Florida Estate Planning Lawyer Blog

Florida DR-219 Form is Repealed as of 06/1/2008

Beginning June 1, 2008:

•The requirement to complete and file Form DR-219 is repealed. •The Department of Revenue will not process DR-219 forms received. •Destroy all blank DR-219 forms in your inventory.

The repeal of the requirement to complete and file Form DR-219 does not impact documentary stamp tax payment and filing requirements. Documentary stamp tax continues to be due on all documents that convey an interest in Florida real property. The tax must be paid at the time of recording with the Clerks of Court or County Recorders if the document is recorded prior to the 20th day of the month following the month the document is delivered. The tax must be paid directly to the Department of Revenue by the 20th day of the month following the month the document is delivered if the document is not recorded before. Delinquent payment of tax will continue to be subject to penalty and interest charges.

When one dies the value of their estate is subject to an Federal Estate Tax. This rate is currently 45%. In 2008 the Federal government has an exemption of the estate tax on the first 2 million dollars in value. In addition, many states have additional state taxes that are due when a resident of their state dies. Florida use to have an estate tax, but repealed it when the federal government stopped allowing you to deduct the amount of state estate tax paid from the federal estate tax due.

You should check on the estate tax in your state and consider costs and benefits of your state versus those with no estate tax. One of the reasons so many wealthy people move to Florida is the lack of income tax and estate tax.

How much are estate taxes?

Your estate will have to pay estate taxes if its net value when you die is more than the "exempt" amount set by Congress at that time. Here is the current schedule for the federal estate taxes:

Year of Death.........Estate Tax "Exemption"
2008................................$2 million
2009................................$3.5 million
2010................................N/A (repealed)
2011 and thereafter..........$1 million

In addition you may have to add your states taxes on top of the numbers above.
Although 2010 looks like 0, it really is higher, in 2010 the plan is tax on the increase in value of one's estate. Under the current plan, most assets are able to take advantage of a free stepped up value based upon the fair market value at the time of the decedents death.

A Florida Life Insurance Trust is an irrevocable trust that allows an individual to make the proceeds of a life insurance poliicy free from income taxes and estate taxes. Typical life insurance policies are income tax free, but many increase the value of one's estate to the point that the federal and or state income taxes are due. By using an ilit one can avoid these taxation issues.

In 2008 the Federal tax exemption is $2,000,000. Lets take a client with 1.5M in assets and a 1M life insurance policy.

If they were to die in 2008 their estate would be valued at 2.5M and 500,000 would be subject to estate taxes. The current estate tax rate is 45% so this estate would have to pay a tax of $225,000.

In 2011 the estate tax exemption is only $1M. With an estate valuation of $2.5M, 1.5M would be subject to estate taxes. Using the same tax rate, this estate would have to pay $675,000.

To find out if or how a Florida Life insurance trust can help you please Contact a Florida Estate Planning Lawyer.

The most common problem with Florida Estate Planning or estate planning in general is that those how are in the most need of the benefits a Florida Revocable Trust can offer are the ones who usually fail to fund their trust.

Creating a Florida Revocable Trust is only the beginning. No benefits are received by signing the documents. It is only when the Florida Revocable Trust is funded that the benefits of the trust can be used.

These benefits include avoiding delays in probate, reducing or eliminating the costs associated with a Florida Probate, and not having your assets or the distribution of your assets in the public record.

There are many other benefits that are specific to each Florida Revocable Trust .

If you have not funded your Florida Revocable Trust now is the time to do so. Don't forget to transfer your bank accounts, stocks, bonds, land, and other assets. Generally personal property can be assigned to the Florida Revocable Trust with a simple assignment. This is one type of asset that many people forget about and can often cause a Florida Probate to be necessary.

For more information on how to fund or create a Florida Revocable Trust Contact a Florida Estate Planning Lawyer.

With the recent rise in the popularity of the Florida Pet Trust many individuals are caught off guard with unexpected expenses associated with a Florida Pet Trust. These expenses are also associated with Florida Pet Trusts from other states as they are related to Federal issues.

The primary issue that a pet trust is subject to income tax reporting and required to pay taxes on the income the funds generate. Most Florida Pet Trusts have less than $50,000 in funds and the cost of maintianing them is relatively high. There are some Pet Trusts that pool the money and do master reporting. This can be a solution to smaller pet trusts. If you are interested in creating a Florida Pet Trust, Contact a Florida Pet Trust Lawyer for more information

A number of Texarkana residents have filed suit against sellers of living trust documents in a class action accusing the salesmen of exploiting senior citizens. This is similar to what I reported happening in California in December.

A Plaintiff says he purchased a living trust after attending a lunch presentation at a restaurant. He states the document was misrepresented and that if he dies with only these estate-planning documents, his estate will still need to be probated because the living trust failed to factor in his real property in Arkansas.

