance to your heirs.

If you would like to read more on this topic see Guide Your Heirs Now, Avoid Confusion Later.

Wills, trusts, power of attorneys, health care proxies, etc. are all legal documents that are highly relevant to how your estate will be handled after your death. Contact an Estate Planning Attorney to provide guidance on your drafting and to help avoid confusion to your heirs after your death.

Summer is the time many families gather for reunions, reminding us of the tangible items that make memories: great-grandmother’s silver service, mom’s china, childhood ornaments collected over the years…. all of it contributes to family traditions and memories that make a life.

When doing your estate planning, you should consider the materials things your heirs may treasure in addition to the financial assets they will inherit. Too often, parents or grandparents may be unaware of the value their descendants place on tangible assets and neglect to provide instruction on how they should be dispersed. This has led to many a family dispute, which can easily be avoided with some forethought and planning.

First, you may wish to consider giving these items to their designated recipients before your death. This ensures your wishes are carried out, and gives you the pleasure of seeing your heirs enjoy and benefit from your gifts. If you prefer to designate specific recipients for your tangible assets, you should:

• Identify the items and the intended recipients;

• Write your wishes down and share them with your family members or the executor of your estate;

• Include your wishes in written form in your Will or other estate planning documents.

A qualified Florida estate planning attorney can further advise you of all your options as part of a comprehensive estate plan.

Estate plans are just like any other plans we make in business or in life: they change. Here are some things to remember to ensure your estate plan is always relevant:

• Update your estate plan with each life-changing event – divorce, birth, death, remarriage, change in economic condition, etc.

• Make sure your trustees and/or executors know where all your documents are, or all that work – and your wishes – can be ignored.

• Don’t do it yourself. Adding a “wish list” or other new provisos only leaves the door open for interpretation after you’re gone – and it could be the exact opposite of what you intended. If you have something to add, speak with your estate planning attorney and make it official.

• If you have a trust, you need to be sure that all new assets you acquire after the formation of that trust are owned in the name of the trust.

• Don’t assume that because members of your family “get along great” right now that this will always be the case. The only sure way to avoid a family fight over an estate is to have a detailed estate plan in place.

For more information about Florida estate planning, contact our Jacksonville estate planning law firm.

If so, check out a recent poll taken of estate planning attorneys, CPAs and advisors from all over the U.S.

I took part in the poll and agree with the majority of those polled. I believe the estate tax will return at a $1 million exemption with a 55% tax rate for every dollar thereafter. How long it stays there I am not sure about. I think Congress will pass legislation which increases the exemption. However, there is an increasing thought that Congress will do nothing at all. By doing nothing, Congress will increase their income through estate taxes. The money is desperately needed, especially due to the fact that several billionaires have passed away this year with no estate taxes being due.

To learn more about where the estate tax could go, please consult our Jacksonville estate planning attorney.

The world of technology has effected another area of law, estate planning. Your online existence includes your email accounts, usernames, passwords, social networking accounts such as Facebook, MySpace, or LinkedIn, and more. Whether you pay bills online, shop, or even date, today, almost everyone has some sort of online account. What happens to these accounts after your death depends on the actions you take while living.

It is smart to have passwords to your online accounts only you know. However, this protective measure may pose problems at your death. For example, it depends on the provider of the service as to who owns your account when you die: Yahoo Mail will not divulge the decedent’s account information to their family without serious legal action; Google’s Gmail requires a copy of both the death certificate and power of attorney or birth certificate, as well as a e-mail sent from the decedent’s account – a not so easy task; and MySpace’s terms of agreement state that when you die, your profile dies.

Some steps you can take in order to avoid these types of obstacles:

1. Keep your passwords and usernames on a portable flash drive and pass the device onto a friend or family member at your death.
2. Companies, such as Legacy Locker, serve as a safety deposit box for passwords and other account information. These companies also provide personalized instructions on how to handle your online identity.
3. If you wish for your online identity to dissolve with you at death, an option is to do nothing and some accounts will be deleted by the providers as a result of inactivity on the account.

However, if you would like your online identity to continue after your death, it is important to plan for this as you would any other facet of your life. Planning your estate should include your online existence. An Estate Planning Attorney should be contacted so you can discuss these novel legal issues in order to ensure your interests and wishes are carried out after your death.

The primary healthcare document in your Estate Plan is a Health Care Power of Attorney, also known as an Advanced Health Care Directive. It is in this document that you record your wishes and instructions for your medical treatment and the people you nominate as your healthcare agents, who will make healthcare decisions for you if you are no longer able to do so. Whenever you have a major change in your health status, your Advanced Health Care Directive should be updated.

You should also have a HIPAA Authorization as part of your Estate Plan. A HIPAA Authorization gives medical institutions and/or staff legal permission to share your health status with the people you’ve designated as your healthcare agents. Be sure to update your HIPAA every time you nominate new agents.

You may also wish to nominate a disability panel and include the information in your Trust. A disability panel is a list of people you have authorized to decide when you should be declared incapable of handling trust accounts. Although a court can make this decision, you can also name a panel of physicians, financial and/or legal professionals, loved ones, or a combination of any of these to determine your ability to make financial decisions relating to the Trust.

Continue reading "Florida Estate Planning: Health Care Documents" »

An auction is scheduled to sell some personal items of the late Lucille Ball and her second husband, Gary Morton. Morton and Ball were married until Ball's death in 1989, Morton later remarried. The items offered at the auction were consigned to Heritage Auction Galleries by Morton's widow, Susie Morton. Susie Morton is now battling the daughter, Lucie Arnaz Luckinbill, of Ball and her first husband and "I Love Lucy" co-star, Desi Arnaz.

Among the items up for sale are the couple's Rolls Royce, photos, sketches, love letters between Morton and Ball as well as some of the actress' awards.

Susie Morton sought a judge's ruling declaring the auction can proceed. Luckinbill stated she will go to court to try and stop the auction if the items she requested are not returned to her. Luckinbill is requesting the return of seven love letters, Ball's address book, some portraits and several lifetime achievement awards.

Cases like this happen all too often because people do not keep their will up to date. It is important after any major lifetime occurrence or event that you update your will to include in property that may be of value to your or your loved ones.

Continue reading "Heirs Argue over Lucille Ball Auction in Los Angeles, California " »

Florida’s unemployment rate in May was 17 percent higher than the national unemployment rate; currently, it stands at 11.7 percent. That’s a lot of Florida residents either looking for a new job or creating their own, not an unusual event in a time of high unemployment.

Being your own boss brings with it a lot of responsibility – including the responsibility to create an estate plan so your heirs are not left with a lot of your business’s unfinished business.

If your business is a sole proprietorship, the assets of the business (and its obligations) are your personal assets and obligations, so you need to plan for how those are dispensed once you are gone.

Obviously, the basics should be in place: a Will, a Living Will, Power of Attorney that appoints someone you trust to look after your affairs and Durable Power of Attorney for Healthcare to appoint someone you trust to look after you if you become incapacitated.

You should also discuss with a Florida estate planning attorney the establishment of a trust to handle your business affairs after you die, even if you’ll only use it for closing the business down and dispensing the assets.

Establishing trusts that will protect what you’re working so hard to build right now for your surviving spouse, children and other beneficiaries is also something you should discuss with an estate planning lawyer.

If you’re starting a new business, you’re doing a lot of planning. Just be sure you do some estate planning as well to protect it all.

A financial plan can cover savings for your child's education, purchasing a second home and retirement plans. What happens to your money after your death is also crucial to your financial plan. These are some key issues that should be addressed:

1. Wills. - I cannot be stressed enough, everybody needs one. Wills cover issues such as guardianship and let your decide who will care for children in the unfortunate event that you die while they are still dependent. If you and your spouse die, the state will decide who will care for your children regardless of your wished or intentions. Ever wondered what happened to your money if you died intestate (without a will)? Go to mystatewill.com to see how each state deals with your assets if you die without a will.

2. Living Wills and Medical Directives. - After you have a will in place, you need to consider the issues in the event that you are seriously injured or completely incapacitated. These devices express your wishes if you are placed on life support.

3. Special Needs Trusts. - If you are the parent of a mentally of physically challenged child, special needs trusts are a common and effective way to ensure he or she is cared for.

4. Estate Tax. - The estate tax is in an interesting state this year. If Congress does not act, the previous $3.5 million exemption will be decreased to $1 million when the tax is reinstated. This situation is perplexing to say the least. It is important to get legal representation to ensure the effectiveness of legal documents regarding your estate. An Estate Planning Attorney can also provide the best advice and guidance on these legal uncertainties.

An article published by U.S. News & World Report reported the pros and cons of DIY estate planning. Obviously, lawyers are opposed to the do-it-yourself approach claiming this type of estate planning breeds mistakes—one size never fits all. Most agree that for people with complicated family or legal situations (e.g., multiple kids, multiple spouses or great wealth), professional health is the preferred route. However, the disagreement seems to occur more often over straightforward cases—a will for a single person without much money.

Chas Rampenthal, general counsel for LegalZoom, a Los Angeles-based company that sells DIY documents over the Internet, says that DIY sites are good for those people who cannot afford legal representation. LegalZoom helps people who would otherwise not seek any help at all—better to have something rather than nothing, according to Rampenthal.

On the other end of the argument, Deborah Jacobs, author of Estate Planning Smarts, gives the main reasons why legal representation is a must. First and foremost, you might not understand the terms. Not fully understanding what you are giving away or divesting could result in giving someone too much power and place that person in an position where they can take advantage of you. Or worse. Another risk is that if you rely on a self-written will to transfer your money to family members after you pass, the will could possibly contain many holes. A person is not likely to prepare to be pre-deceased by children, divorce, or the births of new children. Also, because the federal estate tax is in a present state of limbo, estate planning lawyers are pulling out their hair as they try to come up with strategies for their clients to deal with present uncertainties.

Jacobs also offers some tips to keep costs down: Read up on estate planning before you meet with an attorney. This will keep down the hourly rate by avoiding an introduction to estate planning. Also, tell your lawyer up front that you would like to keep costs down. To read more on this topic see Disadvantages to DIY Estate Planning.

Although there is disagreement on DIY estate planning, both sides agree on one thing: keep your will up-to-date. It is suggested to revisit your will at least once a year, whether it be a fill-in-the-blank form or an attorney-drafted document. Contact Wood, Atter & Wolf, P.A. to speak to an Estate Planning Attorney.

Purchasing long-term care insurance is a daunting task, even deciding to purchase long-term insurance can be scary. However, statistics show that 70 percent of us will need some sort of long-term care after we turn age 65. A percentage which will probably increase as we begin to live longer due to scientific improvements. Below is a list of things to think about when purchasing your long-term care insurance policy:

1) Make sure that the coverage includes assisted living, nursing home and even home care. Most clients these days wish to stay at home and long-term care insurance should cover this. Certain policies can even pay for training of a family member who you have designated as a caregiver.

