Regardless of income, every adult should have a will, experts say.
Decide now how to distribute your assets and protect your family after your death, or the state of Pennsylvania will decide for you. “Dying without a will — everything gets thrown in one big pot, and goes in an undefined way to undefined recipients,” said Elyse Rogers, a partner with Keefer Wood Allen & Rahal LLP in Harrisburg.
Saturday, November 28, 2009
Monday, November 23, 2009
Those old chattels could be valuable
Those old chattels could be valuable: Have you noticed that almost every publication has an article about estate planning, tax avoidance, retirement plans and the like?
Perhaps, somewhat surprisingly, one particular type of wealth is commonly ignored! Have a look around you, what do you personally own that may have more than just a dollar value?
Chattels, that’s what you probably have!
Perhaps, somewhat surprisingly, one particular type of wealth is commonly ignored! Have a look around you, what do you personally own that may have more than just a dollar value?
Chattels, that’s what you probably have!
Sunday, November 22, 2009
Designate beneficiary on accounts
Designate beneficiary on accounts: Here's something to ponder as you gather with friends and family members over the holiday season: beneficiaries.
If you own various investment and insurance accounts - annuities, life policies, pensions, Individual Retirement Accounts, 401(k) plans and so on - you have the right to name someone to receive any remaining assets at your death. Designating a beneficiary is easy to do and it's important, yet a lot of people don't take the process seriously or procrastinate.
If you own various investment and insurance accounts - annuities, life policies, pensions, Individual Retirement Accounts, 401(k) plans and so on - you have the right to name someone to receive any remaining assets at your death. Designating a beneficiary is easy to do and it's important, yet a lot of people don't take the process seriously or procrastinate.
Will You Owe Estate Taxes?
Will You Owe Estate Taxes?: THE GOOD NEWS is it's becoming increasingly less likely that you'll owe federal estate taxes. That's because the amount an individual can leave to heirs free of federal estate taxes in 2009 is $3.5 million (up from $2 million in 2006-2008).
Still, with retirement accounts, homes and life insurance death benefits thrown into the pot, it's easier than some think for a working couple to be subject to the federal estate tax. And this tax can be brutal. For every dollar more than $3.5 million that you leave behind, Uncle Sam will take 45 cents.
Still, with retirement accounts, homes and life insurance death benefits thrown into the pot, it's easier than some think for a working couple to be subject to the federal estate tax. And this tax can be brutal. For every dollar more than $3.5 million that you leave behind, Uncle Sam will take 45 cents.
You've Gotta Start Somewhere
You've Gotta Start Somewhere THERE ARE CERTAIN ESTATE planning imperatives that you should get squared away no matter what your circumstances. A will is chief among them. The other choices to the left are less obvious, but also important to make sure your affairs are dealt with as painlessly as possible.
Friday, November 13, 2009
Money Matters: What You May Overlook In Estate Planning
Money Matters: What You May Overlook In Estate Planning: Picture this - a frantic call to the family lawyer by a recent widow we'll call Fran. Fran had just learned that her deceased husband's life insurance proceeds were going to be paid to his ex-wife. As the deceased's current wife shouldn't Fran be entitled to the life insurance proceeds, rather than the ex-wife? The husband had changed his will to make Fran the beneficiary of his entire estate. Doesn't this change the policy designation as well? ...
Thursday, November 12, 2009
PRACTICE MANAGEMENT: Don't Overlook Digital Assets In Plans
Wall Street Journal Article: Traditional estate planning is adapting to the world of new media, as planners start to deal with issues like access to clients' email, Facebook accounts and online photo albums when they become incapacitated or die. ...
Wednesday, November 11, 2009
GETTING PERSONAL: Roths As Tools For Wealth Transfer
Wall Street Journal article on Roth Conversions : Converting a traditional IRA to a Roth IRA makes sense for many older people who want to create a tax-free legacy for heirs. For them, a common equation that Roth conversions aren't for anyone over 50 simply doesn't apply......
Having the Last Word
Most estate plans are missing a key ingredient. Many estate planners don’t recommend it, and it isn't even mentioned in many estate planning discussions. One reason might be that, despite its importance, the document is not legally binding on anyone...Read More
Tuesday, November 10, 2009
Don't Make the Same Mistakes You've Seen in the Headlines
Now is the time to update your existing estate plan, or proceed with implementing a comprehensive estate plan. Why? First, we now know with certainty that the federal estate tax is not going away, and thus we should establish a plan that avoids or at least minimize this voluntary tax.
More importantly, if you don't you just might end up like the host of celebrities who have made the headlines recently because they either had no estate planning or because the planning they did have was woefully out of date or otherwise inadequate.
