January 2009 Archives

January 25, 2009

Leaving Assets to a Child in Prison

One should be careful when leaving assets to someone who is in prison. They often have fines assessed against them and the assets can be taken for these fines. Sometimes it is beneficial to leave assets to the incarcerated persons heirs. While many trusts can be created to provide for creditor protection, these trusts usually fail when the government tries to take the assets. Often this happens with the IRS but it is logical to assume that the state could also take money from a trust offering asset protection.

As with most instances of Florida Estate Planning it is important to look at each families unique circumstances and dynamics to design aFlorida Estate Plan that addresses each families goals and objectives.

January 23, 2009

16 States You Don't Want To Die In.

state death tax rate.gif Forbes.com has an article on where not to die.

Sixteen states and the District of Columbia (shaded in red) impose their own estate taxes. The dollar amount exempted from tax (in black) and the top tax rate (in yellow) vary by state. Eight states (shaded in orange) levy an inheritance tax, meaning the tax rate (in black) depends on who gets the money. New Jersey and Maryland levy both types of tax.

January 20, 2009

Do it yourself Estate Planning: Bad News Part 10

Bad will articles popping up all over the placeJacksonville, Jacksonville Beach, PVB, Ponte Vedra Beach, Orange Park, Florida Will

Seems like everywhere you turn these days there is another article on how Quicken and other online estate planning tools are a bad idea. I will begin to compile a list of other articles on this topic below my examples.

Some other examples of Do it your self wills and bad news are covered in my articles listed below

Do it Yourself Wills? More bad news and
Do it Yourself Wills? a Good Idea or Not?
Do it yourself Estate Planning: Bad News Part 3
Do it yourself Estate Planning: Bad News Part 4
Do it yourself Estate Planning: Bad News Part 5
Do it yourself Estate Planning: Bad News Part 6
Do it yourself Estate Planning: Bad News Part 7
Do it yourself Estate Planning: Bad News Part 8
Do it yourself Estate Planning: Bad News Part 9

Others have covered this topic also

Would You Consider a Do-It-Yourself Estate Planning Kit? by Paul Rabilias
Do-It-Yourself Wills: Is the Cheap Way the Best Way? by Hull & Hull
Using Wills from the Internet or a Book NJ Estate Planning

Florida Probate cases often result when people try to make their own wills, or transfer their assets without getting professional help from a Florida attorney or Accountant who is familiar with the effects of gifting and estate planning.

If you have a personal experience with software that you would like others to know about Contact Us .

If you have used software, a form, or an online service to prepare your will, a deed, or other document, you Contacta Florida Estate planning Attorney or Florida Estate Planning Lawyer to review your documents for potential problems.

January 20, 2009

Amber Alerts for Children - Silver Alerts for the Elderly

First there were Amber Alerts, now Florida along with a dozen other states have adopted the Silver Alert. A Silver Alert is circulated when a person 60 or older who suffers from Alzheimer's, dementia, or another cognitive impairment goes missing.There is legislation creating a national program that is pending in Congress. So far Florida has issued 19 bulletins and all 19 have been found. One feature of the Florida program is an automated phone call to every residence within a one-mile radius of the missing person’s home.

January 14, 2009

Do you have an interesting experience with a will?

The Wills, Trusts, and Estates Prof Blog had a posting from someone looking for interesting WIll issues. I thought some of my readers may be interested in contacting this person.

I'm a researcher working on a documentary series about people's first-hand experiences with a family will. The project is being produced for a major US broadcaster.

The documentary explores various, unexpected family issues surrounding wills. We would like to showcase the powerful, true-life stories of family wills, in an effort to create a deeper awareness of the difficult subjects of legal wrangling, conflict, grief and deep-seeded dynamics that can often arise when the will of a loved one is read.

If you're interested in helping others reach closure on their feelings concerning a past will, or want to make sense of your own experience with a will, I would be very interested to hear your personal story. Thank you very much for generously sharing your story with me. You can email me.


