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The Basics of Estate Planning Clearwater Documents

While estate planning may seem a daunting task, understanding your estate planning Clearwater documents typically involved can take a lot of the mystery out of it.

Health Care Directive

One of the most important documents in your estate plan is your Advanced Health Care Directive. This document allows you to nominate agents to make health care decisions for you in the event you are unable to do so yourself. Further, it permits you to be specific as to the type of treatment you do, and do not, want. It can be clear in explaining any end-of-life treatment decisions you may choose, such as maintaining or withdrawing life support, or organ donations. Finally, it should include clear HIPPA releases which allow your agents to access your medical records and deal with health insurance issues. Consult with your Clearwater estate planning attorney to assist in drafting this important document.

Financial Power of Attorney

In the event of your incapacity, it is important that your bills continue to be paid, your assets managed, and your family provided for. This can be accomplished through the power of attorney, in which you nominate an agent to handle these matters on your behalf. The power of attorney can be effective immediately, or only upon your incapacity. Additionally, it can give limited or broad powers to your designated agent. Your Clearwater estate planning lawyer can guide you in determining how best to construct this document.

Will

Your will designates an executor to administer your estate after your death. Your executor is empowered to pay bills of the estate and file tax returns, managing your estate until it can be properly distributed to the beneficiaries named in this document. Again, it is important to discuss your goals with your Clearwater estate planning attorney.

Living Trust

This is a very powerful document which nominates your successor trustees who will manage trust assets upon your incapacity or at your death. It designates beneficiaries who will inherit your estate at your death, but also ensures that you designate a professional fiduciary or trusted friends or family members to manage the estate on your behalf, during your lifetime, if you are unable to do so yourself. Again, the Clearwater estate planning attorneys at the Coleman Law Firm can assist you in preparing this document.

Contact Us for More Information on Estate Planning Clearwater Documents

Contact the Coleman Law Firm at 727.461.7474 or toll free at 866.461.7474 to prepare or review your estate plan.

Dunedin Estate Planning Attorney Offers Tips and Advice on Estate Planning

dunedin estate planning attorney greeting clientProper estate planning is essential for people of all ages. Here are some tips from a Dunedin estate planning attorney to help you get the most out of your estate plan.

Essential Documents

  • Will and/or Trust
  • Health Care Directive
  • Power of Attorney

A will is a testamentary document which nominates an executor to administer, and names beneficiaries to inherit, your estate. You can also make provisions for minor children, including naming a guardian for them.

Consult with your Dunedin estate planning attorney to determine whether a trust is advisable for you. The advantages of a trust include the ability to avoid probate (a court process administering your estate after your death), potential tax advantages, and privacy. Unlike a will, which becomes a public record, your trust generally will avoid probate and allow your estate plan not to become publicly known.

Your advance directive for health care allows you to direct your end-of-life care as well as nominates agents who can make health care decisions for you in the event you are unable to do so.

Your Dunedin estate planning lawyer can draft a power of attorney on your behalf which names your agents who will act on your behalf in the event of your incapacity. You need not empower your agents now, but planning in advance can allow your named agent to swiftly manage your estate if you are incapacitated and ensure that your obligations are being met and your family is protected.

Regular Review

Once in place, you should regularly review your estate plan with your attorney to ensure that your needs are continuing to be met. Most changes to estate plans result from the following:

  • Change in tax laws
  • Change in family circumstances such as births, deaths, marriages, divorces
  • Change in net worth
  • Change in assets owned
  • Moving your residence
  • Purchase or sale of a business
  • Minor children reaching adulthood
  • Change in the choice of named executors, successor trustees, and agents.

It is very important to discuss each of these changes with your attorney as they happen. For example, a change in tax laws could mean that you are not getting the most from your estate plan as written. Similarly, consultation with your lawyer could alert you as to issues regarding your investment portfolio.

Contact a Dunedin Estate Planning Attorney

Contact Mr. Coleman at the Coleman Law Firm at 727.461.7474 or toll free at 866.461.7474 to prepare or review your estate plan.

When to Consider Estate Planning

Proper estate planning can ensure that your wishes are observed, and you and your loved onesWest Palm Beach Estate Planning Lawyer  Gavel and Power of Attorney Document are protected.

Health Care Decisions Explained By a Clearwater Estate Law Attorney

Have you considered who will assist you in the event you cannot make health care decisions yourself? What if you are in an accident and cannot be consulted about your own health care? What if you require long-term care? These are real issues faced by many. Ensure that your wishes are known and that your desired agents are empowered to carry out those decisions through consultation with a Clearwater estate law attorney at the Coleman Law Firm.

Guardianship of Minor Children

Proper estate planning with a Clearwater estate law attorney can ensure that you have provided for minor children. Who will be their guardians? Will their guardian also be the financial trustee of your estate? These decisions must be carefully considered.

A Loved One with Special Needs

If you have a family member who will inherit, is that person suited to manage the assets received? Perhaps your loved one has a disability qualifying for public assistance. Will an inheritance disqualify them from receiving future benefits?

Issues Which May Endanger an Inheritance

Perhaps your loved one has or had a substance abuse issue for which management of an inheritance is warranted. Does a family member have a marriage which may end in divorce? Does a family member have a spending problem, or perhaps he or she is not adept at managing assets. In any of these cases, you may consider establishing a trust which would benefit that family member without risking the loss of the estate through profligate or unwise spending. A candid discussion with your Clearwater estate law attorney at the Coleman Law Firm can address potential problems and identify solutions.

Privacy

A probated will is a public record, meaning that anyone could conduct a search to determine what assets are in an estate and who the beneficiaries are. A trust can avoid this situation since it is a private document which is generally administered without court intervention.

Tax Issues

Transferring assets through inheritance or gifts can lead to unintended tax consequences. Estate, capital gains, income, and gift taxes are just a few traps for the unwary, the impact of which consultation and proper planning with your Clearwater estate law attorney can minimize.

Contact Us

Call the Coleman Law Firm at (727) 461-7474 to discuss these and other estate planning issues.

Orlando Man Arrested in $2 Million Dollar Fraud Scheme

The Florida Office of Financial Regulation announced on January 14, 2015 that they had arrestedclearwater estate law attorney Gavel on top of book Gus Papathanasopoulos, owner of Neofat Industries, Inc., a/k/a Microlipid Technologies.  Mr. Papathanasopoulos was arrested on one count of securities fraud, 18 counts of selling unregistered securities and 18 counts of selling securities as an unregistered agent.

Mr. Papathanasopoulos solicited more than 100 investors located throughout the United States and Europe.  In return for their investments, individuals were told they would receive stock in his Orlando based company, Neofat Industries, Inc.  According to the Office of Financial Regulation (“OFR”), the company is alleged to be an empty shell with no legitimate business activity.  It was suggested by the OFR that all of the money raised by Mr. Papathanasopoulos was used for his personal benefit.

Mr. Papathanasopoulos was being held in the Orange County Jail, but it is not known if he is still there at this time.

This is just another example of why we here at the Coleman Law Firm recommend that you check out who you are really doing business with BEFORE you make that investment.  It is so important to check with www.finra.org to ensure that your broker is duly registered with a broker dealer, and that you also check out the broker dealer where your broker is employed.  You want to go to the “BROKER CHECK” box on the main page of the FINRA website.  You can see how long your broker has been in the business, if he has had any regulatory issues in the past or is currently involved in one, and if he has had other customer complaints.  You don’t want to hand over your life savings to someone that was selling used cars just a month before you became his client unless you find he is under the careful eye of an experienced manager.

If you have any additional questions on how to check out your broker, please do not hesitate to give us a call or drop us an email.  Our phone number is (727) 461-7474 or email us at jeff@coleman law.com.  We would much rather be assisting you with your estate planning asset management than trying to recover lost assets.

Estate Planning Gives You Peace of Mind

Estate planning is not simply an exercise for the elderly, but a prudent step for any adult. It is a clearwater estate law attorney Seat of Judge
valuable gift you can leave your family, which, with your proper planning, will be spared the expense and distress often associated with administering an intestate estate.  

Will

This is the most basic document in your estate plan. It provides for disposition of assets at death and appoints an executor to administer the estate.  A will’s advantage is orderly estate administration. Additional benefits include nominating guardians for minor children, leaving funds for education, providing for the care of pets, and ensuring the continued operation or disposition of a business. Consultation with your Clearwater estate law attorney can help you ensure your will addresses issues significant to your family.

Health Care Directive

Your health care directive identifies an agent enabled to make care decisions for you if you cannot. This document can provide for your wishes relative to organ donation or life support. Making your wishes known in advance can avoid contentious future litigation, and can give your loved ones the comfort of knowing they are following your wishes.

Power of Attorney

Your Clearwater estate law attorney can assist you in drafting a power of attorney nominating an agent who will be able to handle your affairs if you are unable to do so. In the event of your incapacity, bills still need to be paid, your investments need to be managed, and your family cared for. Your agent under power of attorney will have the authority to act on your behalf if you cannot to ensure your obligations are being met.

Living Trust

You can establish a living trust after consultation with your Clearwater estate law attorney that will provide substantially the same benefits as a will, and offer you significant additional benefits as well. Like a will, your trust can provide for disposition of assets at your death to ensure your family, pets, business, and other interests are provided for. Unlike a will, though, your living trust can avoid the necessity of probating your estate.

Contact A Clearwater Estate Law Attorney

Call a Clearwater estate law attorney at the Coleman Law Firm, 866.461.7474, to discuss establishing an estate plan to benefit your family.

Information Your Estate Planning Attorney Needs

Tampa FL estate planning lawyer Lady of JusticeWhen you meet with Tampa FL estate planning lawyers, you may be asked to provide information regarding yourself and your estate needs. Here is a brief list that Tampa FL estate planning attorneys may request of you.

Background Information

Be prepared to provide information that can help identify you, including your name, address and date of birth. Tampa FL estate planning lawyers will also likely ask for your contact information to update you when your documents are in order.

Liabilities

In addition to providing Tampa FL estate planning attorneys with information regarding your assets, also be prepared to provide information about your liabilities. Have your mortgage, credit card debt, business debt and guarantee information ready.

Current State of Affairs

Tampa FL estate planning lawyers need to know whether their clients have taken any other steps to prepare for death or incapacitation. When they prepare clients’ wills, they must expressly revoke other wills, if applicable. Additionally, they will want to know whether the testator has provided for any previous taxable gifts. Your attorney will want to know whether you want to include a trust for minor children or other beneficiaries, as well as the identity of all of your intended beneficiaries. If you have unique estate planning needs, such as making charitable gifts, providing for disabled loved ones or simplifying the probate process, communicate this information to your attorney.

Fiduciary Information

It is important to provide your lawyer with information regarding the individual that you want to help handle your financial affairs. Include contact information for your personal representative, as well as his or her relationship to you. Additionally, provide information for alternate or successor trustees or personal representatives. If you have minor children, discuss who you want to serve as their guardian.

If you would like to know about other information that your estate planning attorney will need, contact the Coleman Law Firm by calling (727) 461-7474.

Why You Need an Attorney In Fact for your Estate

Tampa estate attorney GavelIf you are in the process of settling your estate and preparing it for your beneficiaries, a Tampa estate attorney advises why you need an attorney in fact.

An attorney in fact is the person otherwise known as the designated agent in regards to your document of power of attorney. According to a Tampa estate lawyer, this person is given the authority to handle everything under the scope of the power of attorney:

  • Your personal financial affairs;
  • The execution of contracts;
  • Motor vehicle registration;
  • Bank account transactions;
  • Tax returns; and
  • Real estate sales.

When the power of attorney is considered “durable,” the attorney will have power even if you are incapacitated.

The decision to select an attorney in fact is very important, as the right choice will allow you peace of mind that your affairs will be handled exactly how you specified.

A Tampa estate attorney advises that an attorney of fact must fulfill one of the two requirements in Florida:

  • Must be 18 years or older and of sound mind; and
  • Must be a financial institution located in Florida and have trust powers.

When choosing an attorney, a Tampa estate attorney recommends that you have complete faith in that person’s legal abilities. If you trust the competence, loyalty and devotion of your attorney, then you should proceed to make the power effective immediately. The original document should be left in the care of your attorney to make sure it is safe.

If your faith in your attorney is not strong, you may not want to grant power of attorney.

Other considerations for selecting an attorney in fact:

  • Is the attorney close or convenient to you, geographically?
  • Is the attorney willing to serve on your behalf?
  • Does your attorney get along with the person you want to designate as your health care surrogate?

For more information regarding attorney in fact, contact a Tampa estate attorney from the Coleman Law Firm by calling 727-461-7474.

Financial Accounts That Avoid Probate

As part of your estate plan, your Tampa FL estate planning lawyer may recommend a variety of Tampa FL estate planning lawyer Judge Seatfinancial accounts that are designed to avoid the probate process. Additionally, these accounts can help get much needed funds in the hands of the beneficiary whom you designate.

Joint Tenants with Right of Survivorship

Your Tampa FL estate planning lawyer may recommend using this type of account that disallows creditors from reaching the proceeds in the account. Unless a signature card, agreement or contract with the financial institution specifies otherwise, the proceeds in the account pass through survivorship upon the death of the other account holder. Some individuals establish this type of account as a convenience so that another person can write checks for them. However, a Tampa FL estate planning lawyer may describe the potential drawbacks of establishing this type of account, such as making a presumptive gift to another individual.

Tenants by the Entirety

This type of account is only available to spouses. If the account was established with the unities of interest, possession, time and title, there is a presumption that a joint account held in both spouses’ names is a tenants by the entirety account.

Pay on Death Accounts

This type of account is a traditional financial account. However, your Tampa FL estate planning attorney can explain that the main difference is that the account holder can designate a person to receive the remaining balance in the account after he or she dies. The beneficiary receives no immediate right to the account or the funds in it during the account holder’s lifetime. The account holder can name one party as the beneficiary or multiple parties. Additionally, he or she can set up the account so that one of the parties listed is the trustee for the other beneficiaries.

Convenience Accounts

Your Tampa FL estate planning attorney can explain the value of using a convenience account. This type of account allows you to give limited powers to another party to assist you without having to relinquish control of the account.

If you would like to know if any of these types of accounts or any others can help you with your estate plan, contact the Coleman Law Firm by calling (727) 461-7474.

Avoiding Estate Taxes

Clearwater estate planning attorneys Gavel and American FlagDue to the fact that estate laws change so frequently, it can be difficult for Clearwater estate planning attorneys to devise an effective estate plan that minimizes the amount of taxes that an estate may be subjected to. In recent history, only those estates that have high values are subject to the federal estate tax. Additionally, estate tax exemptions tend to increase over time to properly account for inflation.

Federal Exemption Rate

Clearwater estate planning attorneys can explain that the federal exemption rate in 2014 was $5.34 million. This means that the value of the estate over this amount is subject to a large estate tax.

State Estate Tax

While some states also impose an estate or inheritance tax, Clearwater estate planning attorneys can explain that Florida does not impose such a tax. State estate taxes tend to have a much lower exemption rate than the federal exemption rate.

Ways to Avoid Estate Tax

If you anticipate that the value of your estate may exceed the federal exemption rate, Clearwater estate planning lawyers may advise you to take advantage of one or more of the following strategies to help reduce your tax liability.

Leave It to Your Spouse

The federal exemption rate excludes those assets that you specifically devise to your spouse. You can leave your entire estate to your spouse tax-free. However, when your spouse dies, his or her estate will be subject to the exemption rate.

Use an Irrevocable Trust

Clearwater estate planning lawyers can explain that revocable trust assets are still used to calculate the total amount of tax due because the settlor still has control of these assets. However, irrevocable trusts function differently because you do not retain control of these assets. The trust becomes the legal owner of the assets. Through an irrevocable trust, you can transfer assets to beneficiaries without incurring taxes, even if their value exceeds the exemption amount.

Use a Different Trust

Additionally, your estate planning lawyer can advise you of other potential trust options. For example, a credit shelter trust can have assets that are equal to the value of the federal exemption rate. If you establish this trust at your death, your spouse can still receive income from these assets like he or she would have if you devised them specifically to your spouse in a will. This strategy can also help you avoid putting your spouse’s estate over the federal exemption limit.