2) Buy a flexible policy that allows you to have a choice of dollar benefits to fit your budget.

3) Make sure that you policy includes inflation adjustments. A policy that gives you benefits at X dollars today may not be sufficient simply due to the inflation of medical costs.

4) Make sure the policy calculates the waiting period in calendar days and not service days. A policy that calculates the waiting period in service days may cause you to wait longer for policy benefits if you do not need daily care.

5) Make sure your policy does not include a lot of red tape and legal hoops to jump through before the policy benefits kick in.

6) Seek out a policy that includes a cash benefit. This is especially important if you have a family caregiver as it will allow the family member to use policy benefits to pay for the small day-to-day things associated with your care.

7) See if the policy calculates its maximum using a monthly number rather than a daily number. Some days cost more than others and you will want a policy that uses a monthly maximum that will average out the more expensive days.

8) Seek professional advice. This is the most important item in this list. Seek out someone whom you trust and has a proven track record in dealing with long-term care policies.

To learn more about long-term care insurance, contact our Jacksonville estate planning attorney.

The recent death of child actor Gary Coleman should serve as a reminder to us all of the importance of having an advance medical directive.

After suffering a major brain hemorrhage sustained in a bad fall, Coleman was placed on life support at a Utah hospital while doctors consulted with the woman they believed to be his wife – but who, it turns out, had been divorced from Coleman in 2008. She was no longer legally able to provide direction for his care.

Luckily, Coleman had drafted an advance medical directive, no doubt because of his long history of health problems. Medical authorities followed his wishes as laid out in that directive, and he was removed from life support and died shortly thereafter.

Advance medical directives include:

Living Will – a document that specifies what kind of medical treatments should take place in case you are incapacitated.

Health Care Proxy – a document that designates a person who can make health care decisions for you in cases where you cannot.

Durable Power of Attorney – a document that gives the power of attorney to others to make financial transactions for you in case you are medically incapacitated.

For more information on advance medical directives and Florida estate planning, contact our Jacksonville Florida estate planning law firm.

If you started and/or own a family business, chances are that you spend a lot more time thinking about running the business than you do about leaving it. However, having a business exit strategy in place – whether you plan to retire or go out feet first – is an essential part of estate planning.

A business exit strategy usually involves the transfer of ownership interest to other family members or key employees, or the sale of the business. As part of your business exit planning, you will need to prepare a list of assets and have the business valued by conducting a professional appraisal or valuation.

You will then need to confer with your estate planning attorney to examine all the potential alternatives available and the legal and tax consequences of each for your estate. Once a business exit plan has been designed, it must be implemented carefully following the proper legal and business steps to accomplish your end goals.

Having a documented business exit strategy in place ensures that you protect the business you’ve spent years building, as well as a secure future for your heirs.

If you need more information about business exit strategy planning, contact our Jacksonville Florida estate planning law firm.

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.

Identifying the individuals who will carry out your wishes once you are gone is an important part of estate planning. There are several different roles to fill, including:

Executor – this is the person who takes charge of all your assets and ensures they are distributed in accordance with your wishes as spelled out in your will. Some people choose a responsible family member to fill this role, while others may prefer a professional.

Guardian – this is the person who is designated to care for your minor children in case you and your spouse die before they come of legal age. While this is usually a family member, careful consideration needs to be given to a guardian’s financial and emotional capabilities as well as their willingness to care for your chlld(ren). Sometimes, two guardians are appointed – one to look after the children and one to manage the children’s financial assets.

Durable Power of Attorney – this is the person who would make financial decisions for you if you become disabled or otherwise unable to manage your financial affairs.

Power of Attorney for Healthcare – this is the person who would make healthcare decisions for you if you are unable to make them for yourself.

If you need help with ensuring your wishes are respected after you’re gone, contact our Jacksonville Florida estate planning law firm.

The battle continues over the former childhood star's estate. Gary Coleman's ex-wife Shannon Price and former business associate, Anna Gray continue to argue over who Coleman left as the beneficiary of his estate. In the meantime, Robert Jeffs, an attorney, has been appointed as the estate's temporary special administration.

Coleman and Price were divorced in 2008, but were living together at the time of Coleman's death. One one hand, Price argues that she was Coleman's common-law wife and has filed a hand-written document from 2007 that would give her Coleman's estate, if validated by the court. On the other hand, Coleman signed a will in 2005 that named Gray, from Portland, Oregon, as executor and awarded her all of his estate.

It is expected to take Utah District Judge, James Taylor, several months to conduct a trial that will determine which document is Coleman's last legal will and, thus, who will be awarded Coleman's estate. Until then, Coleman's remains are expected to be cremated and locked into a vault by Jeffs. There is no debate over whether or not Coleman wished to be cremated; the 2005 will called for his remain to be cremated as well as an earlier will made in 1999. Although both these wills are in agreement over Coleman's cremation, the wills contradict each other over whether or not Coleman wanted to have a funeral service. The 2005 wills states "there be no funeral serve, wake, or other ceremony memorializing my passing." However, the earlier 1999 will states gives instructions on who could and could not attend any funeral or memorial service. To read more about the battle of Coleman's estate see Gary Coleman's estate may take months to resolve.

Coleman's case happens all to frequently; where different and conflicting wills are created throughout one's lifetime. It is important to keep your legal will up to date. A legal will ensures your interests are protect and your estate is divested the way you intended. Contact a Florida Estate Planning Attorney to draft a legal will, update a previous legal will or discuss any questions or concerns you may have regarding the planning of your estate.

The Section 7520 rate, a minimum interest rate that the IRS makes you use, is at 2.8% for July. This rate is published on a monthly basis. An example of when this rate is used is when you create a note. Recently, I prepared a short term note, less than three years, using an interest rate of .76%.

With rates being this low, it is a great time to do some advanced estate planning. A few great planning ideas include:

1) Grantor Retained Annuity Trusts (GRATs). A GRAT is a trust where the grantor retains the annuity interest for a period of years with the remainder going to the beneficiaries. The annuity payment is calculated using the 7520 rate. With a low rate, the assets should be able to increase faster than the interest rate. Therefore, the investment returns above and beyond the interest rate is passed on to the beneficiaries of the GRAT.

2) Charitable Lead Annuity Trust (CLAT). The same reasoning for doing a GRAT applies to a CLAT. The difference is that a charity has the annuity interest instead of the grantor.

3) Gift of a remainder in personal residence or farm. A lot of clients give a piece of real estate to charity upon their death. With low interest rates, the life estate retained by the property owner is worth less and the remainder to the charity is valued higher. The higher the gift to a charity, the bigger the tax deduction.

4) Notes to family members. With banks still being reluctant to give loans to new businesses, some clients are giving intrafamily loans. The interest rate will be low on the note, very low if the note is for less than 3 years.

The above are just a few great advanced planning opportunities available now while the 7520 rates are low. However, Congress and the IRS have recognized some of these and are discussing how to increase the taxes being paid. So plan now while the planning is good.

To discuss planning opportunities while the 7520 rate is low, please consult with an estate planning attorney.

If your phone contact list includes both a pediatrician and a gerontologist, welcome to the sandwich generation, that growing demographic segment of the population who are taking care of their parents and their kids at the same time.

Besides healthcare, many of us are also taking on more responsibility for helping older parents manage their finances. If you are currently tasked with that responsibility – or will be at some point – here are some things to put on your checklist:

Prescription drug coverage. Is the Medicare drug program your parents chose a year or two ago still the right one for them? Most seniors find the plethora of choices confusing, so defer making any changes they might need. Mark Nov. 15 on your calendar, which is the start date for Medicare’s open enrollment program (it ends on Dec. 31). Visit www.medicare.gov and use the online prescription drug plan finder to find the best plan for them.

Retirement account distributions. If you have parents over the age of 70 ½, they must take the required minimum distributions from their qualified retirement accounts by the end of each year. If they don’t, whatever is left over on Dec. 31 is subject to a 50 percent penalty. You can set up automatic deductions to solve this problem as well.

Estate planning. If they have not done so already, your parents need to visit with an estate planning attorney. Estate planning laws change constantly, so even if they do have an estate plan in place but haven’t updated it in awhile, they need to do so.

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

As stated in my last few blogs, there are certain things you should think about when designing a trust for a beneficiary. Also remember, this list takes a very conservative approach and can be modified according to specific state law. The list continues as follows:

7) Consider selecting a state to settle the trust or move the location of the trust to a jurisdiction with more debtor friendly laws to maximize the protection of the corpus from the claims of potential creditors of a beneficiary. Some states are much friendlier than others.

8) Avoid giving a beneficiary the authority to remove and replace any trustee because a court may view it as placing with the beneficiary ultimate control over the trust.

9) Give the trustee the authority to distribute income or principal to multiple current beneficiaries rather than a single current beneficiary. This can easily be done by including the children of the beneficiary you intend to be the main beneficiary.

10) Consider including provisions that might automatically eliminate or suspend a beneficiary’s interest in the trust or give an independent trustee the authority to eliminate or suspend a beneficiary’s interest in the trust. This is commonly done with divorce provisions to cut-off an in-law upon divorce.

11) Consider limiting the beneficiary’s access to all or a portion of the trust for the term of the trust or a lesser period. You may want to limit distributions to income until age 65 to allow the principal to be there for your beneficiary’s retirement.

12) Consider giving an independent trustee the power to distribute the assets of the trust to the trustee of another trust.

And a bonus consideration: Do not permit a beneficiary to assign any part of all of his or her beneficial interest in a trust to anyone, not even a limited class of individuals such as a beneficiary’s descendants.

To discuss your current estate plan, please consult with an estate planning attorney.

The Atlantic magazine has calculated the net worth of all U. S. presidents in 2010 dollars and the richest chief executive is the one whose face graces those dollars:  George Washington.

By taking into account property assets as well as income and inheritances, our first president ranks #1 at $525 million in 2010 dollars, mostly due to his 8,000 acres of Virginia farmland and his high salary, which was two percent of the total U.S. budget in 1789.

The Atlantic article noted that inherited wealth contributed to the fortunes of a number of presidents starting in the 20^th century, including both Roosevelts, both Bushes and John F. Kennedy.

The publication did not list a “poorest” president, instead listing nine presidents whose net worth was less than $1 million, including the notable (Abraham Lincoln, Ulysses S. Grant, Harry Truman) and the not-so-notable (Chester A. Arthur, James Garfield).

The wealthiest of contemporary presidents was Lyndon B. Johnson, at $98 million.  JFK died before he could inherit any part of his father’s estimated $1 billion estate.

If you need more information about protecting and enhancing your net worth, contact our Jacksonville Florida estate planning law firm.

