Wealth Preservation, Trusts and Estates

One of the Irrevocable Trusts we prepare for clients who enter into

Nursing Home Asset Protection planning is referred to as the Medicaid Intentionally Defective Grantor Trust (MIDGT).  One of the tax features of the MIDGT is that the person, usually an elderly parent, who transfers assets to the irrevocable trust will continue to be responsible for paying the income tax due on the trust earnings even though he or she has severed all other ties to the assets.  One of the significant benefits of the parent, in this scenario, retaining the responsibility to pay the income tax is that he or she will be able to offset the income earned by the trust using possible long term care costs.

Below is a brief review of the Medical Care Costs that you or a loved one might incur and which might be used to offset income or gain.

It is important to maximize all income tax deductions available to you or a loved one.  Medical expenses are deductible only to the extent they exceed 7.5% of a taxpayer’s adjusted gross income (AGI). You can only use medical expenses that are not reimbursed through insurance or other means.  It is infrequently the case that the common medical expenses can be used as deductions because either the costs are covered by insurance or they do not rise to the necessary percentage of gross income.

That being said, the entire cost of a long-term care facility, including meals and lodging, can be a deductible medical expense. The care cost is fully deductible if the principal reason for entrance into the facility is the provision of medical care.  The retained ability to take such a large deduction could result in significant income tax savings.

A person living in an assisted-care facility can only deduct a portion of the cost of the payment to the care facility.  The IRS does not view the entire payment as a medical care cost considering the taxpayer is only being “assisted” and is not receiving complete care.

You can also take medical deductions if you are spending significant dollars to upgrade your home in order to remain at your residence comfortably.  Equipment and home modifications to accommodate the handicapped (no age limit) that do not increase the market value of the home are deductible as a medical expense.  Examples of such deductible improvements include additions of handicap accessible bathrooms or hospital beds.

So you can see, the income tax savings could be significant if the care recipient is claiming the income and offsetting it with care costs.  This would potentially let the trust assets to grow income tax free for years.

As a side note, these medical deductions can even be taken at the estate level after a person’s death.  When a person dies owing medical expenses, and those expenses are paid by the estate within one year, a medical expense deduction can be taken on the decedent’s final income tax return (Form 1040) or on the federal estate tax return (Form 706).

For a more detailed review of the Medicaid Intentionally Defective Grantor Trust click here.

For additional information on Elder Law Planning and the use of Elder Law, asset protection planning please contact Douglas L. Kaune at 610 933 8069 to schedule a client conference to determine if the Firm can be of assistance. For a review of Doug’s bio page click here.

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Delaying Estate Planing For Law Changes?  Does That Make Sense?

DO You Delay Other Acts of Love and Responsibility?

Well, you’d expect lawyers who make
a living advising affluent clients
on issues of estate planning to be biased.

They’ll tell you to do it now.
Why wait?

Well, as it turns out, there are few good
reasons to delay and many great
reasons to get the job done now.

When done right, thoroughly, and with the right tools, estate planning
is, plain and simple, an act of love.  It really matters only if you want to
preserve your legacy and to make life better, and easier for those you leave
behind.

But I’m a trust and estate lawyer so you’d think that I would feek that way.
As it turns out, this reporter also thinks that way and review the issues
involved in effective estate planning and why delay makes no sense.

Click here for Delaying Estate Planning Is Never A Good Idea.

Want To Protect Your Spouse, Children and Grandchildren?

Call any time between April 15th and June 1st to get this
limited time Family Plan pricing.

For a limited time, now that tax season is over we will be offering
estate planning family programs.  You can get your own plan, a family
meeting (by phone or in person) and gift certificates for your heirs
to get their own estate planning done.

If you and one or more of your children and grandchildren live in
the state of Pennsylvania, this Family Plan Program might be
just what the estate planning “Doctor” ordered.

Want your spouse to stop worrying?  Want to protect your heirs
from divorce or lawsuits?

Want to mimimize taxes, trouble, and expenses if you die?

Want to make sure that your adult children do the same for your
grandchildren?

CALL 610-933-8069 and ask for David Frees to review your
estate planning and the terms of our Business Class, First Class
and Family Plan Estate Planning options

You can also email dfrees@utbf.com to request a free telephone
consultation or appointment to get one of the limited spots available
until June 1st.

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By: David M. Frees III Pennsylvania Trust and Estate Lawyer

Is A Bank Ever The Best Trustee?

There are many reasons to set up a trust (either during life or under your will). Some people set up a trust to protect a young child from having access to money at a young age. Others use a trust to protect and to provide for a child with special needs.

Many trusts are established to provide income and assets to a surviving spouse and then to pass on the assets to family members such as children and grandchildren.

