Family limited partnerships are a popular estate planning tool because they allow a donor to make annual gifts of fractional partnership interests up to the limit of the annual gift tax exemption. Gifting fractional interests provides a convenient way to retain family ownership of assets, such as real estate, that cannot easily be divided otherwise.
]]> A family limited partnership can also provide a mechanism for reducing gift tax liabilities because the value of the interests may be discounted based on the recipient's limited rights to the use and control of partnership assets.One of the challenges with using a family limited partnership to make discounted gifts is that the IRS may value gifted interests at a higher rate than that assessed by the donor. A higher valuation may result in unanticipated gift taxes that cut into assets the donor wishes to retain for living expenses.
The recent tax court decision provides a mechanism for hedging against valuation disparities. The court upheld a family limited partnership agreement that based the percentage of interests conferred upon the future determination of value by an independent auditor. The agreement set a limit upon the dollar value of the interests granted and provided that percentage interests in excess of the dollar value would revert to the donor's estate. The reversion of interests to the estate reduced the donor's gift tax liability.
Achieving the gift tax benefits of a family limited partnership requires a carefully drafted partnership agreement, and the terms of the agreement must be supported by some consideration other than the goal of reducing tax liabilities.
Source: Forbes, "Beating The Possible Estate Tax Increase Without Wwitching To Cat Food -- The Midmill Dilemma," Peter J. Reilly, May 2, 2012
]]>Relying on her appointment under a durable power of attorney, the daughter sought authority over two accounts established for the benefit of the companion. Even as the daughter argued that granting her control over the accounts would reflect her father's wishes as expressed to his attorney, a lawyer representing the companion argued otherwise. It was claimed that distributing assets to the companion would best fulfill the father's intentions.
]]> The probate court sided with the companion and ordered the daughter, as executor of her father's estate, to pay $1.8 million in attorney fees and other costs related to the lawsuit.The competing arguments in the dispute suggest that the father, whose estate is estimated at $86 million, may have failed to update his estate plan when he designated assets to provide for his companion. The probate court was forced to rely on letters and outside testimony in reaching its conclusion.
The case of the Gainesville millionaire illustrates the importance of clearly setting forth one's testamentary wishes, especially with respect to relationships formed later in life. In the absence of a clear directive, leaving large gifts to loved ones who are not family members may lead to probate disputes that frustrate plans and deplete estate assets. Floridians involved in situations that call a testator's intent into question will want to be aware of all the legal options for achieving a fair outcome that preserves the wishes of a loved one.
Source: The Gainesville Sun, "Appeals court affirms decision against Butler's daughter," Lise Fisher, April 26, 2012
]]>Business owners in West Palm Beach may want to consider trusts for smooth succession and estate planning benefits. A well designed trust can offer tax breaks for beneficiaries and provide the grantor with a measure of certainty as to future ownership and management of a family-owned business.
Certain types of trusts allow the grantor to retain management authority and income entitlement while passing to beneficiaries the legal property interest in business assets. An effective trust instrument can reduce the impact on the grantor's gift tax exemption while lessening beneficiaries' tax burden.
]]> A business succession trust can at once be advantageous to a group of beneficiaries while also placing limits on their ability to influence the future operations of the company. The trust instrument can designate a particular successor to control a business. Such a trust can also limit the voting and management rights of other beneficiaries.Other advantages to a business trust include protections against creditors and the fractionation of interests in the event of divorce or business dissolution.
In order to achieve the grantor's goals, a business succession plan needs to evolve over time as the company grows and family relations change. Business owners should start planning as early as possible to establish a stable platform on which the ultimate succession plan is built.
With at least the foundation of a succession plan in place, Florida residents can take some comfort in knowing that the fruits of their labors will not end up being distributed in an undesirable fashion.
In combination with structured entities, such as family limited partnerships or limited liability companies, trusts can serve as highly effective tools for preserving business assets and providing for family members and loved ones. Florida business owners would do well to consider options for guiding business succession as an essential component of their estate plans.
Souce: North Bay Business Journal, "Trusts enhance options in business succession plan," Eric Gneckow, April 16, 2012
The use of trusts to provide for pet care is becoming increasingly popular. A trust can spell out how much of the trust principal should be used for basic care needs and authorize a trustee to draw extra funds for emergency care and other veterinary procedures. As an added incentive to take good care of a furry friend, a trust can also provide an allowance for the designated caregiver.
]]> Another easy option to provide for a pet's well-being is to designate a caretaker in a will. A gift of cash to the caretaker can be accompanied by a request that the money be used to provide for the pet's needs.One of the most important considerations in estate planning for a pet may be the choice of a caretaker. An all-too-common occurrence when people fail to plan ahead for their pets is that the pet ends up in the hands of an unwilling care provider.