As I stated in my last blog, the ways you pass the assets on to your beneficiaries determines whether or not there is any asset protection for thos assets.  In the end, most clients want to make sure it is their family who enjoys the assets and no one else.  Below is the first 6 in a list of 12 things you should think about when designing your estate plan.  Remember, this is a very conservative list and dependent on various state laws.

1)  Do not appoint the beneficiary as a Trustee, or if the beneficiary serves as their own Trustee, vest the distribution authority solely in an independent Trustee.

2)  Make all interest in income and principal discretionary unless a mandatory income interest is required to qualify for a tax benefit.  The assets left to a surviving spouse, to qualify for estate tax deferral, must pay all the income to the surviving spouse.

3)  Provide that distributions of income and principal may only be made in an independent trustee's sole, absolute, uncontrolled, unfettered, unlimited and full discretion.

4) Do not give a beneficiary with a withdrawal right over trust assets.

5)  Draft the trust to continue for a beneficiary's life rather than providing for outright distributions or unfettered withdrawal rights.

6)  Do not give a beneficiary a testamentary general power of appointment unless it is required to qualify the trust for a tax benefit.

My next blog post will finish the list of things to think about when designing your estate plan.  To have your estate plan reviewed to ensure it is designed to meet your needs, please consult an estate planning attorney.

There many things to think about when designing your estate plan.  One very important thing to think about is how to leave assets to your beneficiaries after your death (and your spouse’s death if applicable).

Most older estate plans just pass the assets outright to the beneficiary.  The downside of that is that if the beneficiary is ever sued, divorced or has to go on government benefits, the assets are completely subject to be taken.  There is NO ASSET PROTECTION when you leave assets outright to a beneficiary.

The best way to leave assets to a beneficiary is through a trust.  By leaving assets in trust for the beneficiary, as long as the language is correct, the assets will only be available for the beneficiary’s benefit, not for the benefit of any creditor.

Over the next few blogs, I will lay out 12 steps to take in designing a trust share for a beneficiary.  These 12 steps will help better protect your beneficiary from any potential creditor attack in the future.  These 12 steps are very conservative in nature and there may be case law that is more favorable and lenient towards creditor protection.  However, for purposes of my blog, I want to take the most conservative approach to education.  Stay tuned for the rest of the week to see how to properly design your estate plan.

To learn more about designing your estate plan to best protect your beneficiaries, please consult an estate planning attorney.

Many Americans have the mistaken belief that estate planning is just for the wealthy, but that is not the origin of the term “estate” planning.

Everyone who dies owning property or other assets leaves an “estate.”  If you do not have property that would normally go through probate, then having a will is probably good enough.  And drawing up a will is an important part of estate planning.

Another important part of estate planning is developing advance directives, which spell out your wishes in terms of healthcare and/or property management.

Some other reasons for having an estate plan include:

• You have children from one or more marriages or relationships
• You have minor children
• You have a disabled child
• You have no heirs but want your property dispersed to someone other than the state
• You have heirs you want to disinherit

Whatever the size of your “estate”, it is a good idea to formulate an estate plan that reflects your wishes after you’re gone.

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

It used to be that you could decide at what age you wanted -- or were able -- to retire.  Not any more.

According to a recent NPR report, older Americans are being forced to take early retirement because of the high unemployment rate.  And the Social Security Administration confirms that more older Americans are applying for benefits early.

In fact, the average age of retirement for men and women has gone down steadily since 1945, when the average retirement age was 69.6.  In 2008, the average retirement age stood at 63.6.

From the NPR report:

The Social Security Administration had predicted there would be a 15 percent increase in retirement applications last year as baby boomers reached retirement age. Instead, the increase was 20 percent.

"That's a significant amount," says Jason Fichtner, chief economist at the Social Security Administration.

Fichtner says you might expect fewer people to retire early after the beating so many 401(k)s took when the markets crashed.

"But we also see that there are those people who at age 62 or 63 might have lost their jobs and find it harder to find new employment and decide to take retirement benefits earlier," says Fichtner. "On net, there seems to be more people filing for early benefits than delaying."

If you need help preparing a retirement plan that works for you, contact our Jacksonville Florida estate planning law firm.

Saving too much for retirement is such a contrary notion – especially today, when it has been estimated that Baby Boomers have lost 45% of their net worth in the last five years.

However, it is possible to save too much.  We have been taught to spend our pre-retirement years maxing out contributions to 401(k)s and IRAs in order to save on taxes.  However, much of the tax breaks we enjoy while we are employed no longer are available to us upon retirement.  And if we find ourselves needing less money than we saved, Uncle Sam requires us to start taking the money out and – surprise – gets a nice big chunk of it.

Thus, the taxes we spent so many years deferring now come back to haunt us in our golden years.  Not what most of us planned on!

Which is why retirement planning is essential, and the sooner the better in terms of years left before you retire.  Getting a handle on how much you will really need to retire comfortably is key to managing your retirement funds.  Because you may not need as much as you think.

Once you retire, you will no longer be paying Social Security taxes.  You won’t be making contributions to a retirement account.  And you should rethink paying off that mortgage, since mortgage interest is one of the biggest deductions available for personal income taxes.

And even if you are able to live off other income while your tax-deferred income languishes in your retirement accounts, your heirs may have to pay a hefty price once you’re gone.

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

It is estimated that 15 million Americans have left a 401(k) behind with a former employer.  Which means there are 15 million opportunities for Americans to save on their taxes by reclaiming that orphan 401(k) and rolling it over into a Roth IRA.

In addition, if your current employer’s 401(k) plan allows you to make in-service rollovers, you can do the same.  And if you are over the age of 59 ½, you can roll all your money over from your current employer’s 401(k) to a Roth IRA without penalty.

Rolling a 401(k) over to a Roth IRA is the same as rolling over a traditional IRA: the old account is declared taxable with taxes paid on pretax contributions and earnings; the rest goes into the Roth IRA, where future growth is tax-free.

But here’s where converting 401(k)s provides a better tax break than converting traditional IRAs: when converting your 401(k) into a Roth IRA, you can disregard your other IRAs and 401(k)s when determining what percentage of the conversion is taxable.  IRS rules say that if you own several IRAs and want to convert just a portion of the total, that amount must be drawn proportionately from pretax and after-tax dollars in all the IRAs.

If you earn more than $250,000 annually and are thinking about converting a 401(k) to a Roth IRA, better do it this year.  Taxes are likely to go up next year for your income bracket.

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

The editors at Money Magazine have put together a good guide on Social Security and pension payouts:

The best age to start collecting Social Security -- You will receive a much larger benefit if you can afford to delay until you reach "full retirement age" or later - and working in retirement might allow you to do just that. For example, if you take an early benefit at 62 the payment will be 25% less than if you waited until your full retirement age. Hold off until you are age 70 and your benefit will be 25% to 30% more than the payout you would have received at full retirement age. So the difference between taking early retirement and waiting until you are 70 can be a benefit that is more than 50% higher.

Of course, the tradeoff is that when you take the earlier benefit you have that many more years of receiving a payout. Still, with much longer life expectancies today, delaying the payout as long as possible typically pays, assuming you make it to at least age 77. And according to the official actuary tables, if you are alive at 65 there's a high probability you will indeed still be around at age 77.

Will you receive your deceased spouse’s Social Security? -- Yes; you will be covered under the Social Security Survivor's Insurance program. And this being Social Security, there are the usual array of odd rules that determine how big a benefit you will receive.

If you have already reached full retirement age (somewhere between 65 and 67 based on your date of birth; if you aren't sure, check your latest Social Security annual statement), you're entitled to 100% of your deceased spouse's benefit.

If you're at least 60 but not yet at Social Security's definition of "full retirement age," your payout will be somewhere in the range of 71% to 99% of your deceased spouse's full benefit. Note that a widow or widower of any age with a child under age 16 is entitled to a 75% payout.

Will you receive a deceased spouse’s pension? -- Maybe. It depends on whether your spouse chose a monthly payout based solely on his/her life expectancy, or a monthly payout that continues through your life - that is, the "joint and survivor" benefit option. If you aren't sure what your spouse chose, get in touch with the company providing the pension.

As you might expect, with the "joint and survivor" option, the size of the monthly payout is smaller because the chances that one of you will live a long time are greater. Additionally, many plans offer different payout options: you may choose a setup that pays 100% to the surviving spouse, 75%, 50%, etc. The higher the promised payout to the surviving spouse, the lower the monthly payment will be.

Once the payout decision is made, it typically can't be changed. So if your spouse hasn't retired yet, your best bet is usually to make sure he or she chooses "joint and survivor" - or you may be in serious financial jeopardy if your spouse dies before you do. Alternatively, choose the bigger payment pegged to the retiree's lifespan, and invest the difference to build a bigger nest egg for you. If your spouse dies shortly after retiring, however, you're out of luck.

Are you up to speed on the latest developments concerning Social Security and pension benefits?  If not, contact our Jacksonville Florida estate planning law firm.

Are you considering retirement in another country?  You’re certainly not alone.

A few years ago, American retirees were flocking south to Mexico, lured by cheap housing and a lower cost of living.  The recession and the Mexican drug wars have stemmed that tide, although a recent CNNMoney.com report noted that, “The housing markets down south may be starting to revive a little after being on life support the past couple of years.”

While the cost of living in many countries is lower than the U.S., there are several factors to consider when making your decision, including:

Healthcare – it stands to reason that some of the countries with the lowest cost of living also have sub-standard healthcare.  As Americans, we are used to good quality healthcare, even if it is expensive.  Also, Medicare coverage does not extend beyond the U.S. borders, so you may need to return to the U.S. for healthcare or plan to spend more out of your pocket in your adopted country.

Taxes – if you move to another country, you still have to file a U.S. tax return.  If you work in that country and make less than $91,400, you won’t have to pay taxes, thanks to the Foreign Earned Income Tax Credit.  However, pensions are taxable no matter where you live.

Money Management – in many countries it is very difficult for a U.S. citizen to open a local bank account.  In addition, most foreign banks cannot accept deposits in U.S. dollars, so gaining access to your Social Security or other direct deposit funds may require wire transfers from a U.S. account, which can be costly.  Your U.S. income could also suffer due to fluctuations in the exchange rate.

If you need help with your retirement plan, contact our Jacksonville Florida estate planning law firm.

For this year only, Florida has come up with a way to fix old estate planning documents that have tax planning in them but did not contemplate the debacle that 2010 has caused without having an estate plan in place.  One major problem that has arisen is that people have passed away with estate plans in place that implemented tax planning, usually a good thing.  However, the tax planning stated that whatever could pass estate tax free upon their death would go to beneficiaries other than the spouse and anything left over would go to the surviving spouse.  With no estate tax in place in 2010, this would leave the surviving spouse out of the estate plan.