Minimize the Value of Your Estate

Another potential way that you can minimize your tax liability is by decreasing the value of your estate. For example, you can make gifts of up to $14,000 each year without having to pay gift taxes while keeping within the annual exclusion limit. Certain gifts do not count toward the annual exclusion, such as tuition or medical expenses that you pay on behalf of another person.

If you would like to learn about other ways that you can potentially avoid incurring federal estate tax, contact the Coleman Law Firm at 727-461-7474.

Clearwater trust administration attorney

Estate Plan Considerations

Dunedin estate planning attorney working at his deskWhile your Dunedin estate planning attorney can explain that the foundation of any estate plan is to provide a plan for how your property is distributed at your death, he or she can explain that estate plans involve many more principles than this. A Dunedin estate planning lawyer can help you devise a plan in case you become incapacitated and plan for other potential events that can significantly impair your finances. Here are some documents that a Dunedin estate planning lawyer may advise will be part of your estate plan.

Wills

When most people think of estate planning, they think of wills. Rather than having the state decide how to dispose of your property, a will lets you make these decisions. However, your Dunedin estate planning lawyer can explain that wills also allow parents to name a guardian for their children. Additionally, you can name an executor to oversee the process.

Trusts

Another tool that you can add to your estate plan is a trust. Trusts provide for the lawful transfer of property. Trusts can help provide for the management of assets during your life and upon your death. Trust assets are shielded from the probate process. Additionally, you can set parameters around when property should be transferred from the trust to your beneficiaries, unlike with wills.

Power of Attorney

A Dunedin estate planning attorney may recommend that you include a power of attorney as part of your estate plan. This legal relationship allows another person to make financial decisions on your behalf. They can operate while you are ill, when you become incapacitated or both.

Health Care Directives

A health care directive allows you to pre-determine how you want things to proceed when certain situations occur. For example, you can instruct medical providers not to provide you with life-sustaining treatment through the use of a living will. Additionally, you can designate a health care proxy who will have the legal right to make health care decisions on your behalf.

If you would like more information on what you should include in your own estate plan, contact the Coleman Law Firm at 727-461-7474.

Limited and General Financial Power of Attorney Designations

Largo estate planning lawyer signing documentsMany estate plans focus on what will happen after the client dies and virtually ignore what financial arrangements should be made during the client’s lifetime. If you would like to appoint another person to be able to make financial decisions on your behalf, a Largo estate planning lawyer can help establish a power of attorney for you.

Definitions

A Largo estate planning lawyer may define the following terms:

  • agent or attorney-in-fact – the individual who is given the right to make financial decisions on another person’s behalf
  • principal – the person who is giving the other individual the right to make financial decisions on his or her behalf
  • financial power of attorney – the legal document that provides the powers that the principal gives the agent

As the principal, you can determine which powers you want to give the agent, when you want the person to start having those powers and when you want them to cease having these powers.

Some FPOAs Address Specific Situations

Your Largo estate planning attorney can explain that some financial power of attorney designations are limited in nature. These special power of attorney designations may limit the powers, such as only giving the agent the right to write checks on your behalf or the amount of time that the agent will have these powers. For example, if you inform your Largo estate planning lawyer that you will be out of the country, he or she may recommend that you provide a start and end date for the agent.

Specific Designations

Statutory power of attorney forms usually provide for general powers to be provided to the agent without you having to do much more than initial the page. However, there are certain powers that you may have to specifically list on your power of attorney document. For example, you may have to specifically state that you give your financial power of attorney the right to change your beneficiaries, trusts or will.

Commencement and Termination of Financial Power of Attorneys

A Largo estate planning attorney can explain that there are ways that you can ensure that your financial power of attorney be able to act on your behalf when needed. For example, by making the power of attorney durable in nature, your agent will continue to be able to act as your agent in this capacity even if you become disabled or incapacitated. Additionally, your power of attorney can start taking action immediately. If you are worried only about someone handling your affairs if you are incapacitated, your attorney may recommend that you use a “springing” power of attorney. All power of attorney designations naturally expire at death.

If you would like assistance in establishing your power of attorney, contact the Coleman Law Firm at 727-461-7474.

Legal Requirements for Trusts

Bellaire estate planning attorney reviewing legal bookIf you are interested in creating a trust as part of your estate plan, a Belleair estate planning attorney can discuss the legal formalities that must be executed with trusts. Additionally, your Belleair estate planning attorney can explain that these formalities are the same as those required by individuals who make a valid will.

Writing

One basic requirement of a valid trust that your Belleair estate planning attorney can mention to you is the need for the trust to be in writing.

Signatures

Additionally, your Belleair estate planning attorney can explain that you must sign the trust or ask another person to sign on your behalf in your presence. Two witnesses must see this signing personally. These witnesses must also sign the trust in front of the person creating it and in the presence of one another.

Presumption of Revocability

The person who establishes the trust is usually able to revoke or amend the trust at his or her bidding unless the trust is expressly made irrevocable.

Revoking or Amending a Trust

If only one person created the trust, the settlor can generally amend or revoke the trust by substantially complying with a revocation or amendment provision in the trust. If the trust does not say how to amend or revoke the trust, the settlor can revoke or amend it by making a later will or codicil that specifically devises the trust property or any other method that provides clear and convincing evidence of the settlor’s intention to revoke or amend the trust. Again, the formalities of creating a will are required.

Special Rules Regarding Joint Settlors

If more than one settlor established a trust, such as when a married couple does, there are different rules regarding revoking or amending the trust. For example, if the trust has community property in it, the trust can be revoked by either spouse. However, it can only be amended by both of the spouses together. For property amendments that are separate property, each settlor can revoke or amend the trust regarding that part of the trust individually. Contact a Belleair estate planning attorney from the Coleman Law Firm at 727-461-7474 for help with your estate plan.

Health Care Advanced Directives

Dunedin estate planning attorney gavel and American flag

While much of estate planning involves the distribution of certain assets, a Dunedin estate planning attorney can discuss the importance of healthcare documents. These documents can have a significant impact on your future and well-being.

General Information on Advanced Directives

Your Dunedin estate planning attorney can explain that an advanced directive is a statement that gives certain directions to healthcare providers. The individual giving the instructions is referred to as a “principal.” The principal. A Dunedin estate planning attorney can explain that the most common kinds of advance directives are health care surrogate designations and living wills.

Health Care Surrogates

Additionally, your Dunedin estate planning attorney can explain that health care surrogates are individuals who are allowed to make decisions on behalf of the principal once the principal is declared to be incapacitated. Additionally, these individuals are given the power to consult with healthcare providers and access medical records to help them make more informed decisions. They also have the authority to give consent on behalf of the principal. Health care surrogates can apply for benefits and access income and asset information for this cause.

Your Dunedin estate planning attorney can explain the legal requirements of appointing a health care surrogate. To create a surrogate, the principal must be competent at the time of the designation. Additionally, the principal must sign a document that designates a health care surrogate. If the principal needs someone else to sign the form because he or she is physically incapable, the principal can direct another person to sign for him or her. Two witnesses must be present at the signing, neither of whom can be the health care surrogate. Only one of the two witnesses can be the principal’s spouse or relative.

Living Wills

A living will provides specific directions from the principal regarding important health care matters. The living will applies to when a person has a terminal illness, has an end-stage condition or when the person is in a persistent vegetative state. Directions may pertain to providing life-prolonging procedures, withholding these procedures or withdrawing these procedures.

Contact a Dunedin Estate Planning Attorney

If you would like more information on this topic, contact the Coleman Law Firm at 727-461-7474.

Probate Advantages and Disadvantages

Largo estate planning attorney Money and CalculatorWhile you may have heard many individuals talk about the hideous probate process and the desperate need to avoid them, your Largo estate planning attorney can explain the advantages as well as disadvantages of the probate process. Being more informed on this topic can help you construct a more effective estate plan with your Largo estate planning attorney.

Disadvantages of Probate

Your Largo estate planning attorney can explain that the most significant disadvantage of probate is that it takes too much time. While life insurance proceeds may go to the beneficiary shortly after the necessary forms and proof of death are completed or a property may immediately transfer if there is a right of survivorship attached to it, probate can take many months or even years. This means that the beneficiaries may not receive needed assets until well after the decedent dies. Another disadvantage that your Largo estate planning lawyer may discuss with you is the cumbersome characteristic of probate. Probating a will can involve the need to file numerous documents with the court.

How to Avoid Probate

Due to these disadvantages, your Largo estate planning lawyer may recommend attempting to avoid probate. This can be accomplished through several avenues, such as by providing inter vivos gifts, adding a transfer on death characteristic for bank accounts, joint tenancies with the right of survivorship for certain bank accounts and real property, trusts and life insurance policies.

Advantages of Probate

Probate offers some advantages. For example, it usually provides greater protection to your beneficiaries. Additionally, it has an established set of rules to help handle creditor claims of the estate.

Unexpected Circumstances

While many individuals have the goal of avoiding probate, they may be unaware of the consequences that can occur when this route is taken. For example, if a person is added to an account so that the account can pass automatically at death, that individual may make charges that the original owner did not authorize. Likewise, a person may use up their gift tax and have their beneficiaries liable for estate tax.

If you would like more information on the probate process, contact the Coleman Law Firm at 727-461-7474.

Information to Provide to Your Estate Planning Attorney

Largo estate lawyer GavelYour Largo estate lawyer requires a lot of information in order to help you establish an effective estate plan. This information helps your Largo estate attorney to better understand your financial situation and goals. Your lawyer may ask you to complete a questionnaire or to bring a variety of documents with you when you first meet with your Largo estate attorney. The following information may be required by your attorney.

Information about You and Your Background

Your Largo estate lawyer may ask you about the following information that is pertinent to you and your background:
  • Your full legal name
  • Your mailing and physical address
  • Your home phone number and your cell phone number
  • Whether you have lived in another state or country
  • The country where you are considered a citizen
  • Your date of birth
  • Your job

Family Information

Your Largo estate lawyer may ask about your marital and family history. In particular, he or she may ask for the following information:

  • Your current marital status
  • Date of your current marriage
  • Whether you are divorced or widowed
  • The name of your former spouse
  • The date of death of your former spouse or the date of divorce
  • Whether your deceased spouse left a will
  • State where your former spouse died or where the divorce was granted
  • Financial requirements listed in the divorce decree
  • Whether a prenuptial or postnuptial agreement is in place
  • Whether you have any children and their identification
  • Whether you wish to leave any children out of your will

Assets

Your lawyer also needs to know about the types of assets that you have. He or she will likely ask for the different types of financial accounts you have, their location and their relative value. You may be asked to provide information about real property you own, checking accounts, retirement accounts, life insurance policies, business interests, pension plans, trust interests and other assets of significant value.

For help with your estate plan, contact Coleman Law Firm at 727-461-7474.

Durable Power of Attorney Designations

Safety Harbor estate lawyer meeting with clientsA durable power of attorney may be one document that your Safety Harbor estate lawyer recommends as part of a comprehensive estate plan. Your Safety Harbor estate attorney can explain the dynamics of this legal designation.

General Guidelines

Your Safety Harbor estate lawyer can explain that a durable power of attorney gives you, the principal, the power to designate another person, the agent, to take care of your personal financial affairs. The powers that you give the agent are at your discretion. There are general rights that a power of attorney usually receives, such as the ability to file your tax returns, execute contracts on your behalf, complete bank account transactions and register motor vehicles unless you have different instructions. You may also prefer to limit your power of attorney to a particular task, such as selling real estate.

Durability

A Safety Harbor attorney can explain the special term “durable.” Generally, a power of attorney expires upon the incapacitation of the principal. However, a durable power of attorney endures after the principal becomes incapacitated. This means that the individual will retain the right to take care of your financial affairs if you become incapacitated.

Types of Power of Attorney Designations

There are several ways that you can establish a power of attorney relationship, as your Safety Harbor estate lawyer can explain. For example, you can grant a special durable power of attorney. This provides for the completion of tasks related to a specific project, such as the sale of a house. A springing power of attorney allows you to designate an agent of your choice, but the individual does not get the power to conduct your financial affairs until you become incapacitated or until another event transpires that you establish ahead of time. You can also grant a general durable power of attorney if you would like the individual to be able to make financial decisions on your behalf and to have general powers.

If you would like more information on a durable power of attorney and how this can help your estate plan, contact the Coleman Law Firm by calling 727-461-7474 and setting up a confidential consultation.

An Overview of Estate Planning  

Dunedin estate planning lawyer Men Reviewing Estate Planning DocumentsSome people entertain the mistaken belief that estate planning is only for the elderly. However, it is especially necessary for anyone with minor children, assets to protect and anyone who wants to prepare for the future. Your estate plan helps you clearly communicate your wishes in writing through legal documents, including a will, a trust, a living will and powers of attorney. The focus is on helping your loved ones after your passing and protecting them from undue expense or pain. Our Dunedin estate planning lawyer can provide guidance through this process, no matter the size of your estate.

Meeting Your Estate Planning Needs

Our Dunedin estate planning attorney will discuss your goals and work to develop an estate plan tailor-made to meet your needs. We will answer your questions and address your concerns in order to ease your mind as you take care of these matters.

Parts of Estate Planning

The amount of estate planning you need depends on your specific concerns. For example, a will is used to transfer your property to those you designate, such as individuals, charities or businesses. The will also addresses the care of any minor children and usually sets up a trustee to represent you after your death. A living will is used to provide instructions regarding medical treatment if you cannot make your own decisions and generally includes addressing your preferences regarding any life-sustaining methods. A trust is an entity that manages monies and distributes them to one or more beneficiaries. While a will takes time to administer, a trust is immediately effective and avoids the red tape of probate. Our Dunedin estate planning lawyer can address your concerns regarding each of these areas.

Probate

Probate settles the decedent’s estate and transfers assets to the correct recipients. It is also the process of legally validating the will. The time frame can take from a few months to many years. Our Dunedin estate planning attorney can provide suggestions on how to minimize this time frame.

If you have questions or need help with organizing your affairs, call our Dunedin estate planning lawyer. Contact the Coleman Law Firm at 727-461-7474 for further information.

Probate and Non-probate Assets

Dunedin estate attorneys meetingOne of the important aspects of developing an estate plan is using non-probate assets. Your Dunedin estate attorney can explain the key differences between probate and non-probate assets.

Probate Assets

Your Dunedin estate attorney may tell you that probate assets are those that are typically subject to probate. They may include assets that are listed in the decedent’s will or that are those mentioned in the laws of intestacy if the decedent had no will or his or her will was declared invalid. Your Dunedin lawyer may further simplify this definition by saying that probate assets are usually those that are titled in the decedent’s name.

For example, real property, bank accounts, CDs, stocks, bonds, brokerage accounts, vehicles, personal property, royalties from intellectual property, personal loans, an interest in a pending lawsuit and money are commonly probate assets. However, if there is a right of survivorship that is attached to the asset or if the asset is subject to a payable-on-death designation, the asset is usually not a probate asset. Additionally, many jurisdictions have a protected homestead law to prevent the decedent’s primary residence from being passed through the probate process. Furthermore, if any of these assets allowed the decedent to establish a beneficiary upon death, the asset is usually not subject to probate.

Non-Probate Assets

In contrast, your Dunedin lawyer can explain that non-probate assets are those that do not pass under the terms of a will or the laws of intestacy. Additionally, your Dunedin estate attorney may provide you with a list of typical non-probate assets. For example, life insurance is commonly a large portion of non-probate assets as long as the estate or the personal representative is not named as the beneficiary. Employer-provided retirement plans are common non-probate assets, assuming that the testator is not married. Likewise, funds that are part of a person’s Individual Retirement Account are usually non-probate assets. So are assets that are part of trusts and assets that pass with a right of survivorship, such as real property or a bank account.

Contact the Coleman Law Firm at 727-461-7474 for help with your estate plan.

Legal Requirements for Trusts

If you are interested in creating a trust as part of your estate plan, a Belleair estate planning attorney can discuss the legal formalities that must be executed with trusts. Additionally, your Belleair estate planning lawyer can explain that these formalities are the same as those required by individuals who make a valid will.

