Estate Planning

July 16, 2015

When to Decant A trust?

While irrevocable trusts were once thought to be untouchable this may no longer be true as the practice of “decanting” a trust becomes more commonly used. Decanting lets a trustee, or the manager of the trust, change certain terms by figuratively pouring the assets from an old trust into a new one. So far, 21 states have adopted decanting laws and a group of trust lawyers and professors are drafting a model law to serve as a template for states to use in the future as a model.

Many families use irrevocable trusts to pass wealth to their beneficiaries because of the tax advantages and other benefits the trust offers. So far there are some limits to what decanting can do, as, for instance, trustees cannot change a beneficiary’s already vested interests in a trust.

So what can the act of decanting do? Continue reading

July 1, 2015

What is a GRAT?

by David M. Goldman

A GRAT is a Grantor Retained Annuity Trust and is a special type of irrevocable trust that allows the settlor, or trust maker, to transfer assets to this trust and receive an annual annuity payment for a certain amount of years. When the term of the GRAT ends, the assets remaining in the GRAT are distributed to the trust beneficiaries.

So how does it work?

The amount of the annuity payment paid to the settlor during the GRAT is calculated by using an interest rate determined by the IRS called the section 7520 interest rate. The settlor can even set the annuity payment so that it will be exactly equal to the section 7520 interest rate, meaning that theoretically all of the assets that been transferred into the GRAT will be returned to the settlor in the form of annuity payments. Continue reading

June 23, 2015

Estate Plans for a Single Person

by David M. Goldman

Estate planning often focuses on married couples, but estate planning for a single person is equally as important. A single person often owns assets in their name individually, which means these assets must go through the probate process when the person dies. The big question then becomes whom do these assets pass to? In addition, asset protection and Medicaid issues become more important to address with a single person than a married couple.

A single person like any other person can own many assets and have a desire to see those assets distributed to certain people. Some assets, such as life insurance and retirement plans, are distrusted at death according to the beneficiary designations. If a person dies without a will, his or her possessions are passed intestate according to the intestate laws of the state. For a single person, the state law usually provides that a single person’s assets are passed to his or her closest relatives. If there are no relatives then the assets are collected by the state. So estate planning is needed if a person wants a say in how his or her assets will distributed.

What documents does a single person need?

June 16, 2015

Have my estate planning documents become out of date?

by David M. Goldman

When lawyers draft estate-planning documents they are made with current laws in mind. However, estate-planning laws have changed in some key ways over the last few decades. Here are 4 key dates that have changed estate-planning. If your documents created before these dates it may be time to update them.

HIPAA

The first date to look out for is April 14, 2003, which is when the privacy rules under the Health Insurance Portability and Accountability Act first took effect. Although HIPAA was enacted in 1996, its privacy regulations were not enacted until several years later on April 14, 2003.

This act brought about much stricter guidelines regarding the disclosure of a person’s health information to third parties without explicit permission. Now, only a few people are allowed to receive this information, which becomes a much bigger issue if the person becomes incapacitated, such as in Terri Schiavo’s case. Now, a durable power of attorney is needed to make important health care decisions for loved ones. If your will, revocable trust, durable power of attorney or health care power of attorney was executed before this date, your executor, trustee, or agent may not be able to effectively work with your medical care providers or insurers.

State estate taxes Continue reading

June 9, 2015

How to modify an irrevocable trust in Florida

by David M. Goldman

In Florida, courts are now permitted to judicially modify an irrevocable trust even when a trust is unambiguous.

Historically, courts held the belief that the intent of the settlor, the person who creates a trust, should only be determined from the actual language of the trust document. This belief led courts to only modify a trust when the trust’s purpose, or provisions within the trust, were found to be ambiguous. If no ambiguity was found the court was unable to consider any other evidence of the settlor’s intent, and the beneficiaries were stuck with whatever the trust says on its face. In Florida, this changed when Florida adopted the Florida Trust code in 2007.

Florida’s Trust code is modeled on the Uniform Trust Code (UTC). The UTC deals with modifications in a number of sections that Florida has mostly adopted. For instance, UTC § 412 allows a court to modify or terminate a trust when the following circumstances occur:

May 29, 2015

Florida’s Probate and Trust Codes, 2015 Amendments Regarding Attorney’s Fees

by David M. Goldman

In Florida, the Florida Probate Code and the Florida Trust code govern the administration of estates and trusts. These codes establish the rules and procedures for all probate matters such as the administration of a will. The Florida Legislature has recently amended the Florida Probate Codes.