So Florida has come up with a plan to allow the court system, upon the application of the personal representative or beneficiary, to construe the terms of a will to define the respective shares or determine beneficiaries, in accordance with the intention of a testator.  This law is only in effect through December 31, 2010.  Although the intent of the Florida legislature is good, the law allows almost anything to come into evidence that could determine the testator’s intent, including any evidence that contradicts anything clearly stated in the will.  This could cause expensive litigation.

To discuss the new law or learn how to avoid the impact of the law, please consult with a Florida estate planning attorney.

What are the basic estate planning tools that you can use to protect your family – and your assets – no matter what age you are right now?

Will – if you die without a will or a living trust in place, your assets will be divided up according to state law.  And you might not like it.  Are you on a second marriage?  Just been through a divorce?  Without a will designating how your assets will be distributed, you will be leaving a mess for your heirs to clean up.

Financial Power of Attorney – this allows you to designate a responsible party to handle your financial affairs in case you become incapacitated.

Living Will – a living will or a healthcare power of attorney designates someone to make major healthcare and/or end-of-life decisions for you when you cannot, according to your wishes.

Beneficiary Forms – even if you name the beneficiaries of retirement accounts or life insurance policies in your will, if those names are not on the account or policy’s beneficiary form, they will not receive them.

Title Your Assets – if you have set up living trusts for your spouse or children, you must be sure to retitle the assets in the name of the trust or the living trusts are invalid.

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

On May 27th, Florida Governor Crist signed a bill which added a new dimension to the way a homesteaded property may pass to a surviving spouse.  Under the current law, if a Florida resident died leaving a surviving spouse and adult children, the property had to pass outright to the surviving spouse without any strings attached.  However, this distribution of the homestead was subject to a prenuptial agreement, postnuptial agreement.  If there was no marital agreement in place and the homestead was distributed without 100% going to the surviving spouse, the surviving spouse would get a life estate in the property with the children receiving the remainder.  Therefore, if the surviving spouse ever wanted to sell the home, the children would also have to sign off on the sale. Further, while the surviving spouse is living in the homestead during the life estate, they would be solely responsible for the upkeep of the property. 

Under the new law, in situations where the surviving spouse would only have a life estate in the home, the surviving spouse may make an election to take a 50% interest in the homestead as tenant in common with the children.  This election must be made within 6 months after the decedent's death and during the surviving spouse's lifetime and is irrevocable.  The upside to this election is that if the surviving spouse is not interested in keeping the home, they could force a sale of the home through a partition action in the court system.  This option is not available if the surviving spouse only has a life estate. 

For more information on the new homestead election, please consult a Florida estate planning attorney.

A University of Michigan study on the effectiveness of advance directives (living wills and durable powers of attorney) shows that medical professionals almost always respect the wishes of people who have advance directives in place.

The study, published recently in the New England Journal of Medicine, is one of the largest ever done on the effectiveness of advance directives.

From an article on the study in the Los Angeles Times:

In a study of 3,746 deaths, researchers found that 42.5% of patients had faced treatment decisions near the end of their lives but that more than 70% of those people had lacked the ability to make choices because of their mental or physical health. Among that group, however, the majority -- 67.6% -- had advance directives.

Moreover, the instructions left in the advance directives were almost always carried out by surrogate decision-makers. The will of the patient, said the lead author of the study, prevailed.

"This is a big change from the early '90s, when studies reported that only about 20% of people had advance directives," said Dr. Maria J. Silveira, a clinical scientist at the Veterans Affairs Ann Arbor Healthcare System and an assistant professor at the University of Michigan. "I think it shows the public has bought into this and thinks it's important."

Silveira used data from the long-running Health and Retirement Study, which surveys adults ages 51 and older nationwide. In analyzing data from people ages 60 and older who died between 2000 and 2006, researchers found that of the 398 incapacitated people who had used a living will to request limited care at the end of life, almost 83% received it. Limited care was described as care in only certain situations.

Of the 417 incapacitated people who had requested comfort care in a living will, 97% received it. Comfort care was described as being kept comfortable and pain-free while forgoing extensive measures to prolong life.

If you need more information about living wills or durable powers of attorney, contact our Jacksonville Florida estate planning law firm.

Contingency planning for estate taxes has never been more critical than it is this year.  Why?

The federal estate tax expired on Jan. 1, 2010.  In addition, a long-standing provision that "stepped up" the basis of someone's assets to their market value at his or her death (which allowed them to be sold immediately with no capital gains taxes), also lapsed in 2010.  The federal estate tax will come back to life on Jan. 1, 2011.  

Do you know how this will end?  If so, forget about the contingency planning.  If not, then you need to consult with your estate planning attorney to ensure your estate plan has taken into consideration a year with no estate tax as well as the minimum $1 million exemption for 2011.

If you are married, chances are your estate plan has been designed to use each spouse’s estate tax exemption; when one spouse dies, the amount of the exemption goes to a “bypass trust” for other heirs and the rest goes to the surviving spouse.  But with no estate tax in place, this plan doesn’t work.

Some states have passed laws addressing this, but Florida decided to require the heirs to go to court to sort it out.  Consulting with a Florida estate planning attorney can help you bypass this requirement.

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

 

My last blog on gifting between spouses discussed an irrevocable trust that allows spouses to gift into irrevocable trusts while still maintaining control and allowing the assets to grow income tax free and pass estate and gift tax free to the beneficiaries.  However, doing so is not as easy as it sounds. 

The type of assets that may hold are cash, stocks, bonds, insurance, real property and business interests to name a few.  The amount that may be transferred into the trusts though is the tricky part.  The IRS has a rule, called the 5 and 5 rule, which states that when an annual exclusion gift is placed into an irrevocable trust for a spouse, a portion of the transfer will be included in the spouse's estate if the transfer is greater than $5,000 or 5% of the value of the trust property. 

Taking the 5 and 5 rule into account, if the trust has no asset in it, then $5,000 will be the limit for transferring assets into the trust until such a time arises that 5% of the value of the trust becomes greater than $5,000.  At that point, then the amount that may be transferred per year will be 5% of the trust assets until you reach the annual gift exclusion amount (currently $13,000 per year in 2010).  You can transfer $260,000 in year one into the trust tax free by filing a gift tax return and borrowing against your lifetime gift exemption ($1,000,000).  By doing this, 5% of $260,000 is $13,000 and you may then transfer the maximum amount per year.  This second technique is super charging the trust and dramatically increases the amount that passes to your beneficiaries completely tax free.  By creating these trusts, you are creating a second estate tax exemption above and beyond the exemption that the IRS currently allows. 

To discuss the benefits of these trusts, please contact an estate planning attorney.

Many retirees – and those planning for retirement – are taking a look at reverse mortgages to supplement their retirement income.  If you are 62 or older, a reverse mortgage allows you to use your home equity to receive a loan.  The loan does not have to be repaid until you die or sell the home.

Reverse mortgage income is tax-free income that you can receive either as a lump sum, monthly payments or as a line of credit to draw on as you need it.  If you are married and your home is owned by both spouses, then each of you must be at least 62 years of age to qualify.  Generally, a reverse mortgage loan does not require a credit or income test.

With a reverse mortgage, you can borrow up to 80% of the equity in your home.  If the value of your home increases in the future, you will be able to increase the amount of your loan as well.  Conversely, if the value of your home decreases, you could be incurring more debt than you want.

The most popular – and only government-insured – reverse mortgage loan is the FHA’s Home Equity Conversion Mortgage (HECM).  To qualify, you must:

• Be 62 years of age or older
• Own the property outright, or have a small mortgage balance
• Occupy the property as your principal residence
• Not be delinquent on any federal debt
• Participate in a consumer information session given by an approved HECM counselor

There are no income or credit qualifications for an HECM, no repayment as long as the property is your primary residence and you can finance the closing costs in the mortgage.

To determine is a reverse mortgage or any other financial instrument makes sense as part of your retirement plan, contact our Jacksonville Florida estate planning law firm.

Generally, when clients make gifts, they make them to their children and grandchildren in an amount that is completely free from the gift tax (currently in an amount equal to $13,000 per year).  However, you may use the same logic to make gifts between spouses.  The best part...you do not lose control of the money and it passes to your beneficiaries free from the estate tax.  It must be done correctly though.

First, set up an irrevocable trust, where the donor spouse is the trustmaker and the other spouse, the donee, is the beneficiary.  The donee spouse may also be the Trustee so you do not lose any control over the assets.  The Trustee then may pay out of the trust for the beneficiary’s health, education and maintenance.  By limiting the distributions to this standard, the assets held in the irrevocable trust are asset protected for the beneficiary.Further, the trust is generally structured as a grantor trust, meaning that the income taxes that would be owed by the trust are actually paid by the trustmaker.  By structuring it as a grantor trust, then the assets in the trust will grow income tax free as well!  In my next blog, I will discuss the rules that apply to transfers to the trust as there are specific requirements for gifts between spouses to ensure that they are free from gift taxes.

To learn more about spousal gifitng, please consult with an estate planning attorney.

According to a recent Harris Interactive national survey, half of American adults do not have even the most basic estate plan in place to protect them and their assets.

The survey, detailed in a recent article in Forbes, showed:

Of those surveyed, only 35% have a will directing who gets their assets and only 29% have a living will that states their views on end of life medical procedures. Not surprisingly, older Americans were more likely to have made some preparations: 77% of adults over 55 had signed at least one of the needed documents, compared with 24% of those under 35. There was no noticeable difference in planning between men and women, but Americans with more education were far more likely to have planned.

Even the oldest respondents were hardly well prepared. For example, only 48% of those 65 and older said they a financial power in place authorizing someone to make financial decisions for them if they were incapacitated and only 51% said they had a health care power in place. Perhaps spurred by hospital admissions personnel, who usually ask if admitted patients have a living will, 58% of those 65 and older reporting having this crucial document.

The survey delved into why so many Americans lack estate planning documents. In a sign that the recession is taking its toll on planning, 44% of those without any documents said the reason was because they were more focused on "essentials" like paying bills and buying groceries. Feeding the neglect, however, were misconceptions about the primary purpose of estate documents or what might happen if someone hasn't planned.

If you need more information about retirement plans, contact our Jacksonville Florida estate planning law firm.

It is officially dead....for now.  On April 30th, the bill died in the Committee on Finance and Tax.  So for now, nonresdients with property in Florida upon their death do not have to worry about having to pay a Florida estate tax.  As stated before, there are still PLENTY of other reasons though to become a Florida resident.

To learn more on becoming a Florida resident, please consult a Florida estate planning attorney.

The primary reason that people engage an estate planning attorney or financial planner is to ensure they have enough money for their retirement.  So how do you know how much is enough?

