Florida Estate Planning, Probate and Asset Protection

The Importance of Recurrent Estate Plan Updates

[An estate case resulting in a dreaded family feud] underscores why clients should review their estate plans annually because tax laws change. Failing to do this might land families in court and entangle inheritances in litigation.

It is apparent that 2012 is a unique year for planning with the current estate tax and gifting laws. But as the years go by and laws change, are you paying attention to your estate plans and how they could be affected?  Such was the case back in 2010 when there was no estate tax, a very unique situation that some did not plan for.

It just goes to show that changing laws matter, and that your estate plans must change accordingly.

For fresh evidence of the necessity for annual visitation of the estate plan, and for the oddities of 2010, Financial Planner magazine recently published an article titled “Family Feud: Review Estate Plans Annually.” It’s the case of the family behind Magnolia Audio Visual, and the couple that sold its retail rights to Best Buy and accumulated a cool $100 million estate in the process. Unfortunately, the parents weren’t as savvy with their estate planning.

The estate plan provided that the maximum amount allowable under the federal estate tax threshold would be passed down to the children, with the rest to pass to the surviving spouse to thereby avoid immediate estate taxation. Unfortunately, the plan didn’t account for the fact that 2010 didn’t have an estate tax (thanks to expiring Bush-era laws and a gridlocked Congress).

The wife died. When the husband nevertheless claimed the estate that was to pass to the children under the estate tax planning, the children were noticeably irked. It seems they had been passed over and were in danger of losing a fortune afforded under the once-in-a-lifetime and quite unintended tax loophole. Accordingly, the children filed suit against their father on the grounds of “non-compliance, forgery and the use of undue influence.”

This case serves as a lesson to all that we should frequently update our estate plans to ensure our wishes are carried through to our loved ones.

Reference: Financial Planning (September 1, 2012) “Family Feud: Review Estate Plans Annually”

Planning for an IRA Inheritance

If you needed a reminder of just how byzantine the rules are that govern inherited IRAs—and the importance of preparing your family for receiving such an account—the IRS just handed you one.

Parents who have substantial assets in an IRA should plan ahead for how their children may inherit those assets. The laws governing IRA assets, their transfers, taxation and inheritance, are complex. A single mis-step can be unnecessarily costly. A recent article in the Wall Street Journal outlines some of the specific perils, and offers a few salient tips. Above all, this is one aspect of financial and estate planning that truly requires professional advice. A good place to start learning more is in the Journal’s article, “Pitfalls of Inherited IRAs.”

Reference: The Wall Street Journal (December 10, 2011) “Pitfalls of Inherited IRAs”

 

ESTATE PLANNING / ESTATE TAXES

 From Forbes.com (Feb 4, 2011) “Estate Tax Lessons From George Steinbrenner, Gary Coleman And More”

" Big changes on the estate tax front this year call for smart planning. Celebrities provide motivation."

The New Year is well underway, and we’re three months into a new estate tax law as well. Now is a good time to review your estate plan, and Forbes.com provides some “motivation” for proper legal planning by recounting tips we could all learn from last year’s highly-publicized celebrity estates.

Tip # 1 – Familiarize Yourself with 2011 Estate Tax Laws. George Steinbrenner, as you may recall, timed his death well by passing away in 2010 when there was no estate tax. Of course, while his estate was highly publicized, other wealthy people died last year, too – and now their heirs can elect whether to use the 2010 or the 2011 laws, picking whichever regime is most advantageous.

What are the 2011 estate tax laws? In a nutshell, the federal estate tax is back, at a maximum rate of 35 percent, with a $5 million exemption for individuals and a $10 million exemption for married couples. The gift tax and generation skipping tax are both set at the same $5 million level. Additionally, the annual gift exclusion remains $13,000 per individual per year.

The catch? These new laws are just temporary, in effect only through 2012. So don’t become complacent. You’ll want to stay tuned to see what develops, and what happens next. Sort of like a daytime drama, eh?

One good way to stay on top of the law is to subscribe to this blog and visit our website to subscribe to our monthly e-newsletter. We will post news as it develops.

