Wealth Preservation, Trusts and Estates

Need a quick overview of the federal estate tax to make this crazy situation make sense? I found a good overview that just takes a few minutes. Since you’re probably from Pennsylvania (most of our clients are from South Eastern Pennsylvania) just ignore the last fifteen seconds on the Ohio inheritance tax. I’ll write a little overview for you on the Pennsylvania Inheritance tax down below.

But for now, click here for more on the current state of the federal estate tax.

The Pennsylvania inheritance tax overview: By: David M. Frees III, Esquire

Transfers on death to a spouse in Pennsylvania are taxed at a zero percent tax rate.

Transfers to children, grandchildren and linear descendants are taxed at 4.5% for Pennsylvania inheritance tax purposes.

Transfers to brothers and sisters are taxed at 12%.

Transfers to charities are taxed at a zero percent rate.

Transfers to all others are taxed at 15%.

There are many nuances, discounts, deductions, and specifics that cannot be covered here. If you’re an executor, make sure to get good advice before filing a form 1500 Pennsylvania Inheritance Tax Form.

P.S. Here’s another view on the federal estate tax and the problems created by congressional inaction.

David M. Frees III, Esquire practices law with Unruh, Turner, Burke and Frees with offices in Phoenixville, Malvern and West Chester, Pennsylvania. Mr Frees Chairs the Trust and Estate Section of the firm with clients throughout the Main Line, Devon, Wayne, Exton, and surrounding areas.

610-933-8069
dfrees@utbf.com

P.P.S. Want the estate tax and inheritance tax secrets that they don’t want you to know? Do you know the pros and cons of using joint accounts in estate planning? Call for a complimentary consultation or for a free will update. Mention this code avidFrees for the free consult. with David or one of the attorneys at Unruh, Turner, Burke and Frees.

The Latest Attempt To Pass A Federal Estate Tax Is Dead – What Now?
By: David M. Frees III – 2010 Pennsylvania “SuperLawyer” Trusts and Estates
Phoenixville * Malvern * West Chester Law Offices

Executive Summary of Federal Estate Tax News:

As you may recall, we recently reported to our clients that a motion was pending
before the Senate to pass a bill that would finally end the agony of not knowing
what was going to happen to the federal estate – or death tax.

Currently, the uncertainty is creating problems for many families and if the law falls
back, as now expected, in January of 2011, many families will need to radically
alter their existing estate plans to avoid the massive 55% tax.

Current Details:

Senator Jon Kyl and Blanche Lincoln’s proposal to phase in a permanent
top estate tax rate of 35 percent and to raise the individual exemption
to $5 million, indexed for inflation appears to be dead.

There has been a discussion by many democratic Senators that
the federal estate tax is a tax break for the “wealthiest of the wealthy.”

But, since the tax includes the proceeds
of life insurance, IRAs and other assets, many middle class and moderately
affluent families will be drastically impacted if congress fails again to act.

The “wealthiest of the wealthy” statement by Pennsylvania Sen. Robert P. Casey Jr.
is a good indication of the strong position Democratic leaders have taken. Currently, the
democratic leadership is proposing – rather than let the exemption sink back to a mere $1,000,000 and the rate rise to 55 percent – a top rate of 45 percent and a $3.5 million exemption.

Yet, nothing seems to be happening. Even the IRS doesn’t know what to do.

However, the political pressure on both parties is increasing dramatically.
Articles abound about George Steinbrenner’s death as estate planning and the windfall to his family
are according to Steve Limberg Esquire “driving people bats and putting pressure on both parties to stop the hemorrhaging blood flow of lost revenue.”

CONCLUSIONS:

I have (and I am not alone in this) been wrong about Congress quite a few times.

However, I believe that there is not likely to be any congressional action until
after the November elections. I also think it is possible but unlikely that the Senate
will really allow the limit to fall back to One Million dollars. Finally, I believe that 3.5 million
would help to exempt most families from a massive tax. And, while many affluent
families will still have a significant tax ( probably at a 45% rate) planning will be vital for any
family.

Recommendations:

Planning should include flexibility, attention to IRA and deferred tax assets, use of trusts – when appropriate, and planning to protect yourself and your heirs from creditors claims, divorce and law suits. You should also pay careful attention to life insurance to avoid it being included and taxed in your estate.

Keep the faith and check in for the latest and for a different analysis in the Post click: Estate Tax Changes Needed in The Washington Post.

David M. Frees III is the Chairman of Unruh, Turner, Burke and Frees’ Wealth Preservation, Trust and Estate Section.