January 14, 2009

Common Asset to Review with Special Needs Trusts

The following fifteen common assets and applicable beneficiary designations should be reviewed to make sure they will not be paid (or given) directly to the special needs child:

(1) IRA, 401(k) and other retirement benefits.
(2) Life insurance (including employer-provided life insurance) benefits.
(3) Accidental death and travel insurance benefits provided through credit cards when a person purchases a plane ticket, etc. using that credit card.
(4) Annuities.
(5) Savings Bonds.
(6) Any property not subject to the parents’ will or trust.
(7) UGMA or UTMA accounts.
(8) TOD, POD, ITF designations on accounts, savings bonds, or securities.
(9) Inheritances, gifts, or bequests through another person’s will or trust (if not paid to a third-party created and funded SNT).
(10) Deeds.
(11) Joint accounts.
(12) Jointly owned property, including jointly owned real estate.
(13) Final paycheck (including unused vacation and sick pay).
(14) Collectibles, antiques and family heirlooms.
(15) Personal injury and wrongful death proceeds payable to a parent’s estate (in contrast to personal injury and wrongful death proceeds payable, by law, directly to the special needs child).
(16) Homestead laws that give the surviving spouse a life estate and the minor children a vested remainder interest (as does Florida law in certain instances).

January 14, 2009

Appoint a Trust Protector For a Third-Party Created and Funded Special Needs Trust

A third-party created and funded SNT can have a trust protector. At a minimum, the trust protector should can have the power to: (i) direct the trustee's actions; (ii) receive financial-investment statements and accountings; (iii) terminate the trust (and have the assets be distributed to the remainder beneficiaries), (iv) remove and replace a trustee, and (v) direct or approve the reformation or amendment of the trust to reflect changes in the law and in order to comply with the trustmaker's intent and purpose.

For tax reasons, a trust protector should not be "related or subordinate" to the settlor or the trust beneficiaries, within the meaning of IRC section 672(c).

January 14, 2009

Benefits of An Inter-Vivos Stand Alone Third-Party Created and Funded Special Needs Trust.

The thirteen benefits of an inter-vivos stand alone third-party created and funded SNT are:

(1) The trust can be established by the parents (or by any third party, such as the grandparents) for the benefit of the special needs child.

(2) The trust provides for the investment and management of the special needs child’s inheritance by a third party - the trustee.

(3) The persons establishing the trust (such as the parents or grandparents) decide the terms and conditions of the special needs child’s inheritance and who is to receive the balance of the trust funds when the special needs child dies - rather than having to reimburse the government for Medicaid and/or “cost of care” benefits provided to the special needs child. One of the significant differences between a between a third-party created and funded SNT and a first party SNT is that there is no Medicaid payback requirement for a third-party created and funded SNT, and a third-party created and funded SNT should not contain a Medicaid payback provision.

(4) The trust does not have to be for the “sole benefit” of the special needs child; other children of the parents can be current beneficiaries (although it is generally recommended that the special needs child be the preferred beneficiary vis-a-vis the other current beneficiaries).

(5) The persons establishing the trust can name who should serve as the initial trustee and as the successor trustees, thereby avoiding the risk of the probate court appointing a “stranger” as a trustee.

(6) The trust avoids family conflict, since the trust spells out who gets what, when, how, and why.

(7) The trust avoids a probate court guardianship for the special needs child’s inheritance.

(8) The trust (if properly drafted and administered) maintains the special needs child’s eligibility for government benefits (assuming the child is otherwise qualified to receive government benefits).

(9) The trust coordinates government benefits and trust assets to meet the special needs child’s lifetime needs.

(10) The special needs child can be any age (i.e., the trust is not limited to a special needs child under age 65).

(11) The trust can provide for the appointment of an independent advocate for the special needs child, regardless of whether the child has a guardian, as well as a Trust Advisory Committee to advice the trustee concerning distributions for the benefit and well being of the special needs child.

(12) The trust protects the special needs child’s inheritance from being seized by his or her creditors, and avoids the imposition of a Medicaid lien.

(13) The trust can be “simple” or “sophisticated,” depending on the amount and type of assets that are used to fund the trust.

January 13, 2009

Coordinate Other Relatives’ Estate Planning Documents With The Parent’s Third- Party Created and Funded Special Needs Trust.

The principal purpose of a third-party created and funded SNT is to provide an inheritance for the special needs child without risking the loss of important government benefits such as SSI, Medicaid, etc. Consequently, it is important that grandparents and other relatives (including the siblings of the special needs child) not leave an inheritance outright to a special needs loved one.

Fortunately a parent’s stand alone inter-vivos third-party created and funded SNT can be structured to receive gifts, bequests, and inheritances from grandparents (and other relatives/friends) for the benefit of the special needs child. This avoids the grandparents (or other relatives/friends) having to prepare a separate third-party created and funded SNT.