Some of our clients set up GRATs and or nursing home trusts to move assets to the next generation, or to protect them from being lost to a nursing home.

And, with each situation where a trust is the best solution another equally important question arises: Who should be the trustee of this trust?

There are many possible trustees to choose from. For example, you can select the following a trusts of your Pennsylvania trust:

you
a friend
a family member
a professional adviser
a bank or trust company

However, depending on the purpose of the trust, you may need to limit cases where you name yourself or family members as trustees since a trust is often taxable or reachable by creditors in a lawsuit, when a family member, spouse, or parent is the trustee. In fact, there is a specific section of the IRC (Internal Revenue Code) (Section 672) that will cause such trusts to be included in a beneficiary’s estate and then taxed.

So, it may be that you want to avoid family members or at least make them a co-trustee. Also, family members are often unaware of all of the new rules which apply to trusts under the UTA (Uniform Trust Act) and the Prudent Investor Rule. Family members also often fail to file income tax returns for the trust or to keep the trust records properly. Accordingly, family members might actually end up exposed to liabilities and law suits that they never anticipated.

But, if you want to avoid using a family member as trustee, what are the alternatives?

Friends, Advisers, and Banks.

And, while many families have family members and friends that will undertake the risks of being a trustee, and who will seek the right advice to make sure that they follow the new legal compliance requirements of trustees, it may be that a bank or trust company offers a viable alternative and may be the best choice.

Banks are well insured, are highly regulated, have procedures and specific policies, and they regularly file the returns and keep the records accurately.

I know that almost everyone has heard about a beneficiary that did not like their bank trustee, but banks can be the best choice and that can be especially true when a family member or friend is appointed as a co trustee or a trust protector and can fire and hire bank trustees to ensure that the bank is charging appropriate fees, getting good investment returns and is looking out after the beneficiary.

Of course, there are advantages and disadvantages to each approach. But make sure that you discuss trustee selection with your lawyer and accountant because the wrong choice of trustee can mean that the trust will not work to accomplish your tax and planning goals.

For more on trust protectors and trustee alternatives click here and watch for upcoming posts.

David M. Frees III, Esquire
610-933-8069
dfrees@utbf.com

P.S. If you would like to create a trust now or under your will, please call

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What Is A Trust Protector and Why You Might Need One ?
By: David M. Frees III Esq.
Unruh, Turner, Burke and Frees

There is a new sheriff in town and the sheriff’s name is the “Trust Protector.” By naming a trust protector, you can select a person, in advance, who can make hard decisions, change the terms of the trust (within certain preset limits and for certain purposes), and who can hire and fire trustees.

The job of the trust protector varies significantly depending on the nature and purpose of the trust. However, there are certain jobs that you may not want to assign to a trustee or a beneficiary and they can instead be assigned to a specific person named as the protector.

For example, it may not be desirable for a child (even an adult child) to be able to fire and replace trustees. However, if a trustee is not performing, it may be important for them to be discharged and replaced without the need and expense of court petitions. So what can you do? If you plan in advance, in steps the trust protector who can make these decisions.

In many cases, you can draft a trust to create the role of trust protector and then give that person the right to review financial transactions, to discharge and replace trustees, to resolve disputes, and more.
This can save money, protect your beneficiaries, limit court intervention, and make sure that the assets are not taxed again in a child’s estate because he or she had too much power over the trust. Trust protectors can also make sure that a corporate trustee’s fees are reasonable and their performance is effective.

For more information on trust protectors and specifically:

How, when and why to create a trust protector,
Who should act as a trust protector, (often lawyers, CPAs and other independent and trusted advisers)
The pros and cons of a trust protector, and
Why the trust protector is more important than ever in a changing tax environment,

please come back to this blog or sign up for our RSS feed to be automatically notified when we publish new articles on this topic.

And, for more information on trusts and trust planning please click here to order our Enhanced Estate Planning workbook.

David M. Frees III
Unruh, Turner, Burke and Frees has law offices of it’s Trust, Estate, and Wealth Preservation Section in Malvern, West Chester and Phoenixville, Pennsylvania.

These offices provide legal services to clients in the greater Philadelphia area including Wayne, Devon, Berwyn, Malvern, Phoenixville, Exton, and many other local communities.

For a complimentary consultation please call 610-933-8069 and mention PAESTAEPLANNERS for your free estate planning materials and resources.

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Rarely do our blog postings and articles come under the category of urgent. But, if you have an estate in excess of $1 million dollars (including life insurance), then you might need to review this immediately.

Why?

The failure of Congress to act on the issue of the end of the federal estate tax has caused an estate planning debacle for Americans that is both complicated and involves risk in either taking a wait and see or an early action strategy.

In other words, since the tax appears headed for an automatic disappearance at 12:00 on December 31st, but might be reenacted after the Congressional holiday break, there is no perfectly clear choice of action.