Writing

One basic requirement of a valid trust that your Belleair estate planning attorney can mention to you is the need for the trust to be in writing.

Signatures

Additionally, your Belleair estate planning attorney can explain that you must sign the trust or ask another person to sign on your behalf in your presence. Two witnesses must see this signing personally. These witnesses must also sign the trust in front of the person creating it and in the presence of one another.

Presumption of Revocability

The person who establishes the trust is usually able to revoke or amend the trust at his or her bidding unless the trust is expressly made irrevocable.

Revoking or Amending a Trust

If only one person created the trust, the settlor can generally amend or revoke the trust by substantially complying with a revocation or amendment provision in the trust. If the trust does not say how to amend or revoke the trust, the settlor can revoke or amend it by making a later will or codicil that specifically devises the trust property or any other method that provides clear and convincing evidence of the settlor’s intention to revoke or amend the trust. Again, the formalities of creating a will are required.

Special Rules Regarding Joint Settlors

If more than one settlor established a trust, such as when a married couple does, there are different rules regarding revoking or amending the trust. For example, if the trust has community property in it, the trust can be revoked by either spouse. However, it can only be amended by both of the spouses together. For property amendments that are separate property, each settlor can revoke or amend the trust regarding that part of the trust individually.

Contact a Belleair estate planning lawyer from the Coleman Law Firm at 727-461-7474 for help with your estate plan.

Probate Advantages and Disadvantages

While you may have heard many individuals talk about the hideous probate process and the desperate need to avoid them, your Largo estate planning attorney can explain the advantages as well as disadvantages of the probate process. Being more informed on this topic can help you construct a more effective estate plan with your Largo estate planning attorney.

Disadvantages of Probate

Your Largo estate planning attorney can explain that the most significant disadvantage of probate is that it takes too much time. While life insurance proceeds may go to the beneficiary shortly after the necessary forms and proof of death are completed or a property may immediately transfer if there is a right of survivorship attached to it, probate can take many months or even years. This means that the beneficiaries may not receive needed assets until well after the decedent dies. Another disadvantage that your Largo estate planning lawyer may discuss with you is the cumbersome characteristic of probate. Probating a will can involve the need to file numerous documents with the court.

How to Avoid Probate

Due to these disadvantages, your Largo estate planning lawyer may recommend attempting to avoid probate. This can be accomplished through several avenues, such as by providing inter vivos gifts, adding a transfer on death characteristic for bank accounts, joint tenancies with the right of survivorship for certain bank accounts and real property, trusts and life insurance policies.

Advantages of Probate

Probate offers some advantages. For example, it usually provides greater protection to your beneficiaries. Additionally, it has an established set of rules to help handle creditor claims of the estate.

Unexpected Circumstances

While many individuals have the goal of avoiding probate, they may be unaware of the consequences that can occur when this route is taken. For example, if a person is added to an account so that the account can pass automatically at death, that individual may make charges that the original owner did not authorize. Likewise, a person may use up their gift tax and have their beneficiaries liable for estate tax.

If you would like more information on the probate process, contact the Coleman Law Firm at 727-461-7474.

Information to Provide to Your Estate Planning Attorney

Your Largo estate lawyer requires a lot of information in order to help you establish an effective estate plan. This information helps your Largo estate attorney to better understand your financial situation and goals. Your lawyer may ask you to complete a questionnaire or to bring a variety of documents with you when you first meet with your Largo estate attorney. The following information may be required by your attorney.

Information about You and Your Background

Your Largo estate lawyer may ask you about the following information that is pertinent to you and your background:

Your full legal name
Your mailing and physical address
Your home phone number and your cell phone number
Whether you have lived in another state or country
The country where you are considered a citizen
Your date of birth
Your job

Family Information

Your Largo estate lawyer may ask about your marital and family history. In particular, he or she may ask for the following information:

Your current marital status
Date of your current marriage
Whether you are divorced or widowed
The name of your former spouse
The date of death of your former spouse or the date of divorce
Whether your deceased spouse left a will
State where your former spouse died or where the divorce was granted
Financial requirements listed in the divorce decree
Whether a prenuptial or postnuptial agreement is in place
Whether you have any children and their identification
Whether you wish to leave any children out of your will

Assets

Your lawyer also needs to know about the types of assets that you have. He or she will likely ask for the different types of financial accounts you have, their location and their relative value. You may be asked to provide information about real property you own, checking accounts, retirement accounts, life insurance policies, business interests, pension plans, trust interests and other assets of significant value.

For help with your estate plan, contact Coleman Law Firm at 727-461-7474.

An Overview of Estate Planning

Some of our clients come to Coleman Law Firm with the mistaken belief that estate planning is only for the elderly. However, it is especially necessary for anyone with minor children, assets to protect and anyone who wants to prepare for the future. Your estate plan helps you clearly communicate your wishes in writing through legal documents, including a will, a trust, a living will and powers of attorney. The focus is on helping your loved ones after your passing and protecting them from undue expense or pain. Our Dunedin estate planning lawyer can provide guidance through this process, no matter the size of your estate.

Meeting Your Estate Planning Needs

Our Dunedin estate planning attorney will discuss your goals and work to develop an estate plan tailor-made to meet your needs. We will answer your questions and address your concerns in order to ease your mind as you take care of these matters.

Parts of Estate Planning

The amount of estate planning you need depends on your specific concerns. For example, a will is used to transfer your property to those you designate, such as individuals, charities or businesses. The will also addresses the care of any minor children and usually sets up a trustee to represent you after your death. A living will is used to provide instructions regarding medical treatment if you cannot make your own decisions and generally includes addressing your preferences regarding any life-sustaining methods. A trust is an entity that manages monies and distributes them to one or more beneficiaries. While a will takes time to administer, a trust is immediately effective and avoids the red tape of probate. Our Dunedin estate planning lawyer can address your concerns regarding each of these areas.

Probate

Probate settles the decedent’s estate and transfers assets to the correct recipients. It is also the process of legally validating the will. The time frame can take from a few months to many years. Our Dunedin estate planning attorney can provide suggestions on how to minimize this time frame.

If you have questions or need help with organizing your affairs, call our Dunedin estate planning lawyer. Contact Coleman Law Firm at 727-461-7474 for further information.

Probate and Non-Probate Assets

One of the important aspects of developing an estate plan is using non-probate assets. Your Dunedin estate attorney can explain the key differences between probate and non-probate assets.

Probate Assets

Your Dunedin estate attorney may tell you that probate assets are those that are typically subject to probate. They may include assets that are listed in the decedent’s will or that are those mentioned in the laws of intestacy if the decedent had no will or his or her will was declared invalid. Your Clearwater Dunedin lawyer may further simplify this definition by saying that probate assets are usually those that are titled in the decedent’s name. For example, real property, bank accounts, CDs, stocks, bonds, brokerage accounts, vehicles, personal property, royalties from intellectual property, personal loans, an interest in a pending lawsuit and money are commonly probate assets. However, if there is a right of survivorship that is attached to the asset or if the asset is subject to a payable-on-death designation, the asset is usually not a probate asset. Additionally, many jurisdictions have a protected homestead law to prevent the decedent’s primary residence from being passed through the probate process. Furthermore, if any of these assets allowed the decedent to establish a beneficiary upon death, the asset is usually not subject to probate.

Non-Probate Assets

In contrast, your Clearwater Dunedin lawyer can explain that non-probate assets are those that do not pass under the terms of a will or the laws of intestacy. Additionally, your
Dunedin estate attorney may provide you with a list of typical non-probate assets. For example, life insurance is commonly a large portion of non-probate assets as long as the estate or the personal representative is not named as the beneficiary. Employer-provided retirement plans are common non-probate assets, assuming that the testator is not married. Likewise, funds that are part of a person’s Individual Retirement Account are usually non-probate assets. So are assets that are part of trusts and assets that pass with a right of survivorship, such as real property or a bank account.

Contact the Coleman Law Firm at 727-461-7474 for help with your estate plan.

Durable Power of Attorney Designations

A durable power of attorney may be one document that your Safety Harbor lawyer recommends as part of a comprehensive estate plan. Your Safety Harbor attorney can explain the dynamics of this legal designation.

General Guidelines

Your Safety Harbor lawyer can explain that a durable power of attorney gives you, the principal, the power to designate another person, the agent, to take care of your personal financial affairs. The powers that you give the agent are at your discretion. There are general rights that a power of attorney usually receives, such as the ability to file your tax returns, execute contracts on your behalf, complete bank account transactions and register motor vehicles unless you have different instructions. You may also prefer to limit your power of attorney to a particular task, such as selling real estate.

Durability

A Safety Harbor attorney can explain the special term “durable.” Generally, a power of attorney expires upon the incapacitation of the principal. However, a durable power of attorney endures after the principal becomes incapacitated. This means that the individual will retain the right to take care of your financial affairs if you become incapacitated.

Types of Power of Attorney Designations

There are several ways that you can establish a power of attorney relationship, as your Safety Harbor lawyer can explain. For example, you can grant a special durable power of attorney. This provides for the completion of tasks related to a specific project, such as the sale of a house. A springing power of attorney allows you to designate an agent of your choice, but the individual does not get the power to conduct your financial affairs until you become incapacitated or until another event transpires that you establish ahead of time. You can also grant a general durable power of attorney if you would like the individual to be able to make financial decisions on your behalf and to have general powers.

If you would like more information on a durable power of attorney and how this can help your estate plan, contact the Coleman Law Firm by calling 727-461-7474 and setting up a confidential consultation.

Estate Planning and Fiduciary Management

Clearwater estate attorney Lawyers Business MeetingA fiduciary is a person who holds something in trust for another, such as management of assets. In estate planning, fiduciaries are deemed to have a great deal of power and authority in the management of one’s affairs and may be empowered to make decisions that are delicate and difficult when you, the testator, are not able. When planning your estate you will need to appoint one or more fiduciaries, and a Clearwater estate attorney will help in this regard.

Who Can Be Named Fiduciaries to Manage the Estate?

It is the duty of the named fiduciary to act on behalf of the testator and carry out responsibilities that serve his best interests. A fiduciary may be a person, but it may also be an entity. For instance, a tax advisor can be a fiduciary, but a bank, or your Clearwater estate law firm, may also assume this role.

It is important to point out that you should appoint individuals whom you feel are best suited to the various roles. You might also name one person to take on all of the fiduciary responsibilities. There is good reason for this. The individual you name must be someone you implicitly trust, one who you literally trust with your life. Moreover, you need to make sure that the person you name does not have a personal stake in your estate. This may exclude a spouse. The fiduciary may need at some point to make difficult decisions regarding the medical status of the testator, which may be hard for a spouse to do. You must also make sure that the person you name will not cause undue conflict in the family.

What Are the Specific Functions of the Fiduciary?

The fiduciary may make decisions when you are deemed incapacitated and unable to do so for yourself. Also, the fiduciary will carry out functions such as investing funds held in trust, offering financial planning advice and paying taxes. Your Clearwater estate attorney will tell you that when you choose the fiduciary, there are matters you need to consider:

• Does the person have sufficient knowledge of financial matters to help?
• Does he/she want to take on the role?
• Does the person live nearby, and will he/she be available when needed?

A Clearwater Estate Law Firm Can Help

If you are planning your estate and need to name fiduciaries, consult with a Clearwater estate attorney. Call Coleman Law Firm to arrange a meeting at 727-461-7474.

Charitable Trusts

Clearwater trusts attorney Father and Son Reviewing Estate Planning DocumentsOne of the chief goals of estate planning is to find ways of minimizing taxes on money left to beneficiaries. Sometimes settlors wish a portion of their assets to go to a charity as well. Charity trusts serve this purpose. The charitable remainder trust, or CRT, is one of the most common charitable trusts. A Clearwater trusts attorney will help you ascertain whether a charitable trust is right for you, and help you to set it up.

Charitable Remainder Trusts Explained

A CRT allows you, the settlor, to use part of the assets during your lifetime. A portion of the rest is left to named beneficiaries when you die, and the remainder goes to a charity that you name. The attorney with your Clearwater trusts law firm will tell you that one distinct disadvantage of this type of trust is that once it is established, you cannot add or remove beneficiaries. One way to circumvent this problem is to name heirs as contingent beneficiaries, which your will can order removed.

Types of Charitable Remainder Trusts

Three types of CRTs exist, and your Clearwater trusts attorney will help you choose which one is best suited to your needs: the unitrust, annuity trust or pooled income trust. While there are definite differences with each, in common is the fact that the named charity acts as trustee. The charity will invest the money in ways that will bring the highest return. It is the charity, then, that will pay assets out of the trust to beneficiaries for the appointed amount and duration.

It is important to note that the named charity must be one that is approved by the IRS for this purpose.

Tax Savings

You can enjoy tax advantages in a number of ways. For one, you can take a tax deduction spread over five years for the amount you gift to charity. It is important to note, however, that the IRS will calculate the amount you are likely to receive out of the CRT during your lifetime and deduct this amount from the tax-deductible gift.

You may also be able to help beneficiaries avoid a capital gains tax, since charities do not have to pay this. Unless your estate is very large, it is unlikely you will need to worry about an estate tax.

A Clearwater Trusts Law Firm Can Help You Establish a CRT

If you are interested in setting up a charitable trust or have questions, call a Clearwater trusts attorney today. Call Coleman Law Firm at 727-461-7474.

Living Trusts

Clearwater trusts lawyer meeting with clientsA living trust is a popular estate planning tool a Clearwater trusts lawyer can create that can be useful during the lifetime of the person as well as make the distribution of assets after death less complicated and less expensive.

A Living Trust is Revocable

The person who creates the trust, called the settlor or grantor, creates the trust in their lifetime and can add to it, change it in any way or revoke it entirely in their lifetime.

Essential Components

A Clearwater trusts attorney can explain that a legal trust requires a grantor, at least one named beneficiary, a trustee and assets that are legally transferred to the trust. Most often, the grantor is also the original trustee and thus retains complete control over the management of the trust.

Incapacity

A well-crafted trust should contemplate the possibility that the grantor, or other named trustee, may become incapacitated. By naming a successor trustee who assumes trust management in the event the trustee can no longer handle trust management duties, the trust can continue to operate to pay bills and make investment decisions without the need for a court-ordered guardian.

Death of the Grantor

Typically, at the death of the grantor, the trust becomes irrevocable and the plan for distribution of the decedent’s assets is implemented. The primary exception is for a trust created for a married couple. In such a case, most commonly the surviving spouse becomes the sole trustee upon the death of the first, and the trust becomes irrevocable after the death of the survivor. In either case, a named successor trustee then manages the trust.

Living Trust Advantages

The primary advantage is the avoidance of probate for those assets that have been properly transferred to the trust. Title to those assets remains in the trust after the grantor’s death. Assets that are not in a trust need to go through probate to legally allow transfer of title from the name of the grantor to the name of the beneficiary. For large estates, there may also be a federal estate tax advantage where a married couple has a joint trust.

Contact a Clearwater Trusts Lawyer for Legal Advice

Learn whether a living trust provides an advantage over a standard will for your particular needs. Call the Coleman Law Firm at 727-461-7474.

 

Estate Planning for Dual-State Residents

estate planning lawyer in Clearwater Balancing Money and HomeHaving a residence in another state is not uncommon for many Floridians. While this clearly provides many benefits for the individual’s lifestyle, it requires some extra planning by an estate planning lawyer in Clearwater.

State of Domicile

While a person may have a residence and spend time in more than one state, they may have only one domicile, which as defined by an estate planning lawyer in Clearwater, is the person’s legal home. If that fact is in dispute, the primary consideration is the person’s intent, as evidenced by some of the following:

• Where the person holds their driver’s license
• Where the person is registered to vote
• The mailing address the person uses for federal and state income tax purposes

Estate Probate

As each state has different laws regarding probate issues, there can be a significant impact on the heirs and beneficiaries depending on the person’s legal residence. This impact can be even greater in instances where one state is a community property state and the other is a non-community property state or where the person dies and leaves an intestate estate.