There Are Many Ways A Special Needs Child Can Receive An Outright Inheritance and Lose Means-Tested Government Benefits. A special needs child can receive an outright inheritance in indirect ways. For example, if the grandparent’s will leaves his or her estate to “my descendants, by right of representation,” and the parent of the special needs child predeceases the grandparent, actually or presumptively under the requirement for survival (typically 120 hours (or 90 days for GST tax purposes)), a portion of the deceased parent’s share of the grandparent’s estate will pass outright to special needs child, and possibly disqualify the child from receiving certain government benefits.

Another way, that is not so obvious for a special needs child to receive an outright inheritance, is when an unmarried adult sibling dies without children and leaves his or her estate to his or her “heirs” and the decedent’s parents are also deceased. In such instance, the decedent’s special needs sibling (as an heir of the decedent) will receive an inheritance.

January 13, 2009

Selecting The Right Trustee For A Third-Party Created and Funded Special Needs Trust Is Important.

The trustee of a third-party created and funded SNT is given complete discretion in making distributions to or for the benefit of the special needs child. Thus, who should serve as the trustee of a third-party created and funded SNT is important.

The selection of the trustee involves many considerations, including the trustee’s ability to understand and respond to the needs of the special needs child; the trustee’s knowledge of government benefit programs and the effect that trust distributions will have on the special needs child’s government benefits; the trustee’s health, integrity, reliability and financial acumen; the trustee’s potential for a conflict of interest if the trustee is a current or remainder beneficiary of the trust; the potential for adverse income and transfer tax consequences if a family member serves as a trustee and is also a current or remainder beneficiary of the trust, etc.

Caution: Due to SSI and Medicaid rules and for various tax reasons, neither the special needs child nor his or her spouse should serve as trustee of either a third-party or first- party SNT.

January 13, 2009

Estate Planning Options Available To Special Needs Families

There are five estate planning options available to parents concerning their special needs child:

(1) Distributing assets outright to the special needs child (not recommended since the assets may disqualify the child from receiving means-tested government benefits);

(2) Disinheriting the special needs child (generally not recommended since the child will have no “safety net” if government benefits are subsequently reduced or eliminated);

(3) Leaving property to another family member with the “understanding” that the property will be used for the benefit of the special needs child (generally not recommended since the arrangement is not legally enforceable and the sibling’s creditors (including a potential ex-spouse) may be able to seize the assets);

(4) Establishing a third-party discretionary support trust for the special needs child (generally not recommended since the trust will, in many states, disqualify the child from receiving means-tested government benefits); and

(5) Establishing a third-party created and funded SNT for the special needs child (highly recommended since the trust will not disqualify the child from receiving means-tested government benefits).

If an irrevocable inter-vivos third-party created and funded SNT is established by the parents or grandparents, the parents’ (or grandparents’) wills should specify the source for the payment of any death taxes attributable to the trust if any part of the third-party created and funded SNT is included in the parents’ (or grandparents’) gross estate. These trusts should not include a Medicaid Benefits payback clause. If its not drafted properly you can create a requirement to reimburse Medicaid.

January 13, 2009

Tax Planning For A Special Needs Family Should Not Be Overlooked

Tax planning should not be ignored when preparing an estate plan that involves a special needs child.

There is a general (and incorrect) assumption among some estate planners that taxes are of little or no concern to families of special needs children.

Income taxes, estate taxes, gift taxes, and the confiscatory generation-skipping transfer ("GST") tax should all be considered and dealt with when preparing an estate plan. Equally important are the income and transfer tax consequences of a special needs trust.

January 13, 2009

Five Essential Estate Planning Documents For A Special Needs Family

Five Essential Estate Planning Documents For A Special Needs Family. At the minimum, a special needs child deserves a parent's continued stewardship and guidance, even though the parent may be incapacitated or deceased. Therefore, the parents of a special needs child should typically have the following five estate planning documents prepared:

(1) Last will and testament.

(2) General durable power of attorney for financial affairs ("GDPA"). The parent's GDPA should permit the agent to make discretionary non-support distributions to or for the benefit of the special needs child, and to establish a SNT for the benefit of the special needs child.

(3) Durable medical power of attorney.

(4) Revocable living trust. During a parent's period of incapacity, the parent's revocable living trust should contain language that permits the trustee to make discretionary non-support distributions to or for the benefit of the special needs child. Upon the parent's death, the special needs child's inheritance should be distributed to a third-party created and funded SNT previously established by the parent.

(5) Third-party created and funded SNT.