The living trust sellers are facing allegations of "masquerading as qualified financial advisers, estate planners, lawyers, and paralegals" to "exploit and prey" upon senior citizens with the creation and selling of "unnecessary and often useless" living trusts.

Defendants are accused of fraud, unauthorized practice of law, negligence, breach of fiduciary duty and conspiracy. The suit alleges that the defendants created and sold the living trusts as part of a scheme to gain access to senior citizens' financial information in order to sell annuities and other financial products.

According to the original complaint, the scheme begins with advertisements that persuade senior citizens to attend a free lunch or dinner. At these meetings, the "unlicensed" living trust defendants conduct presentations and distribute materials that misrepresent the impact of probate fees and estate taxes in order to create fear that the senior citizens need to buy a trust to prevent heirs from losing their estate.

These presentations include references to celebrities such as Elvis and describe the large amounts these celebrities have paid in estate taxes. The plaintiffs state these presentations do not include information about the federal estate tax exemption, the sliding scale of the exemption amount, or the possibility of the elimination of future estate taxes.

Further, the presentation does not tell senior citizens with estates larger than the exemption amount that the purchase of these living trusts will not automatically eliminate all estate taxes. The forms and decisions made by the defendants fail to take into account the entire senior's assets and ultimately and fail to serve the legal purpose as presented, argue the plaintiffs.

The plaintiffs claims the presentations convince the senior citizens to use their IRA accounts or other tax-exempt growth products to purchase variable annuities. However, according to the plaintiffs' accusations, the presentations and documents do not demonstrate the redundancy with regard to a variable annuity's tax deferral benefit when purchased in a qualified plan and also do not inform the consumer of the associated fees, surrender charges and commissions associated with these variable annuity products.

These types of programs are everywhere. It is important to use a lawyer who will look at your individual assets and who is not trying to sell you other financial products. To review your estate planning needs contact a Florida Estate Planning Lawyer.

The Florida Bar has released consumer information on Florida Probate where they describe many of the issues related to Probate in Florida. They discuss the following:

1. WHAT IS PROBATE?
2. WHAT ARE PROBATE ASSETS?
3. WHY IS PROBATE NECESSARY?
4. WHAT IS A WILL?
5. WHAT HAPPENS TO PROBATE ASSETS IF THERE IS NO WILL?
6. WHO IS INVOLVED IN THE PROBATE PROCESS?
7. WHERE ARE PROBATE PAPERS FILED?
8. WHO SUPERVISES THE PROBATE ADMINISTRATION?
9. WHAT IS A PERSONAL REPRESENTATIVE, AND WHAT DOES THE PERSONAL REPRESENTATIVE DO?
10. WHO CAN BE A PERSONAL REPRESENTATIVE?
11. WHO HAS PREFERENCE TO BE PERSONAL REPRESENTATIVE?
12. WHY DOES THE PERSONAL REPRESENTATIVE NEED AN ATTORNEY?
13. HOW ARE ESTATE CREDITORS HANDLED?
14. HOW IS THE INTERNAL REVENUE SERVICE ("IRS") INVOLVED?
15. HOW IS THE FLORIDA DEPARTMENT OF REVENUE INVOLVED?
16. WHAT RIGHTS DO THE SURVIVING FAMILY HAVE IN THE PROBATE ESTATE?
17. WHAT RIGHTS DO OTHER POTENTIAL BENEFICIARIES (OTHER THAN THE SURVIVING SPOUSE AND CHILDREN UNDER CERTAIN CIRCUMSTANCES) HAVE IN THE PROBATE ESTATE?
18. HOW LONG DOES PROBATE TAKE?
19. HOW ARE FEES DETERMINED IN PROBATE?
20. WHAT ALTERNATIVES ARE AVAILABLE TO FORMAL ADMINISTRATION?
21. WHAT IF THERE IS A REVOCABLE TRUST?

If you have questions about a Florida probate case please contact a Florida Probate Lawyer.

A recent update to the IRS website could affect you if your Jacksonville Florida Business is a Limited Liability Company.

Important information for Single Member Limited Liability Companies (LLC) who have or will have employees within the next 12 months:

IRS regulations require a single member limited liability company that is (1) owned by one individual and (2) has or will have employees within the next 12 months to have two EINs. One EIN is assigned to the individual owner (as a sole proprietor) and one is assigned to the LLC. If you do not already have an EIN as a sole proprietor, you cannot use the online EIN application to apply for the LLC EIN. Please call the Business and Specialty Tax Line at (800) 829-4933 between 7:00 a.m. and 10:00 p.m. local time and an assistor will take your information and assign you the two required EINs. We are sorry for the inconvenience.