Thanks to Congress, any decision you make could end up being a problem. However, you need to consider your options before the end of the year and in 2010. And many people need to consider wills that use disclaimers or QTIP (Qualified Terminable Interest Property) trusts rather than outright gifts to spouses or the traditional federal estate tax formula trusts.

Why? Many wills which are drafted to deal with federal estate tax issues have formula clauses that might no longer make sense but may work again if congress reenacts the estate tax after January 1, 2010. Planners simply did not believe that the tax would ever really disappear and clients could not tolerate plans that tried to deal with every possible eventuality because of the complexity involved.

For example, many wills carve out a portion of the estate to go into a generation skipping trust. That is, a trust that goes to children or grandchildren at some point, or is for their use. However, if there is no generation skipping transfer what happens to those funds?

There are also complications for state death tax planning caused by the elimination of the tax. Not only did Americans generally, and their tax advisers believe that this was unlikely, but so did the states. In Pennsylvania, this is less of a problem than in other states, but there are still consequences to consider when using trusts (either created during lifetime, or under wills).

No one really thought that the federal government would ever let this happen, especially, in light of the federal deficit, but it appears to be a real possibility if not the most likely scenario. And, we are not the only ones who think that this failure of Congress created a big mess. See Forbes article on the estate tax mess. So how do you get the information that you need?

Call your estate planning attorney at least for a conference call. And, if your will or trust, has federal estate tax planning provisions, then be sure to review it promptly.

Our Telephone Strategy Telephone Seminars:

For our clients who are reading this, or for you if you want to become a client of the firm, we know it is the holiday season, but we are scheduling telephone seminars on some of these issues in light of the last few days. There will be two different calls. The first is for those who have estates of under 3.5 million dollars. The second will be for those with estates of 3.5 million or above. These calls will brief you on your options and what needs attention right away, and what can wait and you can enjoy them from your home or office just by calling in to the number we provide you.

Our Limited Emergency Update Plan Option:

Also, for our clients, or prospective clients, who want to act now to protect your estate but worry that you might be revising them again, we are currently offering you our Emergency Estate Plan Update (TM) which includes the opportunity to revise and update your plans right now, and pre-arranged small additional fee if revisions are required if Congress acts next year.

So, you can get the coverage and updates you need now without worrying about being recharged the full price for another round of revisions. Preference for these Update Plan appointments is given to existing clients and their are a limited number of such appointments available in December and January.

How To Get Information:

There are three ways to get more information on these calls, or our Emergency Estate Update Plan: 1) leave a comment below, 2) call 610-933-8069, or 3)email dbrownback@utbf.com and put “telephone seminar” in the subject line. We will let you know when the schedule is set. For an Update Plan appointment, simply call Donna, Denise or Beth at 610-933-8069.

Please Get Us You Updated email Information:
We will also be sending client emails on these important issue so make sure that you call the office and give Donna, Denise, or Beth your current email address. You can give them your email address by phone at 610-933-8069 or by email at dfox@utbf.com.

Enjoy your holidays.

David M. Frees III, Esquire HIGHEST AVVO RATED
Douglas L. Kaune, Esquire HIGHLY AVVO RATED

And the entire team at the Unruh, Turner, Burke and Frees
Trust, Estate and Wealth Preservation Section
610-933-8069

P.S. The Emergency Update Plan appointments are limited so please book yours today if you are worried about this confusion or if you feel that your plan is out of date. The plan’s prices start at $600.00 and go up from there depending on your plan and it’s complexity. There is no charge for the additional appointment. And, at the end of the appointment you are quoted a flat fee and a fee to be paid only if another round of revisions is required. We hope that this helps you. Update Plan appointments can be made by calling 610-933-8069.

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by Douglas L. Kaune, Esquire
Estate Planning & Administration, Wills,
Trusts, Asset Protection, Elder Law
Unruh, Turner, Burke & Frees
Phoenixville, Malvern, West Chester PA
Pennsylvania Attorney
dkaune@utbf.com PH: 610-933-8069

We continue to receive inquiries from clients in search of ways to protect the assets they leave to their children and beneficiaries from divorce, law suits and creditors. Although clients protection from tax liability is of continued importance, asset protection in estate planning has grown in significance. Clients recognize that 50% or more of the assets left through their wills and revocable living trusts can ultimately be lost by their beneficiaries. We have continued to develop strategies for increasing the protection of the inheritance left to adult beneficiaries from loss to a divorcing spouse, plaintiff or other creditor. Take a look at the recent guide that I published on AVVO regarding the benefits of the Beneficiary Controlled Trust as an asset protection tool. This guide will help further explain a great asset protection strategy to employ under wills and revocable living trusts for inheritances left to beneficiaries of ages and abilities.