January 13, 2009

Unique Estate Planning Challenges For Special Needs Parents

In addition to the usual hurdles that parents face when preparing an estate plan (e.g., who should be the guardian, trustee, executor, etc.), the parents of a special needs child are faced with five unique estate planning challenges:

(1) How to provide for all of their loved ones without jeopardizing the special needs child's current (or potential) eligibility for means-tested government benefits such as SSI and Medicaid;

(2) How to design an estate plan that supplements the special needs child's means- tested government benefits and enhances the quality of the special needs child's life;

(3) How to treat the other children equitably while adequately providing for the special needs child;

(4) How to make sure there are sufficient funds available at a parent's death to care for the special needs child; and

(5) How to provide for the proper supervision, management, and distribution of an inheritance for the special needs child through a third-party created and funded SNT

Of these five unique estate planning challenges, above items 4 (sufficient funds) and 5 (proper supervision and management of the funds) typically prove to be the most difficult to implement. This is especially true: (i) if the majority of the parents' estate is composed of retirement benefits (see, Section 9, below, concerning retirement benefits), (ii) if the proposed trustee is inexperienced in administering SNTs, or (iii) if there is an experienced trustee available that is knowledgeable about special needs (typically a corporate or professional trustee), its minimum annual fee is too high relative to the proposed size of the SNT.

When creating an Florida Estate Plan your lawyer should ask about special needs.

January 13, 2009

Seven Practical Options for Family Seven Practical Options for Family Philanthropy

There are at least seven options for family philanthropy, each of which has its own
strengths and weaknesses from tax, regulatory, and personal perspectives. Some are extremely complex while others are simple.

1. Private Foundation According to the IRS in 2006 65% of the 80,000 private foundations had assets of less than 1 million dollars. Biggest reason for forming a foundation is control over the assets and expenditure.

Advantages: 1) Charitable deduction for the gift. 2)Distributions to individuals and foreign charities. 3) Control of charitable distributions 4) Control of administrative and investment management decisions. 5) Memorializing the family. 6) Endowing the family's charitable priorities while maintaining long-term flexibility. 7) Platform for family philanthropy. 8) Visibility and influence for family members. 9) Protection of assets from personal bankruptcy
Disadvantages: 1) Lower annual gift limitations. 2)Limitations on the value of some contributed assets. 3) Excise taxes on income 4) Costs of creation and ongoing management. 5) Investment restrictions. 6) Potential for personal liability. 7) Complicated rules and procedures

2. Type III Supporting Organization: A supporting organization (SO) is a separately-established public charity that makes distributions to or for one or more public charities. Since the SO exists solely to support the public charity, it derives its "public" tax-exempt status from its nexus to those charities rather than from meeting the public support tests on its own.

Advantages: 1) Full benefit of public charity deduction rules 2) Supporting organization administrative role 3)Supporting organization grantmaking role.

Disadvantages: 1) Supporting organizations under Congressional scrutiny. 2) Public status at risk with certain transactions. 3)Burden to establish support status 4) Less control than with private foundation 5) Ongoing Congressional involvement 6) Limits on payments to family members or related parties 7) Type III SOs subject to as yet to be determined mandatory distributions 8) Limits on family business holdings in Type III SOs

3. Donor Advised Funds A donor advised fund is created by making a charitable gift to a publicly supported charity to create a segregated fund over which the donor or named individuals reserve the right to make non-binding recommendations to the sponsoring charity on the charitable entities to receive the funds. In the past, traditional community foundations and Jewish community foundations were the primary sponsors of donor advised funds. Over the last fifteen years, however, commercially sponsored donor advised funds have become popular. Under the legal definition established under the Pension Protection Act of 2006, a donor advised fund has the following three characteristics:

• A fund identified by reference to one or more donor contributions;
• Which is owned and controlled by the publicly supported (sponsoring) entity; and
• Over which the donor(s) has a reasonable expectation to advice on distributions or
investments for the amount (because of his status as donor).