To get a realistic picture of what your retirement expenses will likely be, you should do the following:

Calculate your current expenses. If you currently operate with a good household budget, this should be simple.  To get a quick snapshot, consult your latest tax return.  Take your after-tax income, deduct your savings and charitable contributions and the total will generally tell you what your cost of living is now.

Subtract the expense you will no longer have in retirement. Perhaps your mortgage will be paid off by the time you retire.  Subtract any child-related expenses, expenses associated with a job (clothing, commute costs, etc.),  entertainment and leisure expenses (don’t forget you’ll have those senior discounts!) and any other expense you think you’ll leave behind once you retire.

Add expenses you may have in retirement. Your healthcare expenses may be more.  You may decide you want to spend more to travel.  Or you may have children or grandchildren that need financial assistance.

Once you’ve done this exercise, your next step will be to engage some professional help to develop a comprehensive retirement plan.

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

 

There are a number of myths surrounding retirement plans and when you are in the process of doing your estate planning, you should be able to sort truth from fiction.  So here, finally, are some unvarnished truths about retirement plans:

You can take money out of your 401(k) before you retire without penalty. Most 401(k) plans have exemptions to early withdrawal penalties.  You can take early withdrawals to pay medical expenses, if you lose your job and you are between the ages of 55 and 59 ½, if you set up substantially equal periodic payments (which you can do at any age) or if you are taking dividend distributions from employer stock within an employee stock ownership plan (ESOP).  You won’t have to pay early withdrawal penalties, but the IRS will be expecting you to pay income tax on those withdrawals.

You can take money out of your traditional IRA before retirement age without penalty. Yes, there are several ways you can take money out of a traditional IRA before you are 59 ½ without an early withdrawal penalty (but not without paying income tax!).  Your estate planning attorney can provide you with information on how to do this – including setting up installment payouts, paying for college or buying a first home.

You do not have to automatically take money out of an IRA or 401(k) when you turn 70 ½. You are required to take a minimum amount out of an IRA once you reach the age of 70 ½; however, if you own a number of IRAs you can subtotal the amount from each and take the grand total out of just one.  If you are still employed at age 70 ½, you do not have to take money out of your 401(k) unless you are the owner of a business.

If you need more information about retirement plans, contact our Jacksonville Florida estate planning law firm.

A charitable trust is truly the gift that keeps giving since it allows you to generously donate assets to charity and provides you and your heirs with tax breaks.

Establishing a charitable trust is fairly easy.  First, the charity you choose must have tax-exempt status from the IRS.  With the help of an estate planning attorney, you can then set up the trust and transfer the assets you wish to donate to that trust.  The charity serves as the trustee, and manages or invests the property to provide income for you or your beneficiaries.  Then, upon your death, the property reverts to the charity.

Usually, the income you receive from a charitable trust is through a fixed annuity or a percentage of the trust assets (at least 5% of the value of the trust per IRS rules).

By setting up a charitable trust, you receive significant tax advantages.  You can take an income tax deduction over five years for the entire value of your gift, minus the income you are likely to receive from it.

If you donate property, stocks or bonds, the charity will sell these to acquire property that will produce income for you – and since charities are not subject to pay capital gains tax, all the proceeds remain in the trust.

When you die and the trust property reverts to the charity, it is no longer a part of your estate, so it is exempt from any federal estate tax.

For more information on establishing a charitable trust, consult a Florida estate and tax planning attorney.

If you’re like most people, you may believe that your estate planning duties are done once you make a will.  Wrong.  There are several important things a will can do for you, like distribute family heirlooms, but there are just as many – if not more – important things it cannot do:

Avoid probate – if you leave property to someone through your will, it will not be passed on to them except through probate court proceedings, which can take a year or more.

Reduce estate taxes – a will won’t help you reduce estate taxes; you will need to set up some kind of a trust to do that.

Provide care – if you wish to provide for someone with long-term care needs, a will cannot do this for you.

Distribute some types of property – a will cannot allow you to distribute property that you co-own with someone else or have transferred to a living trust, the proceeds of a life insurance policy, stocks or bonds held in transfer-on-death form, money in a payable-on-death account, or money in a pension plan, IRA, 401(k) or other investment account.

Provide for pets – pets cannot own property, so to provide for them properly after your death, you will need to designate a caretaker for your pet and leave appropriate pet care funds for them.

To learn more about the proper uses of wills and trusts, consult a Florida estate and tax planning attorney.

A buy-sell agreement is an agreement between business owners that states what is to happen upon one of the owners becoming disabled or upon their death.  The surviving owner usually does not want to go into business with the surviving spouse or children of their deceased owner.  However, buy-sell agreements can be very tricky as they usually attempt to set a price for the value of the ownership interests and getting the IRS to accept that valuation is the key.  Below are several things to keep in mind when drafting a buy-sell agreement.

• The buy-sell shall have a reasonable and determinable price stated in the agreement at the time of signing of the agreement.  The specific price need not be in the agreement but if you are using a formula to determine the price, the formula should be clearly stated.
• The estate of the deceased owner should be bound to sell the ownership interests and not given the option to do so.
• The buy-sell agreement is a device used to sell the ownership interests and not a testamentary device used to pass the business to the next generation at a lower price.
• The agreement should be a bona fide business agreement with each side having their own attorney.  However, there is usually only one attorney involved in drafting the agreement.
• The price to sell the ownership interest during life should not be higher than the price to sell at death.
• If it is a family business, the buy-sell agreement should be comparable to that of a similar business owned by non-related parties.  Ask yourself "would non-related parties do the same?"

Again, buy-sell agreements are very important but also very tricky to draft and require an attorney to be involved.  This is not a do-it-yourself type of deal.  There are plenty of cases out there where DIY buy-sell agreements came back to haunt the deceased's estate along with the surviving business owner(s).  To learn more about buy-sell agreements, consult a business, tax or estate planning attorney.

What happens to your property located in the United States upon your death if you are a Canadian citizen?  That is the situation with quite a few Canadians who have homes here in Florida that they live in during the winter months.  Prior to this year, a non-resident had an estate tax exemption of only $60,000.  Meaning upon their death, all they could pass tax free to a beneficiary was $60,000.  After that, they were subject to a tax rate of 45% (for 2009).

If your surviving spouse is a non-resident, then you can defer the estate tax with the use of a qualified domestic trust, also known as a QDOT.  However, the trustee for a QDOT must be a U.S. trustee with the power to withhold taxes as withdrawals are made for the benefit of the surviving spouse.  The purpose of thise requirement is to ensure the non-resident spouse pays the taxes on the assets and does not just leave the U.S. without paying the tax.

However, this year specifically, there is no estate tax...even for a non-resident.  That being said, there are specific basis rules in play this year since the full step-up in basis is not available.  The basis rule specifically relating to non-residents is that they may only step-up $60,000 worth of assets this year.  If Congress does nothing to change the estate tax in its current form, the pre-2010 rules will again be in place on January 1, 2011 with a limited amount of $60,000 available to be passed tax-free to your beneficiaries.

For more information on estate planning for non-residents, please consult with an estate planning attorney.

Most of us have submitted our 2009 taxes and breathed a sigh of relief that we don’t have to pay attention to another tax return until 2011 rolls around.  Not so fast.  New laws enacted over the past year have made figuring taxes a challenge, and that trend will continue with 2010 returns due to the passage of the new health care legislation.

Do you have a healthcare savings account (HSA)?  In 2010, the penalty for non-qualified distributions double, from 10 to 20 percent.  In 2011, over-the-counter drugs will no longer qualify as a HSA expense – only prescription drugs and eyeglasses and insulin qualify.  And if you do not use all the money you have set aside in your HSA during the year, you will likely lose any remaining balance.  Beginning in 2013, there will be a $2,500 cap on how much you can put into your healthcare savings account.

Also taking effect in 2013 is a 3.8 percent tax on net investment income for those single taxpayers earning $200,000 or more, or joint filers with gross income of more than $250,000.  This is in addition to capital gains and other required taxes.  This tax does not apply to qualified pension plans, IRAs, 401(k) plans, municipal bonds or tax-exempt interest.  A higher Medicare tax will also go into effect in 2013 for higher-income households.  See my blog posts from April 19th, April 21st ad April 23rd.

On the horizon:  the Obama administration’s proposal to increase the top 15 percent capital gains tax to 20 percent in 2011 for those with household incomes exceeding $250,000.  And if the 2001 and 2003 federal tax cuts are allowed to expire, tax rates for high-income households can go even higher.

If you have questions about how new legislation may affect your estate and tax planning, consult an estate planning attorney.

Florida, like many other states, has a slayer statute.  The statute states that a murderer is not able to receive property or any other benefits by reason of killing someone.  So if you kill your parents and you are a beneficiary of their will, you are not able to take your share of their estate under the will.  Florida treats you as if you had died before your parents.

The IRS recently released a private letter ruling (PLR 201008049) which came to a different result.  While Florida law may prohibit an individual who kills an IRA owner from benefitting under the IRA, the letter ruling states that a murder conviction in and of itself does not have the effect of retroactively removing the individual as the designated beneficiary of the decedent's IRA as of the measuring date.  Therefore, an individual convicted of and imprisoned for the murder of the decedent will still be treated as the designated beneficiary of the decedent's IRAs despite the state law slayer statute treating him as predeceased for purposes of inheriting property from the decedent.  The decedent's life expectancy will be used to calculate required minimum distributions.

To speak further about the private letter ruling, please consult an estate planning or tax attorney.

Most people think that to receive tax benefits from a charitable trust, they have to have large sums of money to donate and an army of tax lawyers to set up and administer the trust.  But with a pooled charitable trust, you can donate as little as $5,000 and receive tax benefits.

A pooled charitable trust is just what it sounds like – a trust set up by a charity or investment company that accepts donations from anyone, then pools the donations into one investment fund.  Dividends are paid to donors according to the fund’s earnings and the donor’s contribution.

Most pooled charitable trusts have minimum initial donation levels, but then allow donors to contribute subsequent amounts in as little as $1,000 increments.  You can make contributions via cash, stocks or bonds.

Each time you make a donation to the pooled charitable trust, you can take an income tax deduction.  If you donate stocks or bonds, you can convert those assets into income-generating vehicles without paying capital gains taxes.  If you owned the stocks or bonds for over a year, the charity doesn’t have to pay capital gains either.

Any payments you receive from the trust are considered regular income, but you can request that your earnings be retained until you reach a certain age.  Upon your death, the charity receives your donations outright, without probate.

If you’d like more information on pooled charitable trusts, consult a Florida estate and tax planning attorney.

With the uncertainty still there as far as what Congress will do with the estate tax, many are waiting to see where it all ends up.  However, there are many non-tax related reasons to plan your estate that have nothing to do with Congress lack of clarity.