Tip #2 – Review and Update Your Estate Planning Documents. As you may recall, Gary Coleman broke this critical rule. He created a handwritten codicil to his will leaving much of his estate to his then-wife. They later divorced, however, and Coleman never updated his will or created a new one. This led to a court fight that could have easily been avoided had Coleman updated or made a new will, making his wishes clearly known. Your wills, trusts, powers of attorney and other documents (including health care directives) should be reviewed and updated every few years – or whenever you experience significant life events like a marriage, divorce, move to another state, birth of a child or grandchild, etc.

Learn more about the estate plan review process on our website www.kaneandkoltun.com.

Tip # 3 – Beware of Financial Exploitation. Forbes notes the circumstances surrounding Anna Nicole Smith and her protracted legal siege as an example of what not to do. 2010 marked the fifteenth year of fighting, and the Supreme Court’s ruling that it will hear her case once more, of whether or not her late 90-year-old husband left his estate to her. Some allege the young model was financially exploiting her (wealthy) elderly husband.

This year the first of the baby boomers will turn 65, along with approximately 2.5 million of their peers. Exploitation of those 65 and older is a growing epidemic: a study by Met Life found that seniors are exploited in the amount of $2.6 billion annually. This figure is only expected to grow as the baby boomers hit retirement age.

Good estate planning is one of the first lines of defense against financial exploitation. With solid legal documents spelling out your wishes regarding your estate, your personal and health care decisions, and proper planning for long-term care, you will be better protected than most. Which means you will not be an “easy target.”

Learn more about fundamental estate planning on our website.

 

ELDER LAW / RETIREMENT PLANNING

   From Smart Money (Jan 20, 2011) “How To Test-Drive A Retirement Plan”

 If you have had to push-back your retirement plans and continue working, you are in good company. As many as 60 percent of eligible workers say they are postponing retirement. According to a recent article in SmartMoney, that may actually be a good thing. Take this additional time to finalize your retirement planning, and maybe even put your plans through a “test-drive.”

“The idea might sound strange. There doesn’t seem to be much need to “practice” retiring. (After all, what’s so hard about not working?) In truth, though, retirement will probably be a sizable shock to your wallet and lifestyle As such, if you can test your planned budget and daily routines before walking away from a first or primary career, later life should be that much more enjoyable,” writes Glenn Ruffenach.

This is an idea that just might catch on. Are you really ready for the slower pace of retirement? Try carving out a sabbatical for yourself. Combine at least two or three weeks of vacation, but don’t actually travel. Instead, trying following your anticipated “retirement schedule.” Are you bored after just two or three weeks of a trial run? Or, does your “retirement schedule” just need a little tweaking?

You also may want to test-drive your retirement finances. If you haven’t already, write up a retirement budget. Now, try to live on that budget for four to six months. If you find yourself burning through your money at a faster rate than you anticipated, then you need to revisit your retirement budget.

The point is, we test-drive a lot of things in our lives before we commit – cars, ideas, running shoes, even relationships. Retirement is often a no-turning-back proposition, at least in regard to your primary career. If you find you must postpone your plans, it just makes sense to use this extra time to assess – and if necessary, tweak – your plans to ensure you fully enjoy your golden years when you do finally get there!

 

 

 

CHARITABLE GIVING / RETIREMENT PLANNING

From The Wall Street Journal Online (12/18/2010) “IRA Donors Catch A Break”

 

Recognizing that their own foot-dragging imperiled many IRA donations
this year, lawmakers included a special rule allowing IRA gifts made
in January 2011 to count for 2

 

            Good news for donors looking to give from their IRAs: as a recent Wall Street Journal article pointed out, the mammoth tax bill just passed by Congress resurrects an expired provision allowing special charitable donations of IRA assets for taxpayers age 70½ and older. Additionally, since lawmakers allowed this benefit to expire in 2010, they included a special rule that allows you to make an IRA gift this month (January 2011) and count it for last year (2010).