Advantages 1) Funds managed by charitable sponsor/manager. 2) Staff resources support grantmaking. 3) Anonymous giving possible

Disadvantages 1) Loss of control 2) Institutionalized nature of fund may extend for only one or two generations below the donor 3) New limitations and requirements for charitable deduction. 4) Limitation on distributions from the advised fund. 5) Limitation on holdings through application of the excess business holdings rule. 6) Penalties for taxable distributions. 7) Penalties for more-than-incidental benefit distributions. 8) Penalties for excess benefit transactions

4. Charitable Lead Trust A charitable lead trust is an irrevocable trust that creates an income, gift, and estate tax charitable deduction for the present value of amounts irrevocably set aside for one or more charities over the term of the trust. When there is greater than a 5% probability the assets will be returned to the grantor at the end of the trust term, it is treated as a grantor trust. The donor is entitled to a charitable income tax deduction for the charitable portion in the year of gift but is taxed on the undistributed income and gains in the trust over its term. When the trust is structured to distribute the assets to family members or other individuals at the end of the trust term, the donor is entitled to a gift or estate tax deduction for the charitable portion of the transfer and the trust is taxed as a complex trust, responsible for payment of taxes on undistributed income.

Advantages 1) Platform to combine personal and charitable goals. 2)Current environment attractive to lead trust gifts. 3) Short-term foundation substitute 4)Short-term foundation substitute. 4) • Long-term philanthropy funding mechanism
Disadvantages 1) Complex trust tax rates. 2)Prohibited transaction rules apply. 3) Donor involvement limitations when lead trust funds private foundation

5. A "Charitable" Revocable Trust A "charitable" revocable trust is simply a revocable trust used for family philanthropy. The Donor funds the revocable trust with dollars that will be used to make charitable gifts. The trust adopts by-laws and operating procedures that bring the family together as trustees or an advisory board for the purpose of making distributions. And the donor - without creating an expensive, irrevocable structure- can engage in the process of teaching younger generations about philanthropy, engaging the family in philanthropic impact, and benefiting the community. In addition, the donor can add a testamentary provision that distributes any remaining assets to a donor advised fund, a private foundation, or any of the other philanthropic entities discussed here to perpetuate that giving.

Advantages: 1) Control and use of assets during life. 2)Platform to engage and train family members. 3) Little or low cost to create 4) Flexibility in determining charitable form at death. 5) Income, gift, and estate tax charitable deductions. 6) Discount and defer transfers to heirs

Disadvantages: 1) There is no immediate charitable deduction for assets transferred to the trust. 2) Assets set aside for charity not protected

6. Partnership With the Charity Sometimes donors do not need to create a separate entity, especially when charitable interests are focused narrowly on a single charity. In these instances, the donor may want to engage family members to fund a program over a defined period of time (or lifetime) or may want to create a permanent endowment using family members to provide ongoing advice and counsel.
Advantages: 1) Public charity tax benefits. 2) Achieving specific results and controlling the terms. 3) Flexibility to stop funding. 4)Louder voice. 5) Meeting goals.

Disadvantages: 1) No tax disadvantages. 2) For short-term projects, no ongoing pool of funds. 3) Potential lack of family interest.
7. Informal or Kitchen Table Philanthropy
Advantages: 1) Direct engagement with and training of family. 2) Flexibility. The arrangement is as flexible as the donor's goals and objectives. 3) Ability to adjust annual contributions based on convenience, the economy, and need. 4) Ability to "test drive" and determine priorities
Disadvantages: 1) Temporary structure. 2)Avoids experience with administration
January 12, 2009

Ending Underwater GRATS

Given that many GRATS are now underwater and will not likely recover.

Grantor can purchase assets, acknowledge that the GRAT will fail and create a new GRAT with the assets.

If the GRAT contains an annuity payment and the grantor believes that that the underlining asset will still preform over the term of the GRAT, the annuity payments can be taken and new GRATs can be formed with these payments.

There is a potential that the the Code will be reformed and that a 10% remainder will be required. For those concerned about this forming a long term GRAT, at this time, may be a hedge against this risk.

January 12, 2009


Seven states have enacted statutes that permit a trustee with discretion to distribute principal of a trust to exercise the discretion by transferring principal to a new trust, which may have terms different than the original trust. They are Alaska, Delaware, Florida, New Hampshire, New York, South Dakota and Tennessee.

Main issues for using Decanting statutes:

1. The discretion the trustee of the first trust must have to use the
2. The permissible beneficiaries of the second trust;
3. Interests in the first trust that are protected from change;
4. The ability of a beneficiary-trustee to exercise a decanting power;
5. Whether the statute permits transfer to a trust in another state
and/or applies to trusts that move into the state; and
6. The effect of decanting under the rule against perpetuities.