Disability planning is a very important part of estate planning.  Most insurance plans and Medicare do not cover long-term care, meaning the money will come from your own pockets.  You should always consider using long-term care insurance for protect your assets.  Statistics says that almost half of Americans 65 or older will end up in a nursing home at some point.

A living trust can also include disability provisions to make sure you are taken care of according to your wishes.  It is best to plan now just in case something happens to you tomorrow and you are no longer competent to sign your estate planning documents.

Special needs planning is also an important reason to do your estate planning now.  A special needs trust ensures that your special needs beneficiary (usually your child) is taken care of financially without being disqualified for government benefits.  Usually this type of planning is done with life insurance to ensure that money is there to care for the beneficiary after your death.

You also can provide asset protection for the assets left to your surviving spouse and beneficiaries.  This is really important to ensure that they assets go to your ultimate beneficiaries instead of anyone else, including a surviving spouse's new spouse should they get remarried.  Speaking of getting remarried, estate planning should be done in a blended marriage situation.  A lot of blended marriages have children from previous marriages and the one spouse usually wants their assets to go to their children only.  To prevent any legal disputes upon death, an estate plan must be completed.

To speak with someone on why you should still do your estate plan in 2010, please consult with an estate planning attorney.

Last week Senator Max Baucus (D-Mont) stated that action on a small business tax cut bill should be coming forth and then shortly thereafter, a bill on the estate tax.  He stated that discussions will begin with the estate tax exemption from 2009 which was $3.5M per person with a tax rate of 45% for anything above and behond $3.5M.

Having read the above in an article, this is what it really means.  It is very unlikely that anything will be up for a vote or passed until after the November election.  If they made good time on the small business bill, that means they would not get to the estate tax bill until June or July, making it likely a vote would not take place on it until late September or October.  Due to the mid-term elections in November, there will not be anyone available to vote on the bill.  This subject will show up in the November elections and will be politicized.  Stay tuned to further updates...

To learn more about the estate tax, please consult with an estate planning attorney or other estate planning professional.

The Wisconsin Supreme Court ruled last week that personal estates -- not those who inherit from them --are responsible for paying state and federal estate taxes.

From the Associated Press article on the ruling:

Writing for a unanimous court, Chief Justice Shirley Abrahamson said state and federal law is clear in making estates responsible for tax liabilities that can be up to 50 percent on the accounts and not the recipients.

The court declined to adopt a so-called apportionment rule that would divide tax liabilities among beneficiaries of an estate when the deceased does not specify who is responsible. Abrahamson said state lawmakers, not the court, should decide whether that is the policy in Wisconsin.

The decision was a victory for Jessica Schleis, who was 17 when she inherited more than $3.7 million in two accounts from her deceased godfather, James Sheppard.

Sheppard, a co-founder of the Menomonee Falls, Wis.-based Cousins Subs sandwich chain who died in 2007, had an estate worth $12 million and other heirs scattered across the country.

Her parents signed an agreement with the estate to keep 50 percent of the money in the accounts to cover any "required" state and federal taxes on them.

Attorneys for Jessica Schleis and her parents later said the agreement was not binding since they were not required to cover the tax bill under Wisconsin law.

The estate filed a lawsuit to require Schleis to pay all the taxes generated by the two accounts she received. Its attorneys argued she would receive a windfall at the expense of other heirs if she wasn't required to pay the taxes as originally envisioned.

A Washington County judge dismissed the case, saying the estate was responsible for the inheritance taxes.

Are you up to speed on the latest developments concerning estate taxes?  If not, contact our Jacksonville Florida estate planning law firm.

My last blog began a series of questions you should ask yourself to see if your estate plan needs to be updated.  Again, if you answer “No” or “I don’t know” to any of the questions, please set up a consultation with us so that we may review your estate plan with you to either tell you what it says or update it so that you have an estate plan that works for you and your families needs:

1. I am satisfied with the persons I named as guardians of my minor children in my current plan.
2. I am satisfied with the persons I named as executor or trustee in my current plan.
3. The persons I named as executor are either a Florida resident or a family member.
4. I am satisfied that my current plan sets up a contingent trust for my minor children.
5. I am aware of all future estate planning fees and expenses; including an understanding of those involved at the time of my death.
6. My children have met with my attorney and fully understand their roles and responsibilities upon my incapacity or death.
7. My Revocable Trust, if any, and Power of Attorneys specify an understandable test to determine my disability.
8. My Revocable Trust, if any, gives instructions for my care and the care of my loved ones if I become mentally disabled.
9. My Revocable Trust, if any, is fully funded so that my family can avoid the delays, publicity  and expenses of probate.
10. I and my spouse, if applicable, own everything jointly.
11. I have put my personal property into my Revocable Trust, if applicable.
12. I own property in another state which has already been dealt with in my estate plan.

If your estate plan needs updated, please conult with an estate planning attorney to set up a review of your current estate plan.

Does your estate plan need a tune up?  Although most Americans do not have an estate plan, those who do have an estate plan set up their estate plan, shove it in a file drawer in their homes and completely forget about it afterwards.  Below are a series of questions to quickly ask yourself to make sure that your estate plan still does what you originally wanted it to do.  If you answer “No” or “I don’t know” to any of the questions, please set up a consultation with us so that we may review your estate plan with you to either tell you what it says or update it so that you have an estate plan that works for you and your families needs.

1. I have a current Health Care Power of Attorney that has the required HIPAA authorizations to permit my spouse, children and/or family to make emergency health care decisions for me in the event I am unable to do so.
2. I have a current Durable Power of Attorney that is less than four years old to permit my spouse or children to handle my financial affairs in the event I become disabled.
3. I am certain that my current estate plan will minimize possible federal estate taxes at my death, including taxes on my house, life insurance and IRAs.
4. I have taken steps to avoid possible will contests and disputes at my death.
5. I have taken steps to protect my children’s inheritance in the event my surviving spouse chooses to remarry.
6. I have recently checked the beneficiary designations of my retirement plans and life insurance policies, and I am confident that I have not listed my estate or any minor children as either primary or secondary beneficiaries.
7. I have a plan to provide creditor and lawsuit protection for assets passed to my surviving spouse.
8. My current plan provides creditor and lawsuit protection for my children’s’ inheritance.
9. My current plan addresses income tax planning.
10. I have a plant to protect my children’s inheritance from a divorcing spouse.

Again, if you answered "No" or "I don't know", please consult with an estate planning attorney to review your estate plan and ensure it still works for you and your family.

The federal estate tax has gained lots of attention in 2010 because it ceased to exist...at least until Congress reinstates it, which many believe will be the case.

For Florida residents with sizeable estates – in 2009, the estate tax threshold was $3.5 million – adding an AB provision to a living trust can provide substantial tax savings.  An AB trust ensures that both spouses can take advantage of the government’s “unified credit” – a credit that allows you to exempt $1 million during your lifetime to reduce or eliminate gift taxes or reduce estate taxes.

By establishing an AB trust, each spouse can take advantage of the unified credit – once when the first spouse dies, and again at the death of the second spouse.

When the first spouse dies, an AB trust creates two separate trusts.  The assets of the survivor are transferred to the A trust, and an amount up to the exemption limit of the deceased spouse’s assets goes to the B trust.  Each trust is taxable, and each can use the exemption.

The B trust is subject to estate taxes, but because of the unified credit, no taxes are owed.  The surviving spouse receives income from the B trust while maintaining control over the A trust.  Upon the death of the second spouse, the benefits from the B trust go to the spouses’ beneficiaries, usually the children.  Only the A trust is subject to estate taxes, since the B trust was taxed at the death of the first spouse.

Sound complicated?  It can be, which is why you should consult a Florida estate and tax planning attorney if you have a large estate and want to learn more about the benefits of establishing an AB trust.

There are many couples in the Jacksonville, Florida and throughout the State of Florida who face the problem of setting up an estate plan for their partner when they choose not to be married or are not legally allowed to be married.  Married couples may take advantage of the unlimited marital deduction when creating their estate plan both to balance their estates (gifting while alive) and deferring estate taxes (upon the death of the first).  This is deduction is not available to partners who are not married.  However, Florida specifically has additional hurdles to overcome for those of you who are in this specific situation. 

Florida homestead laws state that the homestead must pass to the surviving spouse and then lineal descendants free of the creditors of the first spouse to die.  Since surviving partners are specifically not given the protection under Florida’s homestead laws, it is very important that the first partner to die does not have any unexpected medical bills or large creditors.  The creditors may cause the home to be sold in order to satisfy the outstanding debt, leaving your partner without your home.

The Florida Health Care Surrogate and Durable Power of Attorney statutes do not include partners as next of kin in determining who you may serve as your surrogate/power of attorney.  If you do not have any documentation in place for this, your partner will be left out of the decision making process for you.

Finally, if you have no estate plan in place at all, a partner will receive nothing under the will that the State of Florida has set up for you.  So if it is your intent to pass assets onto your partner, you will want to have a valid estate plan set up.

If you would like to discuss the estate planning issues relating to same sex or unwed couples in the Jacksonville, Florida and throughout the State of Florida, please consult with an estate planning attorney who is knowledgeable with the issues being raised by your specific situations.

Probate is a lot like trying to get to a destination going through a long construction zone, very frustrating.  An important goal in Florida estate planning is to spare your family the expense and hassle of a probate court proceeding.  Here are some options to avoid Florida probate:

Living trust – setting up a Florida living trust can ensure that all your assets will be passed on to whomever you designate without probate court proceedings.  This entails creating living trust documentation and assigning a successor trustee to transfer the assets to your beneficiaries after your death.  However, you must transfer property ownership to yourself first as the trustee of your trust to ensure the property will be controlled by the terms of the living trust.  An estate planning attorney can help you with this.

Joint tenancy – if you own property with a spouse or someone else, a “right of survivorship” provision will ensure that the property transfers to the surviving owner.  In Florida, each owner must own an equal share of the property.  For married couples, this is known as “tenancy by the entirety.”  The downside to joint tenancy is that it can really mess up estate tax planning (remember, the estate tax returns on January 1, 2011, if not before).

Transfer-on-death designations – in Florida, you can register brokerage accounts in “transfer-on-death” (TOD) form.  Bank accounts and CDs can be designated “payable-in-death” (POD).  For both, the beneficiary inherits immediately upon your death, but you control the funds until that time.  Florida does not have such provisions for real property, like homes or vehicles.  There is also a possibility that TOD and POD designations will not avoid probate in the future.  There is talk that the Florida lawmakers are contemplating making accounts with TOD and POD designations an asset subject to probate.

If you need information on how to avoid Florida probate, consult a Florida estate and tax planning attorney.