Other Considerations

Not only is the state of domicile on the date of death an important factor, so too is the consideration of which state the estate planning documents were executed in. Again, each state has its own laws. Issues to consider include:

• The executor; some states place limitations on who may be named as an executor if that person is not a state resident. At the very least, the fact that an executor may have to travel to another state for probate purposes should be considered.
• Advance healthcare directives; sometimes called living wills, these documents provide guidance for the type of medical care the person wishes to receive if incapacitated. The forms as well as the limitations may vary by state.
• Durable powers of attorney; these documents appoint an individual to handle a person’s financial needs if that person becomes incapacitated. This is especially important to consider if the person conducts business in both states.

Contact an Estate Planning Lawyer in Clearwater for Legal Advice

The planning necessary to properly safeguard an estate is more difficult for those with residences in two states. Be certain your interests are well protected. Call the Coleman Law Firm at 727-461-7474.

Storing Wills

Largo estate attorney Living Trust & Estate Planning DocumentAs you wrap up your session with a Largo estate attorney, you may learn about how to properly store your will. This is important information to know because if your will is not located, all of your hard work with establishing the best estate plan for you with your Largo estate attorney may be for nothing.

Reasons Why Storage Is Important

While many clients might express fear of their will being lost because of water damage, fire or theft, these occurrences are much less likely than family members being unable to find the original will. In some situations, the family does locate the will but only after they have incurred significant legal expenses.

Contingencies

Your Largo estate lawyer can also explain that it is important that you plan for contingencies. For example, your personal representative may die before you do and your alternate personal representative will be the one who needs to know where the will is. If you simply informed your original personal representative of the will’s location, this will not assist you if the contingency arises. Another possibility is that both personal representatives might predecease you. Planning for these contingencies can help your beneficiaries be spared from hassle and expense.

Storage Locations

Your Largo estate lawyer may give you several options for storing your will. For example, he or she may say that you might choose to store your will in the same location where you keep other important documents. Your Largo estate planning lawyer might inform you of the pros and cons of certain storage locations. For example, if you store the will in a safe deposit box, the contract with the bank may state that no one can access the contents if you die without certain documentation from a court, which would not help your beneficiaries who need to get the will before any such legal procedures were put in place. Your Largo estate attorney might recommend providing a copy of the will to the personal representative that you have named or storing the will himself or herself.

If you would like more information on this subject, contact Coleman Law Firm at 727-461-7474.

Community Property in Florida

estate planning attorney in Clearwater Scales of JusticeAlthough Florida is considered a non-community property state, Florida probate law does recognize that assets and the proceeds from those assets acquired by an individual while living in a community property state may retain their community property character. A estate planning attorney in Clearwater can explain if it is beneficial to retain the assets as community property and the issues that affect how such assets are distributed.

Application

In addition to the actual assets that were acquired or became community property in a community property jurisdiction, a estate planning attorney in Clearwater emphasizes that the law also applies to:
• Assets acquired with the proceeds or income from community property, or
• Assets that are traceable to community property.

Presumptions

A presumption is a fact that the law presumes, but which can be overcome by evidence to the contrary. Florida law presumes personal property acquired in a community property jurisdiction is community property, but real property located in Florida is presumed not to be community property, with some exceptions.

Distribution after the Death of the First Spouse

If an asset is deemed to be community property, then, upon the death of the first spouse, one-half of that asset belongs to the surviving spouse and is not subject to any testamentary disposition of the deceased spouse. The other-half is subject to the deceased spouse’s testamentary disposition.

Stepped-up Basis

The benefit for a surviving spouse in holding assets as community property is that under federal estate planning tax law, the entire value of community property receives an adjustment to a valuation as of the date of death. If the property was held as non-community property, the income tax basis of the deceased spouse’s property and only one-half of the jointly owned assets receive a date of death valuation.

Contact an Estate Law Firm in Clearwater for Legal Advice

It is possible to sever the community property nature of assets without intending to do so. It is important to have a clear understanding of the goals of the individuals and a complete knowledge of the complexities and nuances of the law. For all your estate planning planning concerns, call the Coleman Law Firm at 727-461-7474.

Where Should I Keep My Estate Planning Documents?

In our estate planning practice, we are frequently asked by our clients where they should maintain their original estate planning documents. In my opinion, the place to keep your original Last Will and Testament, Power of Attorney, Health Care Power of Attorney, Trust, and Living Will is with your lawyer. There are a number of reasons why this is advisable. This article attempts to address some of the major considerations for placing your estate planning documents with your attorney.

If you choose to keep the Will in a safe place at your home, you face a number of possible risks that could frustrate the purpose of your Will or otherwise impede the appropriate distribution under the Will or effectuate other documents related to your healthcare directives. For instance, if your Will is different from the distribution plan written for you by the Florida Legislature under the laws relating to intestate (meaning “without a Will”) succession, then you run the risk of an individual (who might be receiving less under your Will than they would receive under intestate succession) destroying the Will, thereby creating the possibility of argument by the beneficiaries that the previously executed Will was actually revoked by the deceased individual by the physical act of destroying the original.

Another potential difficulty in keeping the estate planning documents at your home is if the documents include an original Power of Attorney, the Power of Attorney could be misused by the Attorney-in-Fact to effectuate “advance planning” with respect to any estate planning or even divorce. By keeping the Power of Attorney at the law offices, it is less likely that a Power of Attorney could be misused by the person given authority under that Power of Attorney.

The third reason to keep your estate planning documents with your attorney is that sometimes situations occur outside your living area that might require a transmittal of estate planning documents. For instance, let us suppose that you are injured in an automobile accident while visiting your daughter in Nebraska. It might be necessary for a Health Care Power of Attorney, Power of Attorney or Living Will to be used at the hospital in Nebraska. A simple phone call to your lawyer results in those documents being faxed to the hospital so that your plans and interests can be protected and effectuated.

Some people have the idea that these important documents should be placed in a safe deposit box owned by the client. As discussed above, one of the difficulties with having the documents in your safe deposit box is that if you were injured outside of Florida and you were not available to access the safe deposit box, your important documents may not be available when they are urgently needed. Also, if you place the original Will in a safe deposit box, it is possible that it would be necessary upon your death to obtain a court order to get access to the estate planning documents. This would entail substantial legal expense, and perhaps, the expense of actually “drilling” out the lock on the safe deposit box if the key cannot be found.

Original documents are extremely important. In order to probate a Will, the court will typically require the production of the original Will. Unlike some states, Florida does not allow for the filing of original Wills before death. Safe deposit boxes can be difficult to access after death and, even after the death, what protection is there from the person entering the box? Additionally, there is a risk from an unscrupulous heir that may choose to destroy a document that does not serve their interest.

Finally, this issue cannot be properly addressed without talking about the tremendous risk associated with a Power of Attorney. A Power of Attorney can be used by any individual that might be designated thereunder to transfer assets in such a way that would effectuate “pre-divorce planning” or “pre-death planning” that would frustrate the estate plan of the client. The procedure followed at the Coleman Law Firm is that the Power of Attorney is not generally provided to the client. Rather, a letter is prepared by our law firm indicating in what circumstances a Power of Attorney will be released to the designated Attorney-in-Fact so that there will be some degree of protection that the Power of Attorney will not be misused to address such issues as the Attorney-in-Fact’s financial difficulties or to otherwise frustrate the intent set forth in the Last Will and Testament of our client.

Coleman Law Firm works to document the client’s intent with respect to the distribution of their wealth and their healthcare decisions. It is critical that the documents prepared by our law firm be effective and enforceable at the time of the death or disability of our client.

© Jeffrey P. Coleman P.A. 2011

Rolling Over Your 401(k): Should You Do It?

When leaving a job, most people automatically transfer, or “roll,” their 401(k) accounts to an individual retirement account. Now, some companies are urging departing employees to leave their savings right where they are – and there could be some good reasons for doing so.

When an employee leaves a job, he or she is generally free to roll 401(k) money into an IRA; such accounts typically offer a much wider array of investment options. But while most employers have historically encouraged departing employees to make transfers, a growing number of companies now say they’re eager to keep former employees’ savings within their plans.

As baby boomers start to retire, “companies are realizing that participants with the biggest balances are going to be leaving the plan relatively soon,” says Katharine Wolf, a senior analyst at research firm Cerulli Associates. When assets decline, companies have less leverage to negotiate with plan administrators and fund companies for lower fees and unique investment options, she says.

In considering whether to keep money in a 401(k), departing employees must consider a range of factors, including fees, investment options and whether they may need protections from creditors or early access to their savings.

Participants in some 401(k) plans may discover that it’s cheaper to stay put. Often, plans with assets of $100 million or more receive access to low-cost investment products, including collective trusts, which resemble mutual funds but generally charge lower fees. (To find out what you’re paying in investment and administrative fees, ask your plan administrator or go to BrightScope.com, which rates plans.)

A 401(k) plan also may offer greater protection from creditors. While federal law shields the assets in 401(k) plans from a variety of claims, it only safeguards IRA assets in cases involving bankruptcies, says Ed Slott, an IRA consultant in Rockville Centre, N.Y.

Some states, including New York, have laws that provide greater protections for IRAs. But “that’s not the case in every state,” cautions Mr. Slott.

After leaving a company at age 55 or older, a former employee also has leeway to take penalty-free withdrawals from that company’s 401(k) account. In contrast, those with IRAs generally must pay a 10% penalty on distributions taken before age 59[frac12], says Keri Dogan, a senior vice president at Fidelity Investments.  (SMARTMONEY, MAY 11, 2011)

Estate Planning Smarts For New Moms

Having a child is often the first time people think about their estate plans. New moms have much on their mind. I highly recommend the second edition of Deborah L. Jacobs’ book Estate Planning Smarts: A Practical, User-Friendly Action-Oriented Guide to help them plan for their family’s future.

Caring for yourself. Contrary to what many think, estate planning is not just for millionaires and billionaires. Everyone should have at least a basic plan that provides for what will happen in the event of disability or illness. Failing to have an estate plan can hurt the people you love.

The first chapter of Estate Planning Smarts is titled, Nothing Lasts Forever. The subtitle suggests to [r]ead this chapter even if you are hearty and clear-headed. This chapter defines and discusses documents that everyone needs in their estate plan “ a power of attorney, HIPAA release, living will, and health care proxy.

Once you have these basic estate planning documents, you will need a place to store them. The second edition of Estate Planning Smarts has a new and very informative section on organizing financial records. Jacobs discusses various options that you have, including keeping your records in loose-leaf binder, on a computer, or on an online storage site.

Providing for your children. Jacobs informs that estate planning entails providing for your children’s future and making sure someone will care for them if you suddenly perish.

Estate Planning Smarts has an entire chapter devoted to anticipating the needs of young or disabled children. Chapter 5 gives tips about choosing a guardian to take care of your child in the event something happens to you. This chapter also discusses how to leave sufficient funds for your child and how to put money in good hands. The to-do list at the end of the chapter can help you avoid potential legal and economic pitfalls.

Chapter 8 discusses a topic that many think about only after they become parents: life insurance. Jacobs discusses how life insurance can serve your estate planning goals, how to avoid tax traps, and finding the best way to fund the premium.

Chapter 9 is also essential reading for a mother. It discusses how to pay for health care and education. This chapter begins by discussing custodial accounts for minors. It then discusses funding Section 529 plans and Coverdell Education Savings Accounts, and financing heath care and education by using a trust. There are many choices to consider and the to-do list at the end of the chapter asks some questions and tells you the action to take if your answer is yes.

Your assets. Estate Planning Smarts has advice on deciding who gets what (chapter 2). It also has chapters devoted to specific assets “ retirement accounts (chapter 7) and houses (chapter 11).

Business owners. Today, many mothers are also business owners. Some women are mothers, business owners, and the bread winners in the family. These entrepreneurial mothers will find the advice in chapter 12 invaluable. As the subtitle states, Read this chapter if you have your own business or share in a family-held enterprise.

Taxes. Jacobs discusses estate and gift taxes in plain English. Chapter 3 (Understanding the Tax System) is up-to-date and covers all the ramifications of the 2010 estate tax overhaul. As the subtitle to the chapter informs, Read this chapter even if you think estate taxes won’t affect your heirs. If saving taxes is a high priority for you, then chapter 15 is also invaluable: Give Now, Save Tax Later.

Giving. If you want to give to your family, chapter 13 is key. Many new moms take motherhood as an opportunity to turn the table and celebrate their own moms and families. Chapter 17 discusses philanthropic giving and gives tips on how you can support the causes that you care about.

Why Estate Planning Smarts? You can’t afford to neglect estate planning. Estate Planning Smarts is, therefore, a must-read. It is written with you in mind. 

  • Chapter previews. Each chapter begins with topics that you will learn about. 
  • Great writing. Jacobs has the rare talent of discussing complex issues in a way you can understand. Jacobs is an award-winning business journalist and a lawyer. Her writing is clear and concise.
  • Informative charts and graphs. Estate Planning Smarts uses charts and graphs that provide perspective and insight.
  • Life-changing to-do lists. Each chapter ends with a very useful to-do list. Estate Planning Smarts is not just for reading; it is for taking action.
  • Handy glossary. There is a very useful glossary at the end of the book. 
  • Detailed indexEstate Planning Smarts has a 26-page index that will allow you to find the information you are looking for.

The perfect gift. Tell new moms you know happy Mother’s Day and give them a copy of Estate Planning Smarts as a gift. It is a great way to show them you care, and they will appreciate it. I gave the first edition ofEstate Planning Smarts to new mothers that I knew and they were always grateful for the gift. This year, I will give them the second edition ofEstate Planning Smarts. Jacobs has revised the book by bringing it up-to-date, and she has added helpful new information. For example, on pages 289-291, Jacobs gives tips on how to start the estate planning conversation with family members. On pages 291-292, she emphasizes her objection to DIY estate planning.

For all mothers. Estate Planning Smarts has useful information for all mothers. For example, grandmothers would especially find interesting chapters 14 (What You Can Do for Grandchildren), 13 (Subsidize Friends or Family) and 9 (Pay for Healthcare and Education). Anyone who has done an estate plan before should read chapter 19 (Keep Your Plan Current).

For all women. Jacobs is on a mission to educate women about estate planning. Tomorrow, May 9, she will give a talk at Barnard, Estate Planning Is A Women’s Issue. Here is the description of the talk:

Estate planning is important for both sexes, but for various reasons, it affects women more profoundly. As a group, women live longer than men, earn less than them, and are more likely to spend their final years without a spouse or partner. Therefore women need to be especially vigilant about providing for their financial security. Whether you’re doing an estate plan for the first time, or revising a plan to reflect changes in your life, this program will cover the key issues, including:

  • Caring for yourself
  • How the new tax law affects estate planning for couples
  • How to start a conversation about estate planning – with your spouse or partner, with adult children, with aging parents
  • Should your plan be equal or fair?
  • The impact on planning of subsidizing adult children and grandchildren
  • What are non-probate assets and key pitfalls that surround them

This talk will address estate planning issues for women, but of course, the men in their lives are also welcome. Jacobs will adapt this talk and speak to other audiences around the country during the year ahead. (Forbes, May, 8 2011)

Estate Tax Tips for Married Couples

Thanks to the generous $5 million exemption for individuals who pass away in 2011 or 2012, the assets of relatively few people in the United States will be exposed to the federal estate tax over the next few years. To see if you and/or your spouse’s estate might bump up against the exemption, try our estate tax calculator and read on for estate-tax-saving tips.

Take Advantage of the Unlimited Marital Deduction

If your spouse is a U.S. citizen, you can leave any amount to him or her with no federal estate tax hit. If you are a U.S. citizen, your spouse can do the same. This is the so-called unlimited marital deduction privilege. For married couples, the $5 million federal estate tax exemption and the unlimited marital deduction privilege provide significant federal estate tax shelter for those who die in 2011 or 2012.

If either you or your spouse has a large estate, however, leaving everything to your spouse can result in your spouse having an estate that exceeds the federal estate tax exemption when he or she dies. In that case, you need to look at the other estate-tax-saving tips.

Take Advantage of Portable Estate Tax Exemption

For 2011 and 2012, you can direct the executor of your estate to leave any unused federal estate tax exemption to your surviving spouse. For example, if you die in 2011, you can leave everything to your spouse, including your unused $5 million exemption. Your spouse would then have a $10 million exemption if he or she dies in 2011 or 2012 (his or her $5 million exemption plus your unused $5 million exemption). Unless Congress takes action, however, portable estate tax exemption will expire at the end of 2012.

