Estate Planning Presentation Today

Posted by on Jan 31, 2011 in asset protection, corporate formation, estate planning, Legal News, tax, Trusts, Wills |

This afternoon, I will be the guest speaker at Valic’s monthly meeting of life insurance and financial advising professionals. The purpose of this blog post is not to invite everyone to attend but rather to inform my readers as to the topics I will be covering.

As we begin 2011, there is much uncertainty in the areas of both estate planning and asset protection. For much of 2010, we expected 2011 to greet us with a 55 percent estate tax on all assets over $1 million. Toward the end of 2010, President Obama gave in to Republican demands of a reprieve on this exorbitantly high death tax and agreed to reduce the estate tax for 2011 and 2012 to 35 percent, with a $5 million exemption amount. If you plan on dying in the next two years, you may be relieved. However, if you plan on living well past 2012, uncertainty still remains. As of today, the estate tax rate for 2013 will revert to 55 percent, with only a $1 million exemption amount. We will hope for the best but must plan for the worst, which is why we recommend that our clients set up Irrevocable Life Insurance Trusts for all life insurance policies over $250,000 and Bypass trusts for all marital estates over $2 million. As the estate laws change, we will continue to update you so that you may better serve your clients and protect yourself and your family.

The world of asset protection was turned slightly on its head as well in 2010. On June 24, 2010, the Florida Supreme Court issued its long-awaited opinion in the case of Shaun Olmstead, et al., v. The Federal Trade Commission and raised the question as to whether Florida limited liability companies (LLCs) will continue to have charging order protection. A charging order is a remedy that a creditor of a member in an LLC can receive from a court that instructs the entity to give the creditor any distributions that would otherwise be paid to the partner or member from the entity. Generally, a creditor who receives a charging order with respect to a member’s interest in the entity does not have any authority to mandate distributions from the entity or to participate in the management and affairs of the entity, nor are they able to access the assets of the company.

Charging orders are governed by state law, and in many states, a charging order is the exclusive remedy for a creditor with respect to a debtor’s LLC membership. However, the Olmstead ruling allowed the creditor to “pierce the corporate veil” of the LLC and access the actual assets of the LLC. While the LLC at issue in Olmstead was a single-member LLC, many attorneys are concerned about the slippery slope that would allow the piercing of multiple-member LLC’s as well. It is definitely something that we will keep an eye on in the coming months.

If you have any questions about anything above, or anything regarding estate planning, asset protection, or probate in general, please feel free to contact me directly at 954-944-2855 or via email at It’s a Wild world! Are you protected?

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Separate Share Trusts for Your Children

Posted by on Jan 25, 2011 in asset protection, estate planning, Family Law, Legal News, tax, Trusts, Wills |

It is more than likely that the reason for establishing your estate plan is to ensure that your family is financially secure after you are gone. Estate planning for families with minor children can present challenges and difficult choices to parents. The challenges originate from the minor’s legal restrictions on ownership of property and by the parent’s desire to gift assets to a minor but to defer the minor’s actual possession until the minor reaches some level of maturity or at least the age of majority. estate planning for minor childrenAdditionally, planning for minors also involves planning for the custody of the minor in the event both parents die before the minor reaches the legal age of majority. Once appointed, the guardian has a significant impact on the child’s value system, religious beliefs, education and, in general, the child’s development to adulthood.

Once a guardian is chosen, the most effective way to make sure that each of your children receives the necessary financial support to ensure that they are well taken care of is to establish your Revocable Trust and draft a provision that would create Separate Share Trusts upon your death. A “Separate Share Trust” is called that because a separate trust is created for each of your children. This can make it easier for the parents to account for the differences in the needs and propensities of each child. If one child has special medical or education needs, or if there is a wide gap in the children’s ages, parents can establish the appropriate portion of the estate, and can establish the terms of the distribution accordingly. Thus, by using Separate Share Trust, you can ensure that each child is cared for according to their specific needs.

In Separate Share Trust the parent/grantor can decide under what circumstances and at what age each child has the maturity sufficient to take possession of the assets. This will ensure that children will not recklessly waste the funds when they turn 18. However, one disadvantage to using “separate share” trusts with multiple children is the difficulty in administration. Depending on the provisions of the trust agreement, the trustee (which does not have to be the legal guardian) may have to account to each beneficiary separately and may have to maintain records of the distributable net income attributable to each beneficiary for income tax purposes.

A grantor need not have a large estate to create a trust. The assets you will leave your children can add up faster than you think. If you add the value of your home, savings and investment accounts, you may find that you are well over $75,000. In these cases a trust is usually the best solution. In addition, the trust could be funded by life insurance policies which can push the value of their estate much higher. Once established, the trust would provide for the children’s care and education and make money available to them as they reach certain ages indicative of maturity 18, 21, 25, 30, 35 or any other age you specify. You’ve worked hard to provide for your family a bright future. Plan accordingly and make sure that your work creates the best opportunities imaginable for your children.