Please call or email me for further discussion on this and other estate planning topics.
Douglas L. Kaune
dkaune@utbf.com
610-513-2288

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If you have accumulated any wealth during your lifetime, and you have the desire to pass all or part of that legacy on to your heirs, you have probably been reading quite a bit lately about the unique planning opportunities that exist today.

And, it is true, that there are some conditions in the market place that have created unique and almost unparalleled opportunities to pass wealth to the next generation.

Historically low interest rates, real estate values, and temporary impairment in the value of otherwise strong family businesses mean that you can use a variety of techniques to pass stock, land, income producing assets, and interests in real estate to your heirs at a fraction of the long term value of those assets.

These conditions are not likely to continue, and there is a move afoot in Washington to eliminate some of these valid planning tools.

So planning now may be important. But, many people rush into these techniques without careful consideration of a number of important factors.

First and foremost, most of these techniques involve some aspect of irrevocability. It is therefore essential to review your current and long term cash flow needs to ensure that the gifting techniques will not impair your own security and lifestyle.

Care must also be taken to make sure that the technique or techniques used are the best match possible under all of the assumptions and current conditions. For example, should a GRAT be used? What happens if the trust is a grantor trust and you remain liable for the taxes? How does that impact your retirement cash flow?

The short version is that the time for action may be now and the need for speed is present. But, these techniques require you to carefully analyze your current estate, your cash flow and lifestyle needs, the risks of the marketplace and the best technique or combination of techniques for you under all circumsatnces.

David M Frees III is Chairman of the Trust, Estates and Wealth Preservation section of
Unruh, Turner, Burke and Frees

dfrees@utbf.com

His Avvo rating is “Superb” 9.5

For more information on estate planning, asset protection, protecting heirs
from divorce and litigation and related topics call Donna Brownback at 610-933-8069 for
an appointment or teleconference with David Frees

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Asset protection is a practice of using certain strategies and tactics, to legally and ethically protect your assets from various risks such as litigation, taxation, divorce and other claims. It differs from ordinary estate planning but many professionals, real estate owners, and business owners now seek added levels of protection in Pennsylvania that go beyond mere wills and trusts.

If you would like to learn more about protecting assets in IRAs, 401(k)s, trusts, Limited Partnerships and other structures, click here to visit my articles on asset protection planning at www.paestateplanners.com

By: David M. Frees III, Esquire
Follow David on Twitter
dfrees@utbf.com
610-933-8069

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Concerned that a child or grandchild might lose an inheritance to divorce or a lawsuit? There are techniques that can be used to protect lifetime trusts and transfers and transfers under your will.

Often referred to as Beneficiary Controlled Trusts, or testamentary asset protection trusts, these vehicles can give an heir control over assets without ownership of the assets. In this way, they can often be protected from taxation, from lawsuits, and from divorces. Learn more in this video or call 610-933-8069 or email dfrees@utbf.com and ask for David Frees’ article on protecting your heirs from lawsuits and divorce.

David M. Frees III, Esquire
610-933-8069

To follow David on Twitter for the most up to date information on estate planning and asset protection planning for Pennsylvania residents click here.

Questions and Comments? Please feel free to leave a question or comment below.

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Are you -

Worried about your children and grandchildren getting sued or divorced and losing their assets or an inheritance?
Concerned that your estate plan no longer reflects your current thinking or the current laws?
Wondering how to best protect your assets and your lifestyle for yourself and your heirs?
An Executor or administrator, or trustee of a trust or estate an feeling overwhelmed with your responsibilities or unsure of how to protect yourself from liabilities?

Then we are glad that you found this resource.

Please bookmark and visit this blog site regularly or subscribe below
to get email updates whenever we post them.

We will be posting regular information that you can actually use.
We will have regular videos exploring and answering your questions
and keeping you up to date with changing laws.

We will also be posting check lists, articles, and information
that you can use to keep your plan current and up to date.

Take a moment to view our welcome video and make sure to use the
email addresses to send questions or leave a comment below.

You can call for an appointment at 610-933-8069.  Appointments can sceduled for any one of our three convenient offices:

Phoenixville – 120 Gay Street, Phoenixville, PA 19460
Malvern – 116 E. King Street, Malvern, PA 19355
West Chester – 17 W. Gay Street, West Chester, PA 19380

click here for directions

For Appointments at any office call 610-933-8069

David M. Frees III Chairman Wealth Preservation, Trust and Estates Section
Douglas L. Kaune Managing Partner Estate Section Chairman Elderlaw Solutions Section (R)

Email us at: dfrees@utbf.com            dkaune@utbf.com

Please also take a moment and get the inside scoop on what is to come. Watch the brief video below.

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