Category Archive: Estate Planning

Estate Planning given the Taxpayer Relief Act (Part 1)

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The changes in the Estate and Gift Tax laws over the last decade have altered the landscape of Estate Planning. 

Clients who have implemented tax planning as part of their Estate Plan prior to the 2012 American Taxpayer Relief Act (ATRA) should revisit their Estate Plans to ensure that the plan in place accurately reflects their intentions and needs.

Individuals and Married Couples Worth Less than $5 Million:

Spouses with a total net worth that is less than $5 million are currently under the threshold which triggers an Estate Tax (assuming no taxable gifts were made) and the Estate Tax driven aspects of their Estate Plan may no longer be necessary.

Many of the planning ideas which were intended to lessen the Estate Tax such as the creation of a Family Limited Partnership, the creation and funding of a Credit Shelter Trust / Family Trust (see below) or the creation of a GST Trust (see below) may no longer be necessary for tax purposes.

Also, liquidity planning to ensure that the client’s Estate has sufficient liquidity to pay Estate Taxes upon the client’s death (i.e. second to die life insurance policies) may no longer be required.

Married Couples Worth More than $5 Million:

For married couples whose net worth is more than $5 Million, portability has provided them with flexibility in structuring their Estate Plan that was not available before ATRA.

Namely, the first spouse to die can leave their assets outright to the surviving spouse (rather than to a Credit Shelter Trust for the surviving spouse’s benefit) without wasting the first spouse’s Exemption.

Further, the division of assets between spouses that may have been recommended prior to ATRA may no longer be necessary.

Individuals Worth More than $5 Million and Married Couples Worth More than $10 Million: 

Single individuals whose net worth is more than $5 million and married couples with a combined net worth of more than $10 million have Estate and Gift Tax issues that cannot be addressed by merely utilizing their Exemption(s) to shelter assets from transfer taxes.

While ATRA has provided additional flexibility in achieving certain tax objectives (see previous Paragraph), tax planning will still be a priority for people in this category as the top Estate and Gift Tax Rates have been increased from thirty-five percent (35%) to forty percent (40%).

Additional tax planning ideas can include formulating a gift giving program, creating Family Limited Partnerships, creating and funding a Personal Residence Trust, creating and funding a Grantor Retained Annuity Trust, entering into a sale to a Defective Grantor Trust, creating Private Annuities, creating and funding a Life Insurance Trust, creating a Charitable Trust or Private Foundation, etc.

Overview of the American Taxpayer Relief Act of 2012

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The new American Taxpayer Relief Act passed December 2012 finalized the Federal Estate Tax laws after 11 years of uncertainty that began with the Bush Tax Cuts in 2001. 

During these 11 years of uncertainty, the Estate Tax was temporarily repealed for one (1) year (2010), the value of assets that each individual could transfer to beneficiaries free of Estate and Gift Taxes (and Generation Skipping Transfer Taxes) rose from $1 million to $5 million (indexed for inflation), the top Estate and Gift Tax rates fell from fifty-five percent (55%) to thirty-five percent (35%), and the Annual Exclusion rose from $10,000 per year, per individual to $13,000 per year, per individual.

Prior to the passing of the new American Taxpayer Relief Act of 2012, all of the foregoing tax breaks were going to expire and the Estate and Gift Tax laws in existence before the Bush Tax Cuts were to set to return on January 1, 2013.

With the passing of the American Taxpayer Relief Act of 2012 (ATRA), a return to the Gift and Estate Tax laws as they existed in 2001 was avoided and the Federal Gift and Estate Tax laws appear to be finalized for the foreseeable future.  The final Gift and Estate Tax laws are as follows:

1. The value of assets (after deductions) that each individual can pass to their family free of Estate and Gift Taxes is $5 million (indexed for inflation) (for a total of $10 million for husband and wife) (the “Exemption”);

2. Surviving spouses can add the deceased spouse’s unused Exemption to the surviving spouse’s Exemption allowing the surviving spouse to shelter more than $5 million of assets from Estate and Gift Taxes upon the surviving spouse’s death. This tax benefit, which was also available for decedents dying in 2011 and 2012, is commonly referred to as “portability”;

3. The value of assets that each individual can pass to a skip generation (i.e., grandchildren) free of GST Taxes is $5 million (indexed for inflation);

4. The top Estate and Gift Tax Rate (and GST Tax Rate) is forty percent (40%); and

5. The Annual Exclusion (the amount each individual can gift each year without reducing the individual’s $5 million Exemption) is $14,000 per year, per individual.

Additional provisions of ATRA include the following: maintaining the tax rates for individuals earning less than $400,000 (and $450,000 for married filing jointly); increasing the income tax rates for individuals earning more than $400,000 (and $450,000 married filing jointly) from 35% to 39.6%; increasing the Long Term Capital Gains Rates from 15% to 20% for taxpayers in the 39.6% tax bracket; reducing personal exemptions and limiting itemized deductions for taxpayers with Adjusted Gross Income in excess of $250,000 (single) and $300,000 (married filing jointly).