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Should I Deed My Homestead Property Into My Revocable Trust?

Posted by on Jan 12, 2011 in Legal News |

Yes! If you dont deed your home to your trust, your home will be forced into the probate process after the deaths of both you and your spouse. Real estate is one of the most difficult assets to probate, so you definitely want to assure that ALL of your real estate is owned by your trust or by your LLC. Your home should always be owned by your revocable trust.

Some of my clients are concerned that the transferring of their homestead into their revocable trust will forfeit their homestead protection. It will not affect any homestead rights you currently have. Trust ownership has always provided for the continued tax advantages and creditor protection that home owners are afforded in Florida. Florida’s Third District Court of Appeals affirmed this understanding in their Octobet 27, 2010 ruling in the case of Aronson v Aronson.

There should now be no question as to the title of your homestead. It should always be owned by your revocable trust.

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Should My Business Be Categorized as an S Corp or an LLC?

Posted by on Jan 5, 2011 in asset protection, corporate formation, Real Estate |

A difference between a corporation and an LLC is that a creditor of an owner may directly levy on the debtor/shareholder’s stock in a corporation and thus take all the rights that compose the stock share, such as voting rights, right to elect directors, etc. By contrast, a creditor of an LLC is usually limited to a lien against the debtor/member’s economic right to distributions only until the judgment is paid, but the creditor usually takes no other of the debtor/member’s rights in the LLC. (This is often referred to as a “charging order lien” from the form of the relief usually specified in the RULPA/RULLCA).

Calculator on the beachKeep in mind that one can have an “S-LLC” by the simple expedient of checking the box for the LLC to be taxed as a corporation instead of a partnership, and then making the S-election for the LLC.

Although the ruling in the Olmstead case subjected single-member LLC assets to liability tied to its single member, this may be held to be a bad ruling in the future. It certainly goes against the purpose and spirit of the LLC laws. In any event, this potential adverse result may be easily avoided by interjecting a second member in any Florida LLC until the law is further clarified. Another significant problem with an S Corp is that they are, by far, the worst structure for advanced planning purposes. The limitations imposed on financial planning and estate planning and the limitations against international shareholders are major impediments to using S corps, particularly in an increasingly more complicated estate and tax environment and a world that is quickly globalizing.

Too many attorneys and CPAs don’t seem to know that you can make the S election for the LLC; in general I much prefer the LLC for estate planning and asset protection purposes (although the single-member issues can be a concern if their are not two viable members to include in the LLC). While S corporations still have some effective uses, their use in the future as business entities will be far more limited, and LLCs will continue to be the vehicle of choice for privately-held and family businesses.

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Protecting the Nuclear Family

Posted by on Jan 3, 2011 in asset protection, estate planning, Family Law, tax, Trusts, Wills |

Divorce and second marriages present special challenges in estate planning. These challenges are common where the spouses have children from prior marriages. The emotions and people involved require a delicate balancing between the needs of the surviving spouse and those of natural children. The surviving spouse will want to insure a continuation of the lifestyle they enjoyed while both spouses were alive and children from a prior marriage may require support for education and maintenance until they are mature.

new familyMultiple marriage spouses cannot afford to procrastinate or put off the issue for later. Some believe that the best approach to estate planning is to put everything into joint ownership with the new spouse and expect that person to be fair and honest. This rarely works; the messiest probate battles almost always involve step parents, step children and step siblings. Don’t be the person who left a legacy of hurt feelings and anger. Inheritance battles will permanently divide families. The feud between families can go on for a very long time because the expensive and emotionally draining probate litigation process can go on for years. If you love your family, don’t leave them to sort out your mess. With proper planning, the estates of multiple marriage spouses can be administered in an orderly, mature fashion, with provision made for all interested parties.

One convenient and effective solution is the Revocable Trust. In a Revocable Trust only the Grantor can amend the agreement. Upon the death, the Trust becomes irrevocable, since the only person who had the right to amend it is unable to do so. In order to ensure the welfare of the children of the prior marriage, each spouse’s Revocable Trust should be funded with that spouse’s separate assets. Separate assets funded in each spouse’s separate Revocable Living Trust, and subsequently maintained in that Trust during the course of the marriage, often remain separate in a subsequent divorce. The Grantor can name anyone they wish as Trustee to manage and distribute the trust assets. The trust will specify all the provisions necessary to ensure that the Grantor’s wishes are met. In contrast to a will there is no probate process and a trust will not be contested.

The needs and wishes of couples in second marriages vary widely, depending on the age of the spouses, their net worth, the length of their marriage, the age of their children, and their relative contributions to the marital estate. A heartfelt and mature conversation must take place to discuss what is best for the family. Consulting an experienced Estate Planning Attorney is a good starting point. The result of establishing the Trust is that the Grantor may provide for his or her surviving spouse, and be assured that the Grantor’s children will also be taken care of.

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