Well, we’ve almost made it out of 2020. Now what? 2021 brings with it a lot of potential, not only for America to make it out of this pandemic, but also for life to restart. Job opportunities and career changes that have been sidelined can now begin, and any plans that were scrapped on account of the pandemic can possibly be revived. 

2020 has been a big year for all of us, whether positive or negative. It is important, at the beginning of the New Year (if not now), for you to take this opportunity to review and update your estate plan, if necessary. In this article, we’ll give you a brief overview of that reviewing and updating process. 

The General Rule of Thumb

Most people remember to review their estate plan at least semi-regularly. The general rule of thumb is to review your estate plan at least every three to five years, as something big is bound to have happened within that time frame. Also, you should review your plan when you have experienced a major life event, which we will discuss in the next section. 

If you don’t have an updated estate plan, you might find yourself legally unprepared, which could lead to expensive and time-consuming fixes. It’s best to keep ahead of any possible changes, especially after a wild year like 2020.

Major Life Events

Discussed below are some of the most common examples of major life events that could possibly require estate plan changes. 

New Family Members 

To start on a happy note, new family members are always a cause for celebration. If your family has welcomed a new child—adoption or biological, it doesn’t matter—it might be time to update your estate plan to include them in asset distribution. Or, you might want to set up a tax-advantaged 529 savings plan to get a head start on your child’s college. 

Illness & Death

If someone in your family has fallen ill or died, you might need to reflect that in your estate plan, whether that requires you to remove the deceased family member or sign on as power of attorney for another. If you are the one experiencing illness, you will want to get your healthcare in order through the use of legal tools like a healthcare directive, power of attorney, and guardianship papers. 

Marriage and Divorce

Marriage and divorce are two other major life events that should set off an alarm bell in your head that you need to change your estate plan. The most common change that comes from marriage/divorce is adding or removing someone as a beneficiary. 

Everything Else 

Perhaps there have been changes in the circumstances of the estate plan. For example, if the proposed guardian of your kids or the proposed executor of your will has died, you will need to select a new one. If you have purchased a home or had a salary increase, you might also need to change your estate plan. Changes in the law and tax code are also common reasons that people need to change the plans they’ve made. A new career in a different field might lead you to the same conclusion. Only you know what goes on in your life, and it’s important to act quickly after an event has occurred. 

To change your estate plan properly, you’ll need to contact your estate planning attorney. Explain that there have been some changes in your life, and you need to make additions, subtractions, and updates to reflect those changes. It’s advisable that you avoid sites like LegalZoom. Though convenient, these sites don’t have the ability to address all the nuances and quirks of the law. It’s best to get the process done correctly the first time, as that will save you time and money. 

Check out our website for more info on estate planning and how to review your estate plan. 

The holiday season is the season of giving, whether you’re handing out gifts or donating your money or time to charity. No matter the holiday you celebrate, the end of the year always gives people time to think about what is most important to them. In some cases, true giving is caring for what you already have, and one way to do that is through a trust. In this article, we’ll discuss how a trust can help you care for the people closest to you.

What is a Trust? 

A trust is a three-party fiduciary relationship. You act as the donor (or grantor), and you transfer an asset (money, property, a valued item, etc.) to the trustee, who holds legal title of said asset. When you transfer the asset to the trustee, you no longer hold legal title. At your direction or upon your death, the trustee will transfer legal title to the beneficiary. The beneficiary is the person that you always intended to possess the asset in the end.

Trusts are beneficial, when compared to wills, because they do not have to pass through probate court. Another benefit of trusts is that there are many, many different types from which to choose. Below are just a few of the main kinds of trusts, as well as a brief definition of each and what they entail.

Revocable

A revocable trust is a type of trust that has provisions which can be altered or canceled should the grantor choose. These trusts usually provide that the property be maintained for the benefit of the grantor. After the grantor dies, the trust functions like a will. These trusts are beneficial because they ensure that your trust is for your own benefit, and it holds true to that purpose even if you are incapable of managing your affairs.  

Irrevocable

By contrast, an irrevocable trust’s terms or provisions cannot be modified, terminated, or amended without the permission of the intended beneficiary. The main downside is the lack of flexibility. If you change your mind, you’re out of luck. One of the main upsides of an irrevocable trust is that it can potentially offer asset protection from possible lawsuits or future creditors. 

