Irrevocable Life Insurance Trusts Provide Protection From Taxes and Liability

Posted by on Mar 29, 2010 in asset protection, estate planning, Legal News, tax, Trusts, Wills |

Irrevocable Life Insurance Trusts

Many people don’t realize that the proceeds of a South Florida life insurance policy are added to your estate for estate tax purposes if the policy is owned by the deceased during their last 3 years of life.  This is the case for over 90 percent of all life insurance policies.  While the beneficiary is not taxed on the proceeds directly, the estate will be taxed at a level of 55 percent beginning in 2011.  Most of the time, the beneficiary of the life insurance is also the representative of the estate.  This means that the government can tax your family coming and going if your plan is not structured properly.

Due to the massive tax implications, an Irrevocable Life Insurance Trust (“ILIT”) is quite useful for South Florida estate planning purposes.  An ILIT a legal instrument drafted by a South Florida estate planning attorney for the purpose of removing the life insurance from your estate in order to reduce taxes and increase asset protection.  You may designate your spouse, child, or other appropriate party as the beneficiary of the trust.  You may also provide detailed directions to the trustee of the ILIT, including how the life insurance payout should be distributed, when the trustee should make payments, loans, or investments, what to do with the family business, who receives the assets at the death or disability of your original beneficiaries, and when to terminate the trust.  The ILIT gives you control of the money from beyond the grave and protects your children from unnecessary liability.

As you can see, the structuring of your life insurance policy so that the ILIT holds the life insurance benefit is useful to achieve a number of goals, including:

1.    limiting or eliminating the estate tax;
2.    increasing the level of assets available to your spouse, children, and other loved ones or entities after you are gone; and
3.    providing extra liquidity to a cash strapped estate or business.

Since the ILIT is a separate South Florida legal entity that is outside your estate, the IRS is unable to levy an estate tax on the assets within the ILIT since they are out of your control.  Due to the fact that you are able to lay out all of your goals and desires in the trust document, and because normally the only asset inside the trust during your lifetime is your life insurance, it is logical to trade off giving up control in exchange for all of the tax benefits.  The trustee will be the applicant, owner, and beneficiary of your life insurance, so the proceeds will never pass through your taxable estate and the estate tax will be reduced by 55 percent of the life insurance benefit total.

Having your spouse or child own and act as the beneficiaries of a South Florida life insurance policy on your life is another way to avoid the estate tax on your life; however, the ILIT has the added benefit of also keeping the undistributed proceeds out of the taxable estates of your beneficiaries.  Properly planned ILITs will avoid estate taxes and generation skipping taxes for multiple generations.

An ILIT can also help you increase the assets available for your beneficiaries because it makes it easy to own one or more policies of life insurance.  The South Florida trustee has the trust document as an efficient road map to follow concerning the purchase, premium payments and distribution of the proceeds.  The ILIT infuses cash into your estate by making distributions, purchases, or loans as needed.  The trustee of the ILIT makes appropriate distributions of cash proceeds to cover debts, taxes, and funeral expenses.  The trustee could even purchase some or all of the business with the cash proceeds and professionally run the business until the children were old enough to take over.  The trustee could also make appropriate loans to the spouse, children, and business.

The early stages of estate planning are critical.  If you would like to arrange a free consultation, please contact the South Florida estate planning attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at  Let us protect what you value most.

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A Battle of Wills

Posted by on Mar 18, 2010 in asset protection, estate planning, Family Law, Legal News, tax, Wills |

Civilized Will Preparation in South Florida

In South Florida, something as personal a preparing a will often turns into a battle of wills for too many couples and families.  The creation or updating of an estate plan necessitates the contemplation of money, death and extended family.  These are topics that can cause fighting in even the strongest of families. To avoid any conflict with your partner or spouse over the planning of your estate, here are a few tips to following when discussing the subject.

