Living Trusts are not just for millionaires. Any person whose assets exceed $100,000 should have a trust in place. Considering that that figure includes the value of your home, your liquid assets (bank account), you cars, investments, jewelry, painting, life insurance, etc., this includes most of us.

Without a trust, even though the beneficiary may collect the full amount of the benefit without any income tax liability, your estate will be hit with an estate tax on that benefit amount.

There are four major advantages to using a Living Trust rather than relying completely on a Will, for your estate planning needs.

1) Wills need to be probated. This includes anything you own at the time of your death Probate attorney costs range from 3%-10% of the estate. Personal representatives and executors are also charge a fee for service. Assets placed in a Trust do not go through probate. This, by itself saves you a good deal of money. For more on the perils of probate, please contact my office for a copy of the article, Avoiding Probate at All Costs.

2) Efficiency. It takes between six months and two years to probate a will. When estate is due, probate takes at least one full year. A client came to me in his fourth year of probate. During that four year period, all of the assets are tied up and cannot be accessed, or enjoyed. Had the deceased placed his assets in Trust, they would have been distributed without any attorney or court involvement and therefore  distributed much faster. In many cases, distribution of assets requires little more than the Trustee providing a copy of the Trust and a Death Certificate.

3) Control. When you use a Trust to distribute your assets, you can protect your beneficiaries from losing those assets, from their own bad judgment and from anyone else trying to take the assets from them. When you die, your Living Trust becomes an Irrevocable Trust and forms a layer of asset protection for your beneficiaries. By contrast, when you use a Will, once your assets are distributed to your heirs, you cease to have any control. If your beneficiaries are inclined to frivolously blow their inheritance on foolish things, there is nothing to prevent them. Even if they are responsible and frugal, they still might lose it all through litigation, divorce, or even creditors. By using a Trust to distribute your assets, you can protect your beneficiaries from losing the assets you left them.

4) Privacy. Wills are public documents and upon your death, anyone may view them. Any family disputes arising from the Will are also public record. Trusts are not required to be recorded. No one, but you, your attorney, and the Trustee that you name, ever has to know the details of your Trust.

As you can see the advantages of placing your estate into a Living Trust, rather than a Will are many and significant.  For more information and a free consultation, phone my office at: (954) 944-2855

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Upon your death, all all of your assets, (those in your name) will be listed on your Federal Estate Tax Return.  If the value of your estate is higher than that year’s estate tax threshold, estate tax will be owed. In 2011, the estate tax threshold will be one million dollars and the estate tax will be fifty five percent, which means that for every dollar you pass over the first million, your estate will be taxed 55 cents.

A million dollars may sound like a lot of money but it is really quite small when you consider that it includes life insurance proceeds, the value of your home, stocks, bank accounts, retirement accounts, jewelry, paintings, and anything else that you may have had titled in your name at the time you died. Estate taxes must be paid in cash within nine (9) months of death.

One approach to providing ready cash to pay these taxes and other expenses is through life insurance proceeds. The proceeds may be paid to the Federal government, which may eliminate the need for your heirs to liquidate assets in order to pay the estate tax bill.

While life insurance provides an income tax free death benefit be advised that the value of the benefit is added to the total of assets in the estate if not structured properly. This can generate a never-ending cycle of taxes and insurance policies.

The way to avoid this effect, while limiting or eliminating your estate tax, and present tax free money to your beneficiaries is to hold the life insurance policies in an Irrevocable Life Insurance Trust, or ILIT.

An ILIT combines both the protection a trust with the liquidity life insurance .

Taking advantage of the $13,000 per year gift tax exclusion, you can gift assets to your ILIT annually which will cover the insurance premiums while generating no tax consequence. At your death, the proceeds are transferred to your heirs free of all income tax and all estate tax. This technique will provide the necessary liquidity your heirs will need to pay your funeral costs, estate taxes, probate fees and settlement costs without forcing them to scramble.

Upon your death, the trustee of the ILIT will make appropriate distributions of cash proceeds to cover debts, taxes, and funeral expenses.

