Wills, Trusts, & Estate Planning » Estate Tax Law

WealthCounsel Training on Retirement Plans

stevenberger — Sun, 06 Mar 2011 20:56:32 +0000

I just returned from three days in Grapevine, Texas getting trained on the latest features of WealthCounsel software and the latest changes in Estate Planning. The change I am bringing back to my practice is the use of Standalone Retirement Trusts to hold retirement assets. WealthCounsel has developed a trust that can hold a retirement asset such as an Individual Retirement Plan or other Qualified Plan. By proper drafting the trust can stretch the distributions over the life of the beneficiary instead of the life of the deceased. If the trust is designed as a conduit trust, all distributions flow directly to the beneficiary. If the trust is designed as an accumulation trust, the trust can hold the distributions for further growth, allow for creditor protection, and allow a minor to reach an age where he or she can receive the funds.

The retirement account can also be used to fund a bypass trust to avoid federal and state estate taxes. The trust can hold assets for a surviving spouse using the deceased spouse’s exemption. The use of this strategy depends on the couples’ estate plan and what other assets are available to utilize the deceased spouse’s estate exemption.

The drafting of a retirement trust depends on the beneficiary’s circumstances, the type of retirement asset, and the other assets available to the beneficiary. I am available to consult with you on whether a retirement trust fits into your estate plan.

Training in Texas.

Write Your Own Will using an On-Line Package

stevenberger — Fri, 01 Oct 2010 18:47:56 +0000

You can easily write your own will, power of attorney, medical power of attorney, and living will using an on-line package. Most of the software packages do a pretty good job for the “I love you wills” giving everything to your spouse, then to your children. The software replicates what most general practice attorneys can provide you. Some of the problems I have seen are improper execution (usually a problem with the witnesses) or failure to include a common clause such as excusing the executor from posting bond. You will never know if you made such a mistake, because a will is not probated until you depart this life.

Rather than spend your money on a software package and a Saturday of your time, you can go to a lawyer who prepares wills as loss leader for $300 to $500. The lawyer is willing to do this work to create a new client. The business model is that you will come back for other legal work. Eventually, the office can probate your estate for a nice fee.

The third alternative is to go to an attorney whose practice centers around estate planning. This attorney will evaluate your entire estate, e.g.; check the title of all your assets, review the beneficiaries of your life insurance policies and retirement plans, account for step children and second marriages. You will have to pay for the time, training, and experience of this attorney which should benefit your heirs in reduced estate taxes and probate costs.

The analogy I use is the maintenance of my automobile. I worked in my Father’s garage in High School and learned to maintain my own car. In the Air Force, I was able to use the lift and tools at the base garage to maintain and repair my car. As the years passed, automobiles became more complicated and my knowledge of mechanics grew rusty, so oil changes and tire rotations were all I could do at home. I found that I could get this work done at a very low price at the big tire shops. However, when it came time to get some other work done on my car the savings of those “inexpensive oil changes” disappeared. I asked around for the recommendation of a good technician and moved my business to “Richard’s Auto Repair”. I spend a little more on routine maintenance, but little problems get solved before they become big problems and I am kept appraised of what costs to expect as my car ages.

The lesson learned. You can write your own will on-line. You should be able to save a few hundred dollars. Beware – the few hundred dollars you save could cost your family thousands.

Unintended Consequences of Estate Tax Repeal

stevenberger — Mon, 03 May 2010 18:55:34 +0000

This year’s temporary repeal of the Federal Estate Tax has created a new set of problems for those inheriting appreciated assets. Amy Feldman details these problems in her article “Trouble For Heirs” found in the April 25, 2010 issue of Bloomberg Businessweek. There is no Federal Estate Tax in 2010, but stepped-up basis of assets is limited to:

1. $1.3 Million of assets determined at date of death.

2. An additional $3 million for the surviving spouse.

3. Basis allocation based on the Executor’s discretion.

In addition, there exists the practical problem of finding all the records to determine the basis especially where dividends have been reinvested or improvements have been made to real property. How many people have all those records that could go back 50 to 60 years or more.

Maryland heirs’ situation is further complicated by the State’s Estate Tax of up to 16% on amounts exceeding $1 million. The Maryland Legislature did pass emergency legislation to protect the bypass exemption to the December 31, 2009 amount of $3.5 million. The legislation solves one of the problems that Amy Feldman mentions in her companion article “Wills That Won’t”. However, for most families putting up to $3.5 million in a bypass trust leaves nothing to pass outright to the surviving spouse creating even more unintended consequences.