Whether through trusts or wills, estate planning provisions for a pet's care should be reasonable in scope and should make the owner's wishes clear. Designating large sums of money for pet care or failing to make one's intentions clear can sometimes upset family members and lead to probate contests.
Even though Americans are living longer than ever, pets often outlive owners for a variety of reasons. Thoughtful estate planning can afford peace of mind in the knowledge that a beloved pet will be left in the care of someone with resources available to provide for the pet's ongoing needs.
Source: Forbes, "What will happen to Fido when you die?" April 17, 2012
]]>While two states are working on legislation that would authorize third-party access to accounts like Facebook and Twitter during estate administration, so far only Oklahoma has such a law on the books. The lack of any statutory law about access to a decedent's online accounts means that Florida estate administrators may have to turn to the probate court for an order authorizing account access and management.
]]> In some cases, an estate administrator may need access in order to cancel online accounts, but in other cases the administrator may have reasons to keep an account active. For instance, in Oregon, the mother of a man who died in a motorcycle accident petitioned the court for an order to keep his Facebook page active as a way to remember her son's life and relationships.State laws authorizing access to online accounts have the potential to both complicate and simplify matters for families and estate administrators when a person dies without a will or estate plan. But advance planning for the management of online accounts can no doubt help ease the burden on loved ones.
Questions remain about how issues will be resolved when state laws or estate planning instruments clash with terms of service associated with different Internet accounts. Nonetheless, including online accounts in a comprehensive estate plan is worth considering in an increasingly Internet-connected world.
Source: wfit.org, "Who has the rights to our Facebook accounts once we die?" April 3, 2012
]]>An LOI can address nearly any aspect of an estate plan. Maybe you want to include PIN numbers or access codes, online usernames and passwords, even military discharge papers. This last item is especially important for veterans who wish to have their burial and funeral expenses reimbursed. A letter of instruction can also include language that gives the estate administrators chosen in your will special access to certain documents, such adoption or birth certificates.
]]> Of course, a letter of instruction is no substitute for other estate planning documents such as powers of attorney, wills or trusts. Those documents are meant to be legally binding, while a letter of instruction isn't. But an LOI can help highlight your end-of-life wishes and provide supplementary guidance to heirs and beneficiaries.To add that extra degree of clarity, readers in South Florida may want to take the time to draft a letter of instruction. Doing so might help relieve some of the stress loved ones sometimes encounter when they confront estate planning documents while trying to cope with losing a loved one. There are many tools for achieving a solid estate plan, and an LOI is one more of them to help family members see the clear picture of your wishes.
Source: Times Herald-Record, "Bonnie Kraham: Add a letter of instruction to estate plan," Bonnie Kraham, April 8, 2012
]]>With the widow now in jail, members of the man's extended family question whether the widow's children from a prior relationship should enjoy the benefit of the estate's assets. The hotel heir's family members filed a petition in probate court seeking an interpretation of Florida's slayer statute that would prevent the estate administrator from distributing assets to the widow's children.
]]> The slayer statute bars a murderer from profiting off the victim's probate assets, but Florida courts have never before been asked to apply the statute to non-marital children of the alleged murderer.At stake are proceeds, held in trust, from the sale of a large portion of the man's estate, including personal property and a collection of comic book memorabilia valued at around $2 million. The deceased man's will expressly bequeaths a portion of his estate to his widow's daughter and two grandsons. Whether the probate court will uphold the gifts of the will in the event that the widow's trial ends with a murder conviction remains to be seen.
According to the man's family members, they intend to raise the slayer statute in civil court as a bar to inheritance by the widow's children, even if the criminal case clears the widow of murder charges. The outcome of this case could change the landscape of probate litigation in Florida in the future.
Source: The Jewish Daily Forward, "Hotel Heir's Murder Sparks Miami Feud," Mary Jane Fine, March 19, 2012
]]>Although the Delray Beach mortgage scam provides high-visibility evidence of the ease with which seniors can sometime be targeted for fraud, one insurance industry study suggests that family members represent the majority of perpetrators of senior financial abuse.
]]> According to the study, family members are responsible for roughly 60 percent of senior financial abuse cases. Interestingly, sons are responsible for the majority of that percentage. In cases in which there is a risk that a senior may suffer financial exploitation by a family member, establishing a guardianship or conservatorship may help preserve estate assets to provide for the senior's future care and living needs.Signs of elder financial abuse may include the sudden appearance of new friends, isolation by care providers, disappearance of possessions or financial papers, or unusual worry over money matters. Floridians concerned that a senior loved one may be the victim of financial abuse would do well to consider all of the available legal options to determine whether establishing a guardianship or conservatorship may be in the senior's best interest.