Florida statute for decanting Fla. Stat. §736.04117 (2007)

§736.04117. Trustee’s power to invade principal in trust

(1)(a) Unless the trust instrument expressly provides otherwise, a trustee who
has absolute power under the terms of a trust to invade the principal of the trust,
referred to in this section as the “first trust,” to make distributions to or for the benefit
of one or more persons may instead exercise the power by appointing all or part of the
principal of the trust subject to the power in favor of a trustee of another trust, referred
to in this section as the “second trust,” for the current benefit of one or more of such
persons under the same trust instrument or under a different trust instrument; provided:
1. The beneficiaries of the second trust may include only
beneficiaries of the first trust;
2. The second trust may not reduce any fixed income, annuity, or unitrust interest in the assets of the first trust; and
3. If any contribution to the first trust qualified for a marital or charitable deduction for federal income, gift, or estate tax purposes under the Internal Revenue Code of 1986, as amended, the second trust shall not contain any provision which, if included in the first trust, would have prevented the first trust from qualifying for such a deduction or would
have reduced the amount of such deduction.

1 (b) For purposes of this subsection, an absolute power to invade principal shall include a power to invade principal that is not limited to specific or ascertainable purposes, such as health, education, maintenance, and support, whether or not the term “absolute” is used. A power to invade principal for purposes such as best interests, welfare, comfort, or happiness shall constitute an absolute power not limited to specific or ascertainable purposes.

(2) The exercise of a power to invade principal under subsection (1) shall be by an instrument in writing, signed and acknowledged by the trustee, and filed with the records of the first trust.

(3) The exercise of a power to invade principal under subsection (1) shall be considered the exercise of a power of appointment, other than a power to appoint to the trustee, the trustee’s creditors, the trustee’s estate, or the creditors of the trustee’s estate, and shall be subject to the provisions of s. 689.225 covering the time at which the permissible period of the rule against perpetuities begins and the law that determines the permissible period of the rule against perpetuities of the first trust.

(4) The trustee shall notify all qualified beneficiaries of the first trust, in writing, at least 60 days prior to the effective date of the trustee’s exercise of the trustee’s power to invade principal pursuant to subsection (1), of the manner in which the trustee intends to exercise the power. A copy of the proposed instrument exercising the power shall satisfy the trustee’s notice obligation under this subsection. If all qualified beneficiaries waive the notice period by signed written instrument delivered to the trustee, the trustee’s power to invade principal shall be exercisable immediately. The trustee’s notice under this subsection shall not limit the right of any beneficiary to object to the exercise of the trustee’s power to invade principal except as provided in other applicable provisions of this code.

(5) The exercise of the power to invade principal under subsection (1) is not prohibited by a spendthrift clause or by a provision in the trust instrument that prohibits amendment or revocation of the trust.

(6) Nothing in this section is intended to create or imply a duty to exercise a power to invade principal, and no inference of impropriety shall be made as a result of a trustee not exercising the power to invade principal conferred under subsection (1).

(7) The provisions of this section shall not be construed to abridge the right of any trustee who has a power of invasion to appoint property in further trust that arises under the terms of the first trust or under any other section of this code or under another provision of law or under common law.

January 12, 2009

22 States have inhertance tax in 2009

The following states will have an inheritance tax in 2009
Estates in excess of

$3,500,000: NC, VT
$3,000,000: OK (tax expires after 2009)
$2,000,000: CT, IL (tax expires after 2009), WA
$1,000,000: DC, KS (tax expires after 2009), ME, MD, MA, MN, NY, OR, TN
$ 675,000: NJ, RI
$ 338,333 OH
$ 0: IA, IN, KY, PA.

Florida has no estate tax for individuals who die in 2009.

Individuals may consider transferring assets though gifts prior to death to avoid estate taxes as most states do not have gift taxes.

January 12, 2009

Rollovers and Plan-to-Plan Transfers by the Participant

A retirement plan distribution is not taxed in the year received if it is "rolled over"
to the same or a different retirement plan or IRA, if various requirements are met.
§ 402(c)(1). A rollover means either:

A. 60-day rollover. A distribution from one plan or IRA to the participant (or his surviving spouse), followed by the participant's (or spouse's) redepositing the distribution in the same or another plan or IRA; or

B. Direct rollover. The transfer of assets from the participant's account in a qualified retirement plan (QRP) to an IRA in the name of the participant or of his surviving spouse.

