Articles Posted in Estate Planning

Asset protection was previously out of reach for most Americans.  Thanks to a new trust called the IPUG™ Trust, Asset Protection is affordable for the average family.  In the past many families created trusts to avoid estate tax, but with the recent increases in the Federal estate tax exemptions, many use trusts to manage assets, avoid probate, and protect assets from creditors.

The iPug™ Trust not only provides advantageous tax benefits, but it also provides asset protection, while retaining Grantor control,” explains David J. Zumpano, CPA, ESQ., President and Founder of MPS and creator of the iPug™ Trust. “iPug™ Planning will  apply to 99.5% of Americans.”

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Estate Planning for Digital Assets is becoming a more important part of our estate planning.  While most online accounts simply expire when you die, Facebook has recently incorporated some changes to your account so you can specify what happens when you die.

Until recently, loved ones of the deceased only had two choices:

  1. Keep the wall public so everyone could continue to post messages and thoughts on the wall, or
  2. Request to have the page “memorialized,” which meant the profile was no longer searchable or visible to those who were not already friends of the individual.

What Facebook did not allow to happen was for someone to manage the profile of the deceased owner without  having the password.  That just changed with the Facebook Legacy Contact feature.  A Facebook user can now choose a “legacy contact.”  The Legacy Contact can manage your account  or delete the account after you pass away.

Facebook’s Updated Options and Release Stated:

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The amount you can give anyone without having to file a gift tax return in 2015 remains the same as 2014 at $14,000.

Remember that you can give your children, their spouses, your grandkids $14,000 each. In addition, if you are married, your spouse can also gift $14,000 to each person.

Generally, families use gifting to reduce the size of their estate do not need Medicaid long-term care coverage, but if you or your spouse need care and you have gifted money in the past, it may affect your ability to obtain coverage.

The $14,000 figure is the amount of the current gift tax exclusion (for 2014 and 2015), meaning that any person who gives away $14,000 or less to any one individual does not have to report the gift to the IRS, and you can give this amount to as many people as you like. If you give away more than $14,000 to any one person (other than your spouse), you will have to file a gift tax return. Filing a gift tax return does not mean you will have to pay a gift tax. Taxes are only when your reportable gifts total more than $5.43 million (2015 figure) during your lifetime.

Many people incorrectly believe that if they give away an amount equal to the current $14,000 annual gift tax exclusion, this gift will be exempt from Medicaid’s five-year look-back at transfers that could trigger a waiting period for benefits.

The gift tax exclusion is an IRS rule, and this IRS rule has nothing to do with Medicaid’s asset transfer rules. While the $14,000 that you gave to your grandchild this year will be exempt from any gift tax, Medicaid will still count it as a transfer that could make you ineligible for nursing home benefits for a certain amount of time should you apply for them within the next five years.

If you think there is a chance you will need Medicaid coverage of long-term care in the foreseeable future, see your Jacksonville elder law attorney before starting a gifting plan.

If you have been told, don’t worry about your IRA it is protected because Florida has statutory protections for IRAs, you may have misunderstood or been mislead. While Florida does have statutory protection for inherited IRA’s, this protection only applies if your beneficiaries are residents of Florida at the time of your death.

Why take a chance with naming individuals as a beneficiary of your IRA. A properly designed trust should be the beneficiary of your IRA to protect the proceeds from the creditors of your beneficiaries at the time of your death.

In June of this year, the US Supreme Court in Clark V Rameker stated that children or other “non-spouse” individuals who inherit are at risk of loss to their creditors. This was not a close call, it was a 9-0 decision and clarifies that an inherited IRA is not protected from the creditors of its owners.

While a spouse can be named, the spouse has a unique option that other beneficiaries do not have. The spouse can do a rollover IRA. This protection does not help one who dies without a spouse or has serious risks if the surviving spouse is in need of long-term care.

While in the past, most financial professionals would object to naming a trust as a beneficiary, you will start to see them realize the benefit as they become aware of the new risks to the beneficiaries that they did not foresee. They also did not understand that it is possible to create a trust where the stretch out provisions are not lost.

To maintain the stretch out provisions in an inherited IRA where a trust is a beneficiary, the trust must be a qualified beneficiary. For a trust to be a qualified pass thru beneficiary of an IRA, it must meet 4 criteria:

  1. The trust must be valid under state law;
  2. The trust must have identifiable “human” beneficiaries;
  3. The Trust must be irrevocable after the death of the settlor; and
  4. a copy of the plan document must be provided to the plan administrator

It is important to comply with these rules when naming a trust as a beneficiary of an IRA or other retirement account.

If a spouse was to maintain the decedent’s IRA status and draw out funds over the life expectancy of the decedent, the IRA would not be protected as a Roll over IRA or a new IRA.

If you would like to discuss how to properly name a trust a beneficary of your IRA, please contact our Jacksonville estate planning lawyers.

We often get asked about the iPug™ Trust and how it can be so different than a traditional revocable trust or a standard irrevocable trust. The iPug™ takes the best parts of an irrevocable trust and mixes them with the best parts of a revocable trust to create a new type of irrevocable trust where you are in control and can make changes to the beneficiaries and management of the trust just like you can with a revocable trust.