I was given a plan to review for a potential client who is a physician with significant wealth.  The plan was drafted about two months ago and the initial concern from the financial advisor was that funding was not discussed with the client.   So I began reviewing the plan and noticed that the attorney who drafted it did no tax planning at all.  The plan gave everything to the surviving spouse in a trust that qualified for the marital deduction.

Although the plan works great for this year, as of January 1, 2011, the estate tax returns.  So unless both spouses passed away this year, the plan would cause more taxes to be owed upon the second of them to pass away than they would had they done some VERY simple tax planning.

Just because there is no estate tax for this year does not mean that there is no longer a need to do tax planning.  In fact, the tax rules this year require even more tax planning to take place to make sure you effectively pass assets that will increase the basis in the assets to their maximum amount permitted under this years basis rules.  This will all change of course in 2011.

Unfortunately there is no crystal ball that I can look into to give anyone a clear answer to where things will be a year from now.  However, your plan should be reviewed, no matter how new, to ensure that the plan is still tax efficient.  To have your plan reviewed, please consult an estate planning attorney to set up an appointment.

The primary purpose of a Florida living trust is to spare your beneficiaries the delay, publicity and expense of a probate court proceeding.  In Florida, a probate court proceeding can take anywhere from 8-15 months, depending on the size of the estate and whether or not a hearing is needed.  However, with a Florida living trust, your assets can pass to your beneficiaries without delay, usually within a month or two.

Florida also has a simplified probate process for smaller estates – those less than $75,000 – so if your estate falls into this category, a living trust may be an unnecessary expense.

A living trust also allows you to do disability planning in order to avoid having to set up a guardianship in the future.  This alone is a big benefit to setting up a living trust and transferring all of your assets into the living trust.

There are two types of living trusts:  revocable and irrevocable.  A revocable living trust keeps you in control of your assets while you are still living, and allows you to change beneficiaries, modify the terms or even revoke the trust.

An irrevocable living trust is one you do not control, and it cannot be changed or revoked.  However, there are tax benefits to an irrevocable trust that are not available with a revocable trust.  Generally, an irrevocable trust is not subject to estate taxes.  On the other hand, an irrevocable trust is only available in certain situations.

If you are interested in learning about all the advantages of a living trust, consult a Florida estate and tax planning attorney.

As I blogged about last week, the Florida House and Senate has introduced a set of companion bills that will introduce an estate tax on the estates of nonresidents who have property in the state of Florida.  The bills, having read them, are quite confusing. 

My interpretation of them is that they will tax any property of a nonresident that is located in Florida when the nonresidents estate will also be taxed in their home state.  The tax rate in Florida would be the exact same tax rate that is used in the nonresident’s home state.

The tax returns would be due either at the same time as the nonresident’s home state requires it be due or twelve months after death, depending on which bill you read.

Again, the bills are quite confusing and need some work by both the Senate and House to reconcile their differences.   I will update the status of the bills as updates come available.  Again, this may be a great time for snowbirds to begin thinking about becoming a Florida resident.  To consult with an attorney in regards to whether or not you should make Florida your residence, please consult with an estate planning attorney to discuss whether or not to become a Florida resident.

I recently had a potential client come and ask me what happens when property is sold that is subject to the life estate.   My answer to her was it depends (I know, a typical lawyer answer).

The reason it depends is that it depends on who is selling the interest in the property.  With a life estate, there are two real property interests involved.  The first interest is the holder of the life estate itself.  A life estate gives the holder the right to use the property until their death.  Upon death, the property automatically transfers to the remaindermen, the second property interest involved.

If only the holder of the life estate sells their interest, then the buyer is only buying a right to use the property during the life of seller.  They could be buying it for a day or for many years, no one knows.  A valuation specialist usually must be brought in to value the life estate, which is based upon the age of the holder of the life estate.  Again though, the buyer is only buying a right to use the property during the life of the seller, not forever.  Upon the seller’s death, the rights in the property then pass automatically to the remaindermen. 

In order to fully purchase the property so that the buyer owns the property outright, both the holder of the life estate and the remaindermen need to be parties to the transfer.  They each need to transfer their respective property interests to the buyer.

If you have any questions in regards to a life estate, please consult an estate planning attorney to discuss the life estate further.

I have written several blogs in the past on the benefits of being a Florida resident (see my blogs on February 12, 2010).  However, the Florida legislature has added yet another.  On February 22^nd the House and on February 26^th the Senate introduced companion bills that, if passed, would introduce an estate tax in Florida for non-residents.  The Senate's version cites the bill as the Florida Taxpayers Protection Act.  If passed, the bill will go into effect on July 1, 2010.

The bill states that a non-resident, who owns property in the state of Florida and whose state of domicile has an estate tax, will be subject to a separate Florida estate tax on the assets owned in Florida.  This means that those of you who are snowbirds who have a secondary home down in Florida, will be subject to an estate tax here in Florida if your home state has their own estate tax.  There are currently sixteen states have their own separate estate tax.  Now may be a good time to think about becoming a Florida resident.

If you spend your winter months in Florida but claim another state as your residence, you may be much better off by making Florida your state of residence.  To consult with an attorney in regards to whether or not you should make Florida your residence, please consult with an estate planning attorney to discuss whether or not to become a Florida resident.

Although there currently is no estate tax in place, it is scheduled to rear its ugly head once January 1^st rolls around again.  This time though, it comes back with a vengeance at a $1,000,000 exemption and a 55% tax rate for anything over the exemption.  However, if you plan now, there are ways to effectively pay or reduce your estate taxes.

First, you can just pay the taxes.  It is a very rare sight to see, but some folks like to pay taxes.  They feel it is their civic duty.  Again, this is VERY rare.  Second, you can spend all your money.  Clients have told me that they hope to spend every last penny before they die.  Although very admirable and probably the most enjoyable of all the alternatives, it most likely will not happen.  If you have an estate that is taxable, the estate grew to become a taxable estate due to saving and not spending.

Third, you can make charitable donations.  You can make them during your life or at death.  Fourth, you can start a family gifting program.  You may currently give $13,000 per year per person to anyone you want.  So you may give a $13,000 to everyone in your family this year and then on January 1^st, do it again.  The earlier you do this, the more money you will be able to get out of your estate.  Further, you may give an unlimited amount to anyone for education and medical expenses, as long as the money goes directly to the education or medical provider.

Fifth, you may create an irrevocable life insurance trust, also known as an ILIT.  An ILIT is a special type of trust that will own your life insurance and be the beneficiary of it upon your death.  Since you no longer own the life insurance at death, it cannot be included in your estate.  There are a lot of pitfalls though which much be avoided for this to work correctly.

Finally, you can do other advanced planning techniques to shrink your estate.  One technique removes your primary or secondary home from your taxable estate.  Another technique deals with setting up a business and gifting a percentage of the business away on an annual basis.  There are well over 60 different techniques that can be used and each offers a different level of complexity.

If you would like to further discuss ways of reducing your estate taxes, please consult an estate planning attorney.

On February 16, 2010, I wrote a blog about whether or not an inherited IRA was asset protected and I said that it depends on what court you are in.  The latest inherited IRA case proves that to be true.

A bankruptcy court in Texas this week has ruled that an inherited IRA is not asset protected in bankruptcy.  The debtor chose to use the federal exemption under section 522(d)(12).  The Texas court used a two part test: 1) where the funds “retirement funds”; and 2) if they were such, were they exempt from taxation under the applicable Code provisions.

The court first ruled that the funds were not “retirement funds” since they are distributed to the beneficiary without regards to age or working/retirement status.  Simply stated, an inherited IRA in their minds is not equivalent to an IRA.  The court then said, for arguments sake, that if an inherited IRA contained “retirement funds”, the inherited IRA account is not a traditional IRA that is exempt from taxation.  To be exempt from creditors under 522(d)(12), the inherited IRA must be exempt from taxation under one of the IRS code sections enumerated in 522(d)(12).  An inherited IRA is not tax exempt under one of 522(d)(12)’s enumerated tax sections. 

I will try and follow this case as I believe it was looked at by the court very narrowly.  This ruling is completely opposite of the ruling last month, eventually they will have to be reconciled.  For now, at least in Texas, an inherited IRA is not asset protected in bankruptcy.  If you need help with estate planning, please consult an estate planning attorney to discuss your particular situation.

Estate planning is such a broad term.   Estate planning includes wills, trusts, taxes, business succession, asset protection and many other documents and practice areas.  Estate planning also includes long-term care insurance and elder care.   It is all about planning for the future.   The time to plan for a nursing home placement or admission is not the first day of the admission.  Ideally, the best time to plan is when there is no pressure to find a facility, when the person is healthy and able to make an informed decision about long-term care, and when there are funds and insurance plans available to purchase to complete or put in place the planning process.   Douglas K. Gitter, J.D. of Northwestern Mutual will be making a presentation this Sunday, March 14, 2010 on the importance of Long Term Care insurance in estate and succession planning.  According to Gitter, in discussions with clients many of them were unfamiliar with the overall effect long term care can have on their assets.  Take Charge of Your Future is a detailed educational seminar, which illustrates the importance of long term care planning to ensure financial security.   Martin Goetz, CEO of River Garden will also be speaking about his top-rated, five star, long term care facility.

Please join us to learn more at the Brotherhood Sponsored Community Breakfast this Sunday from 10:00 am to noon.  There is a $5.00 per person charge with RSVP to TempleBrothersJax@yahoo.com or $6.00 at the door.    

This is a community event open to all interested in attending.  While Wood, Atter & Wolf are not sponsors or speakers at this event, Wood, Atter & Wolf supports and commends people and organizations promoting good estate planning as well as the proper and dedicated care of the elderly and those in need of long-term nursing home care.

To learn more about Doug and his practice, please visit his website at http://douggitter.nmfn.com/.

A very popular estate planning technique is to transfer assets into a Family Limited Partnership (FLP) and then claim a valuation discount on the interests that the estate still owns upon a person’s death.  The IRS has questioned this technique and is starting to litigate cases that fall within certain parameters.  In fact last year, the IRS hired 14 new estate tax attorneys and plans on hiring 10 more this month.  In doing so, the IRS is looking at estate tax returns that claim reduced values of the estate based upon FLP interests.  The IRS has hinted as to what “red flags” they look at when determining whether or not to litigate a case where an estate valuation discount is taken.  The following is a list of some, but not all, of those “red flags”:

• Near death creation of the FLP
• Decedent retained no assets for living expenses
• No contributions by other partners
• Nature of assets (person use assets)
• Failure to observe partnership formalities
• Commingling of personal and partnership  assets
• Post-death distributions or borrowing from the FLP (ex. Loan taken out by estate to pay taxes)
• Non pro rata distributions if the decedent is the only person receiving distributions
• No real business or investment purpose or creditor protection purpose
• Achieving discounts seems to be the real reason for creating the FLP

If you have created a FLP or are thinking about creating a FLP, please consult with an estate planning or tax attorney for advice or to review how you have been conducting business through the FLP.

