Sunday, March 25, 2012 Beware of "Simple" Estate Plans
“I just need a simple will.” It’s a phrase estate planning attorneys hear practically every other day. From the client’s perspective, there’s no reason to do anything complicated, especially if it might lead to higher legal fees. Unfortunately, what may appear to be a “simple” estate is all too often rife with complications that, if not addressed during the planning process, can create a nightmare for you and your heirs at some point in the future. Such complications may include:
Probate - Probate is the court process whereby property is transferred after death to individuals named in a will or specified by law if there is no will. Probate can be expensive, public and time consuming. A revocable living trust is a great alternative that allows your estate to be managed more efficiently, at a lower cost and with more privacy than probating a will.
Minor Children - If you have minor children, you not only need to nominate a guardian, but you also need to set up a trust to hold property for those children. If both parents pass away, and the child does not have a trust, the child’s inheritance could be held by the court until he or she turns 18, at which time the entire inheritance may be given to the child. By setting up a trust, which doesn’t have to come into existence until you pass away, you are ensuring that any money left to your child can be used for educational and living expenses and can be administered by someone you trust.
Second Marriages - Couples in which one or both of the spouses have children from a prior relationship should carefully consider whether a “simple” will is adequate.
Taxes - Although in 2012, federal estate taxes only apply to estates over $5 million for individuals and $10 million for couples, that doesn’t mean that anyone with an estate under that amount should forget about tax planning.
Incapacity Planning – Estate planning is not only about death planning. What happens if you become disabled? You need to have proper documents to enable someone you trust to manage your affairs if you become incapacitated. Effective Oct. 1, 2011, there is an entirely new statute governing Durable Powers of Attorney.
By failing to properly address potential obstacles, over the long term, a “simple” will can turn out to be incredibly costly. An experienced estate planning attorney can provide valuable insight and offer effective mechanisms to ensure your wishes are carried out in the most efficient manner possible while providing protection and comfort for you and your loved ones for years to come.
Saturday, October 29, 2011 Top 10 Life Insurance Mistakes
Top 10 Life Insurance Mistakes
Here is a list of the top ten mistakes people make with regard to their life insurance policies:
1. The Insured’s Estate Has Been Named Beneficiary. This would require a probate proceeding, when one of the goals of life insurance is to avoid the hassle of probate. With named beneficiaries (i.e., not the estate of the insured), the life insurance proceeds pass outside probate.
2. The Policy Has No Named Contingent Beneficiaries. If the primary beneficiary predeceases the insured, the next default beneficiary is usually the estate – and that means probate is necessary.
3. Minors Or Other Impaired Persons Have Been Named Beneficiaries. If young children are in line for life insurance money, it usually means a court has to supervise the process and administration of the funds. That can be avoided with proper planning. If someone is receiving Social Security Supplemental Income benefits (SSI), the benefits will cease if life insurance proceeds are payable directly to him or her. Proper planning can avoid such an unfortunate result.
4. The Beneficiary Language Is Wrong Or Unclear. Estate planning attorneys run into circumstances all the time where the beneficiary designation does not match the insured’s intentions.
5. Family Needs Are Not Adequately Addressed. It used to be that a million dollar insurance policy felt like it was enough to take care of family needs in the event of the breadwinner’s death. For many, that is not nearly enough anymore.
6. The Wrong Ownership Was Chosen For The Problem To Be Solved. Most people choose to own their life insurance policies personally. That can be a mistake in certain business situations, or where there are family estate tax issues.
7. The Ownership Chosen Creates An Income Tax Problem. Sometimes having a policy owned by a third party can create an unintended income tax problem.
8. Section 101(J) Requirements Have Been Neglected For A Business Policy. In 2006, Congress created new rules for business-related life policies. Careful guidance is needed to be sure business policies are structured properly.
9. Buy-Sell Funding Policies Have Not Been Properly Reviewed. Business owners sometimes use life insurance to help make sure the business will continue after an owner’s death. Even where a plan has been put in place, failure to update it can have disastrous consequences for the owners and their families.
10. Policies Have Not Been Reviewed After Divorce (Or Other Life Event). People sometimes forget to remove an ex-spouse as beneficiary under a life insurance policy. They also sometimes forget that their divorce papers require them to use existing life insurance policies in certain ways.
If you have not done so recently, we strongly recommend that you review your existing life insurance policies with your insurance representative, and/or call our office at (813) 265-0004 and we will be happy to set up an appointment to review your policies for one or more of these mistakes.
Sunday, October 02, 2011 New Florida Power of Attorney Law
Effective October 1st, 2011, there is a new Power of Attorney statute in Florida. There are significant and important changes. The “durable family power of attorney” is a vital part of your estate planning arsenal, so be sure you consult with an attorney who is aware of these changes in the law. The new law is summarized below.
The new law conforms Florida’s power of attorney law under Chapter 709, Florida Statutes, to the Uniform Power of Attorney Act adopted by the National Conference of Commissioners on Uniform State Laws, with some modifications to achieve greater consistency among state laws.