The trustee can even purchase some or all of your business with the cash proceeds and professionally run the business in your stead until your children are old enough to take over. The trustee is also able to make loans to your spouse, children, and business.

An ILIT provides flexibility and tax advantages. For more information on ILITs and to determine if they are the right vehicle for you, please contact your South Florida estate planning attorney.

For more information about estate planning techniques, and a free consultation, please contact the Florida estate planning  attorneys of  Wild Felice & Pardo at 954-944-2855 or via email at info@wfplaw.com . Let us protect what you value most.

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The Florida Supreme Court  recently ruled that a debtor’s inherited IRA may not be protected from creditor claims under Florida law. Consider this when structuring  the inheritance of your IRAs and other tax-qualified plans.

When a person dies, the IRA custodian offers the beneficiary of the IRA two options.  First is to transfer the original IRA into an inherited IRA, necessitating the beneficiary take minimal distributions (based on his life expectancy. This allows him to withdraw additional amounts with no penalty and permits the stretching out of the IRA distributions and limits the immediate taxation.

The 2nd option offered to the beneficiary is to hold the IRA in the deceased person’s account and permit the beneficiary to take monthly distributions over five years.

This option requires the beneficiary to cleaned out the IRA account faster but also provides him with instant asset protection during that five year period, shielding the inheritance from creditors, divorce and any judgment liens against the beneficiary…  at least, that’s what we believed.

According to Florida Statutes Section 222.21(2)(a), any “money or other assets payable to an owner, a participant, or a beneficiary from, or any interest of any owner, participant, or beneficiary in, a fund or account is exempt from all claims of creditors of the owner, beneficiary, or participant if the fund or account” is maintained as an IRA.  The same is true for ERISA plans, DROP plans, Pension plans, and annuities.  (Note: Life insurance and homestead investments also provide instant asset protection but are not pertinent to this discussion.)

In spite of the simple wording of the statute, the Florida Supreme Court recently concluded that Section 222.21(2)(a) doesn’t apply to inherited IRAs because they claim that the statute only references the original IRA fund and that inherited IRAs  are taxed differently. This renders them completely separate from the original account.

The Court’s argument is that an inherited IRA is a separate account which is created when the original passes to a beneficiary upon the original owner’s death.

The Florida Supreme Court’s reasoning is that the IRAs tax-exempt status changes because the beneficiary is required to take distributions.However, in my opinion, the Court forgets the fact that the original owner of the IRA would have to take minimum distributions beginning at age 70½ were he still alive.

While the Court clearly missed the mark when making this ruling, it  doesn’t change the fact that asset protection attorneys must now take this ruling into account when preparing and implementing an asset protection plan.

Change is the one thing we can all count on and  in keeping with this fact, Courts are not consistent regarding the asset protection of inherited IRAs.  Because of these inconsistencies, our law firm recommends that the initial owner of the IRA create a living trust as part of his comprehensive estate plan.

The beneficiary of the IRA should be the owner’s trust.  An irrevocable decendant’s trust is then created and funded upon the death of the original owner.  At that point, all of the assets from the IRA are completely protected by the beneficiary’s trust, while still being completely accessible by the beneficiary.

This entire process is obviouslyu very confusing but with IRA assets becoming an ever more significant portion of many clients’ estates, in situations in which creditor protection for a client’s beneficiaries is a concern, we should all remain acutely aware of the potential asset protection issues presented by inherited IRAs.

When planning your estate, or devising ways to protect your assets from creditor, litigators and other vultures, you should always work with a professional . Asset protection attorneys are trained specialists who will insure that a plan is  in place to protect your assets thoroughly and legally.

For more information about estate planning and asset protection techniques, please contact the Fort Lauderdale attorneys of Wild Felice & Pardo at 954-944-2855 or via email at info@wfplaw.com.  Let us protect what you value most.

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Trusts are an essential tool for estate planning. They offer flexibility in the arranging and disposition of a client’s property that would otherwise not be possible.