Source: Chicago Tribune, "When senior mortgage fraud hits home," Lew Sichelman, March 16, 2012
]]>Today's retirees and soon-to-be retirees face challenges their parents did not have. For previous generations, pension plans and benefits were enough to sustain lifestyles, but with the current low bond yields, flat stock returns and the highest unemployment rates in 30 years, today's older generation has been forced to dip into their retirement income.
]]> According to a study by the National Endowment for Financial Education, 59 percent of parents either have provided or are providing financial support to their adult children who are over the typical school-going age. Surveyed by the Metlife Mature Market, parents across generations said they would help their children if they were suffering from a financial setback. Despite this finding, retirees also demonstrated a strong inclination toward enjoying their retirement.Proper estate planning can help achieve a balance between financial needs during life and after death. Retirement income, college funding, replacement income and the financial needs of heirs all need to be considered when creating a successful plan. To that end, many Florida residents consider life insurance, setting up revocable and irrevocable trusts and taking a close look at business and personal accounts.
Additionally, estate owners can consider offering their children an intra-family loan, which can turn out to be a win-win situation for all involved. The children can pay a fair interest rate every month so that parents have a steady flow of money. However, it would be wise to keep in mind the possibility that the principal may never be repaid.
In these uncertain economic times, one thing is clear: Florida residents who have questions regarding their estate plans will want to consider all of the legal options for protecting assets and ensuring the well-being of future heirs and beneficiaries.
Source: Chicago Tribune, "How to Help Family Members Without Hurting Your Own finances: Family financial demands can pose a challenge in saving for retirement," Rachel Koning Beals, March 12, 2012
]]>The non-profit points to two letters signed by the Florida woman in 2003 and 2010 as evidence of an irrevocable pledge to make the hefty contribution. But the attorney representing the woman's guardian says that the letters are legally unenforceable, and that the elderly woman did not even realize what she signed.
]]> According to the guardian's attorney (not affiliated with this firm), representatives of the non-profit took advantage of the woman's vulnerability by separating her from her personal aide and coercing her into signing the pledge letters. For the non-profit's part, it claims that its intervention will advance the woman's wishes. The non-profit maintains that the guardian's opposition to fulfilling the pledge would only frustrate the woman's philanthropic plans.In many cases, guardianship can serve as a valuable tool for ensuring that an incapacitated person receives needed care and assistance. A guardian typically assumes legal authority to manage the ward's finances and may receive authority to make personal decisions about medical care and other important concerns.
As the case of the Florida philanthropist illustrates, though, guardianship is not always a great substitute for planning ahead. A comprehensive estate plan can help individuals make certain that their assets are not wasted in probate litigation. Floridians who want to include charitable contributions in their legacies will want to look into all of the legal options for obtaining that result.
Source: sunsentinel.com, "Holocaust center pursues woman, 88, for alleged $1 million pledge," Tonya Alanez, Feb. 29, 2012
]]>The probate court appointed a guardian when the mother became incapacitated by Alzheimer's disease. The daughter claims that her mother expressed a desire before the guardian's appointment to live with the daughter in Florida, but attorneys for the guardian say otherwise. According to the attorneys, the daughter's real motivation lies in acquiring access to her mother's multi-million-dollar estate.
]]> Litigation over the mother's guardianship extends back over several years with each of the children battling for control over the estate. Even though the probate court already decided that the daughter would not be an appropriate guardian, the daughter maintains that the court-ordered placement goes against her mother's true desires and that other family members are misappropriating estate assets.Guardianship can provide a valuable tool for taking care of a family member who is incapacitated, but this lengthy and complex dispute illustrates the importance of preparing a comprehensive estate plan early in life.
A comprehensive estate plan setting forth the mother's wishes and directions for the administration of her estate might have helped this family avoid divisive litigation that continues to drain estate assets that could otherwise be used to provide for the mother's care.
Source: Milford Mirror.com, "Woman gets accelerated rehabilitation for taking mom to Florida," Jill K. Dion, Feb. 28, 2012
]]>The elderly man's wife had previously been granted guardianship, but in an emergency probate hearing, a judge revoked her rights as guardian and gave them to an independent guardian. The judge also ordered a review of the man's finances.
]]> Often, when Florida residents petition for guardianship, they are seeking legal authority to act on behalf of a family member who may be unable to independently make important decisions due to incapacity. Mental health problems, such as dementia and Alzheimer's disease, are common causes of incapacity that prompt many Floridians to petition for guardianship over a parent or other family member.Guardianships provide authority to make choices about personal and financial matters on behalf of those who are unable to make informed decisions for themselves. These decisions could relate to medical care, the execution of a will or the fulfillment of other legal documents. Beyond managing money and paying bills, the typical powers of a guardian usually include selling or leasing property, investing assets and executing contracts.