Families with wills or trusts that contain bypass provisions should schedule an appointment with their attorney to review their documents. Changes may be needed to comply with the 2010 Estate Tax Laws. Most Estate Tax Lawyers predicted that Congress would act to extend the Federal Estate Tax at least by early 2010. It is now May 2010 and time for astute families to act to ensure their legacy is protected.

Planning for the Generations

stevenberger — Fri, 14 Aug 2009 18:21:55 +0000

2009 Wealth Counsel Symposium in Chicago

I just returned from a four day symposium on issues of concern to Estate Planning attorneys. The question of what will happen with the estate tax in 2010 seems to be overshadowed by healthcare issues. However, everyone is in agreement that Congress will not let the Estate Tax lapse in 2010. A big concern right now is Medicaid Planning as the recession has left many seniors without the assets to pay for long term care. Additionally, medical improvements have lengthened the time that seniors require assistance with their daily activities. The consensus is that our society needs to do more to help seniors continue to live in their own homes.

Ed Slott, PBS host of “Stay Rich Forever and Ever”, presented the strong argument for converting your IRA to a Roth IRA in 2010. Right now, Uncle Sam is a minority partner in your IRA and you have a chance to buy him out in 2010. Otherwise, tax increases will increase the government’s share of your retirement assets especially as we come out of the recession.

William Colby, a nationally known expert on end of life issues spoke on how medicine advances is effecting end of life decisions. The Baby Boomers are now facing these decisions and expect some changes. Mr. Colby’s point to families is to communicate your wishes and values to your families. You do need to have a planning document in place, but nothing can replace some frank discussion among family members.

Additional seminars on putting down personal values into wills and trusts can make bequests far more meaningful than just the money or personal property. Business owners need to have their buy-sell agreements reviewed and fixed to prevent death, disability, divorce, and a myriad of other factors that can destroy a viable business. Farmers and Ranchers need to have estate plans in place as their land really identifies the family and is more important than just the dollar value of their holdings.

Finally, we were able to take in some of the sights of Chicago. Valerie checked out the stores on Michigan Avenue, we listened to some jazz at the Shedd Acquarium, and we had some Chicago pizza and Vienna beef. I left feeling energized to take care of my clients and protect their legacy in this difficult financial environment.

Four Reasons You should have a By-Pass Trust

stevenberger — Fri, 05 Jun 2009 22:26:49 +0000

1. Tax Savings – A trust established by the first spouse to die effectively doubles the estate tax exemption. For 2009 the Federal exemption is $3.5 million and the state exemption is $1 million in Maryland.
2. Keep the money in the family – The first spouse to die leaves the money for the survivor to use according to standards such as health, maintenance, and support. Ultimately, the money passes to their children. The survivor’s new spouse cannot inherit the trust money and does not have any right to the trust.
3. Administration – A trustee provides a check on how the trust assets are spent and provides a means to dispense funds in the event of a disability.
4. The trust can contain provisions to protect the assets from creditors.

By-Pass Trust

stevenberger — Wed, 04 Mar 2009 21:55:48 +0000

Many of you have seen your estate values cut in half or more while the Federal Estate tax minimum has gone from $2 million to $3.5 million. The feeling is that you do not need to do any estate planning. The problem is that you do not know what the law will be at the time when you pass away. Moreover, the law is even more likely to change by the time the second spouse dies.

As an example, we frequently see widows that have outlived their husbands by ten, twenty, or even thirty years. When their husbands passed away the value of his estate was often less than the federal limit at that time of $675,000. The surviving wife ended up with home, investments, and a pension. The pension and social security covered all her living expenses. The home and investments continued to double every seven to nine years depending on the market conditions. The widow continues to hold the investments concerned that she may need the money in the event of a serious illness. More than likely, the state of Maryland will receive 16% of the amount the estate exceeds $1 million dollars or the estate will be devoured by medical expenses.

This scenario could easily repeat itself if assets return to their historic values. Establishing a By-pass trust upon the death of the husband would have protected the couple’s moderately valued estate for their children by effectively doubly the estate tax exemption. Long care health insurance provides protection for the expense of nursing care.