Make Bequests to IRS-Approved Charities

If you had died in 2010, you could have left everything to relatives and loved ones and no federal estate tax would have been due (even for billionaires). For 2011 and 2012, that’s not the case.

You might want to change your estate planning documents to direct the executor to give away more to IRS-approved charities in order to get your taxable estate down to the current $5 million estate-tax-free ceiling, or $10 million if you leave everything to your surviving spouse (including your unused $5 million federal estate tax exemption).

Put another way, you and your spouse can together leave up to $10 million to relatives and loved ones without any federal estate tax hit if you (both) die in 2011 or 2012. If you leave more, there will be a federal estate tax bill to pay. But the taxable value of your estate is reduced by donations that the executor of your estate is directed to make to IRS-approved charities. Of course, increasing charitable donations to avoid the estate tax means leaving less to relatives and loved ones.

Make Annual Gifts to Relatives and Loved Ones

Thanks to the annual federal gift tax exclusion ($13,000 for 2011 and probably the same for 2012), making annual gifts up to the exclusion amount will reduce the taxable value of your estate without reducing your lifetime $5 million federal gift tax exemption or your $5 million federal estate tax exemption. The same holds true for gifts by your spouse.

With two adult children and four grandchildren, for example, you and your spouse could give them each $13,000 in 2011 for a total of $156,000 (6 x $13,000 x 2). Then, do the same thing in 2012. Over the two years, your taxable estates would be reduced by $312,000 (2 x $156,000) with no adverse federal gift or estate tax effects.

Pay School Expenses (Not Room and Board) or Medical Bills for Relatives and Loved Ones

You can give away unlimited amounts for these purposes without reducing your $5 million federal gift tax exemption or your $5 million federal estate tax exemption“as long as you make the payments directly to the school or medical service provider. The same holds true for gifts by your spouse.

Give Away Appreciating Assets to Relatives and Loved Ones While You Are Still Alive

Thanks to the federal gift tax exemption for 2011 and 2012, you can give away up to $5 million worth of appreciating assets (stocks, real estate, etc.) without triggering any federal gift tax hit. So can your spouse. This can be on top of cash gifts to relatives and loved ones that take advantage of the annual exclusion and on top of cash gifts to directly pay college tuition or medical expenses for relatives and loved ones.

Key Point: Gifts in excess of the annual exclusion amount ($13,000 for 2011) reduce your $5 million federal gift tax exemption and your $5 million federal estate tax exemption dollar-for-dollar. But that is OK if you are giving away appreciating assets“because the future appreciation will be kept out of your taxable estate.

If you and your spouse each give stock worth $100,000 to your favorite relative in 2011, for example, the gift uses up $87,000 of both of your $5 million federal gift tax exemption ($100,000 $13,000 annual exclusion) and $87,000 of both of your $5 million federal estate tax exemption. Utilizing your exemptions like this makes sense if you are giving away appreciating assets“because the future appreciation will be kept out of your taxable estate.

Set Up Irrevocable Life Insurance Trust

As you may know, life insurance death benefit proceeds are usually federal-income-tax-free. However, the proceeds from any policy on your own life are included in your estate for federal estate tax purposes if you have any incidents of ownership in the policy. It makes no difference if all the insurance money goes straight to your beloved Aunt Myrtle.

It does not take much to have incidents of ownership. If you have the power to change beneficiaries, borrow against the policy, cancel it, or select payment options, you have incidents of ownership. (The preceding is not a complete list of things that count as incidents of ownership.)

This unfavorable life insurance ownership rule can cause federal estate tax exposure for people who believe they have none.

Key Point: The life insurance ownership rule is more likely to adversely affect unmarried people. Why? Because death benefit proceeds from a policy on the life of a married person can be left to the surviving spouse without any immediate federal estate tax hit, thanks to the unlimited martial deduction privilege (assuming the surviving spouse is a U.S citizen). However, all the insurance money going into your surviving spouse’s coffers could cause his or her estate to eventually exceed the federal estate tax exemption.

The estate-tax-saving solution is to set up an irrevocable life insurance trust to own the policies on your life. Since the trust, rather than you, owns the policies, the death benefit proceeds are not counted as part of your estate (unless the estate is named as the policy beneficiary which would defeat the purpose). You are still able to direct who gets the insurance money because you get to name the beneficiaries of the irrevocable life insurance trust (typically your children and/or grandchildren).

There may be some complications. When you move existing policies into the trust, you must live for at least three years. Otherwise, the death benefit proceeds will be included in your estate, just as if you still owned the policies at the time of death. Also, when existing whole life policies are transferred into the trust, their cash values are treated as gifts to the trust beneficiaries. Finally, you may have to jump through some hoops to get the cash needed to pay the annual insurance premiums into the trust without adverse gift tax consequences. All these issues can usually be finessed with the help of an estate planning professional.

When you have a large estate that will inevitably owe some federal estate tax, you can set up an irrevocable life insurance trust to buy coverage on your life. The death benefit proceeds can then be used to cover all or part of the estate tax bill after you die. This is accomplished by authorizing the trustee of the life insurance trust to purchase assets from your estate or make loans to the estate. The extra liquidity is then used to cover the estate tax bill. When the irrevocable life insurance trust is eventually liquidated by distributing its assets to the trust beneficiaries (usually your children and/or grandchildren), the beneficiaries will wind up with the assets purchased from your estate or with liabilities owed to themselves. Bottom line: the federal estate tax bill gets paid with dollars that are not themselves subject to the federal estate tax.  (SMARTMONEY, MARCH 18, 2011)

Clearwater probate lawyer

Women and the Law

Traditionally, women have been the nurturers in our society. This is especially true in the context of family relationships. Depending on how family is defined for her, a woman may care for a husband, children, pets, parents or even in-laws. Amidst all of her caring for others, however, too many women overlook important legal and financial matters.

Women play a variety of roles in their lifetime. For example, depending on her unique circumstances, a woman may be a daughter, an aunt, a wife, a friend, a mother, a grandmother or even a great-grandmother. Traditionally, especially in her family relationships, a woman is likely the nurturer or caregiver. While she is busy meeting the needs of others, a woman may forget to take care of her own needs; even needs as fundamental as her own Life & Estate Planning.

Who will take care of her, the important people in her life and her property if she is unable to do so? Who will be the caregiver for the caregiver?

Life Planning

Would your loved ones be prepared to take care of your legal and financial responsibilities if you were incapacitated? The law says every adult American must make their own personal, health care and financial decisions. Certainly the daily news and our own personal experiences tell us that a serious injury or illness can strike anyone at any time.

Without proper Life & Estate Planning your loved ones will be unable to automatically step in and handle routine legal and financial matters for you.

For example, regardless of their relationship status to you (e.g., this includes a spouse), no one can sign your name to a tax return, a real estate deed or the back of a check unless you have given them authority to act on your behalf through appropriate legal documents.

In addition to legal and financial matters, your loved ones will be barred from access to your medical information, verbal or written, without your prior authorization because of the legally protected confidential relationship between patients and their physicians.

Note: Access to such medical information is crucial for your loved ones to advocate on your behalf regarding important life and death treatment decisions, to include obtaining second opinions or transferring you to a new hospital.

In the absence of proper planning, your loved ones may be forced into court to obtain the legal authority required to care for your personal, health care and financial needs. This likely will be an expensive and inconvenient experience for them.

Estate Planning

If given the choice of planning for their own death and anything else, most normal people would choose anything else. It is just human nature. Nevertheless, no one wants to be remembered for leaving a legal and financial mess for their loved ones to sort out. What, if any, legal arrangements have you made? Whom do you want to care for your loved ones, charities or pets, if you are no longer around to care for them?

As a rule of thumb, surviving spouses are particularly vulnerable during the first year they are widowed. Many grief counselors advise against making any major life decisions during that first year. Feelings of grief can be expressed in many forms, to include feelings of loneliness and abandonment. As a result, many surviving spouses remarry before they probably should. If your spouse were to remarry, will your Estate Plan protect your assets for them in the event of a subsequent divorce or for your children should your spouse predecease his next spouse?

If you have minor children, what legal arrangements have you made for their care in the event they become orphans? Who will provide a safe and secure home for them, as well as help develop their moral character? Who will manage their inheritance and protect it for them and from them? The failure to address these issues may negatively affect your children well into adulthood.

Even if you have no children, you likely have definite ideas about who should inherit and who should not inherit your assets. Whether these objects of your bounty are humans, animals, birds, fish or reptiles, only proper Estate Planning can fulfill your objectives. In the absence of an Estate Plan containing your instructions, state law will control. In most instances, these laws would distribute the estate assets to your surviving next-of-kin, which may differ greatly from your wishes.

Financial Planning

Whenever you invest your money in an asset, you do so with the expectation that you will receive a return on your investment in that asset. At some future point you expect both the return of your money and the return on it. The potential that you will be disappointed in your expectations regarding your investment in a given asset is known as its investment risk. In fact, the greater the risk of losing your original investment, the greater the potential return on it. Conversely, if you play it safe and the risk of losing your original investment is low, then your potential return will be low as well. Accordingly, it can be said that this financial law of proportionality is analogous to a well-known physical law of proportionality: For every action there is an equal and opposite reaction. Without an appreciation of this law of proportionality in the physical world, travel by jet aircraft would be impossible. Without an appreciation of it in the financial world, a prudent investment strategy would be impossible. The key, therefore, is to balance the potential risk and reward for a given investment according to your personal risk tolerance. It is critical that your risk tolerance is reflected in the allocation of your assets.

Asset Allocation

Don’t put your eggs in one basket. That is a proven maxim that also is an appropriate working definition of asset allocation. Simply put, asset allocation is an investment strategy that seeks to balance risk and reward by spreading the investment of your money over a number of assets types. Furthermore, your unique approach to asset allocation will vary based on a variety of factors, to include your investment goals (e.g., accumulation versus current income), your time horizon (e.g., college funding versus retirement), your need for liquidity (e.g., the ability to readily turn the investment into cash), your risk tolerance (e.g., are you more interested in the return of your money versus the return on your money?), your tax status (e.g., the impact of an investment on your tax burden), and current/forecasted economic conditions (e.g., how optimistic or pessimistic are you about the present and future of inflation, interest rates and the overall economy?). The role of a qualified financial advisor is to help you determine your risk tolerance based on such factors and design a basket (portfolio) of eggs (investments) that is most appropriate for you. Then, over time, your financial advisor will help you adjust the eggs in your basket as your circumstances change.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Successful Conclusions

Estate Planning is a Lifetime Process, not a one-time event. Though estate administration is the final stage in the process, a successful conclusion is dependent on proper completion of each of the preceding stages.

Prince or pauper, life’s journey eventually comes to an end for us all. Death, it has been said, is an equal opportunity experience. When your appointed time arrives, will your loved ones find your personal and financial affairs in order or in disorder? What grade will they give your Life & Estate Plan once it has passed through the three basic stages of Estate Administration? These basic stages are Collection & Management; Payment of Expenses; and Asset Administration & Distribution.

Collection & Management

The initial responsibility of your appointed fiduciaries will be to identify, safeguard and insure your assets. Unfortunately, if they cannot identify your assets, then it will be impossible to safeguard and insure your assets. Have you created and maintained an up-to-date inventory of your assets? At a minimum, your inventory should provide sufficiently detailed information about your assets so your fiduciaries can find them.

If you have a properly funded Revocable Living Trust along with a current inventory of all of your assets, then you will dramatically lighten the Collection & Management burden on your fiduciaries. Nevertheless, even if your Life & Estate Plan does not include a Revocable Living Trust, a current inventory will spare your fiduciaries considerable time, aggravation and money in fulfillment of their initial responsibility.

Payment of Expenses

With your assets collected and under management, your fiduciaries are ready to begin paying the expenses you left behind. These expenses include satisfaction of your just debts, your remaining tax liabilities, and your various post-mortem expenses. Time is of the essence in resolving these financial loose ends.

Your fiduciaries will be held personally liable for failing to dot all of the i’s and cross all of the t’s when it comes to dealing with the creditors of your estate, to include the IRS. This potentially unending liability extends beyond third-party creditors to your own estate beneficiaries. For example, certain post-mortem planning techniques, such as various elections and disclaimers must be exercised prior to filing the federal estate tax return (due within nine months of your death). The failure to properly exercise such post-mortem techniques may result in adverse tax and non-tax consequences.

Asset Administration & Distribution

Assuming your fiduciaries still have assets under management after paying your debts, taxes and expenses, then it is time for them to fulfill their final responsibility to administer and distribute your assets as stated in your Life & Estate Plan. This is the moment of truth: Will your assets be protected both for and from your loved ones; or will they be lost through their divorces, lawsuits, bankruptcies and squandering. Without proper Life & Estate Plans for this stage of Estate Administration, your fiduciaries may have no choice but to deliver your assets to parties you would otherwise intend to disinherit, rather than to your loved ones. Like trying to put toothpaste back in its tube, once you are gone the opportunity to change your administration and distribution plans is lost.

Alternatively, consider taking steps now to help ensure a successful conclusion to your Life & Estate Plans. For example, remarriage provisions may help protect your assets for your surviving spouse and children. Long-term discretionary trust provisions may protect your assets both for and from your heirs, even for unborn generations in perpetuity. You worked a lifetime for your assets, but without proper planning your financial legacy can be taken or lost in the blink of an eye.

Aside from your tangible financial legacy, have you considered leaving an intangible character legacy for your loved ones as part of your Life & Estate Plan. For example, you might write individually addressed last letters to remind your loved ones of your love and your confidence in them to press on to their own successful conclusions. Take time today to draft these last letters. Write the letters in your own hand. This is a lost art in this computer age of word processors and email. Then, in your Life & Estate Plan, instruct your fiduciaries to mail these last letters to your loved ones after your debts, taxes and expenses have been fully satisfied. By the way, the inventory of your financial assets is an excellent place to keep both these last letters and the instructions for their delivery.

Funding Your Living Trust

Trust funding is the process of placing your assets under the ownership and control of your Revocable Living Trust. Only those assets which are titled in the name of your Trust (or which name your Trust as beneficiary where appropriate) will be controlled by the terms of your Trust in the event of your incapacity or death. Otherwise your assets may be subject to probate, may lose valuable protection from estate taxes and may not pass to your beneficiaries as specified in your Life & Estate Plan.

There are three fundamental steps in the Trust Funding process:

1. Identify all of your assets by:

  Type: For example, is this asset a bond certificate, a certificate of deposit, or a publicly-traded stock certificate?

Value: How much is it worth and is it encumbered by debt?

Ownership: Do you own it individually or jointly with a spouse or others?

2. Transfer Ownership:

Once you have identified your assets, you can begin transferring ownership to your Trust by sending written notice to the various institutions involved. In that notice you identify the asset, the name of your Trust and then request the change of ownership or beneficiary designation.

Note: Do not be surprised if they respond with a request for completion of their own in-house form.

3. Maintain Your Trust Funding:

As you acquire additional assets, be sure to title them with ownership by your Trust or use the appropriate beneficiary designation from the outset.

Conclusion

Life & Estate Planning is a lifetime process, not a one-time event. A well-designed estate plan must be regularly reviewed and updated, properly funded, and properly administered. Seek appropriate legal counsel at each step along the way to ensure a successful conclusion.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Voluntary Philanthropy

Many taxpaying Americans are involuntary philanthropists because they fail to maximize the tax incentives available under the Internal Revenue Code to become voluntary philanthropists in support of the charities of their own choosing.

Are you a gracious giver, perhaps even a philanthropist? If you are a taxpayer, then the answer is yes.

During your lifetime, your wealth is subject to taxes in a variety of forms. Income taxes levied on your wages, interest and dividends, and capital gains taxes extracted on the sale of your appreciated assets may tend to make April 15th one of your least favorite days each year.

Voluntary Taxes

Our tax system is voluntary in its form, but the civil and criminal penalties for noncompliance make the process involuntary in its substance. Thankfully for our national defense and other essential programs of the federal government, most taxpayers voluntarily comply with the Internal Revenue Code (IRC) and pay their fair share.