Why Do People Love iPug™?
Because iPug™ Protects You and Your Family From:

  • Lawsuits
  • Nursing Homes
  • Those that want to take away what you worked hard for.
  • Children’s indiscretions, their spouses and divorce.

An iPug™ Keeps You In Control By:

  • Allowing you to control your assets until death.
  • Allowing you to retain some, all, or none of thel income from your assets.
  • Permitting you use of your assets during life.
  • Ensuring you are able to qualify for Medicaid in the shortest period of time possible (often less than three years).
  • Favorable income and estate tax treatment.

Asset Protection Planning includes many complex laws, including, trust law, Medicaid law, probate law and contract law. If you have been using a traditional trust or will to protect from probate, it may be time to upgrade your planning to include asset protection. An iPug™ trust can be used with your current estate plan with some minor changes to your will and trust documents.

Many times we get questions from clients asking if their revocable trust provides asset protection from creditors. The answer to this is the typical legal answer “It Depends”. That is it depends on who owes the money. In Florida a revocable trust can provide some limited protection against the creditors of your beneficiaries through a spendthrift clause, but it will not provide protection from the creditors of the person who creates the trust. Upon your death, the assets in your revocable trust are available to your creditors.

There is a new type of irrevocable trust that is similar to a revocable trust in terms of management, control, and no negative tax effects. This special irrevocable trust is called an IPUG and can be structured to provide asset protection for the items placed in the trust.

An IPUG can be designed to protect an entire asset, the principal, or the income from the asset. The most common design is to protect the entire assets. If you are concerned about protecting your assets from future creditors and the creditors of your children, an IPUG may be the right choice for you.

More articles on what an IPUG is and the benefits of using an IPUG trust.

You can use a website or create your own will in Florida, but we find that some people do not create valid wills, or create wills that do things other than what they want. We only charge $200 for a will so an online will does not save very much considering the risks.

If you want to create your own will be sure that you sign the will at the end and in front of two witnesses. There are benefits to using a self proving affidavit, but one is not required under Florida law. Of course, most lawyers will include a self proving affidavit with the will that they prepare for you.

Many online wills or wills that individuals try to create do not include provisions for things that happen routinely. Some examples are a named person dies simultaneously, shortly after you, or before you. An improperly drafted will could expose your belongings to their creditors in such a case.
Another common example is that a will could leave money to someone who ends up being disqualified for government benefits because of the inheritance.

Your will could leave a large amount of money to a young adult, who is not financially responsible yet.

Your will could leave money to someone who is bankrupt or files for bankruptcy shortly after you die and their inheritance could be lost.

There are many reasons to hire a Florida estate planning lawyer to create a valid will in Florida that deals with your specific circumstances, but also many reasons like the ones mentioned above that most people never consider.

Many people see joint accounts as a cheap and easy way to avoid probate, since joint property passes to the join owner at death, but these accounts can actually be quite risky when it comes to estate planning.

Joint ownership of accounts can be a great way to easily pass assets to another owner at death. Joint ownership is also a great way to plan for an elder person’s incapacity, since the joint owner of the account can pay bills and manage investments if the primary owner falls ill or suffers from any other sickness.

There are some potential downsides to joint ownership of an account. The biggest factor to consider is the risk of joint ownership. Joint owners have complete access to the account, and the ability to use the account funds for any purpose. When children are made joint owners of an account, it is often the case they can take money without consulting with the other children.

Another risk involved with joint ownership accounts is that the funds of the account are available to all creditors of all the joint owners of the account. There is one type of joint ownership called tenants by the entireties that does not have this risk for assets in Florida. In addition, joint ownership of an account can also serve as a roadblock to receiving financial aid or health benefits.

Joint ownership of accounts can also cause some heirs to receive more inheritance than others. An example would be if a child is named a joint owner of the account. At the death of the original owner, that child could receive more than the other children. While the original account owner can hope the children will share the funds from the account equally, there is no guarantee the other joint owner will distribute the money equally.

A system based on joint account ownership can also fail if the joint owner passes away before the original owner. If a child is the joint owner and passes, the child’s loved ones may not receive the benefit of those funds. For instance, if a mother places an account in the name of her child and herself with rights of survivorship and the child dies before the mother, the assets in that account will go to the mother’s heirs and not to the daughter’s heirs.

Joint accounts are best used in limited situations. One situation to possibly use a joint ownership account is when a senior has just one child and wants to pass everything to the child. Generally an estate planning trust can provide better protections for the unexpected than joint ownership or a beneficiary designation. There are risks involved with joint ownership and tax issues, so you should consult an estate-planning attorney before relying on joint ownership.

Another way a joint account can be useful is to include children on a person’s checking account to help pay monthly bills. This checking account should be a smaller account that does not include the bulk of the original owner’s assets.

Instead of taking a risk with joint ownership accounts, we recommend using more reliable estate-planning tools such as durable power of attorney to provide the ability to pay bills or help with financial decisions. These tools can limit the risk of loss by eliminating your agent’s creditors from those who can access your funds.