As the recent celebrity examples demonstrate, estate planning is not just about planning to avoid estate tax. Instead, estate planning is about accomplishing what is important to you and your family, like: passing values to your children and grandchildren; passing property in a way that creates a lasting legacy; and protecting your privacy.
Pending Changes to Federal Estate Tax Law: Does It Really Matter?
As we approach year-end we continue to hear scuttlebutt from Capitol Hill that Congress will enact some estate tax legislation before January 1, 2010. As you may recall, this is "necessary" because under current law we are scheduled to have no federal estate tax for those who pass in 2010. Note, however, that in 2010 the estate tax would be replaced with a system that would tax a greater number of Americans when they sell appreciated assets (like stocks and real estate) - a system that Congress tried once before, but it failed miserably!
The consensus from Washington, D.C. is that we will see a "patch" that simply extends current law through the end of 2010. What will happen then, however, is anyone's guess. The cynics suggest that because 2010 is an election year, both Republicans and Democrats may be encouraged to do nothing. If that happens, the current law will expire, and beginning January 1, 2011 we would revert to a $1 Million federal estate tax exemption and maximum estate tax rate of 55%.
While we don't know the details, the fact that we will have an estate tax means that we should all take steps to minimize or avoid it. In addition, more and more states are enacting separate state estate taxes (usually with much lower thresholds) as a way to generate revenue, so state estate tax will ensnarl many who do not plan to avoid it.
Celebrity Examples of What Not to Do with Your Estate Planning
When it comes to estate planning, it seems that folks generally fall into one of three broad categories: (1) those who have done no planning; (2) those who have done some (often inadequate) planning; and (3) those who have done good planning, but who should have it reviewed and possibly updated. The recent spate of celebrity cases that have been in the news lately serves as a pretty telling primer on these various categories. As you consider the lives and stories of these famous people, how do you stack up? You may find that this winter is a good time to revisit your estate planning to make sure your plan is as it should be.
Leaving It to Chance with No Planning
Steve McNair seemed to have it together. A Super Bowl quarterback, 3-time Pro Bowl selection, and one of football's most prolific passers, McNair was killed at the age of 36. Surely thinking that his whole life was ahead of him, McNair did no estate planning at all, leaving his substantial wealth (nearly $20 Million) to be argued over - publicly - in the Tennessee probate courts. His children, assuming they are given substantial shares of his estate, will not enjoy the gift their father could have given by providing a framework in which they could grow into their inheritance.
When McNair's children turn 18 - the legal age of majority in Tennessee - they will receive their inheritance outright; they will be free to do what they please with the money. Can you imagine turning an 18-year-old child loose with several million dollars?
Even if you don't have millions, do you want your loved ones to be able to do with their inheritance as they please, knowing that you can provide them with predictability and guidance to help them protect and preserve what you leave behind?
Inadequate, or "Do-It-Yourself" Planning
Studies indicate that nearly 70% of all Americans have done no estate planning at all. But even of those roughly 30% of people who have done some estate planning, many have done a very poor job, designing an estate plan that inadequately represents their wishes or worse, causes confusion, delays, and unmet expectations.
Heath Ledger had a will. It was a simple, three-page document created before he made his mark in the film industry and made his millions with his Oscar-nominated performance in the movie Brokeback Mountain. When he died at age 28, his estate and his family had far outgrown his inadequate estate plan. His will provided that his estate should be divided equally among Ledger's parents and his siblings, and failed to provide anything for his infant daughter. Although she will surely ultimately be provided for, by relying on a will (and a very deficient one), Ledger assured his family a legacy of confusion, frustration, and public litigation.
The worst offenders feeding this category are those who sell "one size fits none" form estate planning documents, either online or in stores. These folks sell documents to well-intentioned individuals who are proactive and motivated enough to do something about their estate plan. But the key to this mistake is that it approaches estate planning as a document transaction. Sure you get a "will" or a "trust" and some other documents, but do they really represent your goals? Will they properly instruct your family when they need to? As in Heath Ledger's case we may have only one chance to get estate planning right. Printing and signing documents without thoughtful legal help is a disaster waiting to happen.
Imagine that your child is getting married and you need a new suit. Will you go to the corner discount retailer and pull something off the sale rack? After all, they advertise "always the low price." You'll have a jacket, pants, the whole ensemble. But is that really the right solution for you on this special occasion? Isn't it more appropriate to see an expert who can learn about your tastes, your needs, your best features, and deliver what you really need, something you can be proud of?