Beyond the essentials of government, however, are there any programs funded by the federal government you personally consider nonessential and perhaps even wasteful? If there are, then you are an involuntary philanthropist by your financial support of such causes as selected by Congress and the White House. Perhaps there are private sector charities you deem more worthy of your tax dollars? Chances are you already support these charities. If so, then you really should know about IRC § 664 and how you may turn your involuntary philanthropy into tax-savvy voluntary philanthropy.

IRC § 664

Charitable tax deductions have been part of the IRC since its inception. Why? The government’s own research determined that private sector charities deliver social services more cost-effectively than the government itself. The government, in turn, sought to encourage increased charitable giving to private sector charities by enacting IRC § 664 in 1969. In essence, IRC § 664 permits split-interest gifts, making it attractive for taxpayers to have their cake and eat it too!

A Charitable Remainder Trust (CRT) is a popular split-interest gifting technique. Through a CRT, you may increase your current income, enjoy current income tax deductions and leave a substantial financial legacy for your favorite charity (or charities) upon your death (or upon the death of your spouse, if later).

Here is how it works. First, you create a CRT and contribute an asset to it. [Note: Appreciated assets that would be subject to capital gains taxation were you to sell them yourself, are commonly contributed because they tend to be low income producers and have a low income tax basis.]

Second, the CRT sells the asset without capital gains taxation and then reinvests the proceeds in an income-producing portfolio that grows income tax free inside the CRT.

Third, you (and your spouse) receive an enhanced lifetime income plus valuable income tax deductions for up to six years.

Fourth, upon your death (or the death of your spouse, if later), the CRT distributes any remaining CRT assets probate-free to your selected charities and your estate receives a charitable estate tax deduction for the value of the distributed assets.

Family Matters

As the saying goes, charity begins at home. Accordingly, many Americans want to maximize the wealth they ultimately transfer to their children and grandchildren.

While the CRT provides a lifetime income and tax benefits to the taxpayer (and spouse), it correspondingly reduces the estate eventually available to loved ones.

This is obviously one of the major drawbacks to CRT planning. However, there is a tax-savvy strategy available to replace the value of the CRT assets for the benefit of loved ones.

The Trifecta

In the world of high-stakes wagering on horse races, winning the Trifecta requires picking not only the winner of the race, but also the second and third place finishers. When it comes to gracious giving, most taxpayers would prefer to benefit their charities first, themselves second, their loved ones third … and the IRS dead last. This Charitable Planning Trifecta can be achieved through a carefully coordinated financial and legal strategy that includes both a Charitable Remainder Trust (CRT) and a Wealth Replacement Trust (WRT).

The Trifecta Challenge

The creation of a CRT helps your charity finish first, with you (and your spouse) a close second. Before the charity inherits the assets held in the CRT upon your death (or upon the death of your spouse, if later), you enjoy a lifetime income from the CRT and valuable charitable tax deductions. However, when the charity inherits the assets, they are forever unavailable to your loved ones. That is where the WRT comes in.

The WRT Solution

With your CRT generating income sweetened by income tax deductions, you may have a total annual income in excess of the amount necessary to maintain your lifestyle. If so, then you may want to consider acquiring life insurance in a WRT to replace the value of the CRT assets ultimately passing to charity instead of to loved ones. To keep the value of the life insurance death benefit out of your estate (and that of your spouse) you must be very careful to follow the WRT dance steps to ensure proper ownership of the life insurance from the outset.

WRT Dance Steps

First, you create a WRT. While you may not serve as a Trustee (nor should your spouse), you may select the current and successor Trustees. The beneficiaries of the WRT will be your loved ones.

Second, you (and your spouse) make gifts to the Trustee on behalf of the WRT beneficiaries in an amount roughly equal to the insurance premiums. The Trustee then provides written notice of the completed gift to each WRT beneficiary and that each beneficiary has a designated period of time (typically, at least 30 days) to request distribution of their respective share of the gift. After the designated period has lapsed, the Trustee applies for the appropriate life insurance and pays the initial premium. [Note: This annual gifting ritual continues until your death (or the death of your spouse, if an insured and your survivor).]

Third, assuming all of the WRT dance steps have been followed, the death benefit will be estate tax free when paid to the WRT for your loved ones. This will replace the value of the CRT assets paid to the charity.

Finally, seek appropriate legal counsel. It will be time and money well spent.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Planning for Minor Children

It is an unfortunate fact of life: airplanes plummet, trains derail, ships sink and automobiles crash. Sometimes there are survivors, sometimes there are no survivors. What is left when a tragedy claims both parents of minor children? Orphans and assets.

Children are a family’s greatest treasure. Think of all the precautions taken to safeguard young children – from the first purchase of an infant car seat to the compulsory swimming lessons and even driver’s safety instruction. Yet, most parents leave their children completely unprotected from one of life’s most crushing blows – being orphaned upon the loss of their parents.

Great Expectations

While every parent expects to rear their minor children to adulthood, life may throw any of us an unexpected curve ball in the form of a fatal injury or illness. Are you, and your children, prepared for that curve ball? Who would you legally appoint to serve as their back-up parents to fulfill your parental responsibilities? Your answer may depend on how family is defined for you. Is yours a single parent family, a blended family or a traditional family?

Single Parent Families

If you are a single parent, then the surviving biological parent automatically remains the natural guardian, unless proven unfit. Without contrary legal arrangements, the surviving parent likely will manage the inheritance you leave behind. Then, upon reaching the age of majority for an inheritance under applicable state law (e.g., typically age 18), your children will receive whatever is left of their inheritance without guidance or restriction. If both you and the other parent are deceased, what happens? In that instance, if there are no proper legal plans in place, a judge will select the backup parents (i.e., guardians) for your minor children and see that the inheritance is distributed outright at the age of majority.

Blended Families

When the minor children in the household may be yours, mine and ours, how do you select the back-up parents … especially when the children consider themselves to be one family? Should  the minor children remain together, if possible? If not, then with whom should they be placed and should legal arrangements be made to facilitate their ongoing contact?

Traditional Families

If yours is a traditional, nuclear family, then the whole matter seems rather simple, doesn’t it?

The surviving parent remains the natural guardian. However, what if both parents are deceased? Will your children be reared by their paternal or their maternal side of the family? That is when things can get complicated. In our mobile society, both sides of the family may not know one another and may even live on opposite coasts even if they do. Alternatively, perhaps you would you rather your children be reared by good friends in a stable marriage who share your values and lifestyle?

Some Pointers

As you can see, every family situation is different. Nevertheless, here are some general guidelines for your consideration when selecting guardians for your minor children:

• Select guardians who share your religious beliefs, core values and life priorities and already have an established, positive relationship with your children;

• When selecting a married family member, appoint the family member only, not their spouse, in case they divorce or your family member predeceases;

• Ensure that your legal plans provide for compensation of the guardians, or at least that assets are available from your children’s inheritance to cover all expenses incurred on their behalf; and • Obtain permission of the selected guardians before appointing them in your legal plans.

Inheritance Planning

Once these guardians are appointed, great care must be given to any inheritance left to your children. Now, let’s turn our attention to some methods for managing any inheritance left to them. We will review a common default method provided under the laws of many jurisdictions, a method of providing multiple opportunities for inheritance success or failure and a method that seems complex at first blush, but really may be the simplest method of the three.

Outright Distributions

In the absence of any legal arrangements, the laws of most jurisdictions provide for the outright distribution of an inheritance to a child who is at or beyond the age of majority (e.g., age 18 in most jurisdictions). Children who are under the age of majority receive their lump sum inheritance upon reaching that age. Bottom line: Following an outright distribution to your children, the full inheritance may fall prey to such common threats as divorces, lawsuits, bankruptcies or squandering. If you worked hard to accumulate your wealth, then you may want to protect any inheritance both for your children and from them.

Staggered Distributions

Although a bit more complex than the outright distribution approach, the staggered distribution method holds the inheritance of a child in trust until such time as outright distributions are triggered by such terms as you may determine. Oftentimes, parents will designate multiple distributions of a percentage or fractional share upon a child’s attaining certain ages or reaching certain goals set by the parents. Regardless, at some identifiable point the trust share of the child is terminated and the entire inheritance is distributed to them. Contrasted with the outright distribution method, this arrangement with its staggered distribution provisions provides increased protection from the common threats described above. For parents seeking even greater protection of the inheritance and their children, yet another method warrants serious consideration.

Discretionary Trusts

Both the outright distribution and the staggered distribution methods share an apparent attractiveness: Simplicity. But complexity has a tendency to sometimes masquerade as simplicity. For example, of what value is an inheritance if it is taken or lost unnecessarily? Alternatively, an inheritance may be held in a long-term discretionary trust to protect it both for and from your child, regardless of their age. In such a trust you set the terms under which the inheritance is available for your child. Moreover, if properly constructed, a discretionary trust may own assets for the use and enjoyment of your child and even their children for generations … without the risk of loss between generations to divorces, lawsuits, bankruptcies or squandering. In short, great flexibility, creativity and control are made available through discretionary trust planning.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Retirement Plan Tax Traps

Qualified Retirement Plans (QRPs) present some of the most complicated tax and non-tax planning challenges of any asset in an estate, especially for married couples. The failure to make proper Life & Estate Plans for your QRP can unnecessarily enrich the IRS and disinherit loved ones.

For many Americans, a significant portion of their estate value is in Qualified Retirement Plans (QRPs). This remains true despite the (inevitable) ups and downs of the stock market. One reason QRPs weather economic storms better than non-qualified investments is their unique tax treatment. All contributions to QRPs are made with pre-tax dollars and all of the growth inside such plans is tax-deferred until withdrawn. Hence, contributions to QRPs not only reduce your current income tax liability, but they grow with compound interest and without the barnacles of annual income taxation.

Your estate value includes everything that you own: your QRP, your life insurance death benefits, your real estate, your overall non-qualified investment portfolio and your collectibles.

Under current tax law, every taxpayer has a $2 million Applicable Exemption Amount to protect their estate from federal estate taxes. A married couple may protect a combined total of $4 million. However, this is not automatic. Many couples fail to maximize their federal estate tax protection. Consider the following case study.

Husband and Wife have a combined estate value of $4 million. Wife has a $2 million QRP and selects Husband as the Designated Beneficiary. When Wife dies, Husband inherits the QRP as an income-tax-free rollover and no federal estate taxes are due upon Wife’s death because of the Unlimited Marital Deduction. But using this deduction can be a very expensive tax trap.

Any assets passing to a surviving spouse via the Unlimited Marital Deduction forfeit the federal estate tax savings otherwise available under the Applicable Exemption Amount of the deceased spouse. Husband now has the full $4 million in his estate. Since Husband’s Applicable Exemption Amount is less than the estate value at the time of his death, this couple will incur an unnecessary federal estate tax liability.

Given the same basic facts as above, Wife could create a Credit Shelter Trust (CST) to shelter her retirement assets from federal estate taxes by using (and not forfeiting) her available Applicable Exemption Amount instead of the Unlimited Marital Deduction.

Under this approach, Wife would select Husband as the primary beneficiary of her QRP and would designate her trust as the contingent beneficiary. Upon Wife’s death, Husband could disclaim the retirement plan assets, making the credit shelter trust the primary beneficiary by default.

Result: Wife’s Applicable Exemption Amount would be applied to the value of her QRP disclaimed to the trust, yet Husband would be the beneficiary under the trust terms.

Downside: Since the trust is not a surviving spouse, the Wife’s retirement plan cannot be rolled-over to the Husband, and income-taxable distributions must begin to Husband, regardless of his Required Beginning Date.

While this technique may forfeit the income tax deferral available through the spousal rollover, it may achieve significant federal estate tax savings. Nevertheless, this alternative affords the surviving spouse maximum flexibility over the couple’s combined wealth and its ultimate disposition. Therefore, it is most appropriate in first marriages where any children are of that marriage. Blended family situations, on the other hand, present unique planning challenges.

Fact: There are more blended families in the United States today than original nuclear families. If yours is a blended family, then you should give careful consideration to your choice of Primary and Contingent Designated Beneficiaries for your Qualified Retirement Plan.

Again, assume the same basic facts as above, except Husband and Wife have adult children from their respective prior marriages and a minor child from their marriage together.

Dilemma #1:

If Wife identifies Husband as the primary beneficiary of her QRP and her Credit Shelter Trust as the Contingent beneficiary, then it is possible for her children to be completely disinherited upon Husband’s subsequent death. How could this happen? One of two ways: (1) Husband fails to disclaim the retirement plan assets to Wife’s trust, under which her children are the ultimate beneficiaries, or (2) Husband fails to specifically identify Wife’s children as among the primary beneficiaries under his rollover of Wife’s QRP.

Dilemma #2:

Wife cannot designate a Credit Shelter Trust as the primary beneficiary of her retirement plan, instead of her husband, without his knowledge and consent. With very limited exceptions, under federal law a surviving spouse has special rights to the Qualified Retirement Plan assets of their deceased spouse.

Is there any alternative that would allow Husband to rollover the QRP, while ensuring that Wife’s children are not totally disinherited. Yes. We will call it the QRP Insured Triple Play.

Triple Play

There are few more exciting defensive plays in the game of baseball than the triple play. It is where preparation and opportunity meet with no margin for error. So it is with the QRP Insured Triple Play. Here is how it works, assuming the same facts as above.

First, Wife identifies Husband as the primary beneficiary of her qualified retirement plan, with her credit shelter trust as the contingent beneficiary. Wife’s trust identifies Husband, along with their combined children as beneficiaries. Upon Wife’s death, Husband can either: (a) elect the QRP rollover for the income tax savings, instead of the potential federal estate tax savings attained through a disclaimer to Wife’s trust; or (b) elect to disclaim the QRP to Wife’s trust for the potential federal estate tax savings, instead of the income tax savings of a rollover. If Husband elects (a), then he must arrange his primary beneficiaries carefully to include Wife’s children or they will be disinherited. However, if he elects (b), then neither he nor any of the couple’s children will be disinherited.

Second, Wife creates an Irrevocable Life Insurance Trust (ILIT) that in turn applies for and owns a $2 million insurance policy on her life. The ILIT is named as beneficiary under the policy, with Wife’s children as the beneficiaries of the ILIT. Because neither Wife nor Husband is the applicant, owner or beneficiary of the policy, it is not included in their taxable estate.

Third, upon Wife’s death, she is assured that her children will inherit $2 million from her through the ILIT;even if Husband elects the QRP rollover and fails to include her children among his primary beneficiaries.

In baseball, a perfectly executed triple play may not guarantee victory, but it can help you survive a very difficult inning. Similarly, a perfectly executed QRP Insured Triple Play may not guarantee both income and estate tax savings. It can, however, help you provide for all of your loved ones and preserve family harmony.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Estate Planning 101

Unfortunately, confusion and myth abound when it comes to estate planning. Perhaps that is why so few people actually get around to making such plans at all.

What is estate planning? If you were to ask 10 adult Americans this question, you would likely get 10 different answers. Even otherwise financially savvy people seem confused about estate planning. Most erroneously equate estate planning with death planning. They think estate planning is limited to arranging for the ultimate distribution of their assets at life’s end. Due partly to this confusion and partly to good, old-fashioned procrastination, it is little wonder that six out of 10 adult Americans have no estate plan at all.

In reality, the ultimate distribution of your assets is but one of many important elements to successful estate planning. Were your estate plan your autobiography, then the ultimate distribution of your assets would only be Chapter 4, the book’s final chapter. The preceding chapters of your estate plan would involve a lifetime process of making legal arrangements to protect yourself, your loved ones and your hard-earned assets from three fundamental estate planning challenges: unnecessary probate, confiscatory taxes and unpleasant surprises.

Chapter 1: Unnecessary Probate

Probate is the court process that takes care of people and their assets when they no longer can make their own personal, health care and financial decisions. You have two opportunities to experience probate: at incapacity and at death.

The law says every adult American is responsible for their own personal, health care and financial decisions. Such decisions include everything from where to live, to when to die (e.g., authorizing or withholding/withdrawing health care treatments), to filing tax returns, to real estate transactions.