Asset Protection

Also called an ATP, an asset protection trust is a type of trust that holds your assets with the intent of shielding them from current or potential creditors. This financial-planning trust vehicle offers very strong protection against lawsuits against you or your estate. ATPs are set up to legally mitigate the effects of things such as bankruptcy, divorce, or taxation. 

Charitable

If there’s a charity that means a lot to you, consider a charitable trust. This trust, which is irrevocable for public policy reasons, are established for charitable purposes. The set of usually-liquid assets are signed over by the donor. They are managed and held by the charity for a predetermined period of time. Usually, some or all of the assets’ produced interest goes to the charity. These charitable trusts are defined in IRS Code §4947(a)(1), though they are not tax-exempt.

Constructive

The constructive trust differs from the other trusts on this list because it is not a trust by the same legal definition. Instead, a constructive trust is an equitable remedy. The court imposes this remedy to benefit a party that might have been wrongfully deprived of its rights. The deprivation may have been caused by a person holding a property right that they stole, or it could have been caused by a breach of fiduciary duty. This trust is worth a mention because it shows that there are equitable remedies in court—a bad trustee does not mean that all hope is lost. 

Requirements in Florida 

Each individual trust has its own requirements in Florida, as in any state. The requirements to create a trust generally include the duty of good faith, which states that a trustee must act in good faith. The trustee must act in accordance with the trust’s terms and purposes and the beneficiaries’ interests. Secondly, a trust must have a lawful purpose that is not only legal, but also not “contrary to public policy.” The trust’s purpose must be possible to achieve as well. § 736.0105 of the Florida Trust Code governs trust requirements. 

The small list we have given you is just the tip of the iceberg when it comes to trusts. Trusts are a way to care for the people who mean the most to you, all while avoiding the court system that could be time-consuming and expensive for everyone involved. This holiday season, remember that, especially in these trying times, true giving means caring for those already around you.

Visit our website and get more details on trust administration. 

When it comes to estate planning, the word “planning” can mean many different things. There are two main categories into which estate planning falls, and that is short-term and the long-term. How you plan for the short-term differs from long-term planning, and, in this article, we’ll discuss the tools and documents behind both. The goals for each also vary.

Short-Term Planning 

The Goals 

Short-term goals include providing for the needs of you and your family in the present and near future. This means looking at what is currently affecting or will soon impact your family and planning the steps necessary to protect your loved ones. 

The Tools

No one “plans” to fall ill suddenly and, unless there are extreme circumstances, the idea of falling suddenly ill is not something that people often worry about. Until now. With the coronavirus pandemic still coursing through the nation, it’s important to have your healthcare in order. This includes a healthcare directive, power of attorney, and guardianship, among other documents. A brief definition of each is given below.

A healthcare directive lays out your specific orders for healthcare providers in the event that you become too sick or incapacitated to tell these providers yourself. This directive can include Do-Not-Resuscitate orders or religious preferences. It is a deeply personal document that requires a lot of thought. 

Your power of attorney is a trusted individual that you select to handle your financial and/or healthcare decisions if you are unable to do so yourself. Talk to your proposed power of attorney to make sure he or she is on board with this role. 

Guardianship papers are necessary for people with minor children. The worst-case scenario for any disease, be it Covid-19 or something else, is death. If you die, make sure that you and your spouse have selected a guardian for your kids who will take care of them on the day-to-day level. 

The End Result 

The end result should be peace of mind. There is a lot going on in the world right now. Health-wise and finance-wise, it has become more and more common for families to struggle or be unsure about their future. Short-term planning will ease some of that burden and prepare you for what will happen in the long-term. 

Long-Term Planning 

The Goals

Long-term planning, both financial and otherwise, concerns the end-game after you have passed away. You will want to leave future generation(s) with financial support, and there are specific long-term tools that you can use to provide that protection. Long-term strategizing can also encompass plans for after you retire.  

The Tools 

There are a lot of estate planning tools that cover the long-term, and the ones defined below are only talked about briefly. These tools include wills, trusts, and insurance. Each topic could have (and has had) entire books written about it, but this is just an overview. Talk to an estate planning attorney to learn more about what each of these can do for you. 

Your last will and testament is your definitive statement on where you want your assets to go after you die. In Florida, there are several requirements for a will to hold up in probate court and be declared “valid.” First, the will must be in writing. It has to be signed by the testator (you) or another person at your direction at the end of the document. At least two witnesses must be presence, each of whom must sign in the presence of you and the other witness. 