NOTE: You cannot role over money from one IRA to another within 12 months of another roll over with the same IRAs. There are two ways this can be fixed

1. You can roll the money over into a 401K plan or another qualified plan.

2. Roll it into a Roth IRA even if you are not eligible. You can then re characterize the IRA back to a traditional IRA. This is not subject to the same limitation as a traditional IRA.

You cannot retroactively elect to make the first transaction a distribution

NOTE: Plan to Plan transfers do not have the limitations of 1 roll over transfer per year.

NOTE You must roll over the same property as received. You cannot exchange money or another asset of the same value unless you sell the asset.

January 12, 2009

How to compute MRDs: Life expectancy of beneficiary

As long as the sole designated beneficiary is not the surviving spouse the RMD is the life expectancy of the designated Beneficiary.

Each years MRD's is computed by dividing the prior year-end account balance by a life expectancy factor
(called the "Applicable Distribution Period" (ADP) or divisor) obtained from an IRS table,
with two significant differences:

A. Single Life Table. The beneficiary's life expectancy is always computed using the Single Life Table (¶ 1.2.03), rather than whichever table was used to compute the participant's MRDs.

B. Fixed-term method. Post-death MRDs are computed using the fixed-term method (¶ 1.2.04(B)), rather than the annual recalculation method used during the participant's life, unless the surviving spouse is the sole beneficiary (see ¶ 1.6.06(D)).

A distribution must be taken every year, until the account has been entirely distributed. The "fundamental laws of MRDs" continue to apply to the beneficiary just as they applied to the participant during the participant's life.
As long as the beneficiary's remaining life expectancy is greater than [100 ÷ the plan's annual growth rate], the plan balance will be growing faster than the beneficiary is withdrawing it.

January 12, 2009

Stretch Beneficiaries and Complications with Estate Planning

Some of the common issues with naming beneficiaries on retirement accounts:
1) Make sure you name a beneficiary on a retirement account or estate will become beneficiary.
2) Multiple Beneficiaries on accounts can cause problems because all Beneficiaries must take the ADP of the oldest beneficiary
3) Lump sum distribution requirements- can be transfered to IRA.
4) If the beneficiary is a see through trust, then each beneficiary of the oldest beneficiary.
5) if the beneficiary is older than the participant, the life expectancy of the participant is used.

January 12, 2009

Some individuals still will have a RMD's in 2009

We previously reported that there were no RMD (required minimum distribution) in 2009. This turns out not to be trust in at least one case. If you turned 70.5 in 2008 and did not make your RMS in 2009 as required. You must still make your RMD by April 1, 2009

January 12, 2009

Heckerling Institute on Estate Planning starts today in Orlando Florida

The University of Miami School of Law’s Heckerling Institute will host the 43rd Annual Estate Planning Conference from January 12 –16, 2009 at the Orlando World Center Marriott Resort & Convention Center.

The Heckerling Institute on Estate Planning is the nation’s leading conference for estate planning professionals. As the largest gathering of its kind in the country, the conference is designed to meet the educational needs of sophisticated attorneys, trust officers, accountants, insurance advisors, and wealth management professionals.

This year, the Institute offers a new series of programs focusing on the estate planning and administration issues associated with retirement plan benefits. The comprehensive series will provide registrants with a thorough understanding of the planning techniques involved in this growing practice area. This year’s Institute will also address the planning issues and opportunities presented by recent economic developments, changing demographics and the prospect for wealth transfer tax legislation in 2009. Conference sessions such as “Planning for the Unknown for 2010 and Beyond” and “Estate Planning for the Next Generation of Clients” reflect these timely concerns.

The Institute offers a unique opportunity to exchange ideas and network with leading estate planning professionals from around the country. The conference also offers the opportunity to review the latest in technology, products and services displayed by nearly 150 vendors in an exhibit hall dedicated entirely to the estate planning industry. Register for the conference at http://www.law.miami.edu/heckerling or call (305) 284-4762 for more information.

January 11, 2009

Admitting a Lost Will

Professor Gerry Beyer, author of the WIlls, Trust & Estates Professor Blog wrote an article where a Texas court admitted a copy of a will which gave most of the assets to the decedents sister instead of the children. The will had been seen shortly before the decedents death and many people had access to it. Normally, if a will was last seen in the decedents possession and cannot be found the Florida Will is presumed to have been revoked by the decedent. But his presumption can be overcome as it was in this Texas case.