This flexibility inherent in the use of trusts is limited only by the desired goals of the estate owner.  Often these goals are inconsistent and may require various solutions having both advantages and disadvantages. For example, an estate plan developed predominantly for tax savings may not offer the optimal disposition of assets.

While tax considerations make up an essential component of good estate planning, it should not be the sole determinant for all estate planning decisions.

The use of trusts in estate planning is not limited to large estates that produce complex tax issues.

A trust will assure that the property will be used for the benefit of the beneficiary who the client wishes to favor without interference of the spouse of that beneficiary.

A trust may release the beneficiary from the encumbrance of property management.

A trust will protect an estate from the dissipation of the trust’s assets by limiting the interest of the beneficiaries and granting the trustee discretionary powers of distribution through spendthrift provisions.

A trust will permit you to determine the ultimate disposition of your assets through the creation of life estates with remainder interests.

A trust will enable you to preserve uniform administration and command of business interests or real estate.

A trust will enable your estate to avoid probate!.

For more on the use of living trusts and how they might be best used by you and your family, please contact the estate planning and asset protection experts of Wild Felice & Pardo, PA at 954-944-2855 or via email at info@wfplaw.com. Let us protect what you value most.

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While most states add an additional 10%-15% to the Federal Estate Tax, Florida does not. You may die in peace in Florida, knowing the State will not be taking pieces of the assets you’ve left for your loved-ones.

In addition, Florida even permits a Federal Estate Tax credit and a Homestead exemption which makes it possible for a property tax credit on your personal residence.

In spite of hurricanes and oil spills, Florida is truly a great place to live and to die..

I’m constantly asked: ” If I actually live elsewhere most of the year, can I still name Florida as my State of domicile?” The answer is yes!

In spite of what has become popular belief, the six-months-and-a-day rule for claiming Florida as your domicile is pure fiction.

You may reside here for even two weeks each year and still make the case that Florida is your “home state.”

The term “domicile” is defined as referring to a person’s residence coupled with the intent that the residence be permanent rather than temporary. Since there is no single definition that provides sufficient criteria to determine domicile in all case, the determination if a client has a possible double domicile is a factual question. .

Everyone who has significant contacts with more than one jurisdiction has a potential double domicile. However, in most cases, the problem only surfaces after death when litigation is usually the only solution. Determination of double domicile may impose multiple estate death taxes, delays in probate and additional expenses.

When confronted with an uncertain domicile question, the courts seek to determine a person’s intent. No single factor will determine the outcome.. An individual’s intention will be judged by considering the overall picture, including: actions, declarations and behavior, manner of living, associations and interests.

Our estate planning attorneys work from a domicile checklist in order to assure that the evidence is present that will show the probate court that you are truly a Florida resident, even if you rarely resided in Florida. For more information on making Florida your domicile, and to schedule a free consultation with one of our estate planning and asset protection attorneys, please contact the law firm of Wild Felice & Pardo, PA at 954-944-2855 or via email at info@wfplaw.com. Let us protect what you value most.

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Uninformed people may tell you that probate is not all that bad. Those people are probably probate attorneys. The bottom line truth is that if you have in excess of seventy five thousand dollars in assets, you should avoid probate at all costs. Probate is the Court-supervised process of gathering up the assets of a deceased person (called the “decedent”), paying the decedent’s final bills, and then distributing the decedent’s remaining assets in accordance with the decedent’s will, if any, otherwise in accordance with Florida Law. Probate is necessary when the decedent has left assets, including houses, cars, bank accounts, and even life insurance policies or retirement funds titled only in his or her name. It is the erroneous belief that having a will in place will avoid probate. Probate will be required whether or not the decedent has left a will since Florida law provides a “will” for those who chose not to make one through the intestacy statutes.