A trust is a three-party relationship. You hand over legal title of an asset to a trustee, who keeps the asset in their care for the benefit of a beneficiary. When you tell the trustee to do so (or upon your death), he or she will hand over the property to the beneficiary, relinquishing legal title. Unlike a last will and testament, a trust avoids probate court. 

Thirdly, insurance is vital. Life insurance and business insurance are enormously important. While people are used to the requirement of having car and health insurance, they may not think about life and business insurance, or any of the other types that are out there. Talk with an attorney about adding more insurance-related safeguards to your finances. 

The End Result

The end result will be a life protected at key, long-term points, including death and retirement. Neither death nor retirement are cheap, but neither need to be arduous, if you know how to handle them. 

As you can see, you have many different things to think about when it comes to short-term and long-term financial and estate planning. Your strategies and legal tools will vary for each, and it’s important to contact an estate attorney to set in motion plans to achieve your short- and long-term goals. 

Visit our website to learn more about planning and estate planning. 

Black Friday, for a lot of people, is a day to score great deals, and it has been practically a holiday itself since the 1980s. The American Philatelist was the first magazine to use the term “Black Friday,” coining it in reference to dealing with the additional hours, extra long shifts, and traffic. The term was, at the time, negative, but it has since become standard for anyone talking about the day after Thanksgiving. It’s the busiest shopping day of the year.

The Black Friday we’re talking about is somewhat of a “Reverse Black Friday.” Instead of assets that you’re going to buy, this article is about assets you already own and want to protect from possible sources of liability. This article will serve as a guide to the different ways you can do that. 

Source of Liability 

There are many more sources of liability than those listed below, and there is only a brief definition provided for those listed. However, these are some of the most common: lawsuits, underinsurance or no insurance, divorce, callable loans, and debt. These can all result in your assets being taken from you—no matter how precious. 

Lawsuits 

You might think of a lawsuit as only something that happens to you when you do something wrong, but that’s not always the case. America is a very litigious society. Each year, over 40 million lawsuits are filed in the U.S. Businesses can be subject to employment discrimination, worker’s compensation, malpractice, breach of contract, and other lawsuits that can cost you, if not in judgment, in legal fees. 

Uninsured or Underinsured 

If you’re in an auto accident and you don’t have insurance (or you don’t have enough insurance), a lawsuit can go after your assets. States do have minimum liability requirements, but juries aren’t exactly opposed to handing out millions of dollars in awards. 

Divorce 

Your ex-spouse knows more about your finances than most creditors, and a divorce can hit you where it hurts, especially since you cannot usually discharge back child support or alimony in the case of bankruptcy. Things get even trickier if you and your ex own a business together—especially if the divorce is acrimonious. 

Callable Loan

Lenders, in certain cases, can “call” a loan and demand you pay it back immediately. If you have the means, you can refinance the debt and hope that works. If not, your assets are going to be the first to go as a way to avoid bankruptcy.

Debt 

Though federal law puts a limit on liability from the debt that is secured by your home, there are no restrictions like that on commercial loans. If you fall behind on your mortgage (one of the most common debt problems), commercial foreclosure can put other assets at risk; that is, unless you take steps before to contain the fallout. 

Asset Protection from Liability

The above list has just some of the many sources of liability that can come as a shock. Below are some “Reverse Black Friday” ways to protect what you already own from people coming to collect, including use of business entities, insurance, retirement accounts, homestead exemptions, titling, annuities, and elimination. 

Business Entities 

Business entity types (such as sole proprietorships, partnerships, LLCs, and more) are a double-edged sword. For example, there is no limit to personal liability if you own a sole proprietorship. A partnership can leave you liable for your partner’s actions, even if you do nothing wrong. 

Business entity types that can limit liability include LLCs—limited liability companies—and corporations. In some cases, a lawsuit can pierce the veil of this protection, but these types of business structures are generally very protective.

Insurance

You’ve heard it a million times—get insurance, and make sure you get the best type of insurance you can afford. If you can afford umbrella coverage, get it. Do not bet on the odds of something not happening. Homeowner’s insurance, commercial liability insurance, auto insurance, long term care insurance, and more are just some of the many ways you can safeguard yourself. Pay now or pay later.