What happens, though, if a stroke, a car wreck or advanced Alzheimer’s leaves you disabled to the point of legal incapacity? Who will make your decisions for you? Will it be someone you know and trust? Perhaps it will be your spouse, your children, your siblings, a friend or a trusted professional advisor. The answer is none of the above … unless you make proper estate plans in advance of such tragedy.

Incapacity probate is the default plan for people who fail to make plans to avoid it. In the incapacity probate process you can expect to employ at least three lawyers (the probate judge, an attorney to represent your interests and an attorney representing the potential guardian), potentially spend thousands of dollars, expose your personal situation and financial matters to the public, and place yourself under the ongoing control of the probate court until you either recover or die.

At your death, any assets that are titled in your name alone or which name your estate as the beneficiary (e.g., life insurance or retirement plans) will go through probate. One common estate plan myth is that a valid Last Will & Testament will avoid probate of these assets. That myth could not be further from the truth.

In reality, a Will is your admission ticket to the probate court and only has legal effect when accepted by the court as valid. Like the incapacity probate, the death probate is the default plan for people who fail to make plans to avoid it. Similarly, in the death probate process you may expect to pay some potentially unnecessary costs, expose your personal situation and financial matters to the public, and place your assets under the ongoing control of the probate court for six months to a year or more.

Chapter 2: Confiscatory Taxes

Question: Which tax can take the biggest bite out of your estate assets? Is it the income tax, the capital gains tax or the estate tax? Answer: The estate tax. While no one enjoys the income tax with a top marginal rate of 35 percent or the capital gains tax with a top rate of 20 percent, most are shocked to learn that the estate tax is more than 40 percent. Even more disturbing is that this is a final tax on assets that have already been subject to income and capital gains taxes…oftentimes repeatedly during one’s life.

As noted earlier, six out of 10 adult Americans have no estate plan. They likely are headed to probate unnecessarily and may lose hundreds of thousands of dollars to the IRS in death taxes unnecessarily. Even people with estate plans in effect may have made serious mistakes in their planning.

Common mistakes may include joint tenancy ownership of assets, improper ownership methods for life insurance and simple Wills with no tax planning provisions.

Chapter 3: Unpleasant Surprises

Along with probate avoidance and tax minimization, asset protection should be a cornerstone of every estate plan. With divorces, lawsuits and bankruptcies (probably as a result of the other two), proper estate planning includes protecting your assets from unnecessary loss while you are alive and protecting them for your loved ones upon your death. The next and final chapter is a natural extension of this chapter.

Chapter 4: Unpleasant Surprises Reprise

A well-designed, thoroughly implemented and faithfully maintained estate plan can not only protect you and your hard-earned assets from unnecessary probate, confiscatory death taxes and unpleasant surprises, but it also can protect your assets from these same fundamental estate planning challenges to benefit your loved ones over multiple generations.

Is it Time to Review Your Plan?

Estate Planning is a Lifetime Process, not simply an after-death distribution program. So, it makes sense to periodically reflect on your Life & Estate Planning goals, and review your legal documents as circumstances in your life change. Use this checklist of life changes or activities that could alter your estate-planning needs as a starting point.

– Marriage, remarriage or divorce

– Death of a spouse

– Substantial change in total asset value

– Death or incapacity of an executor, guardian or trustee

– Move to another state

– Acquisition of real estate in another state

– Birth or adoption of a child or grandchild

– Serious illness of a family member

– Change in business interest or retirement

– Change in insurability for life insurance

– Marriage or divorce of a beneficiary

– Change in beneficiary attitudes

– Financial irresponsibility of a beneficiary

– Change in tax laws

– More than two years since last review of plan with attorney

Finally, seek appropriate legal counsel. It will be time and money well spent.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material. Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Pet Trust Planning 101

Do any of your closest friends have feathers, fins or fur? What will happen to them if you are no longer around? Although it cannot replace you, a Pet Trust can provide your friends with love and care for the rest of their lives.

An estimated 500,000 pets are euthanized each year by shelters and veterinarians when their owners predecease them.  Do any of your closest friends have feathers, fins or fur? Are you also responsible for their room, board and ongoing veterinarian care?

Consider this: If something untoward were to happen to you today, what would happen to your feathered, finned or furred friends tomorrow?

What arrangements have you made for these friends (some people refer to them as pets, so we will use the terms interchangeably) in your Life & Estate Plans? Unfortunately, if you are like most Americans (58 percent), you do not have even a basic Last Will and Testament. Not surprisingly, most Americans also have neither health care directives (69 percent) nor powers of attorney for either health care or financial matters (74 percent).2

Pet Trust Anatomy

Given these numbers, it should come as no surprise that most Americans (79 percent) have not created a traditional trust as part of their estate plan.3 (Traditionally, a trust is a legal arrangement providing for the ongoing management of assets, sometimes for multiple generations of beneficiaries.) Whether you are among the minority who have completed comprehensive estate planning, or among the majority who have yet to do so, be aware that a new type of trust may be an appropriate adjunct to traditional planning. More than 30 states now have laws permitting the creation of Pet Trusts and a growing number are considering them.

A Pet Trust may be created under a Last Will and Testament or a Revocable Living Trust. Either way, there generally are four parties to any Pet Trust: the trustee, the caretaker, the pet (one or more) and the remainder beneficiary. In addition, a Pet Trust should have property contributed to it to adequately fund the lifelong care of your pet.

The trustee may be an individual, a corporate fiduciary, or both. As with most choices, there are advantages to each approach. The same is true with the caretaker. However, it may be prudent to ensure that the trustee and the caretaker are not one in the same.

While a trusted friend or family member likely knows your pet better than any outsider, whenever money is involved; there also lurks the temptation for mischief. For example, there have been reported instances where pets have died, only to be replaced by look-alikes so the trustees/ caretakers continued to receive compensation for their services. Also, remember to appoint successors in case a primary trustee or caretaker is unwilling or unable to serve.

The remainder beneficiary is the party designated to inherit any remaining trust property upon the death of the last surviving pet beneficiary. Typically, the remainder beneficiary is a family member, friend or charity.

Setting aside the appropriate amount of property to fund your Pet Trust is essential to its success. For example, a horse not only eats like a horse, but has an average life expectancy of between 25 and 30 years (or more than 40 years, with tender loving care). By contrast, a Great Dane has a much smaller appetite and a much shorter average life expectancy of between seven and 10 years.4 Accordingly, you would need to set aside a significantly larger nest egg to fund the future care of a horse than for a Great Dane.

So, just how much of a nest egg do you need to set aside to fund the future care of your pet? The amount depends on two variables “ the life expectancy of your pet and the projected cost of care. Your veterinarian is an excellent resource when estimating the life expectancy of your pet, just as your check register is an excellent resource to calculate the actual cost of annual care. Once you know the likely remaining life expectancy of your pet and the historical cost of care, simple multiplication is all that is needed to determine the amount of trust property required to provide the appropriate nest egg. You may want to err on the conservative side, too, since inflation will affect the future cost of care for your pet.

Refrigerator Notes

It is not unusual for the parents of small children to arrange for an occasional evening out “ alone. Before leaving for their date, however, many parents post rather detailed notes on the refrigerator containing such child-specific instructions as authorized snacks, favorite games and the appointed bedtime hour. Just like these parents, consider leaving written instructions for the trustee and caretaker of your friend. You can update these written instructions as necessary without formal changes to your Pet Trust (or additional legal fees!). In your instructions, tell the trustee and caretaker everything about your friend, from favorite daily rituals (e.g., walks and feeding) to how your friend seeks shelter away from the annual pop-pop-pop of the neighborhood fourth of July firecrackers.

Emergency Cards

Estate planning attorneys oftentimes prepare Health Care Emergency Cards for their clients to carry in their wallets or purses at all times. Why? If a client is ever involved in an accident, or suddenly is taken ill, then the emergency card will let medical providers know that the client has prepared a health care directive, a durable power of attorney for health care matters and a written declaration regarding organ donations. In addition, these emergency cards not only identify the card holder, but also the names and phone numbers of their appointed health care agents. In a health emergency, time is of the essence.

Similarly, consider creating a Pet Card to ensure, upon your incapacity or death, that prompt attention and care is given to your pet. At a minimum, the Pet Card should contain your name, key information about your pet (e.g., name, type, location, special care needs and veterinarian) and contact information regarding the appointed trustee and caretaker of your Pet Trust.

Final Thoughts

Your pet has been a loyal companion and friend, whether it has feathers, fins or fur. Unfortunately, if you have no plan (or plan to leave money to someone) for their future care, then you are simply leaving the future care of your pet to chance. Alternatively, a properly prepared and adequately funded Pet Trust can replace this element of chance with the requirements of law;  providing greater peace of mind. And there is no better time than today to ensure that your pet will be okay even if you are not.

1. Survey, LexisNexis Martindale-Hubbell, 2004

2. Ibid.

3. Ibid.

4. Source, www.estateplanningforpets.com

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Elder Law 101

Good news, bad news. The good news is that Americans are living longer than ever. The bad news is that we eventually wear out physically, mentally or both. It is a classic Catch-22.

Are you a seasoned citizen (i.e., over age 65), do you care about someone who is, or do you anticipate becoming a seasoned citizen yourself one day? According to U.S. Census Bureau statistics, today, there are nearly 35 million and by 2010 there will be some 40 million seasoned citizens. Thereafter, due to the graying of the Baby-Boom generation, we will see that figure jump to 53 million in 2020 and to 70 million in 2030! As this seasoned population grows, so will the need for Elder Law services.

What is Elder Law?

Generally speaking, Elder Law is the holistic application of general legal principles to the specific emotional, logistical and financial needs of the elderly. Many seasoned citizens are concerned with two fundamental threats to their dignity: (1) becoming incapacitated and thereby losing control to the court system regarding their personal, health care and financial decisions; and then (2) running out of money due to the catastrophic costs of long-term care. Fortunately, both of these threats may be minimized or avoided through properly coordinated legal and financial planning.

Incapacity Planning

As the number of birthday candles increases on your birthday cake, so does the likelihood that you will become incapacitated due to an injury or illness. Whether incapacity strikes suddenly, as with an accident or acute illness, or gradually, as with Alzheimer’s, the consequences are the same. Either you will have appointed the back-up decision-makers of your own selection through proper legal plans or, by default, the court system must step in to appoint them for you.

Long-Term Scare

Did you know that after age 65, there is about a 50 percent chance that you will need care in a skilled nursing facility? After age 80 the odds that you will need skilled nursing care jump to 9 in 10, or 90 percent. If you are age 65 and married, the odds are 70 percent that you or your spouse will need skilled nursing care. The average nursing home stay, by the way, is 2.5 years.

And the cost of long-term care is high. The national average cost for a year in a nursing home is estimated to exceed $60,000. Is it any wonder some 50 percent of all elderly couples become impoverished within a year after either spouse enters a nursing home? The number jumps to 70 percent for widowed or single people.

By the way, forget about Medicare paying for your chronic long-term care needs. Medicare only pays for acute nursing home care for up to 100 days, and even then your eligibility and the payments are subject to strict requirements. Remember, too, that Medigap (i.e., Medicare Supplement) policies typically exclude coverage for chronic long-term care.

What about giving away your assets to your loved ones to qualify for Medicaid? Any transfer of assets for less than fair market value may render you ineligible for Medicaid assistance for 60 months or more under the complex and confusing web of Medicaid Regulations.

Long-Term Solutions

The key to proper long-term care planning is to plan now rather than react later. There are numerous legitimate strategies to preserve more of your assets … if you have time to plan.

For example, under a special federal law called the Spousal Impoverishment Act, married couples may preserve more assets for the non-nursing home resident, even if the other spouse is Medicaid-qualified.

Some seasoned citizens have turned to Reverse Mortgages (i.e., borrowing against the equity in their homes) to pay for their long-term care. The best strategy, however, may be to insure your financial security with the purchase of a Long-Term Care Insurance (LTCI) policy.

Long-Term Care Insurance (LTCI)

No one relishes the idea of paying insurance premiums of any kind. After all, you can pay and pay and pay and never collect. If you are fortunate, that is.

The purpose of insurance is to transfer a risk you can afford (i.e., the payment of a premium with no guarantee of its return) to cover a risk you cannot afford.

For example, what homeowner does not insure their personal residence from damage due to fire? Or, what automobile owner does not insure their auto from damage due to a collision? Consider this: The odds of a major fire insurance claim are 1 in 88, with an average claim of $2,000. And, the odds of an auto insurance collision claim are 1 in 47, with an average claim of $8,000.

Against this backdrop, why would any responsible person not insure against the financial risk of requiring long-term care at some point?

Remember: The odds are nearly 1 in 2 that a person over age 65 will need long-term care for about 2.5 years at an average cost of $60,000 per year, with an average claim in excess of $100,000!

The LTCI Alternative

Fortunately, an appropriate LTCI policy can be designed to fit almost any budget. Most LTCI policies share some common features you should know, to include the following:

* Benefit Amount: How much and how long will the policy pay?

* Benefit Triggers: When will the policy pay benefits?

* Inflation Protection: Will the purchasing power of the Benefit Amount increase?

* Level of Care: Are Custodial and Intermediate Care covered, along with Skilled Nursing Care? Is Home Health Care covered?

Caveat Emptor!

That is Latin for Let the Buyer Beware. With many insurance companies selling LTCI, this is an appropriate warning. As with any form of insurance, the policy is only as good as the ability of the insurance company to pay your claim. Check out the financial strength and reputation of the insurance company before you sign on the dotted line.

Reputation also is important. Contact the Insurance Commissioner for your state regarding an insurance company’s status and any complaints from policyholders.

Finally, contact the National Association of Insurance Commissioners for a copy of the Life Insurance Buyer’s Guide, by phone (816) 842-3600 or online at www.naic.org.

Summary

Seek appropriate counsel to interpret the contractual provisions of any LTCI policy before submitting an application for coverage. It will be time and money well spent.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Common Estate Blunders

Proper estate planning is not just for the rich and famous. Every adult American has an estate worth planning, regardless of their net worth.

Quick.  When you hear the words estate planning, what mental images do you see?  Do you see beautiful, tanned people with incredible wealth, living in enormous mansions, riding in shiny limousines and boarding private jets bound for exotic destinations? If so, then you are only partially correct. In reality, everyone has an estate worth planning. Some are just more complex than others. Here are some basic estate blunders common to princes and paupers alike.

Incapacity Issues

Every 18-year-old has an estate, even if they have only two dimes to rub together. On your 18th birthday you are considered an adult American citizen and you become responsible for your own personal, health care and financial decisions. Even your parents become strangers to you, in a legal sense, should you become incapacitated due to an injury or an illness. This same legal strangerhood applies, by the way, between spouses.

As a result, every person age 18 and older, married or single, must appoint agents through proper Durable Powers of Attorney to make their personal, health care and financial decisions in the event of their incapacity. Alternatively, a court process involving at least three lawyers will be required to appoint agents to make such decisions for you under the ongoing supervision of the court. And this can be rather expensive and invasive of your privacy.

Minor Children Matters

Silver and gold aside, if you are blessed with children, then they are your most valuable assets…even if you feel like trading them for S & H Green Stamps at times. If your minor children were orphaned, who would rear them to adulthood and impart your morals and values to them? Only through a Last Will & Testament can you appoint the appropriate guardians (i.e., back-up parents) for your minor children. Alternatively, a court process would be required to appoint them. This court process is not only expensive and public, but the court may not appoint the same parties you would have selected.

Death & Taxes

On every actuarial chart of every life insurance company death is a 100 percent certainty. In fact, there is a long history of anecdotal evidence to support those charts. When it comes to transferring your earthly possessions upon your death, you can either make it easy on your loved ones through proper estate planning or you can leave it up to the court system by default. Prior planning is, without fail, the more efficient and effective option. There are a variety of planning methods to accomplish this transfer. For example, Revocable Living Trusts are commonly used to transfer assets postmortem, independent of the legal system in many states.

Benjamin Franklin observed that the only two certainties in life are Death & Taxes. The United States Supreme Court has ruled that no taxpayer should pay more than his or her fair share in taxes. That said, proper estate planning can save hundreds of thousands of dollars from unnecessary federal estate taxes. If you are married, is your estate plan taking full advantage of your available estate tax exemption through a combination Credit Shelter/QTIP Marital Trust?