Try not to be too critical of your partner’s family members. Many fights that arise over the drafting of a will arise out of perceived attacks on relatives rather than which relative will receive what after the testator dies.  If you have strong feelings that one particular relative should be left out of your will or you disagree with your partner’s choice of South Florida executor, you need to be very diplomatic and describe your position without speaking negatively about the specific relative.  For example, you may explain that you wish to give a particular relative less than an equal share of your estate because other descendants need the money more or will put it to better use.  Be sure not to tell your partner that you believe this person does not deserve the money, even if they really don’t.  You should explain that you are not disagreeing with your partner’s choice of executor or trustee because there is something wrong with this person (even if there is), but because you think that there is someone else even better equipped to handle the task.

Propose compromises rather than arguing for one side or the other. There is a greater likelihood of fights occurring when one partner or spouse feels like his or her voice is not being heard by the other.  One preemptive solution to this problem is to listen to your partner’s positions and look for some kind of middle ground, even if you completely disagree with their decision.  For instance, if you disagree about how to break up the estate among relatives due to some of the relatives being less deserving than others, you may leave this less-than-worthy descendant a family heirloom of sentimental value, even if it has very little financial value.  Another solution could be to establish a South Florida charitable trust that provides for the family as one partner wishes but later donates whatever remains to charity, as the other wishes.

Another possible compromise with re-married couples might involve giving a small percentage of the estate to a partner’s children from a former marriage rather than shut these descendants out entirely.  It might also be a good idea to include a statement in your will explaining that the descendants who received less are no less loved.  If you and your partner or spouse cannot agree on a South Florida executor for your will, you might each name your ideal candidate for executor and make them co-executors rather than selecting one over the other or even name a mutual friend or a South Florida bank as executor rather than argue over which family member to select.

Discuss any issues that are potential landmines with your partner or spouse before meeting with your estate planning attorney. Visiting your South Florida estate planning attorney just so you and your partner can argue in front of him will increase everyone’s tension level and waste your time and the attorney’s time.  Instead of waiting to discuss these situations at the attorney’s office, you should set up a time to sit down with your spouse or partner before the meeting and discuss who should be executor, who should be responsible for any minor children, and who should receive what from each of your estates.  Even if you cannot compromise on every issue, this pre-meeting discussion will allow you to clearly and calmly discuss any disagreements with your attorney at the free consultation.  At that time, he may be able to offer some acceptable solutions.

Discuss each of your goals and come up with one primary objective. What do you and your partner most want your will to accomplish?  If you can agree on one primary objective, you will be less likely to bicker over the smaller details.  If you have minor children, you and your spouse can likely agree that the primary goal of your will is to ensure that the children are taken care of.  Both spouses will be mainly concerned that the children are raised properly.  If your partner protests that giving one of your family members custody of the children will anger or disappoint members of their family, simply remind your partner of the primary goal and explain why living with your choice of guardian would be in the best interests of the children.

Remember to continuously use the term “for now.” You and your partner should have your estate plans revised every time there is a change in your family or in the estate tax law.  Your will can and will be amended in the future.  Reminding your spouse or partner that the decisions made today are not necessarily permanent can remove some of the emotion from the discussion.  For example, if your partner wishes to make her sister the guardian of the children but you would prefer them being raised by your brother because he is married and she is single, you can assure your spouse that the topic can be revisited should her sister get married.

For more information on successfully discussing your estate plan with your partner or spouse, please contact the South Florida estate planning attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at  Let us protect what you value most.

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Same-Sex and Unmarried Couples In “Grave” Danger

Posted by on Mar 13, 2010 in asset protection, estate planning, Family Law, Legal News, Real Estate, tax, Trusts, Wills |

Estate Planning Information for Cohabitating Unmarried Couples

Living together while remaining unmarried has never been more popular. Over 6.4 million opposite-sex unmarried couples currently live together.  This translates into 12.8 million people. There are an additional 750,000 same-sex unmarried couples in the United States which translates to an additional 1.5 million people. This is a whopping 92% increase since 1990. Over half of all unmarried households have children. If you are part of a cohabitating unmarried couple, it may be comforting to know that you have plenty of company. However, this doesn’t mean that you can ignore how the law affects your relationship. Here are some tools that unmarried and same-sex couples can use to avoid the “grave” danger of intestacy.