Retirement Accounts

If you have an ERISA-qualified retirement plan, federal law provides you with unlimited asset protection. If you have an IRA, you are protected for up to $1 million if you go bankrupt. Some states have even more protection, though others have less because they opted out of the Bankruptcy Reform Act. Retirement accounts offer at least some asset protection. 

Homestead Exemptions

Florida is a state that provides a certain amount in home equity if you go bankrupt. You might have to contribute extra to your mortgage payments, but it is worth it, as taking advantage of the homestead exemption is a must-do.

Titling

How is your home titled? For example, owning the home as tenants in the entirety with your spouse means that, if one of you gets sued, the creditors cannot force your spouse to sell their interest. The interest isn’t divisible—your home may be protected if your state doesn’t have a sufficient homestead exemption. 

Annuities

Some states, including Florida, provide protection to assets in cash value life insurance and annuity balances. Florida statute §222.14 protects annuities and their proceeds from creditors. If you don’t have a life insurance policy, annuities protection is a good reason to get one. 

Elimination 

Last but not least, creditors cannot take what you don’t have. Consider transferring title of the asset to someone else—an heir, for example. You can give away (as of 2020) up to $15,000 in gifts without getting taxed. 

This short guide should prove that there is hope for asset protection, but you need to act now before anything has happened (or could happen). The best time to protect your assets is before the source of liability strikes—after that, it is often too late. 

Find out more about asset protection when you visit our website.

Did you know that Thanksgiving dates back to 1621? In 1621, the Wampanoag Native Americans and Pilgrim colonizers shared a meal together at Plymouth Plantation. Contrary to popular belief, the meal didn’t exactly start as a sit-down dinner. The Plymouth Pilgrims were shooting off guns to celebrate an unknown occasion, and the nearby Wampanoag tribes went to investigate the sound. The groups met and cautiously ended up eating together. 

It wasn’t until the 1860s that President Abraham Lincoln made Thanksgiving a national holiday, trying to further a narrative that would bring the country together during the Civil War. 

Now, centuries later, we all sit down for a day of food, football, and family. Speaking of family, there’s no denying that they are probably the most important part of your life. When thinking about being thankful, there are ways to show that thankfulness all year ‘round—including after you’re gone.

What happens after you die?

This might sound like a heady philosophical question, but don’t worry; it’s not. We’re really just referring to what happens to your estate after you pass away. Do you have a will? Do you know what will happen to your property—cash, assets, real estate, etc.? 

Asset Protection 

If you die without a will, your assets will be unprotected. A probate court will divvy up what you own and use your assets to pay off creditors. Your family will get what’s left. Though a last will and testament is one way to provide instructions for asset protection, there are other means of doing so as well, including: trusts, gifts, and college funds. Picking your power(s) of attorney and legal guardians for your kids are two other important legal tools.

Trusts

One of the best things about trusts is how varied they are. A trust is a three-party relationship where the donor transfers legal title of an asset to a trustee, who holds the asset for the benefit of the beneficiary. At the donor’s specification (such as when he or she dies or when the beneficiary turns eighteen), the trustee will hand over legal title to the beneficiary.

Though this sounds simple, there are many different types of trusts. The most common include revocable, irrevocable, asset protection, charitable, construction, special needs, spendthrift, and tax bypass. And that list is by no means exhaustive. An estate planning attorney can help you determine which trust is best for your financial situation. Visit our website and learn more about estate plans and trusts.

Gifts

As of 2020, in America, you can give away $15,000 in gifts to as many people as you want without having to pay tax or report the giveaways. Once you hit the $15,000 threshold, you must file a tax return for the gift(s). Gifts can include money, real estate, property, or cars. Giving gifts of under $15,000 helps you legally avoid taxation on assets, while still benefitting your loved ones.

College Plans

The IRS allows people to save money in tax-advantaged college savings’ programs, called 529 plans. Depending on your state, this tuition money can be used for in- or out-of-state tuition or for private and public schools. Again, this depends on the state. 529 plans are a good way to get a head start on your kids’ future. 

Powers of Attorney

Though it’s important to protect your assets and property for your family after you pass on, the postmortem protection isn’t the end of the story. Pre-mortem arrangements, such as picking a power of attorney, mean that you will have a trusted person in charge of your financial and medical decisions if you are too incapacitated to make them yourself. It might go without saying, but self-protection is just as important as asset protection. 