Attorneys Fees and Costs

Both the probate and trust codes provide that an attorney who has provided services to an estate or trust may be awarded reasonable compensation. The latest update to the codes has been in response to inconsistent application of these laws which used to require there be a finding of “bad faith, wrongdoing, or frivolousness” in order to award a party attorney’s fees and costs. The codes have now eliminated this vague language and have enumerated a list of factors that a court should use when deciding to award attorneys’ fees in a case. These considerations allow a court to even direct, in its discretion, from which part of the estate or trust attorney’s fees and costs may be paid.

May 29, 2015

What are required minimum distributions during retirement and how much are they?

by David M. Goldman

The rules that surround our retirement plan accounts and IRA’s can be tricky, especially when it comes to determining an individual’s required minimum distributions, or RMDs.

RMDs are the minimum amounts that a retirement plan account owner must withdraw as required by the federal government. Generally, a person is required to take RMDs from an IRA or retirement plan account in the year when he or she reaches age 70 ½ or later. If the retirement plan is an IRA or the account owner is a five percent owner of the business sponsoring the retirement plan, the RMDs must start once the account holder is age 70 ½ regardless of whether he or she is retired.

The rules for minimum distributions can be confusing, but a person’s RMD for any year is the account balance as of the end of the preceding calendar year divided by a distribution period from the IRS “Uniform Lifetime Table.” This is the way most people will calculate their RMD. However, if a spouse is the sole beneficiary of an IRA, and is more than 10 years younger, the Joint Life and Last Survivor Expectancy table must be used. A person is also allowed to take penalty-free distributions from their IRA or retirement account plans at age 59 ½.

May 28, 2015

Why you should name a trust as the beneficiary of your life insurance

by David M. Goldman

Naming a trust as a beneficiary of life insurance policy can have a huge benefit for people with large estates that are not taxable. It is also a great way to protect the insurance proceeds from future creditors and to help beneficiaries better manage their assets

There are a few common types of trusts that can serve as the owner or beneficiary of a life insurance policy. These trustees might include: an irrevocable life insurance trust, a living trust, a special needs trust and a spendthrift trust.

Irrevocable Life Insurance Trust

This type of trust, often referred to as ILIT, is used to irrevocably purchase insurance on the life of the grantor of the trust. This means the trust will have actual ownership of the policy, rather than the person the policy is for. This is done usually to avoid the taxing of life insurance proceeds at death under the Federal estate tax. Since the person does not actually own the life insurance policy, the proceeds are not subject to estate tax or included in that person’s estate when he or she dies.

Once a person with an ILIT dies, the insurance proceeds will be deposited into the ILIT. Usually, an ILIT is set up to provide for the other spouse during his or her lifetime, and the balance passes to the children or other named beneficiaries.

ILITs are typically used to save money on estate taxes by ensuring the life insurance proceeds would not be included in the insured person’s estate. In 2002, the estate tax exemption was only $1 million. Since 2013, Congress has raised the estate tax exemption has been raised to $5.43 million, and $10.86 for married couples. This much higher exemption means a large number of estates are no longer facing estate taxes. However, those with larger estates can still benefit greatly from the use of an ILIT. In addition, some families are still using ILITs incase the estate tax exception is lowered in the future.

Living Trusts Continue reading

May 27, 2015

How did the court in Clark v. Rameker change estate planning in Florida?

by David M. Goldman

The U.S. Supreme Court recently ruled that an inherited IRA is not a “retirement account” for purposes of protection under the Bankruptcy code. This now means that inherited IRAs are available to satisfy creditor’s claims in order to pay off debt.

The court characterized an inherited IRA as money that is set aside for the original owner’s retirement rather than money set aside for a designated beneficiary’s retirement. The court reached this conclusion using three elements to differentiate an inherited IRA from a participant-owned IRA:

The beneficiary of an inherited IRA cannot make additional contributions to the account, while an IRA owner can.
The beneficiary of an inherited IRA must take required minimum distributions from the account regardless of how far away the beneficiary is from actually retiring, while an IRA owner can defer distributions at least until age 70 1/2.
The beneficiary of an inherited IRA can withdraw all of the funds at any time and for any purpose without a penalty, while an IRA owner must generally wait until age 59 1/2 to take penalty free distributions.

March 6, 2015

Florida Asset Protection: What is an IPUG™ Trust? How does an IPUG™ Trust work?

by David M. Goldman

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.”