January 7, 2009

Non-Compete Agreements

As a Jacksonville Florida non-compete Lawyer, I often am asked about some of the provisions that are contained in a Florida employment agreement. I found an article on the Texas Non-Compete Law Blog, entitled Texas Executive Employment Agreements: Checklist for Employees and thought that the information would be relevant to my Jacksonville Clients. I have based this information on what was contained in that article, but modified removed some information and added some that is specific to Jacksonville and throughout Florida .

1. Term of Employment. Employment agreements are either for a fixed term or at-will. Most at-will employment agreement can be terminated by either party at any time for any reason. Some Jacksonville employment agreements are for a fixed term (e.g., a six-months or one-year term) also contain provisions pursuant to which the employer may terminate the employee "for any reason" on shorter notice (e.g., "thirty days' notice"). Such an agreement is in reality a 30-day employment contract.

2. Position, job duties, location. Florida Employment agreements routinely contain provisions outlining what the employee's title will be, what their duties will be, who the supervisor will be, and where the work will be performed.

3. Compensation. Employment agreements often reference compensation or salary and sometimes discretionary compensation (e.g. bonuses and stock options).
4. Termination for Cause. Employment agreements often provide that an employee may be terminated for "cause," and "cause" is defined to include various acts or omissions by the employee. Some acts--like commission of a felony and embezzlement of company funds are fairly easy to understand. However, defining "cause" to include the employee's failure to perform his/her job duties can be difficult because this can be subjective. Employees want what a clear non subjective definition of cause.

5. Classification. Employment agreements often reference an employees status as exempt or non-exempt. In some cases employees are classified as independent contractors. Whether or not an employee is an independent contractor, an employee, exempt, or non-exempt is often a factual analysis of the interactions amongst employees and their employers.

6. Nondisclosure Agreements. Employment agreements can contain prohibitions on the disclosure of the employer's confidential or proprietary information to a third party. An employee needs to know what information the employer considers to be confidential or proprietary. Employers need to notify employees what information they consider confidential or proprietary.

7. Non-compete Agreements: can contain provisions limiting an employee's right to compete with the employer, both during and after employment. The provision should specify activities in which the employee may not engage. In Florida the geographic scope of the restrictions must be reasonable. Terms of non-compete agreements are limited in Florida, most agreements that are in excess of 2 years are considered unreasonable and the court may shorten the term.

8. Non-solicitation Agreements. Along with non-compete provisions, some employment agreements contain prohibitions on soliciting the employer's customers, its employees, and/or its vendors. In Florida, these provisions are enforceable.

9. Change in Control. What happens if the employer is purchased by another company? Should that affect the employee's obligations? Should the employee be able to escape his non-compete and non-solicitation obligations? On a related note, should the employer be able to assign the agreement to another company (so that the "new" company can enforce the employee's non-compete and non-solicitation obligations)? Employment agreements don't always address these issues, but employees are wise to think about them.

10. Arbitration. Employment agreements often state that legal disputes between employers and employees must be submitted to binding arbitration (versus being litigated in court). Provisions like this can be one-sided (i.e., sometimes, only the employee is required to arbitrate its disputes, whereas the employer can go to court). Employers need to be mindful of the effects of agreeing to arbitrate disputes as opposed to litigate them.

11. Choice of Law and Forum Selection. Employment agreements usually specify the state whose law will govern the agreement and the place where suit must be filed in the event of a legal dispute. The latter can be especially problematic for an employee, because it may require her to bring any claims she may have in a foreign state, which can be very expensive.

January 6, 2009

Estate Planning and Craigslist

I have begun seeing attorneys advertise on Craigslist. Here is the latest one in San Francisco.
This San Francisco Estate Planning Lawyer is offering a 25% off on California Estate Planning.

I have tended to take a different approach and price my services at lower fixed rate than many of the Jacksonville Estate Planning Lawyers. I am interested to find out If you would check craigslist for a lawyer ? If so please Le me know.

January 5, 2009

Florida Probate Fees

Under Florida Law, the fees for a probate must be reasonable. Many lawyers charge the statutory rates of approximately 3% of the estate. This fee schedule is only a guideline and is not necessarily reasonable. In addition, we have seen probate fees that include the percentage on non probate assets like a homestead. This is clearly not permitted under the statutes and case law. If you would like a quote on a Florida Probate Contact a Florida Probate Lawyer.

Jacksonville Probate Lawyer, David Goldman has put together a Florida Probate Handbook that is being offered free to readers and visitors of his websites. If you would like a copy, visit the Free Florida Probate Handbook web page, fill out the form, and one will be sent to you within 24 hours by email.