Guardianship

Finally, if you have minor kids, you need to arrange legal guardianship for them in the event of a worst-case scenario. Talk to your proposed guardian and make sure they are on-board with your plan before drawing up the papers.

Though this list is by no means exhaustive, it hopefully helps provide the basics for keeping your family safe and secure, no matter what happens.  

One thing 2020 has not been is boring—aside from the months spent in quarantine, that is. 2020 is coming to an end, which is something that pretty much everyone can be grateful for. There are loose ends to wrap up before January 1, 2021 dawns, and, when it comes to your family, these loose ends might include taxes: income, estate, and gift. 

Income Tax

While we all know what income tax is, you might have a couple after-the-fact questions about the process itself, such as: 

When do I get my refund? 

Your tax refund usually comes within 21 days after you electronically file your tax return. If you file paper tax returns, your refund is issued within 42 days. The IRS has introduced a “Where’s my refund?” tool on its website that will help you track your refund status. Though you can call the IRS if your refund is late, note that the chances of getting to talk to a customer service representative are slim to none, as the IRS is very busy during this time.

The IRS suggests that you wait at least 21 or 42 days after electronic or paper filing to contact the 1-800-829-1954 hotline. Additionally, if you’re trying to find out where your refund is, there is an IRS2Go mobile app. 

If your refund is delayed, there might be a few reasons. It’s possible that the check, if you received a paper one, was lost in the mail or even stolen. The IRS must confirm the check was lost or stolen before issuing a new one. If your refund was direct-deposited, there might be a problem with the bank information you put in. The IRS can contact your bank to try to help.

Before panicking, give it some time. Though mistakes with refunds happen, that’s not the case for the majority of delays. Usually, it comes down to the government moving slowly. It’s been a hectic year, and, as we all know, everything takes a little longer because of the pandemic. Also, it is an election year. The USPS is giving first priority to mail-in ballots. Other mail comes second.

What if I did my taxes wrong? 

Visions of jail time might dance in your head, but that’s actually a very, very, very unlikely possibility, especially if the mistake was just that—an unintentional accident. The IRS catches and fixes most errors itself, alerting you about the mistake after they fix it and telling you what they did to rectify it. 

If you catch it before they do, you can solve the error through the electronic filer, or you can use form 1040X to amend your tax return. Missing forms (two of the most common mistakes) is an example of an error that is not automatically solvable. The IRS will alert you of the problem, and you will have to send in the missing form. 

You aren’t the first person to make a mistake on your taxes, nor will you be the last. A mistake is not that big of a deal. You won’t have to redo your entire return unless the whole thing is wrong.

Estate Tax

Next up, and slightly more complicated—if you can believe it—is estate tax. This is a tax on the right to transfer your property after you die, which means that your relatives or lawyer will be the one worrying about it if it’s your estate. 

How does the IRS calculate estate tax? 

The IRS calculates estate tax by taking an accounting of everything you own or in which you have interests at the date of your death, including trusts, insurance, annuities, real estate, cash, and more. The fair market value of the tallied items is used to compute the total, which is the “Gross Estate.” From the “Gross,” there are certain deductions you can take, depending on the estate. After that’s settled, the “Taxable Estate” is what’s left, and that is the total from which the IRS takes the tax.

Who must file?

The requirements for filing have increased. In 2021, if your estate is worth over $11.7 million, you must file an estate tax return. That number has been increased from $11.58 million in 2020, and the previous years have also been increased. For more information, you can look at the IRS’ Form 706 Instructions. 

Gift Tax

Finally, there is a gift tax. Gift tax is a tax on the property or money that someone gives to someone else. You are legally required to report gifts over $15,000. Don’t bother trying to hide a gift, because if you get audited, you will end up paying not only the correct tax, but also likely a fine. The gift tax exclusion lets you give away $15,000 in assets or cash to as many people as you want. Gifts can include stocks, land, cash, cars, and more. Once you hit the limit, you must report and pay taxes on it. 

This article is not the be-all, end-all of the many ways the government can tax you. As with everything in law, there are a million and one details and exceptions to these laws. However, this is a basic primer that might help you tie up any loose taxation ends that you might be facing. As always, it never hurts to hire a lawyer to help you with tax matters. It’s cheaper to do it right the first time than to fix costly mistakes. Visit our website to learn more.