The revised power of attorney law applies only to powers of attorney created by an individual. Powers of attorney validly executed under Florida law before October 1, 2011 will remain valid. If the power of attorney is durable (a power of attorney that is not terminated by the principal’s incapacity) or springing (a power of attorney that does not take effect until the principal loses capacity), it will remain durable or springing under the new law. To be effective in Florida, powers created on or after October 1, 2011 must be exercisable as of the time they are executed. The meaning and effectiveness of a power of attorney are governed by ch. 709, part II, F.S. A power of attorney executed in another state that does not comply with the execution requirement of this part (ch. 709, part II, F.S.) is valid in Florida only if the execution of the power of attorney complied with the law of the state of execution.
Powers of attorney that are executed after October 1, 2011 may not create springing powers, with an exception for military powers. Qualified agents as defined in the bill are entitled to reasonable compensation. The revised power of attorney law provides requirements for written notice with special notice for financial institutions, and special rules for banking and investment transactions; provides default duties for the agent; creates co-agents and successor agents; prohibits blanket or default powers granted to an agent; prescribes requirements for the rejection by a third person of a power of attorney; prescribes requirements for an agent’s liability under a power of attorney; and provides grounds for judicial relief and dealing with conflicts of interest.
Let us know if we can help with your estate plan or planning for your parent(s) or loved one.
Monday, September 26, 2011 Know Your Rights About Medical Records
Did you know that you have the right to a copy of all of your medical records? Read about it here.
Friday, August 06, 2010 Update on the Estate Tax
What’s going on with Federal Taxes? Here’s a recent article that will get you up to speed, with all the political angles included!
Tuesday, August 03, 2010 Florida Statute Helps with Estate Plans in 2010
On May 27, 2010, Governor Charlie Christ signed new Florida Statute 733.1051 into law, which, among other “fixes” to the estate planning laws in Florida, addresses a potential problem in the estate plans of Floridians created by the fact that there is no federal estate tax in effect in 2010. The law is retroactive back to January 1, 2010, and provides a judicial option for the beneficiaries of Floridians’ estates who die in 2010 and have an estate plan that relies on federal estate tax laws to fund AB Trusts or other types of estate plans. Under the new law, the beneficiaries may seek a judicial modification of the estate plan for the deceased Florida resident. The law does not apply to estate plans that clearly anticipate no federal estate tax in 2010, and will become null and void at the earlier of such time in 2010 as the federal estate tax is reinstated or January 1, 2011.
Monday, December 14, 2009 2009 Year End Planning
As we cruise through yet another year, there is still a window of time prior to December 31st to make some planning moves to improve your position going into 2010. Of course, it all depends on your particular situation, but here are some possible moves to make:
1. Purchase a car. State and local excise taxes that are paid for the purchase of a vehicle are potentially tax deductible. If you itemize your tax return, you may have the ability to include these taxes as additional deductions. In addition, there are significant tax credits available for energy efficient vehicles purchased before year end.
2. Energy credit for energy conservation. Purchasing insulation for your home that may not only save you money on your heating and air conditioning bills, but will also provide you with an energy-related tax credit. Keep in mind these are credits, not deductions. This means that the credit is a direct amount of money that will be returned to you in the form of an increased refund or lower tax bill.
3. Check gains and losses. You may wish to offset your gains with losses to the extent that you have any gains in 2009. If not, you may wish to sell assets before year end and take the tax loss, which may be utilized up to any gains, and if there are no gains, then up to $3,000.00 from other income for the year, with a carry-forward of the balance. Keep in mind that assets included in retirement plans are normally not tax deductible, so gains or losses are going to be taken on non-retirement plan assets.
4. Charitable deductions. Consider donating property, goods, and other assets, such as cash donations, stocks, bonds, etc. before year end. You may also consider making a 2010 donation in 2009, thus taking advantage of the deduction a year early. Payment of pledges for future obligations may also be made before year end, and these may also be charged to your credit card. By charging them in 2009, they become charitable deductions in this year even though you may not pay the charge card in the same year.
5. IRA Withdrawals. In 2009, it is not necessary to take a minimum required distribution from a retirement plan, thus allowing you to delay taxable withdrawals until the following year. The intent of this law was to allow your fund to accumulate more money for retirement, based on the downswing in the market. However, if you need the money, and if you have other obligations you wish to make, such as gifts or bills paying, consider reviewing the amount of taxable income anticipated for the year and take out only as much as necessary to maintain a low bracket for tax payments. Always be sure to consider the possibility that social security benefits will be taxable if the threshold for income is received based on your marital status.
6. Consider the child care credit or one for dependent care. In many cases, children may be supporting their parents, and they may need to sign a multiple support agreement, whereby the credit for the parent is rotated on an annual basis between multiple children. The credit is eligible for child care expenses as well as the expenses of caring for a disabled spouse or disabled adult who is dependent while you work or look for work.
While there are many other opportunities, these are a few that you can consider before the holidays occur, so there is ample time to attend to any payments, expenditures, or tax issues before December 31.