By the same measure, buying documents - from a retailer or from an attorney - is not estate planning. Although estate planning requires documents to make a plan legally effective, the art of effective estate planning comes through professional, comprehensive advice that only focused and dedicated estate planning professionals can provide.
Outgrown Estate Plans
Now some time has passed since you bought that new suit for the special occasion. One grandchild, maybe two are born and things have changed. Maybe you've lost a few pounds (or, heaven forbid, gained a few!). What has happened to that nice suit? Sure it's a little musty, but never the worse for wear. But no matter how hard you try, it just doesn't fit like it used to.
Just like a finely tailored suit, an estate plan can get outgrown, too. The estate plan that you spent time, effort, and money to get just right will not automatically evolve as your life changes. Even when you have a great estate plan in place you must remain vigilant. The current battle over Michael Crichton's estate illustrates this point precisely.
Crichton was the creator of movie hits like Jurassic Park and the television series ER. Understanding the importance of sound estate planning to preserve peace of mind for his family, Crichton apparently had a robust estate plan in place. And then life changed.
Michael Crichton had prepared carefully, incorporating a premarital agreement with his fifth (and surviving) wife to make sure that he fully provided for his child from a previous marriage. However, Crichton and his wife were expecting a new baby when Crichton died unexpectedly late last year. Though he had apparently gone to great lengths in earlier planning, the fact that he failed to provide for his unborn child has cast a cloud of uncertainty over Crichton's estate. It appears that despite his earlier efforts, Michael Crichton is bound to leave a legacy of distress, uncertainty, and litigation for his family.
Unlike Heath Ledger and Michael Crichton, you may be certain that you will not have children later in life. But do you know with certainty that your loved ones will not become a spendthrift, develop a creditor problem (50% of marriages end in divorce), or receive government benefits such that an outright inheritance would result in disqualification of those benefits?
Where Do YOU Stand?
Although none of us like to embrace our mortality, as responsible adults we have to prepare ourselves and our families for the inevitable. Whether you're a millionaire or of more modest means, you want to leave a lasting legacy of family harmony, good memories, and caring protection for those you love. Estate planning can be challenging, and should never be done alone. Take the time to discuss your needs with a team of well-trained, attentive estate planning professionals now.
More importantly, if you don't you just might end up like the host of celebrities who have made the headlines recently because they either had no estate planning or because the planning they did have was woefully out of date or otherwise inadequate.
As the recent celebrity examples demonstrate, estate planning is not just about planning to avoid estate tax. Instead, estate planning is about accomplishing what is important to you and your family, like: passing values to your children and grandchildren; passing property in a way that creates a lasting legacy; and protecting your privacy.
Pending Changes to Federal Estate Tax Law: Does It Really Matter?
As we approach year-end we continue to hear scuttlebutt from Capitol Hill that Congress will enact some estate tax legislation before January 1, 2010. As you may recall, this is "necessary" because under current law we are scheduled to have no federal estate tax for those who pass in 2010. Note, however, that in 2010 the estate tax would be replaced with a system that would tax a greater number of Americans when they sell appreciated assets (like stocks and real estate) - a system that Congress tried once before, but it failed miserably!
The consensus from Washington, D.C. is that we will see a "patch" that simply extends current law through the end of 2010. What will happen then, however, is anyone's guess. The cynics suggest that because 2010 is an election year, both Republicans and Democrats may be encouraged to do nothing. If that happens, the current law will expire, and beginning January 1, 2011 we would revert to a $1 Million federal estate tax exemption and maximum estate tax rate of 55%.
While we don't know the details, the fact that we will have an estate tax means that we should all take steps to minimize or avoid it. In addition, more and more states are enacting separate state estate taxes (usually with much lower thresholds) as a way to generate revenue, so state estate tax will ensnarl many who do not plan to avoid it.
Celebrity Examples of What Not to Do with Your Estate Planning
When it comes to estate planning, it seems that folks generally fall into one of three broad categories: (1) those who have done no planning; (2) those who have done some (often inadequate) planning; and (3) those who have done good planning, but who should have it reviewed and possibly updated. The recent spate of celebrity cases that have been in the news lately serves as a pretty telling primer on these various categories. As you consider the lives and stories of these famous people, how do you stack up? You may find that this winter is a good time to revisit your estate planning to make sure your plan is as it should be.
Leaving It to Chance with No Planning
Steve McNair seemed to have it together. A Super Bowl quarterback, 3-time Pro Bowl selection, and one of football's most prolific passers, McNair was killed at the age of 36. Surely thinking that his whole life was ahead of him, McNair did no estate planning at all, leaving his substantial wealth (nearly $20 Million) to be argued over - publicly - in the Tennessee probate courts. His children, assuming they are given substantial shares of his estate, will not enjoy the gift their father could have given by providing a framework in which they could grow into their inheritance.