APPLY FOR AN EIN ONLINE NOW

A recent article on Your Louisiana Estate Planning Blog, For Families With More Than $2 million of Assets: Bad Wills Can Cost You $1,000,000 talks about how poorly drafted wills can quickly cost your over $1Million in estate taxes. I see several clients a month that would have tax bills in excess of 1 Million dollars upon their death.

For those of you who have assets in excess of 2 million or expect to have assets in 2011 in excess of 1 million dollars, did you know that almost 1/2 of your estate will go to pay the tax bill?

If you have substantial assets and want to leave them to your family instead of the government, talk to a Florida Estate Planning Lawyer about how to structure your assets.

Professor Gerry W. Beyer author of the Wills, Trusts, & Estates Professors Blog, as reported on a mistake in estate planning where a Another Self-Help Estate Plan Gone Awry. In this case a man decided not to consult with anestate planning lawyer. He transferred the family home to his stepchildren son and $150,000 of securities to his son.

The house was highly appreciated and as such was a poor asset to select to use as a lifetime gift. Because it was transferred during life, the children had to use the father's basis instead of the price of the home at the death of the father. This resulted in over $80,000 in capital gains liability.

In addition the house, because it was transferred within 3 years of death, was still included in the father's estate value and did not reduce his estate taxes.

The moral of the story: Spontaneous self-help by a Testator / Grantor can backfire and deprive heirs of large percentages of an estate and prompt family tensions. Professional planning would have made a huge difference to this man's family.

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

This is a common mistake found in Florida Probate cases, when people try to make their own wills, or transfer their assets without getting professional help from an attorney or accountant who is familiar with the effects of gifting and estate planning.

If you have used software, a form, or an online service to prepare your will, you should have it reviewed by a Florida Estate planning Attorney for potential problems.

Tax breaks on dividends and capital gains for college-age dependents will end on January 1. In the meantime, families can still take maximum advantage of the current law.

A significant source of tax savings for American families will disappear on January 1, 2008. That’s when changes Congress made to the tax code in 2007 go into effect, increasing the tax rate on unearned income college-age taxpayers receive from their parents. Simply put, Congress is cracking down on parents who transfer such assets as stocks, bonds and mutual funds to children to take advantage of lower income tax rates.

As a result, the Small Business and Work Opportunities Act of 2007 extends the higher tax rate to children 18 years old and to full-time students ages 19 to 23. For 2008, the unearned income of children that exceeds $1,800 will be taxed at their parents’ usually higher marginal income tax rate—making it more difficult to shift assets to children to, say, meet college costs. (The $1,800 limit adjusts annually for inflation. The limit is $1,700 for 2007.)

Time to act

Families affected by the changes may want to take advantage of the time remaining in 2007 before these new rules go into effect. Your Financial Advisor or Jacksonville Estate Planning Lawyer can help you develop a strategy to transfer appreciated assets to your children ages 18 to 23 and sell that property in 2007 at lower capital gains rates.

For now, you can give your child up to $24,000 ($12,000 per parent) in appreciated property without triggering a gift tax. For example, a couple could make their 19-year-old daughter a gift of stock valued at $24,000. Assuming a $4,000 cost basis and the daughter’s sale of the shares by December 31, 2007, the $20,000 gain would be taxed at her 5% tax rate, resulting in a $1,000 tax. However, if the family waits until 2008 to sell the stock, the tax liability could reach $2,800.

If this same family made transfers in previous years in expectation of selling the assets in 2008 or beyond to pay for their daughter’s college education, 2007 would be a good time to consider selling.

Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state or local tax penalties. Please consult your adviser or Jacksonville Estate Planning Lawyer as to any tax, accounting or legal statements made herein.

Mitchell Port a California lawyer posted a link to an article on the California Tax Attorney Blog about an article on the State Bar Website which provides information on estate planning. Although this is a California bar website, many of the same issues and considerations are important to Florida residents interested in Florida Estate Planning. Much of the information is also found on The Florida Estate Planning Lawyer Blog which primarily deals with Florida issues.

1. What Is Estate Planning?
2. What Is Involved in Estate Planning?
3. Who Needs Estate Planning ?
4. What Is Included in my Estate?
5. What Is a Will?
6. What Is a Revocable Living Trust?
7. What Is Probate?
8. To Whom Should I Leave My Assets?
9. Whom Should I Name as My Executor or Trustee?
10. How Should I Provide for My Minor Children?
11. When Does Estate Planning Involve Tax Planning?
12. How Does the Way in Which I Hold Title Make a Difference?
13. What Are Other Methods of Leaving Property?
14. What If I Become Unable to Care for Myself ?
15. Who Should Help Me With My Estate Planning Documents?
16. How Do I Find a Qualified Lawyer?
17. Should I Beware of Someone Who Is a "Promoter" of Financial and Estate Planning Services?
18. What Are the Costs Involved In Estate Planning?

If you or a family member fees that a Florida Estate Plan will benefit you please contact a Florida Estate Planning Lawyer.