The intestacy statutes states that a person who dies without a will shall have his, or her assets distributed as the state of Florida has previously determined. People who die leaving only a spouse, will have all of that person’s assets distributed to the spouse after they have been probated. For people who die, leaving behind both a spouse and children, the first $60K goes to the spouse leaving the rest of the assets to be split equally between the spouse and the children. Although most people would prefer to not give half of their assets to a minor child without some sort of protection, that is how the Florida intestacy statutes are written. While having a will avoids intestacy, it does not avoid the hazards of the probate process. The only way to avoid probate is with a trust-based estate plan..

There are a number of negatives associated with probate. First and foremost, it’s expensive, running between four and seven percent of the estate’s value. In additon, the lawyers, the Court, and the creditors will all be paid before your family or beneficiaries see their first dime. Another problem with probate is the time involved. Even the probate of a simple estate can take between six and eighteen months, with some estates taking in excess of three years to complete. During this period, your loved-ones willnot have access to your assets and have no ability to sell or manage them even if they depreciate in value during that time. Another significant drawback of the probate process is the possible embarrassment of your personal information becoming public knowledge.

Probate is public record. Your will is filed with the clerk of courts and anyone with a computer can download it and read it. Any fighting over the execution of your will, any family arguments about the will are also public record. Trusts, on the other hand, are completely private and shielded from public view.

Another very important drawback of the probate process is that your beneficiaries are not afforded any protection once they inherit your assets. With a trust-based estate plan, you will be able to protect your beneficiaries from anyone attempting to take the assets from them through manipulation, litigation, or divorce. Without a trust, your assets could be taken from your family and enjoyed by a person that you have never even met.

Probate is a very real concern and should be avoided at all costs. Luckily, it is easily avoided by simply calling your estate planning attorney and implementing a trust-based estate plan. For more information on how to protect your family and your assets, please contact the Fort Lauderdale law firm of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com.

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It’s bad enough that the us government has the audacity to tax your family at fifty five percent on the assets that you choose toleave them when you die (property that you have previously paid tax on during your lifetime). One would think that taking eighty percent of everything you’ve ever obtained would be sufficient, but you’d be wrong. There’s yet another tax, the gift tax, which will tax you at the rate of forty five percent on any transfer of assets you make during your lifetime.

This “gift tax” excludes transfers between married couples, since a husband and wife can transfer as much as they want to each other. It is no act of generousity on the part of the Federal government to permit you to transfer your assets to a person with whom you already share ownership of the assets.

The government does allow further exceptions. Every year, you may transfer up to $13,000 worth of cash or assets to any other personl tax-free. You can even walk down the street and hand out $13k to every person you see and you this will be aceptable and tax free, however, every penny beyond the $13,000 will be taxed at forty-five percent, so, if you want to buy your son, or daughter a car or truck, valued at $20,000, you have to fill out a gift tax form and fork over to the Federal government $3,150 in taxes for that year.

If you decide to purchase a house for your daughter as a wedding present, and the house sells for $150,000, you’ll owe a gift tax of $61,650. Even if you mortgage the purchase and pay monthly, you will owe the entire $61,650 for that year’s tax return the government will not wait. .

One way to circumvent this would be to buy the house as an investment property for yourself and rent it to your daughter for around $1k/month ($12K year). Then gift her the rent. Since the annual rent is les than $13K, it’s gift tax free.

There are 3 major exceptions to the gift tax rule. You are permitted to give any amount to your spouse with no additional taxable liability. This will enable us to transfer assets for estate planning purposes.

You may also give as much money as you wish to any IRS-recognized charity which has filed a Form 501(c)(3) and been approved.

A third exception to the gift tax is the ability for you to donate money or assets for either educational, or medical expensies. Many seniors have been able to reduce their estate tax by providing their grandchildren with college educations through 529 plans or Prepaid College Programs.

The gift tax is a horrible tax in that it levies a penalty on generosity, however there are many techniques available to us to limit the amount of gift tax you will be asked to pay during your lifetime. To learn more, consult your Estate Planning Attorney. In Fort Lauderdale, or, indeed anywhere in Florida, contact Wild Felcie and Pardo, P.A. at 954.944.2855 and request a free consultation.

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