Although there is currently no estate tax (which could change any day), there are eight basic estate planning steps that everyone should take, no matter what your net worth is. 

The first step is to have a financial power of attorney.  The financial power of attorney appoints someone to handle your financial affairs if you are unable to do so yourself.  This document ensures that all of your assets are taken care of and your bills are being paid.  The person appointed can be appointed immediately or only upon your disability.  Without a financial power of attorney, your family will have to go to court to have permission to deal with your assets.  State laws change frequently, make sure your financial power of attorney is valid under your state’s law.

Step two is to make sure you have a valid health care power of attorney and living will.  The health care power of attorney allows someone to make health care decisions for you if you are unable to make them for yourself.  A living will states what your intent is if you are in a persistent, vegetative state.  More commonly stated as “whether or not to pull the plug”.  Your health care power of attorney needs to have the HIPAA authorizations within it, otherwise it is not a valid document.

Step three is to calculate your net worth.  You may be surprised where you stand financially.  This is important from a tax standpoint but you will also get a hold of everything you own.  Sometimes assets fall through the cracks and are not properly planned for because they were not brought up during the estate planning discussion.

Step four is to review your beneficiary designations.  Upon your death, your beneficiary designations control how that specific asset will pass.  A will or trust has no say.  If your ex-spouse is named accidently, the ex-spouse will receive that asset.  Beware, it happens everyday!

Step five is to create or update your will.  A will allows you to determine how your assets pass to your loved ones.  If you do not have a will, the state where you live has graciously set one up for you but it probably does not pass your assets according to your wishes.  This is especially true when you are remarried and have children from your current and/or previous marriage. 

Step six is to plan for your state’s estate tax.  The District of Columbia and23 other states have their own estate or inheritance taxes.   If you don’t plan for them, you could inadvertently cause a state estate tax upon your death.

Step seven is to check how your assets are currently titled.  Do you have everything titled jointly?  If you have a trust, does your trust own your assets?  If you are unsure how your assets are titled, please review the title of your assets as it makes a big difference upon your death.

Finally, the last step is to gift while you are alive.  Currently, you can give $13,000 per year to anyone you wish.  You can stand outside of your church and write a $13,000 check to everyone who passes by.  Additionally, you can pay anyone’s college or private school tuition or medical bills so long as they money goes directly to the educational facility or medical provider.

If you need help with any of the above estate planning steps, please consult an estate planning attorney for estate planning legal counsel.

Many people prefer a relative to be a trustee of their trusts.  However, in some situations, hiring an independent corporate trustee may be the smarter decision.

A corporate trustee brings impartiality, experience and expertise at a time that is often filled with emotion.  A corporate trustee will remain neutral in the face of family disagreements.  A lot of attorneys frequently recommend hiring corporate trustees, rather than naming family members for the following reasons:

• Corporate trustees have record keeping systems in place to guarantee timely, accurate accounting of principal and income as well as production of regular statements.
• Past history with family members can impair decision making.  A corporate trustee can ensure decisions are made on facts and not feelings.
• Privacy is a fiduciary duty of the corporate trustee.
• In matters pertaining to your legacy and your beneficiary’s inheritance, it is important to have someone with experience at the helm.
• Corporate trustees are consistently available, devoting full attention and resources to achieving the results required of a trustee.
• Substantial capital surplus and insurance coverage are carried by reputable corporate trustees for liability purposes.
• Perpetual existence assures a capable, professional organization is ready to complete the trust tasks required for decades going forward.
• There are strict compliance standards set by State and/or Federal regulatory agencies, as well as audits conducted by an independent auditor at least annually.
• Corporate trustees are required by law to faithfully perform all its duties and follow the trust document terms to the letter.
• Specialization in trust administration provides services in an efficient, cost-effective manner for reasonable fees.

If you’d like to discuss the value of a corporate trustee further, please contact an estate planning attorney for further information.

Ever wonder what happens to your pets after you pass away?  Most pet owners consider their pets as a member of their family.  It, however, is not uncommon for pets to be left behind as their owners pass away.  What can you do to ensure that your pet is taken care of upon your passing?  Estate planning for pets became more popular in the 90s and pet trusts are now legal in most states.

Legally, your pet is deemed to be tangible personal property that would pass to your heirs or beneficiaries by law.  With a will or a trust, you can control who will get your pets and how they should be taken care of.

Typically a pet trust sets aside a certain amount of money that is dedicated to caring for the pets you owned upon your death.  Once the last of the pets pass, any remaining funds pass to your beneficiaries.  There are decisions to be made though in setting up the pet trust.

The most important decision is who will serve as the trustee of the trust and caretaker of the pets.  Friends and family are usually thought of first.  Although they may enjoy playing with your pets, the enjoyment may diminish quickly.  A good way to test whether or not they will be a good caretaker is to have them pet-sit for several days. 

Another decision to be made is how much, if any, to compensate the caretaker for their services.  If you compensate them too little, they may not adequately care for your pets.  If you compensate them too much, they may keep a suffering pet alive too long.  There is a story about a caretaker who found a new black dog whenever the old black dog passed away to ensure they continued to receive compensation.  You want to avoid this situation.  There are always non-profit organizations who will gladly care for your pet under a pet trust.

If you would like to discuss the possibilities of a pet trust further, please contact an estate planning attorney to draft the legal documents necessary to ensure your pets are taken care of upon your passing.

Are inherited IRAs asset protected?  The answer, unfortunately, seems to be that it depends on which state and which court you are in.  There are state courts all over the United States which have ruled that an inherited IRA is not protected from a creditor of the beneficiary. 

Recently, a Florida state court ruled that an inherited IRA is not asset protected from a judgment creditor.  The facts of the case were that the creditor obtained a judgment against the debtor and served a writ of garnishment to obtain the funds held by the debtor in an inherited IRA received from his deceased father.  The Florida District Court of Appeal ruled that Florida Statute 222.21(2)(a) does not apply to inherited IRAs because the language of the statute references only the original “fund or account” and also that an inherited IRAs tax consequences are different from the original IRAs tax consequences.

However, even more recently, a Bankruptcy court in Minnesota ruled that an inherited IRA is protected in bankruptcy.   In that case, the debtor claimed exemption under 11 U.S.C. Section 522(d)(12).  The court ruled that 11 U.S.C. Section 522(d)(12) does apply and, therefore, the inherited IRA is exempt in the bankruptcy proceeding.  This court however seemed to limit its ruling to the facts of the case.

The easiest way to ensure that your inherited IRA is asset protected is through a trust setup specifically to deal with the inherited IRA upon the IRA owner’s death.

If you have questions regarding inherited IRAs and other assets being protected as they pertain to judgments, bankruptcy and other proceedings, please contact a legal professional for legal counsel.

Currently, the basis of property acquired from a decedent generally is the fair market value of the property on the decedent’s     date of death.  Property included in the decedent’s gross estate for estate tax purposes must be valued at its fair market value on the date of death.

A donee’s basis in property received by gift generally is the donor’s adjusted basis in the property, increase by the gift tax, if any, paid on the transfer.  If the donor’s basis exceeds the fair market value of the property on the date of the gift, the donee’s basis is limited to that fair market value for purposes of determining any subsequent loss.

President Obama recently proposed a consistency and reporting requirement to the above basis in his proposed budget rules.  He is proposing that the basis of inherited property equal the value of that property determined for estate tax purposes.  He is also proposing that the basis of property received by gift must equal the donor’s basis.  The reporting of the basis would be imposed on the executor of the estate and on the donor of a lifetime gift to both the recipient of the property and the IRS.

This may mean that every estate may have to file an estate tax return or any gift may require a gift tax return to report the basis of the property transferred.

If you require assistance with tax planning, please contact a tax attorney for tax planning legal counsel.

The second reason to become a Florida resident is that Florida has favorable asset protection laws to protect its residents.  The most widely used asset protection technique is the homestead.  Only a few states even recognize some sort of homestead protection to protect ones home from a forced sale (subject to three exceptions in Florida).  In order to qualify for the homestead exemption, you must 1) intend to permanently reside in Florida; 2) have legal or beneficial title in equity to the real property on the 1^st of January; 3) reside on the property; and 4) in good faith make the property their personal residence.  There are land limitations on the homestead though.  If the land is within a municipality, the protection is limited to one-half.  If located outside a municipality, then the limitation is to 160 contiguous acres.  Further, due to the Bankruptcy Act of 2005, for the first 1,215 days your own your homestead, you only have an exemption of $136,875.  This prevents someone from moving to Florida, putting all their money into their homestead and then filing bankruptcy.

Life insurance proceed are also exempt from the creditors of the insured unless the policy or a valid assignment provides otherwise.  The cash surrender value of insurance policies insuring the life of a Florida resident and the proceeds of an annuity contract issued to a Florida resident are exempt from the reach of creditors.  Money or other assets payable from a qualified retirement or profit-sharing plan are exempt from claim of creditors of the beneficiary and participant.  Assets set aside in a medical saving account, college trust fund or 529 plans are protected from creditors.  Finally, assets titled as tenants by the entirety, only available to husband and wife, are exempt from the creditors of one spouse.  If the creditor is a creditor of both spouses, this protection does not exist.

Becoming a Florida resident is easy as Florida is an intent state, meaning if you intend to be a Florida resident, then you can be.  The bigger problem is having the state you have left no longer claim you as a resident.  A few simple steps can allow you to show your intent and hopefully break any connection you may have with your old state of residency.

Florida residents and others should consult with an estate planning and tax attorney to review the various documents and strategies to take full advantage of the asset protection benefits under Florida law.

There are many reasons why the State of Florida is a great state to declare your residency in besides the year round golfing.  I meet with clients and prospective clients all the time who are residents of another state and talk to them about why they should consider becoming a Florida resident.

The first reason to become a Florida resident is that there is no Florida income, estate, inheritance, gift, intangibles or generation-skipping tax.  Most states impose at least one of the above taxes on its residents.  Real property and tangible personal property are generally subject to estate tax by the state in which the property is located.  All other property such as bank and investment accounts are generally subject to the estate tax laws in place in the state the decedent resided in prior to their death.

An example that demonstrates this is Bob.  Bob has a checking account in a Florida bank, has him home in Florida homesteaded, a car, an IRA and a vacation home in New York.  Upon Bob’s death, his vacation home in New York would be subject to New York estate taxes but the rest of his property would pass estate tax free under Florida law.  I won’t discuss the federal estate tax as that is a completely different animal.

Florida residents and others should consult with an estate planning and tax attorney to review the various documents and strategies to take full advantage of the tax benefits under Florida law.