Domestic Partnership Agreements: Domestic partnership agreements set out the parameters of a relationship and specify the rights and responsibilities of each partner. They are similar to prenuptial agreements and are well-advised for unmarried couples who live together, be they same-sex or opposite sex.

Last Will and Testament: When you die without a formal will, the state of Florida will provide a will for you and distribute your assets as they see fit. This is known as “intestate succession” and it provides the least amount of protection to your family. Same-sex or unmarried couples are not recognized by Florida intestacy statutes. Thus, upon your death, your partner will have no rights to your estate. The chance for a will contest may be greater in same sex and unmarried relationships, as family members may not understand the choices you have made.

Revocable Living Trust: A living trust may be a good option for same-sex or unmarried couples, due to its private and expeditious nature. A living trust also helps to avoid probate in multiple venues if you own property in more than one state. A living trust can hold both individual and shared property and goes into effect as soon it is funded. In a revocable trust, you (as the “grantor”) retain control over the trust and its assets while you are alive. If you do not wish for creditors to access the trust assets, an irrevocable trust is a better option. A pour over can supplement a living trust and should be used to distribute any property not previously placed into the trust.

Durable Power of Attorney: A power of attorney for legal or financial matters allows you to appoint your partner to manage your affairs, should you become unable to do so. It is also helpful as evidence of your testamentary intentions and the nature of the relationship, in the event of a will contest.

Living Will and Health Care Surrogate: A living will specifies your wishes for medical care and artificial life support. Without specifically declining artificial life support through a properly executed living will, the hospital must keep you alive by any means necessary, no matter how much it costs or what your true desire is. A health care surrogate designation should accompany the living will because it appoints someone to make medical decisions on your behalf in the event that you are unable to communicate your wishes and specifies your wishes regarding artificial nourishment. It is crucial to have the health care surrogate in place because your partner will have no legal rights regarding your care without one.

Joint Tenancy: Same sex and unmarried couples can benefit from owning real estate together as joint tenants with rights of survivorship, which means that when one partner dies the other can take sole ownership of the property even without a will. This designation can avoid estate taxes, capital gains taxes, gift taxes, and probate.

For more information about the legal rights and protections of unmarried couples, please contact the estate planning attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at  Let us protect what you value most.

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In Florida Oral and Handwritten Wills Just Won’t Cut It

Posted by on Mar 4, 2010 in asset protection, estate planning, Legal News, tax, Wills |

Many people are under the false impression that if you write down what you have and who you want it to go to when you die, you are covered and don’t need an official will.  This is a dangerous misconception.  Holographic wills are not valid in the state of Florida.  So what exactly is a holographic will?  While the name might lead you to believe that it has something to do with a third dimension, a holographic will is a will that is entirely in the testator’s handwriting and signed by the testator.

In Florida, according to section 732.502 of the Florida statutes, in order for a will to be valid it has to be signed (or acknowledged) at the end by the testator in the presence of two witnesses who must be in the presence of the testator and the presence of each other when signing.  If there are two witnesses, but each sign separately, and do not see both each other and the testator sign, then the will is invalid.  Moreover, the will must then be notarized by a licensed Florida notary that witnesses the testator sign the will and then witnesses the witnesses sign the will.

Some states have a rule that if a will is executed by a resident of another state and that will would have been valid in that other state at the time it was executed, then it will be valid in the new state too. Florida has a similar rule.  According to Florida Statute 732.502, “Any will, other than a holographic or nuncupative (oral) will, executed by a nonresident of Florida, either before or after this law takes effect, is valid as a will in this state if valid under the laws of the state or country where the will was executed.”

In other words, even if a Holographic will would have been valid in another state, it still will not be accepted in Florida. Of course, if the will is properly witnessed and notarized, then it is valid in any state.  A “nuncupative” will is an oral will.  They are not valid in Florida either, even if videotaped or put on YouTube for the world to see.

For more information about creating a valid will and protecting your family after you are gone, please contact the law offices of Wild Felice & Pardo, P.A. at 954-801-4635 or via email at  Let us protect what you value most.

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