Sunday, December 06, 2009 House Takes Action on Estate Tax
In an action which addresses some of the unease and speculation about the federal estate tax, on Friday, December 4, 2009, the U.S. House of Representatives voted to extend the current 2009 law indefinitely. This prevents the estate tax from being repealed in 2010. The new law means that in 2010 and beyond there will continue to be a $3,500,000 exemption for each individual from the federal estate tax, with a rate of up to 45%. The Senate has not yet acted on the matter, but is expected to before the end of the year. Estate planners keep a sharp eye on these events, since they make a difference in how to craft effective plans for clients. Click here for a helpful Wall Street Journal article on the House bill.
Monday, November 24, 2008 The Basics of Transfer Taxes
1. What are the federal transfer taxes?
There are three federal transfer taxes – the gift tax, the estate tax, and the generation-skipping transfer (GST) tax. Each of these impose a tax on wealth transfers made during life or at death. The goal of the estate planning attorney is to avoid or minimize these taxes by taking advantage of exemptions, exclusions and deductions as part of an overall wealth transfer plan.
2. Are there any state transfer taxes?
Yes, many states have wealth transfer taxes, which can apply in addition to the federal transfer taxes. Florida does not have a wealth transfer tax, but even if you are a Florida resident, you may have state transfer taxes if you own property in a state other than Florida.
3. In terms of my net worth, at what point should I be concerned about planning to avoid transfer taxes?
If your taxable estate is less than the estate tax exemption at the time of your death, no federal estate tax will be due. Conversely, if your taxable estate exceeds the exemption available to you, estate tax will be due based upon the value of your taxable estate that exceeds the available exemption.
Sunday, November 23, 2008 Estate Planning and the Enhanced Life Estate Deed
One of my clients is an elderly divorcee. She recently contacted me with several concerns about her estate. Her primary concern was that she wanted to keep her home out of probate when she passes away. Like most people, she doesn’t like the idea of her property being tied up in legal limbo for months before her beneficiaries (in this case, her three sons) take possession of the home. She was advised by another attorney to set up a trust, put her home (her only asset of real monetary value) into the trust and then manage the trust until she passes away. She brought the matter to me as she does with all of her legal concerns. I advised her that a simpler way for her to handle the matter might be to execute an “Enhanced Life Estate Deed” also known as the “Lady Bird Deed” (named in honor of former First Lady, Ladybird Johnson) or a “Transfer on Death Deed.”
What is an Enhanced Life Estate Deed?
An Enhanced Life Estate Deed is a document that would deed my client’s home to her children but reserve for my client a life estate coupled with the ability to sell the property at any time. This is called an “Enhanced Life Estate.” In layman’s terms, this means that (1) my client still owns the property; (2) my client can sell the property at any time without notifying her beneficiaries; and (3) if my client never sells the property, the house will pass directly to her beneficiaries after she passes away without going through probate.
Florida, Texas, Ohio, California, Kansas and several other states now accept this form of conveyance. In these states it is a recommended alternative to the traditional life estate deed. Of course, where a life estate can result in unwanted capital gains taxation, it should not be used, and other forms of planning should be considered (such as a living trust).
Lady Bird Deed v. Quitclaim Deed
In the past, people have used a Quitclaim Deed in an attempt to avoid probate. The Quitclaim Deed was supposed to make things easier for beneficiaries. A Quitclaim Deed deeds property to one’s children while the parent retains a life estate interest. The problem with the Quitclaim Deed is that my client would not be able to sell or encumber (e.g., mortgage) her property without the consent of her beneficiaries.
Further, creditors of my client’s beneficiaries could obtain an enforceable lien against her home because the beneficiaries could not claim the home as homestead property. Also, spouses of my client’s beneficiaries could claim an interest in the property, either upon their husband’s death or in the event of a divorce.
The Enhanced Life Estate Deed does not share the above pitfalls. For more information about the difference between the Enhanced Life Estate Deed, Warranty Deed and Quitclaim Deed, please contact our office at 813-265-004, and ask for Jeff Aman.
Other Benefits to a Lady Bird Deed
The Enhanced Life Estate Deed has several other benefits including:
(1) bypassing probate;
(2) it does not result in capital gains for the beneficiaries because they will not receive any value until my client passes away. When she passes away, her beneficiaries take the home at a “stepped-up basis” – not my client’s original basis. A “stepped-up” basis is the value of the property on the day of my client’s death;
(3) it does not open up the property to the beneficiaries’ creditors during my client’s lifetime because the beneficiaries have no interest until my client has passed away without selling the home;
(4) it allows my client to sell her home at any time, compared to a regular life estate where she would not be legally entitled to sell her home.
Language Creating the Deed
Attorney’s Title Insurance Fund has recognized certain specific language that must be included to validate an Enhanced Life Estate Deed. Without the specific language the deed will be declared invalid for transferring the real estate in the manner outlined above. We charge our clients $350.00 to meet with you, prepare and record the deed.
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