Seeing as today is President’s Day, I thought it might be appropriate to point out that one of the primary reasons this country was founded was that the King of England was enforcing taxes against the American colonists even though the colonists had no representation in Parliament.  They referred to this as Taxation Without Representation and it lead to both the Boston Tea Party and the American Revolution.

We still have taxation without representation today.  When you die, the state and Federal goverments are able to levy a “death tax” against your estate that could be as high as 55 percent.  This tax is on money that you have already paid income and capital gains taxes on during your life. 

There are ways to completely avoid the death tax.  One such way is with the use of a bypass trust.  Another way uses Irrevocable Life Insurance Trusts.  Sometimes it’s as easy as a scheduled charitable donation or even gifts made to family members throughout your life.  There are many ways to avoid this double taxation without representation but you need to meet with an estate planning attorney to learn which way is most appropriate for you and your family.

For more information on successful Florida estate planning and asset protection techniques, please contact the South Florida law firm of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com to schedule your free consultation.  It’s a Wild world.  Are you protected?

February is a month of only 28 days but it is still chock full of fun holidays that all seem to have something to do with estate planning. What you don’t know about estate planning might not kill you but it will hurt your family when something else does, so here are some fun estate planning facts for your clients, with a February theme.

Groundhog Day – Did you know that without a correctly executed Living Will, any South Florida hospital must keep the patient alive artificially, no matter what their true wishes are and no matter how much money it costs the patient’s family? Perpetual artificial life in persistent vegetative state is the epitome of living the same day over and over again, without any of the charm and comedy of Bill Murray. While most people think of distribution of assets and tax savings when they think of estate planning, getting a correctly executed Living Will, Durable Power of Attorney, and Designation of Health Care Surrogate can sometimes be even more important.

Mardi Gras – The colors of Mardi Gras symbolize Faith, Power, and Justice. If you have faith in the power of the justice system to see to it that your assets are distributed fairly upon your death, you have probably had one too many Hurricanes. Without a Living Trust to distribute your assets, your wishes will be subject to the whims of a probate judge or the Florida Statutes. For smaller estates with no “family nuances,” this may not pose a huge problem. However, for any estate over $75,000 or belonging to any member of a “nuclear family” (i.e. divorced parents, adopted children, unfavorable in-laws, children from prior marriages, etc.), a full probate administration could prove to be financially devastating to the family left behind. The easiest way to avoid probate completely is to distribute assets through a living trust.

Valentine’s Day – Estate planning isn’t about you; it’s about protecting those you love after you are gone. We pay for health insurance for our children because they might get sick. We pay for car insurance for our spouses because they might get into an accident. We save money in a pre-paid college plan in case our children need help paying for school. We plan for “what if’s” on a daily basis yet we constantly avoid the planning necessary for after we die. While our children may get sick, our spouses may get into a car accident, and we may need financial assistance for college, there is only one certainty. The death rate in South Florida is 100 percent. As for that other so-called certainty, while we can’t keep you alive forever, we can help to eliminate any tax burden your family might have to shoulder after you are gone.

February is a very short month so you had better get moving quickly and get your estate plan in place before it’s too late. For more information on successful Florida estate planning and asset protection techniques, please contact the South Florida law firm of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com to schedule your free consultation. Let us protect what you value most.

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 mwild@wfplaw.com. It’s a Wild world! Are you protected?

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. Additionally, 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.

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.

Multiple 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.

In a wise, but surprising turn of events, the President has agreed with the Republican Congress and adjusted the estate tax levels for 2011 and 2012. For the next two years, the estate tax will be levied on all estates over $5 million for an individual and $10 million for a married couple and at a rate of 35 percent. Historically, Republicans have often been known for their distain of excessive taxes and Democrats have been known as the party that favors big government and higher taxes. With the referendum against the Democrats in the last election and the heavy shift to a Republican House and Senate, the President had no choice but to cave to the Republican demand for a lower estate tax. If not, the amount of estate taxes paid by the families of middle-income voters would have been a hot button topic during the 2012 Presidential election, and could have been the cause of a loss of the White House.

So where does this leave us? While the estate tax is held in check for the next two years, there is no definitive answer as to where it goes after that. In 2013, we could have another year of no estate tax or we could have a 55 percent estate tax on everything over $600,000. Who knows? The only thing that we can do is hope for the best and prepare for the worst. A trust-based estate plan will ensure the most tax savings no matter what the estate tax number is in the year you die. In addition, there are more advantages to having a trust than just estate tax protection, including but not limited to probate avoidance, asset protection, and control of your assets from beyond the grave.

For more information on successful Florida estate planning and asset protection techniques, please contact the South Florida law firm of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com to schedule your free consultation. It’s a Wild world. Are you protected?