Inheritance Risks

No one values the worth of a dollar like the person who earned it and paid taxes on it. Have you arranged your estate to impart your work ethic to the next generation and beyond? Careful consideration should be given, therefore, to protecting and preserving an inheritance through one or more Long-Term Discretionary Trusts for your loved ones. Properly structured, such trusts will protect and preserve an inheritance for generations to come from squandering, divorces, lawsuits and bankruptcies. Without proper estate planning, a lifetime of thrift can disappear in a season of conspicuous consumption or through personal misfortune.

Multi-State Real Estate

If you own real estate outside your home state, it will be subject to probate in the state where it is located… unless you have made proper legal plans to avoid the probate process. In some states probate is less burdensome than in other states. However, if you choose to avoid probate you must make appropriate legal plans in advance.

Tax Planning For Retirement Plans

Due to government support of employer-sponsored retirement plans, much of the private, individual wealth in America is in qualified retirement plans. Unless they carefully coordinate their financial plan with their estate plan, much of a married couple’s retirement monies could pass to the IRS instead of their loved ones. With proper coordination, however, the tax impact on these unique assets can be substantially minimized or eliminated.

Business Succession Planning

Statistically, only 30 percent of family businesses survive from the founding generation to the next. The success rate thereafter is even more dismal.

Just like individuals, business owners fail to make plans, have the wrong plan or even an outdated plan for the eventual transfer of their business interests. A comprehensive Life & Estate Plan may incorporate planning for the business succession. For example, if some children are “active” in the business and others are not, how do you treat everyone equally as well as fairly?

Joint Tenancy With Rights of Survivorship

(In some states “Tenancy by the Entirety” when between spouses) This is the most common form of asset ownership between spouses. Joint Tenancy (or TBE) has the advantage of avoiding probate at the death of the first spouse. However, the surviving spouse should not add the names of other relatives to their assets. Doing so may subject such assets to loss through the debts, bankruptcies, divorces and/or lawsuits of any additional joint tenants. Joint tenancy planning also may result in unnecessary death taxes on the estate of a married couple.

Procrastination Perils

Some 60 percent of adult Americans have no estate plan at all and many others have an outdated plan that no longer meets their needs. As a result, these otherwise responsible adult Americans may leave a legacy of unnecessary pain and conflict for their loved ones.

Finally, whatever you do regarding your estate planning, seek appropriate legal counsel. It will be time and money well spent.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Blended Family Basics

If you are a blended family member, then you are in good company. Blended families now outnumber traditional nuclear families. And the number is likely to grow, based on current divorce statistics and trends.

If you are a blended family member, then you are in good company. Blended families now outnumber traditional nuclear families. And the number is likely to grow, based on current divorce statistics and trends.

Divorce is rather common in America. In fact, an estimated 50 percent of first marriages end in divorce after an average of 11 years. The average divorce will cost the parties about $15,000 and take approximately one year to process from initial filing to final decree. Thereafter, the resulting economic fallout will tend to reduce the standard of living of both ex-spouses. Not surprisingly, divorce is not only expensive, but researchers consistently rank it as one of the most stressful life experiences.

Blended families face unique social, psychological and economic challenges. As a result, an estimated 60 percent of second marriages end in divorce. Fortunately, there are numerous organizations and support groups dedicated to helping blended families with these challenges. Unfortunately, however, little attention has been paid to the critical Life & Estate Planning challenges of blended families. These challenges include disinheriting your ex-spouse, protecting your own children, providing for your new spouse and minimizing your estate taxes.

Your Ex-Spouse

Will your ex-spouse inherit your retirement money, even if the laws of your state automatically extinguish their interest in the assets of your estate? It depends. In Egelhoff v. Egelhoff, 121 U.S. 1322 (2001), the United States Supreme Court held that federal law under the Employee Retirement Income Security Act of 1974 (ERISA) preempted state law regarding the retirement plan of a recently divorced and deceased man.

Mr. Egelhoff had failed to replace his ex-spouse with his children as the named beneficiaries of his retirement plan prior to his death. State law automatically disinherited ex-spouses. In a 7-2 decision, the Court found that the retirement plan administrator must follow the ERISA statutes requiring distributions to the named beneficiary, even when the end result conflicts with state law. Bottom line: Mr. Egelhoff’s former spouse inherited the sizeable ERISA retirement plan instead of his own children.

Your Own Children

Assuming you have removed your ex-spouse as the named beneficiary of your ERISA retirement plan, does the rest of your Life & Estate Plan protect the inheritance of your children from your ex-spouse? Without proper legal planning, your exspouse (as surviving parent/guardian) would likely be appointed by the probate court to manage the inheritance you leave to your children. To make matters worse, what if your children later predecease your ex-spouse, and are single and childless at that time? Who would inherit your assets then? That is right … your ex-spouse, as the next-of-kin of your children.

Regardless whether children are reared in a traditional nuclear family or in a blended family, great care should be given to protect any inheritance both for them and from them. For starters, wealth representing a lifetime of your hard work and thrift can be squandered in very short order. Dollars earned just spend differently than dollars inherited. In addition to good, oldfashioned squandering, an inheritance can quickly vanish through divorces, lawsuits and bankruptcies.

Your New Spouse

Chances are you made a few solemn promises to your new spouse on your wedding day. Among them were promises to be there through thick and thin, personally and financially. In the absence of a Pre-Marital Agreement to maintain separate assets, most spouses in blended families tend to blend their wealth. For example, titling their respective assets in the names of both spouses and designating one another primary beneficiary of their respective retirement plans and life insurance policies.

Warning: Should you predecease your new spouse, then you may forever disinherit your own children from your share of such blended wealth! Thereafter, upon the death of your new spouse, your assets likely may be inherited by your stepchildren, or even by your new spouse’s next spouse and their children. 

 Your Estate Taxes

Aside from disinheriting your own children, blending your wealth with your new spouse may unnecessarily enrich the IRS. How? The Internal Revenue Code provides an exemption to each taxpayer for purposes of sheltering a certain dollar value from estate taxes (with marginal rates exceeding 40 percent). However, this is a use it or lose it exemption and you lose it when title to your blended assets vests in your new spouse upon your death. In addition to disinheriting your own children, this mistake alone can trigger hundreds of thousands of dollars in unnecessary estate taxes.

Alternative Solutions

While there is no one-size-fits-all solution, there are a few alternative solutions you might want to consider.

Be sure to disinherit your ex-spouse by replacing them as the named beneficiary of your ERISA retirement plans, for starters. While you are at it, create a Long-Term Discretionary Trust (LTD Trust) to administer the inheritance for your children and appoint a party of your own selection to serve as trustee. That way, even if your children reside with your ex-spouse, your trustee will control the inheritance through the LTD Trust and ensure its use only for your children. Should your children predecease your ex-spouse, the inheritance would remain in trust for your grandchildren, your surviving children or for other beneficiaries of your own selection.

Your LTD Trust does double duty by securing many additional tax and non-tax benefits. For example, protect the inheritance for and from your children (and their potential squandering, divorces, lawsuits and bankruptcies) through Spendthrift Provisions contained in your LTD Trust.

Create a Qualified Terminable Interest Property Trust (QTIP Trust) to provide income and perhaps even principal to your new spouse for life, while protecting the inheritance for your new spouse in the event of any subsequent remarriage and divorce. Thereafter, the QTIP Trust assets may pass to the LTD Trust you established for your own children.

Create an Estate Tax Exemption Trust to shelter the maximum available exemption amount upon your death. Often used in conjunction with the QTIP Trust for your new spouse, this trust can help you leave more wealth for your loved ones … and less to the IRS.

Finally, seek appropriate legal counsel. It will be time and money well spent.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material. Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.] © Integrity Marketing Solutions.

Business Owner Blues

Being a business owner today is both rewarding and challenging, especially if your business is a family business. For business owners facing the unique challenge of transferring ownership of the family business upon retirement, disability or death, a properly funded Buy-Sell Agreement may be the key to survival.

Are you a business owner? If so, then you probably know what it’s like to be the first one to arrive in the morning and the last one to leave in the evening. Over the years, you have no doubt worked through physical, mental and financial pain that would have caused other folks to close shop and look for a job elsewhere. No doubt, as a business owner you have survived untold challenges. If yours is a family business, then you face some unique challenges to protect and preserve your business … and your family. It would be an understatement to say that family businesses are the backbone of the American economy. Some 90 percent of all businesses in this country are either family-owned or family-controlled. They come in all shapes, sizes and colors, representing all sectors of our economy. From agriculture, to services, technology, and manufacturing, family businesses generate an estimated one-half of the U.S. Gross National Product and pay half of all wages earned in this country. Not all family businesses are traditional small businesses either. In fact, about one-third of all businesses included in the Fortune 500 are family businesses. But not all of the family business statistics are rosy.

Tragic Transitions

Family businesses do not tend to outlive their founders. At any given moment, 40 percent of family businesses are in the process of transferring their ownership. Unfortunately, two-thirds of all initial transfers fail. Of the one-third that survives an initial transfer, only one-half will survive a second transfer. Why such a dismal success rate? The reasons are as varied and unique as the businesses and business owners themselves. Nevertheless, many of the failed transfers can be traced to three causes: people, taxes and cash.

People Planning

The family element in every family business can mean the difference between its success or failure during the transfer process. Common triggering events include the retirement, disability or death of the business owner. Tough questions must be asked and answered. Otherwise, a business that took you decades to build can be destroyed overnight.

For example, who will run the business after you? Will it be your spouse, one of your children or a non-family member key employee? What arrangements have you made for the inheritance of your businessinactive children? Have you in-law proofed your estate? Thinking ahead to the secondgeneration transfer of your business, what provisions have you made to encourage thrift and industry among your grandchildren?

Tax Truths

Will the federal estate tax be repealed or significantly reformed in the future? Perhaps. While the future of the federal estate tax is uncertain at best, many states are imposing or may impose their own estate taxes to make up revenue shortfalls, independent of any federal estate taxes.

Careful monitoring of the economic, political and legal climate is required. Why? Without proper planning, you family may have to sell you family business to meet and estate tax cash call. Will there be enough money to fuel the survival of your family business?

Money Matters

Will there be enough money to fuel the survival of your family business? Unless you coordinate your financial plan with your Life & Estate Plan, there may not be enough cash to fund your ultimate objectives. For instance, an appropriately funded plan could provide financial security for your spouse, ensure that your preferred successor takes over the business, equalize the eventual inheritance among your children and protect their inheritance from future problems (e.g., divorces, lawsuits and bankruptcies). Life insurance is typically used to fund such money matters when owned in the proper amount, type and manner.

Buy-Sell Agreements

A Buy-Sell Agreement (BSA) is one fundamental key to the survival of a family business. A BSA is a lifetime contract providing for the transfer of a business interest upon the occurrence of one or more triggering events as defined in the contract itself.

For example, common triggering events include the retirement, disability or death of the business owner. An interest in any form of business entity can be transferred under a BSA, to include a corporation, a partnership or a limited liability company. Also, a BSA is effective whether the business has one owner or multiple owners. As a contract, a BSA is binding on third parties such as the estate representatives and heirs of the business owner. This feature can be invaluable when the business owner wants to ensure a smooth transition of complete control and ownership to the party that will keep the business going. Subject to certain Family Attribution Rules under Internal Revenue Code §318, a BSA can help establish a value for a business that is binding on the IRS for federal estate tax purposes as provided under Internal Revenue Code § 2703.

Three Flavors

A BSA is commonly structured in one of three general formats: An Entity BSA, a Cross-Purchase BSA, and a Wait-And-See BSA. Under an Entity BSA, the business entity itself agrees to purchase the interest of a business owner. Conversely, under a Cross-Purchase BSA, the business owners agree to purchase one another’s interests. The Wait-And-See BSA gives the entity a first option to purchase the interest before the remaining business owner(s). In addition to these three general formats, a One-Way BSA may be used when there is one business owner and the purchaser is a third party. The selection of the appropriate BSA format is critical for a variety of tax and non-tax reasons beyond the scope of this discussion. However, no BSA is complete without a proper funding plan. Like a beautiful automobile without fuel in the tank, a BSA without cash to fund the purchase is going nowhere.

Funding Options

Some common options to fund the purchase obligation under a BSA include the use of personal funds, creating a sinking fund in the business itself, borrowing funds, installment payments and insurance. Of these options, only the insured option can guarantee complete financing of the purchase from the beginning. Accordingly, a proper BSA will include both disability buy-out insurance and life insurance. Since the health of the business owner determines their insurability, any delay in acquiring appropriate coverage could be fatal to the success of the BSA and with it the survival of the business.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material. Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.] © Integrity Marketing Solutions.

Seniors Should Review Their Will

Published by LYNNE BUTLER, Globe and Mail Update

People in their 60s and 70s shift the focus of their estate planning away from accumulation of wealth for the first time. They now focus on strategic use and preservation of assets. Until this point, most planning has been for the future. In this stage of life, the future has arrived.

Most people will retire or semi-retire during this phase of life, happily pursuing those golf games and Aegean cruises that were postponed in the name of work. It’s the time when the initial plans made during your earlier years begin to bear fruit.

It’s not that adults are no longer saving money at this age; it’s more that income sources change. At age 65, you’ll begin to collect Old Age Security and Pension Plan benefits. Private pensions also kick in. By the end of the year you turn 71, your RRSP must be converted to a RRIF, which will provide income whether you want it or not. It’s important to continue working with a financial planner to maximize these sources, minimize taxes and understand what will be available for retirement and to leave in your will.

Incapacity

The second major focus during this phase of life must be planning for incapacity. Of course nobody wants to think about it, but seniors will notice the uptick in the number of serious health issues happening among their contemporaries. Most people will already have health care directives in place and should take them out, dust them off and update them if necessary. This is the time to put serious thought into how one spouse will fare if the other loses mental capacity.

Health and money intersect, of course, and couples should consider the potential cost of health care that may or may not be needed in years to come. Have you thought about the cost of your spouse continuing to live in the family home if you must live in a long-term care facility due to incapacity?

Powers of attorney

In enduring powers of attorney and health care directives, you will name the person or people you want to put in charge of your decision making in the event you cannot manage it yourself. By the time adults are in their 60s and 70s, they generally want to rethink the previous appointment of friends and siblings and appoint their children instead.

The choice of representative is crucial. Financial abuse of seniors is rampant. Sadly, much of the suffering could have been avoided by a more thoughtful and critical choice of attorney under a power of attorney.

Widowhood

During the later years of this phase of life, some Canadians will be widowed. This carries its own set of emotional and financial challenges. The death of a spouse should bring about a complete review of the survivor’s plans.

A majority of widows and widowers find it worthwhile to simplify their assets at this point. For example, a cottage that you’re not going to use much now that you’re a single rather than part of a couple might be sold. The large family home may prove to be too much of a handful for you alone, and you may wish to downsize to a condominium, apartment or smaller house. Joint investments and bank accounts are now solely owned.

Handing down assets

These are worthwhile steps to take as they can smooth potential estate problems. But as always, there are pitfalls. The process of simplification can end up creating as many problems as it solves if it is taken too far. A common homemade estate-planning strategy is to put assets into joint names with the children, which can make even the toughest estate lawyer or accountant wince.

The idea is to avoid probate fees and possibly “simplify” by avoiding the probate process altogether, but the cost is frequently disputes among the children, and in many cases, lawsuits to determine the true owner of the joint asset.

While it’s not always advisable to transfer assets to the kids without advice, it is definitely a good idea to open conversations with your children about estate planning. Let them know who you have named as your executor, your attorney and your health care representative. Tell them where your documents are kept. Find out their thoughts on the family cabin.

And send them a postcard from Greece.

Lynne Butler has worked in estate planning and law for more than 20 years and is the author of several books about estate planning, published by Self-Counsel Press.

Seniors in Clearwater, Palm Harbor, Oldsmar, Seminole and the Tampa area can count on the Coleman Law firm to help them with their wills and other financial planning issues. For more information, see our web site www.colemanlaw.com