A Will Shows Your Concern For Loved Ones (Part 4)

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Several of our Firm’s clients over the years have flatly refuse to execute a will or even discuss the subject because they feel that either of these actions will hasten death.

Often these are the people who have abdicated their legally protected right to make a will (and pass on their property as they desire) by dying intestate, allowing the state to dictate who gets what and when.

Opportunities to provide for a problem child, a dependent spouse, a favorite charity, a spendthrift sister, a needy parent, etc., are all lost when a will is not employed. 

The positions of personal representative of the estate, trustee of family funds, and guardians of the children are all left to the discretion of the probate judge who, although qualified to choose such key persons, is necessarily a stranger to your family, its history and circumstances.

A thoughtful will avoids all this.

A will can, among other things, anticipate family financial needs, ensure continuity of family businesses, protect funds from claims of creditors, authorize sales of real property, educate children and grandchildren and save estate and income taxes. 

As can be seen, a will could be the most important and significant document you ever sign in your life.

There are those who have an exaggerated opinion of the cost of a lawyer’s advice in the preparation of a will, but the cost of not procuring correct, current guidance in making your will can be far more costly than any legal fees involved.

A Will Shows Your Concern For Loved Ones (Part 3)

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There is a growing trend in this country to undermine the sanctity and significance of the act of making a will which is a by-product of the fast-paced computer age in which we live.

We see evidence of it all around us.  The teller at our local bank hands us a form in small print and asks us to “sign here” to open a joint account or safe deposit box with a family member.  The insurance salesman asks, “Who do you want as the beneficiary of this policy?” and then writes down our response on a piece of paper which is submitted to the company and is buried in the final policy we receive at a later time.

Our employer asks us to list the beneficiary of our retirement plan benefits.  The title company representative asks us whether we want more than one name on the deed to property we are acquiring.

These acts, although innocuous in and of themselves, are each destructive of the consummate act of making a will and may operate so as to defeat the intentions of the individual as expressed in his will.

Such inconsistences between the terms of a person’s will and the way in which he actually owns property often result in the payment of additional estate taxes, the failure of bequests for family members and increase the likelihood of will contests, particularly in families of second marriages. 

And because these arrangements bypass a person’s will and yet result in the passage of property at death, they are themselves considered as will substitutes.  In trust for (ITF) bank accounts and joint safe deposit boxes have long been considered “poor man’s will” for the reason that they take the place of a will do not involve the probate and are, therefore, an inexpensive way to pass on property at death.

Encouraging the growth of these will substitute devices is the growing fear of probate – fear of the unknown cost, expense, delay and inconvenience of the court process of providing a person’s last will and testament, clearing title to his assets and passing them on to his family.

Many exaggerations exist as to lawyer’s fees, delays caused by litigation between family members fueding over the assets and the amount of taxes paid to settle the estate.

A Will Shows Your Concern For Loved Ones (Part 2)

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There is no more personal an act or expression of genuine concern than a person providing in their will for the guaranteed financial security and well-being of a loved one.

All of the effort spent in a life in gaining a good education, obtaining your first job, seeing savings grow and paying taxes, seems miniscule and irrelevant when compared to actually passing on all that it has taken a lifetime to accumulate.

That opportunity is typically perceived by an individual as the essence of making a will. 

The formalities of execution which the law requires as an attendant to the act of making a will heighten the solemnity and importance of the occasion.

There is a silence as the individual grasps the pen to sign their name to the will after having heard the lawyer’s instructions which precede the execution of the document.  There is reflection, concern and contemplation at work at that moment.

Lawyers call it the moment of truth – that instant where the mortal meets the immortal – the recognition and admission by an individual that he will not live forever and with it, he has chosen to provide for the people most dear to him in his own way, not to be confused with the thousands of similar ways in which the transmission of wealth is provided for in wills signed the same day in lawyers’ offices, bank trust departments and other places around the country by persons who have given the matter the same degree of premediation.

A Will Shows Your Concern For Loved Ones (Part 1)

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Now that you have reached the stage of life where golf, tennis, fishing and bridge games dominate your days, taking the place of full-time employment or the time spent raising a family, your attention and free time has logically turned to more esoteric subjects such as visits to the doctor’s office and a new pastime – “financial/estate planning.”

You have spent many hours reading up on the subject and have attended the usual number of free seminars given by banks, brokerage houses and insurance companies and, being thoroughly confused and impatient for solutions to various queries raised by all from whom you have sought advice and counsel, have come to the following conclusion:

Why bother dying with a will?

While the majority of people in this country do not have a valid will at the time of their death (four past presidents of the United States died intestate), the fact remains that a will is still considered a sacred and important document involving deliberate forethought and consideration.

The act of making a will is a momentous occasion worthy of sincere introspection.