Although guardianships offer some relief to concerned families, establishing a comprehensive estate plan early in life can make many difficult decisions easier for loved ones. A comprehensive estate plan will address financial matters that may arise during a time of incapacity, as well as incorporate powers of attorney and advance directives to help ease the burden on family members in a time of emotionally challenging health care decisions.
Source: Detroit News, "Children seek custody of dad," Charles E. Ramirez, Jan. 31, 2012
]]>When the entrepreneur established his trust, he appointed a wealth management firm to oversee the trust's administration. Because the trust is irrevocable, the entrepreneur has no authority to remove the management firm as the trustee. Claiming to have lost confidence in the firm's management, the entrepreneur elected to adopt his adult girlfriend in order to make her a beneficiary of the trust.
]]> By adopting his girlfriend, the entrepreneur gave her the legal authority to challenge the trustee's management of the irrevocable trust. Facing possible prison time in relation to a hit-and-run auto accident, the entrepreneur asserted that adopting his girlfriend was the only way to make sure somebody would be in a position to look out for his children's interests.An aspect of irrevocable trusts is that the founder relinquishes all control and access to trust assets. Under the right circumstances, though, the benefits can outweigh the sacrifice. For example, because the assets of an irrevocable trust are not available to the trust founder, they are also shielded against claims of creditors. Likewise, although a trust may have to pay tax on income, irrevocable trust assets are not subject to estate tax when the trust founder dies. For these reasons, an irrevocable trust can be a valuable tool for transferring wealth across generations.
Beyond raising questions about the policy and principles underlying adoption law, the entrepreneur's situation highlights the importance of carefully choosing a trust administrator. As the name implies, an irrevocable trust cannot be undone by the founder. That is why trust founders would do well to choose wisely when appointing a trustee who inspires enduring confidence.
Source: Fox News, "Florida businessman, 48, adopts adult girlfriend, 42, as his daughter," Feb. 1, 2012
]]>Being careful about taxes is one way people can retain more assets. Many retirees pay more than they should in taxes, but changing legal residency and being smart about when to take withdrawals from a retirement account can significantly reduce tax liabilities. For example, Florida has no income tax, yet many retirees who meet the residency requirements here do not take advantage of this benefit.
]]> Retirees should also take care to properly estimate potential healthcare costs. Fidelity Investments estimates that a typical couple retiring at 65 years old will need about $230,000 for medical costs, not including long-term care. Medicare does not cover long-term care and various other expenses. It is therefore a good idea to plan ahead and consider purchasing long-term care insurance, as well as supplemental insurance. These can provide a safety net so retirees' assets are not overly depleted by healthcare costs.Being realistic about longevity can also help Floridians plan. Studies show that, for an average 65-year-old couple, one member has a 63 percent chance of living to at least age 90. But many seniors seriously underestimate the number of years for which they will need savings or income.
Finally, seeking professional help in estate planning is generally the most solid step in the right direction. After all, relying solely on advice from family and friends can prove to be dangerous to a retiree's assets. Even well-intended advice can be wrong and drain resources unnecessarily. Also, failure to seek professional legal help soon enough in financial planning for retirement can result in disaster if a senior loses cognitive ability with age.
A legal professional who focuses on estate planning can provide important assistance to seniors and their families in navigating the increasingly complicated world of retirement.
Source: cbsnews.com, "Groundhog Day: 7 mistakes retirees make repeatedly," Dave Carpenter, Feb. 1, 2012
]]>As of now, the law lets the holder of an inherited IRA receive taxable distributions over the anticipated span of his or her lifetime. However, the senator says the practice has been abused by people who give tax-free benefits to younger beneficiaries.
]]> If passed into law, here is how the proposal would work: younger beneficiaries would be required to pay taxes on IRA inheritances over the course of five years instead of over the course the beneficiary's remaining lifetime. The primary aim of the proposal is to end a tax-planning technique that allows many Florida residents to accumulate tax-deferred gains within IRAs. It is also expected that the new tax plan would give the U.S. Treasury $4.6 billion over the course of the next 10 years. The proposal is meant to go into effect for those IRA owners who die in 2013 or after.The proposal does include some exceptions for beneficiaries who are disabled or chronically ill. There are also exceptions for the spouses of IRA owners and for beneficiaries whose age is within 10 years of that of the account holder. Also, until reaching adulthood, children would also be exempt from the five-year tax rule.
IRA owners and beneficiaries throughout South Florida will want to be aware of how the proposal might affect the distribution of their retirement accounts. If the plan is made into law, methods of estate planning will be considerably changed, meaning the new system may require some creative thinking on the part of anyone concerned with preserving and distributing assets.
Source: Bloomberg, "Sen. Baucus Eyes Inherited IRAs for $4.6B," Richard Rubin, Feb. 7, 2012
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