If your family works in a high stress profession is a good idea to make sure you and your family keep their estate plans up to date.

The unexpected deaths of finance workers in the past few months by suicide around the world have raised concerns about mental health and stress levels of the banking profession.

JP Morgan executive director Julian Knott, 45, killed himself after shooting his wife Alita Knott, 49, to death with a shotgun. Julian worked for JP Morgan until July 2010, before he and his wife moved to the United States. Before the move, Alita had opened a nursery in Southwick, West Sussex and remained the nursery’s care provider until 2013.

Police officials in London are currently investigating two suicides of finance workers. William Broeksmit, 58, was a retired risk executive at Deutsche Bank. Broeksmit died on Jan 26, 2014 at his home in west London, where Police found him hanging. Gabriel Magee was a 39-year-old vice president at JP Morgan who died after falling from his firm’s 33-story building. A few weeks later, Li Junjie, a 33-year-old banker at JP Morgan in Hong Kong, jumped from his firm’s local headquarters as well.

The banking world’s aggressive, hard-working culture may be too much for some to handle. Peter Rogers says banks are beginning to realize the scale of the problem. Rodgers believes the banking sector needs to see a number of initiatives to improve staff well being and hopefully a cultural shift will occur within the firms.

Emma Mamo, who leads a workplace initiative in the U.K. said finance does have a long-hours culture. “People can’t keep doing long hours; you need perspective and downtime,” she warned.

America has also seen a recent trend of banking suicides. Mike Dueker, a 50-year-old chief economist of a US investment bank was found dead recently near the Tacoma Narrows Bridge in Washington State. Richard Talley, 57, was the founder of American Title Services in Colorado. He was found dead earlier this month after allegedly shooting himself with a nail gun.

On January 10, Bank of America issued a statement to employees telling them they should take some weekends off. Christian Meissner, head of global corporate and investment banking at Bank of America said analysts and associates should “take a minimum of four weekend days off per month.”

JP Morgan is not a member of the City Mental Health Alliance and has announced any measures to deal with the alarming increase of employee suicides.

Carolyn Wolf, executive partner and director of mental health law practice at Abrams, Fensterman, suggests the trend may be tied to substance abuse. She thinks many young people get hooked on drugs such as Adderall to cope with the long hours. Many take the drug, prescribed for ADHD, to stay focused during a long workday. However, she says the substance abuse can exacerbate underlying mental health issues.

Suicide statistics show that financial professionals have a 39 percent higher likelihood of suicide than professions within the general public. In 2010, more than 38,000 Americans died by suicide, according to the Center for Disease Control.

Planning an estate can be a difficult process, but also a rewarding one because it helps to ensure that a person’s heirs will be provided for after he or she dies. Many assume they should wait until after death to convey assets to their loved ones, but there are some benefits to giving assets to an heir while still alive.

There are two types of taxes to consider when determining when to give an heir your assets. A decedent who gives his or her assets to someone while still alive may have to pay a gift tax. This is a tax imposed by the federal government on any transfer of property. Property includes intangible items such as cash and stocks, as well as physical items such as vehicles or furniture.

The most important aspect of gift tax to understand is the unified gift and estate tax credit, which allows a person to give property tax free up to $5.34 million throughout his or her life.

According to current tax law, a person is allowed to give a tax-free gift worth up to $14,000 per recipient each year. This $14,000 is not counted against the lifetime exception. Any amount given to one recipient over $14,000 would count against this total. So this means if a person is given $18,000, then $4,000 would be deducted from the lifetime total and reported with a federal gift tax return.

When a person dies, an estate tax is imposed by the federal govern on the decedent’s estate after the property transfers to his or her heirs. This tax is calculated by the decedent’s “gross estate,” which includes all of his or her assets such as real estate, cash, and business interests. The net amount of these calculations are then added to any taxable gifts given by the decedent with a value large enough to deduct from the decedent’s unified credit.

These laws mean that giving heirs some inheritance now can actually be a good way of avoiding higher estate taxes. However, this is only beneficial to the gift giver if he or she avoids the gift tax by giving something with a value less than $14,000 per heir. If the gift giver is married, and gives the gift jointly with his or spouse, this gift will avoid the tax if its value is under $28,000.

There are other advantages to giving gifts while alive, which includes the benefit of seeing the heir actually enjoy the gift. This allows the gift giver to also advise the heir on how to use the gift. If the heir misuses the property against the decedent’s wishes, he or she can stop giving that person money and adjust the will accordingly.

There are also some good reasons to hold off on giving an heir their inheritance early. The biggest reason is the decedent may need that property or money while they are still alive. The financial climate can change between now and when the estate owner dies. A person who gives too many assets away may find they now need them in order to survive. A final reason to wait to give assets until after death is it allows the heirs to grow and mature first before receiving the gifts. This can ensure the inheritance is both more appreciated and used more wisely.

For more information on estate planning, contact Florida estate planning and probate attorney David Goldman at (904) 685-1200.

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