Florida Tax Law Advantages Over Other States (Part 2)

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Florida tax laws give residents several advantages over tax laws of other states. 

Here are some of them (Continued):

5. Florida Real Estate Taxes.  Real estate taxes are assessed as of Jan. 1 each year, but are not payable until the following Nov. 1.  Taxes are assessed on a calendar year basis.  Taxes for any year become delinquent if not paid by April 1 of the next year.

The state imposes no tax on real estate; such taxes usually are imposed by the county and by municipalities.  County and city taxes are included in one bill, which is sent by the county tax collector.

6. Florida Real Estate Tax Homestead Exemption.  In 1934, during tough economic times, Florida amended its Constitution to provide that homesteads would be exempt from taxation up to $5,000.  The homestead exemption has since increased to $25,000.

Any tangible personal property used for the production of income, such as furniture and furnishings in an office or rental apartment, however, are taxable.  A tax return covering such items must be filled no later than April 1 of each year, and a 10 percent penalty is assessed for failure to file the return.

7. Florida Tangible Personal Property Tax.  The Florida legislature has exempted from taxation all household furnishings, clothing and other items.

8. Florida Intangible Tax.   Florida has an intangible tax on stocks, bonds and other securities.  The tax is $1 per thousand dollars of valuation on stocks and bonds.  In 1974, the Legislature provided a $20,000 exemption.  Married couples have a joint exemption of $40,000.

Intangible consist of variety of items including personal loans, notes, and accounts receivable.


Florida Tax Law Advantages Over Other States (Part 1)

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Florida tax laws give residents several advantages over tax laws of other states. 

Here are some of them:

1. No State Income Tax.  A prohibition against such a tax was drafted into Florida’s Constitution in 1885.  This prohibition was re-enacted in the 1968 Constitution.  In order to enact a personal income tax, the state’s Constitution would have to be amended, requiring voters’ approval.

2. No City Income Taxes.  Florida municipalities are prohibited from enacting local income tax.

3. No Florida Gift Tax.  Residents of a number of states may pay state as well as federal tax on gifts.  Florida residents pay no state gift taxes.

4. No State Inheritance Tax.  Florida has adopted an estate tax that is the equivalent of the credit for state death taxes paid to the U.S. government whenever a federal estate tax is paid.

Florida’s death tax is a transfer tax based on the gross value of the estate regardless of how many beneficiaries the decedent has, or how much money each beneficiary inherits.

Tax Scams to watch out for in 2013

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On March 26, 2013, the Internal Revenue Service issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud. 

“This tax season, the IRS has stepped up its efforts to protect taxpayers from a wide range of schemes, including moving aggressively to combat identity theft and refund fraud,” said IRS Acting Commissioner Steven T. Miller.

We have highlighted the following five tax scams from this list of which you should be aware for 2013 and beyond.  The full report can be found in the IRS Newswire, Issue Number IR-2013-33. 

1. Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

During 2012, the IRS prevented the issuance of $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011. This January, the IRS also conducted a coordinated and highly successful identity theft enforcement sweep. The coast-to-coast effort against identity theft suspects led to 734 enforcement actions in January, including 298 indictments, complaints and arrests. The effort comes on top of a growing identity theft effort that led to 2,400 other enforcement actions against identity thieves during fiscal year 2012. The Criminal Investigation unit has devoted more than 500,000 staff-hours to fighting this issue.

The IRS has 3,000 people working on identity theft related cases – more than double the number in late 2011. And we have trained 35,000 employees who work with taxpayers to help with identity theft situations.  Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490.

 2. Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, report it by sending it to  It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

3. Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.  It is important to choose carefully when hiring an individual or firm to prepare your return.

The IRS has created a new web page to assist taxpayers. For tips about choosing a preparer, red flags, details on preparer qualifications and information on how and when to make a complaint, visit

4. Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. As in the case of a recent disaster, Hurricane Sandy, the IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

  1. To help disaster victims, donate to recognized charities.
  2. Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. has a search feature online at, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
  3. Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
  4. Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

5. Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

Florida’s Fraudulent Transfer Law

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As a caveat to all of the recommendations outlined herein, there is a risk that a transfer designed to reduce the risk of claim by a creditor could, by itself, be deemed a fraud on all creditors.

This is particularly true when a judgment has already been obtained by a creditor or when a claim is threatened or a trial is pending.  In general, any creditor of a transferor of real or personal property may seek.

Florida has recently adopted the comprehensive Uniform Fraudulent Transfer Act and this Act should be consulted before any action is undertaken by the individual or his or her advisors (Florida Statutes Chapter 726.01 et. seq.).

While a complete examination of the law regarding ‘fraud on creditors’ is beyond the scope of this Article, in general, the further in advance of any potential claim the measures outlined herein are undertaken, the better the chance of the transfer not being voided by a court of law.

Thank you for contacting our firm. One of our associates will be in contact with you shortly. If the matter is urgent, please call our office directly at 561.775.7500 to speak with an attorney.