            Just as a refresher, if you are 70½ or older, you are eligible to use your individual retirement account (IRA) assets to make special charitable donations. In fact, you can contribute a total of $100,000 in IRA assets to one or more qualified charities, such as schools, churches, and public organizations -- but not non-public or donor-advised funds and foundations.

            The provision itself is simple, and the payout can satisfy your required minimum distribution. You don’t get a deduction, but neither do you have to report the payouts as income. Your donation bypasses tax calculations altogether.

            One caveat: while IRA donations are easy, they may not be the most tax-efficient way for you to support your charitable causes. Since there is no deduction to take, a gift of appreciated assets now and a bequest of IRA assets at death could be the more tax-savvy approach. Be sure to consult qualified counsel, as each situation is different.

            Visit our Charitable Planning Practice Center to learn more about tax-savvy giving strategies.

 

CHARITABLE GIVING / RETIREMENT PLANNING

From The Wall Street Journal Online (12/18/2010) “IRA Donors Catch A Break”

 

"Recognizing that their own foot-dragging imperiled many IRA donations
this year, lawmakers included a special rule allowing IRA gifts made
in January 2011 to count for 2010."

 

 

            Good news for donors looking to give from their IRAs: as a recent Wall Street Journal article pointed out, the mammoth tax bill just passed by Congress resurrects an expired provision allowing special charitable donations of IRA assets for taxpayers age 70½ and older. Additionally, since lawmakers allowed this benefit to expire in 2010, they included a special rule that allows you to make an IRA gift this month (January 2011) and count it for last year (2010).

            Just as a refresher, if you are 70½ or older, you are eligible to use your individual retirement account (IRA) assets to make special charitable donations. In fact, you can contribute a total of $100,000 in IRA assets to one or more qualified charities, such as schools, churches, and public organizations -- but not non-public or donor-advised funds and foundations.

            The provision itself is simple, and the payout can satisfy your required minimum distribution. You don’t get a deduction, but neither do you have to report the payouts as income. Your donation bypasses tax calculations altogether.

            One caveat: while IRA donations are easy, they may not be the most tax-efficient way for you to support your charitable causes. Since there is no deduction to take, a gift of appreciated assets now and a bequest of IRA assets at death could be the more tax-savvy approach. Be sure to consult qualified counsel, as each situation is different.

            Visit our Charitable Planning Practice Center to learn more about tax-savvy giving strategies.

 

 

ESTATE PLANNING / TALKING ABOUT MONEY

 

From: The New York Times, “Talking With Depression-Era Parents About Money” (November 9, 2010)

                Talking about money with family members is never easy. What’s even harder is if you are the child trying to talk about money with your parent(s), and harder still if you are an adult trying to talk about money with your Depression-era parents. People who have lived through the Depression tend to have different thoughts about money and often regard it as private -- even within the family. They learned a silence about money that was meant to stop or hide worries, but now could actually create more of them. The New York Times recently offered a few suggestions on how to talk about money and estate planning with Depression-era parents:

• Parental Duty: Sometimes framing the conversation in terms of how you are worried for them will trigger “the silence.” Instead, try to remind them that you are concerned whether they have done the right thing in terms of handling their estates. This type of conversation may trigger a sense of “parental duty,” which people from this era generally take very seriously.
  
  
• Use Yourself as an Example: You can begin talking about your own concerns, strategies, and plans and even ask for advice. Use that as an opportunity to ask your parents about how they may have handled their own plans.
  
  
•  Professional Assistance: Some parents may also feel more comfortable discussing their financial situation in front of a disinterested party, like a longtime accountant, lawyer or financial planner. The trouble here is that many parents will be wary of the cost of professional assistance, but if you offer to help with the cost, or cover it entirely, they may be more willing to schedule an appointment.

 

The final advice is to use good timing. Thanksgiving dinner probably is best left for enjoying everyone’s company, swapping stories, perhaps watching football, and eating too much pie. However, if you’re looking for a way to bring up the topic, you might consider sharing a recent issue of our e-newsletter, like the October issue that focuses on Family Matters. Trying using the built-in “share” features and send your folks an email!