When McNair's children turn 18 - the legal age of majority in Tennessee - they will receive their inheritance outright; they will be free to do what they please with the money. Can you imagine turning an 18-year-old child loose with several million dollars?
Even if you don't have millions, do you want your loved ones to be able to do with their inheritance as they please, knowing that you can provide them with predictability and guidance to help them protect and preserve what you leave behind?
Inadequate, or "Do-It-Yourself" Planning
Studies indicate that nearly 70% of all Americans have done no estate planning at all. But even of those roughly 30% of people who have done some estate planning, many have done a very poor job, designing an estate plan that inadequately represents their wishes or worse, causes confusion, delays, and unmet expectations.
Heath Ledger had a will. It was a simple, three-page document created before he made his mark in the film industry and made his millions with his Oscar-nominated performance in the movie Brokeback Mountain. When he died at age 28, his estate and his family had far outgrown his inadequate estate plan. His will provided that his estate should be divided equally among Ledger's parents and his siblings, and failed to provide anything for his infant daughter. Although she will surely ultimately be provided for, by relying on a will (and a very deficient one), Ledger assured his family a legacy of confusion, frustration, and public litigation.
The worst offenders feeding this category are those who sell "one size fits none" form estate planning documents, either online or in stores. These folks sell documents to well-intentioned individuals who are proactive and motivated enough to do something about their estate plan. But the key to this mistake is that it approaches estate planning as a document transaction. Sure you get a "will" or a "trust" and some other documents, but do they really represent your goals? Will they properly instruct your family when they need to? As in Heath Ledger's case we may have only one chance to get estate planning right. Printing and signing documents without thoughtful legal help is a disaster waiting to happen.
Imagine that your child is getting married and you need a new suit. Will you go to the corner discount retailer and pull something off the sale rack? After all, they advertise "always the low price." You'll have a jacket, pants, the whole ensemble. But is that really the right solution for you on this special occasion? Isn't it more appropriate to see an expert who can learn about your tastes, your needs, your best features, and deliver what you really need, something you can be proud of?
By the same measure, buying documents - from a retailer or from an attorney - is not estate planning. Although estate planning requires documents to make a plan legally effective, the art of effective estate planning comes through professional, comprehensive advice that only focused and dedicated estate planning professionals can provide.
Outgrown Estate Plans
Now some time has passed since you bought that new suit for the special occasion. One grandchild, maybe two are born and things have changed. Maybe you've lost a few pounds (or, heaven forbid, gained a few!). What has happened to that nice suit? Sure it's a little musty, but never the worse for wear. But no matter how hard you try, it just doesn't fit like it used to.
Just like a finely tailored suit, an estate plan can get outgrown, too. The estate plan that you spent time, effort, and money to get just right will not automatically evolve as your life changes. Even when you have a great estate plan in place you must remain vigilant. The current battle over Michael Crichton's estate illustrates this point precisely.
Crichton was the creator of movie hits like Jurassic Park and the television series ER. Understanding the importance of sound estate planning to preserve peace of mind for his family, Crichton apparently had a robust estate plan in place. And then life changed.
Michael Crichton had prepared carefully, incorporating a premarital agreement with his fifth (and surviving) wife to make sure that he fully provided for his child from a previous marriage. However, Crichton and his wife were expecting a new baby when Crichton died unexpectedly late last year. Though he had apparently gone to great lengths in earlier planning, the fact that he failed to provide for his unborn child has cast a cloud of uncertainty over Crichton's estate. It appears that despite his earlier efforts, Michael Crichton is bound to leave a legacy of distress, uncertainty, and litigation for his family.
Unlike Heath Ledger and Michael Crichton, you may be certain that you will not have children later in life. But do you know with certainty that your loved ones will not become a spendthrift, develop a creditor problem (50% of marriages end in divorce), or receive government benefits such that an outright inheritance would result in disqualification of those benefits?
Where Do YOU Stand?
Although none of us like to embrace our mortality, as responsible adults we have to prepare ourselves and our families for the inevitable. Whether you're a millionaire or of more modest means, you want to leave a lasting legacy of family harmony, good memories, and caring protection for those you love. Estate planning can be challenging, and should never be done alone. Take the time to discuss your needs with a team of well-trained, attentive estate planning professionals now.
