Although the name sounds like a description for a poorly drafted trust, a Crummey trust is actually an estate planning tool that allows the settlor to utilize the annual gift tax exclusion when gifting into the trust.  The trust beneficiary must have notice of the gift into the trust and retain the right to withdraw the gift from the trust.  However, this right can expire after a reasonable length of time, usually 30 or 60 days.

The Crummey trust allows the buildup of a large trust fund over a number of years if the beneficiary does not withdraw the annual gifts into the trust.  Another good use of the Crummey trust occurs when the trustee purchases life insurance on the life of the settlor and pays the premiums with the annual gift into the trust.  This creates the potential that a large trust fund will be created when the insurance is paid to the trust on the settlor’s death.  Because the Crummey Trust is irrevocable, the trust is not considered part of the settlor’s estate and thus is not subject to the Federal estate tax.

To learn more about the Crummey Trust and other estate planning techniqes that can be implemented to preserve your wealth, please contact our estate planning attorneys at 954-944-2855 or via email at info@wfplaw.com.

Florida Residents: Protect Your Assets

Since the Federal estate tax lapsed at the end of 2009, an opportunity arose for high-net-worth individuals to benefit from a rather confusing situation.  The Federal estate tax, also referred to as the “death tax”, was scheduled to be repealed for the year 2010 but no one in the industry expected Congress to allow this to occur.  Now, those who die this year will be able to escape a federal tax of up to 45% on estates valued at $3.5 million or more.  The tax is currently set to be reinstated in 2011 at a rate of 55%, which means that wealthy individuals better walk behind their children when descending the staircase for the time being.

For years, legislators in our nation’s capital have said they would make sure the estate tax law didn’t lapse by passing new legislation by the end of last year.  However, with the debate over health care reform bogarting most of the attention on Capitol Hill, Congress has yet to address the estate tax issue.  When Congress finally does get around to addressing the estate tax law issue this year, it is highly likely that they will make it retroactive to Jan. 1.  This could cause mass confusion for any estates probated or executed in the meantime as the Federal Government could come knocking to collect past-owed estate taxes.

Even if legislation is retroactive, this temporary loophole provides a once in a lifetime opportunity for high-net-worth individuals to leave massive amounts of money to their heirs at a much lower tax rate than they will undoubtedly pay once legislation is in place.  Specifically, with the expiration of the estate tax law, the generation skip tax also disappears. This means that during this time of no estate tax, individuals can gift up to $3.5 million to grandchildren and pay only gift tax on the money.  A good estate planning attorney will also add language that allows the individual to make a gift to grandchildren but stipulate that they can take the gift back if the law changes forcing additional retroactive taxes.

For more on how you and your family might benefit from the temporary repeal of the Federal estate tax, please contact our South Florida estate planning attorneys at 954-944-2855 or via email at info@wfplaw.com.

Many of my clients ask me about the damage that will be done to their credit score if a foreclosure judgment is entered against them.  A foreclosure judgment will cause your credit score to drop around 200 to 300 points.  A good credit score of 700 could drop to as low as 400, which is considered pretty terrible.  The minimum FICO score is 340.  In addition, a foreclosure judgment may lead to tax consequences from the capital gain on the short sale of propety or a deficiency judgment for the remainder of money owed to the bank.

While a foreclosure can remain active on your credit report for three to seven years and make it difficult in certain buying situations, it won’t ruin your credit score for life.  If you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as two years.  The important thing to remember is that a foreclosure is a single negative item.  If you keep it isolated, it will be much less damaging to your credit score than if you had a foreclosure in addition to defaulting on other credit obligations, such as filing bankruptcy.

For more information on how to protect yourself from the consequences of a potential foreclosure, please contact the foreclosure defense team at Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com.

A wrong determination of whether a trust qualifies as a designated beneficiary of retirement benefits can cost the owner decades of tax deferral as well as 50 percent excise tax penalties. Our attorneys know how to provide the best asset protection and estate planning benefits for large retirement plans so that the valuable stretch out does not become a blow out. Most trusts are inadequately drafted to handle retirement plans, especially in light of the recent changes of the Pension Protection Act. New preparer penalties put an additional premium on determining whether the trust is likely to qualify.

Learn more about how to protect your retirement and reduce your estate tax consequences by contacting the Florida asset protection attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com.

Currently Florida does not collect a state estate tax, though things were different prior to January 1, 2005, when Florida, like many other states, collected a separate state estate tax in addition to the Federal estate tax, called a “pick up tax.”  The pick up tax was equal to a portion of the overall federal estate tax bill.  The federal estate tax is scheduled to completely disappear in 2010, but then the provisions of the Economic Growth and Tax Relief Reconciliation Act will sunset and the estate tax, along with the pick up tax, will come back on January 1, 2011.  In 2011, there is a chance that your estate could be doubly taxed.  

The year 2010 will be an “uncapped” year in that the EGTRRA will no longer offer protection to those individuals with a net worth of under $1 million.  With more families being exposed to the estate tax, it is imperative that you sit down with your estate planning attorney and talk about drafting some combination of a will and trusts as soon as possible.

From now until January 7, 2010, Wild Felice & Pardo, P.A. is offering to draft your will for FREE.  Just make an appointment by calling 954-944-2855 or emailing info@wfplaw.com.  There is never any cost for the consultation and one of our estate planning attorneys will go over your risks, assets, and liabilities and then draft your will for FREE.  There are no strings attached but this offer cannot be combined with any other offer and only one free will to be prepared per household.