One common mistake that people make when they have a spouse or children is to transfer their retirement accounts into their Florida Living Trust.

Generally, retirement accounts are not subject to probate because you can name beneficiaries. If you name individual beneficiaries, each beneficiary is given the most flexibility in the way they take and report the proceeds from the IRA.

If you name a Florida Living Trust, the beneficiaries might have to take all of the distributions in the year after death. This can happen when one of the beneficiaries is a charity or not an individual.

The other main problem is when there is a great difference in age between the oldest and youngest beneficiary. Often this happens when the spouse is one of the beneficiaries and there are children or grandchildren that are also named beneficiaries. When this happens it is possible to make all of the distributions the same as with the oldest beneficiary.

These problems can be solved or avoided if the retirement accounts are properly setup, separated, or if the problem beneficiaries are dealt with timely.

Generally its best to either name beneficiaries with retirement accounts individually, separate the retirement accounts while you are still alive, or name a separate revocable trust for these benefits that is different that the main revocable trust.

For more information on how to deal with retirement accounts in probate you should talk with a Florida Probate Lawyer who is familiar with Retirement benefits. It is even better to plan things upfront by using a Florida Estate Planning Lawyer.

Last month the IRS released a newly revised Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and Instructions to Form 706. The new form is to be used for estates of decedents dying after December 31, 2006 and before January 1, 2008, and reflects changes in law as well as indexing changes.

According to the instructions, the following items are new:

• Use of the revision is only for the estates of decedents dying in calendar year 2007.
• The maximum tax rate for the estates of decedents dying in 2007 has decreased to 45%.
• The Small Business and Work Opportunity Tax Act of 2007, P.L.110-28, extends the application of income tax return preparer penalties to all tax return preparers, including estate tax return preparers.
• The decedent's authority over certain financial accounts in a foreign country must be reported on Part 4 - General Information.
• Various dollar amounts and limitations are indexed for inflation, and the following amounts have increased:
1. The ceiling on special-use valuation is $940,000, and
2. The amount used in computing the 2% portion of estate tax payable in installments is $1,250,000.
• Beginning with the estates of decedent's dying and generation-skipping transfers occurring after December 31, 2003, the generation-skipping transfer (GST) exemption is equal to the applicable exclusion amount. ($2,000,000 for 2007).

Visit the IRS website at www.irs.gov and look under Forms and Publications.

Source: Internal Revenue Service, Form 706 (United States Estate / and Generation-Skipping Transfer Tax Return) and Instructions for Form 706, Forms and Publications - September 28, 2007.

One of the first things your Florida Probate Lawyer should tell you is that as an executor or Personal Representative of a Florida Probate Case, you are personally liable for any unpaid taxes or penalties for the decedent.

Kimberly Martinez-Lejarza has a nice review of the Estate of Ziotowski v. Commissioner. This tax court held that the failure of the two executors to file the 706 estate return made them liable for the taxes, penalties, and interest even though their attorney failed to inform them of the tax, filing, and due date.

Kimberly does a good job of analyzing the case stating:

That there was no way the estate could possibly stand upon its argument of reasonable reliance on the advice of counsel: there was no evidence the executors had even asked their attorney for advice as to whether the return was due on time, let alone that they had received such advice. In its analysis, the court also pointed to testimony given by one of the executors that further demonstrated the executors' complete disengagement from the estate administration process, including the preparation of the estate tax return. In the end, the estate was held liable for the additional tax generated as a result of the late filing.

When it comes to taxes, you the PR is ultimately responsible. Make sure your Florida Probate Lawyer understands this before you learn the hard way

In a Florida Probate case there are many tax issues that need to be considered. Below is a list of the things that should be done immediately.

1) Shortly after the decedent's death, someone should contact the decedent's CPA to get general information regarding the status of the decedent's income and gift tax returns.

a) Obtain copies of income tax returns for the last 3 years.
b) Obtain copies of all filed gift tax returns.
c) Consider having the PR sign an IRS power of attorney (Form 2848 and 2848 Instructions) which is submitted to the IRS. This will allow the Florida Probate Attorney to talk with the IRS and obtain information regarding the status of the decedent's federal income taxes and returns. This form can be faxed to the IRS at 866-860-4259

2) the Estimated estate tax liability if any needs to be dealt with immediately. Raise cash for estimated estate tax, debts, and administration expenses.

3)File Form 56 for

a) Decedent's income tax.
b) Decedent's Estate, Generation-skipping and gift taxes

4) Consider whether it is necessary to file extensions for decedent's prior year gift and income tax returns. NOTE an extension does not extend the due date for tax remittance.

5) Retirement plan (IRA) minimum distribution for the year of death. IRC 401(a)(9) and 408(a)(6).

6) If PR is not going to take a PR fee, file a Waiver of Commission in court probate file. See. Rev. Rul. 66-167