Roth Conversions
I hosted a wonderful Advisors Forum CPE teleconference today. Bob Keebler spoke on Roth Conversions. My take on it is, while not for everyone, everyone with a retirement account should at least consider taking advantage of Roth Conversion. The design options of a Roth Conversion are virtually unlimited as you can do partial conversions and multiple conversions. Multiple conversions allow you to take advantage of the Recharacterization rules to only convert those accounts that have grown in value. It is possible to pay the tax out of the retirement account, or to enhance the Roth balance, pay the tax with dollars outside of the account. In certain circumstances, Roth Conversions can be used to enhance Asset Protection.
Again, everyone should consider taking advantage of Roth Conversion.
Again, everyone should consider taking advantage of Roth Conversion.
Monday, November 9, 2009
Lifetime “QTIP” Trust to lock in today’s Generation Skipping Transfer Tax Exemption
The Generation Skipping Transfer (GST) Tax Exemption is the amount of wealth you can pass directly (or indirectly) to a grandchild without being penalized for skipping your children.
The GST Exemption is currently $3.5 million.
The GST Exemption is scheduled to return to $1 million in 2011. If this happens, you will have LOST the higher exemption altogether.
This Exemption CAN be locked in today, without paying any Gift Tax, by utilizing a special type of Trust. This Trust is called a “QTIP” trust.
A QTIP Trust is a trust set up for your spouse, paying all income to your spouse for the rest of his or her lifetime.
You can take advantage of QTIP Trusts to:
• Lock in today’s high GST Exemption with no gift tax cost.
• Create creditor-protected assets for your spouse (and vice versa!).
• Enhance other Estate Tax Planning opportunities.
One major planning opportunity is the ability to inherit QTIP Trust property from your spouse (yes, that is assets you first give your spouse) in a GST Tax Exempt, Asset Protected, Divorce Protected, Grantor Trust.
The GST Exemption is currently $3.5 million.
The GST Exemption is scheduled to return to $1 million in 2011. If this happens, you will have LOST the higher exemption altogether.
This Exemption CAN be locked in today, without paying any Gift Tax, by utilizing a special type of Trust. This Trust is called a “QTIP” trust.
A QTIP Trust is a trust set up for your spouse, paying all income to your spouse for the rest of his or her lifetime.
You can take advantage of QTIP Trusts to:
• Lock in today’s high GST Exemption with no gift tax cost.
• Create creditor-protected assets for your spouse (and vice versa!).
• Enhance other Estate Tax Planning opportunities.
One major planning opportunity is the ability to inherit QTIP Trust property from your spouse (yes, that is assets you first give your spouse) in a GST Tax Exempt, Asset Protected, Divorce Protected, Grantor Trust.
Tuesday, November 3, 2009
Charitable Lead Annuity Trust Planning Tip
For those clients with a large spike in income, establishing a grantor CLAT in the same year will generate an immediate charitable income tax deduction that can offset the spike in income. Taking the deduction in the first year and reporting as the taxpayer's own the CLT's income each year during the CLT's term thus has the effect of spreading the taxpayer's spike in income earned in the first year over the term of the CLT.
Monday, November 2, 2009
Planning Tip: Living Trusts
Revocable Living Trusts can be excellent vehicles for disability planning, privacy, and probate avoidance. However, a revocable trust controls only that property affirmatively transferred to the trust. Absent such transfer, a revocable trust may not control disposition of property as the trust maker intends. Also, with revocable trusts and wills, it is important to coordinate property passing pursuant to contract (for example, by beneficiary designation for retirement plans and life insurance).
What are some of the issues that arise in a blended family?
- Your children versus your new spouse – who is to get what assets and when?
- If your spouse dies first will you divide your assets among your children and stepchildren equally when you die?
- Are you treating assets that were acquired during your marriage the same way you treat assets acquired before your marriage?
- Do you wish to make gifts to your children during your lifetime even if it means your spouse will have less after your death?
- If your spouse has a close relationship with his or her children and you don’t, are you still going to treat the children equally?
What is the effect of intestacy?
If you die without establishing your preferences for the distribution of your assets, you are said to die “intestate”. North Carolina has established a “will” for you and it will determine the distribution of your property. This might cause some surprises for your family. For example if you die married, but without children and you have a surviving parent(s), your spouse gets the first $50,000 of your personal property and then everything else is split 50% to your surviving spouse and 50% to your parent(s). Don't leave things to chance.
At least use your Annual Exclusion
At a minimum, if you may be subject to federal or state estate tax, you should take advantage of the annual gift tax exclusion ($13,000 per person as of January 1, 2009) to transfer assets with reduced values to children, grandchildren and others. Ideally, you should make these gifts in trust to provide the beneficiaries protection from divorce, creditors, predators, and themselves.
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