You can schedule a consultation with David Frees at 610-933-8069 for any of the firms office in West Chester, Malvern, and Phoenixville.

He is a regular contributor to blogs at www.utbf.com/trust-estate
www.PaEstatePlanners.com where there are a number of free reports available for download, or in print.

Future Federal Estate Tax System: Still Looking For Answers for 2011
By: Douglas L. Kaune, Esquire
Estate planning attorneys and their clients would like to know what the future of the federal estate tax system holds for them.  As many know, we are in uncharted territory with no federal estate tax in 2010, with an ominous return of the tax system slated for 2011. The return of the “Death Tax” as the law is written now woould see the tax applying for every dollar over $1 million in a decedent’s estate.  The top marginal rate of 55% in 2011 would make for a hefty tax bill in many estates. 

There is speculation that Congress will swoop in at the end of the year to modify the federal estate tax law to increase the credit amount and/or lower the top marginal rates.  Unfortunately, there is no way to tell what changes, if any, will be imposed by Congress.  After all, this is the same Congress that allowed the tax to lapse at the end of 2009 and has forced us to drive blind for the first 7 months of 2010.  Read this mid year CNN Money article for some additional insight by clicking this link.

Many clients are taking affirmative action in preparation for the likely return of the federal estate tax.  Others are readying for end of the year 2010 with planning and documents to be signed into effect once they have a better idea of how the federal estate tax issues will play out in Congress.  Some might even consider taking advantage of moderately lower gift tax rates of 35% for every dollar gifted in excess of $1 million In 2010. By paying the gift tax at 35% these clients might avoid a tax on these same dollars at the highest federal estate and gift tax rate of 55% in 2011. Regardless of your decision regarding planning now, you should be very careful to watch how the federal estate tax law progresses.

Douglas L. Kaune, Esq. is a partner with the law firm of Unruh, Turner, Burke & Frees, P.C. which is a full service law firm. You can call Doug at 610 933 8069 or email him at dkaune@utbf.com.
Offices located in Malvern, Phoenixville, West Chester and also serving surrounding locations such as King of Prussia, Media, Norristown, Paoli, and other towns in Chester County, Montgomery County, Delaware County, Bucks County, Berks County, Philadelphia County Pennsylvania (PA).

Federal Estate Tax Reform and Certainty Is Needed
by: David M. Frees III, Esquire

Congress failed, at the end of the year to enact any estate tax reform. As a result, the tax was eliminated for a one year period. This might seem like a blessing, but currently, many people’s documents no longer function as they were intended to work. To add insult to injury, in just a few more months it is scheduled to return with a vengeance.

On January 1, 2011, absent congressional action, the tax will return and American tax payers will only be able to shelter one million dollars. A couple could, with careful planning, shelter up to two million dollars but that would require the use of trusts prepared during the lifetime of each spouse. And, as if that is not bad enough, the tax rate is going up to a maximum rate of 55%.

However, since this tax includes retirement accounts, the value of a house and business, and life insurance proceeds, the one million dollars may not go as far as it might otherwise.

We need and deserve clarity on this issue.

Yet, just a few weeks ago, negotiations between Republicans and Democrats broke down and Estate Tax reform disappeared from the legislative agenda.

This is not a political or partisan column. And, for my money, both parties have failed to deal effectively with this issue. I simply believe that Congress owes certainty and clarity to the American people. Right now, careful and rational estate and tax planning for families with substantial assets is almost impossible.

Clarity is essential and now requires congressional action.

Here is video of a recent statement on the Senate floor.

David M. Frees, III
is an attorney focusing his practice in the areas of trusts, estates, probate, and estate and asset protection planning. His firm, Unruh, Turner, Burke and Frees also offers elder law planning for families facing nursing home care and the related issues.

The firm maintains law offices that serve many local communities including Devon, Wayne, Malvern, Phoenixville and West Chester.

David M. Frees III, Esquire on The Ten Year GRAT

The Houses Passes A New 10 Year GRAT Requirement

On June 15th, the US House passed H.R. 5486 (a “jobs bill”) that contained a requirement that GRATS (Grantor Retained Annuity Trusts) be for a term of at least 10 years.

As readers know, we have been promoting and using GRATs for many clients as a way or moving large increases in wealth without triggering significant gift taxes.

GRATs are often used by clients with rapidly rising stock values, real estate, or other assets with a high probability of significant growth.

The government now views this technique as being just too good for the tax payer and is attempting to restrict it’s use to raise additional revenue.

The main purpose of H.R. 5486 is not, of course, to modify the GRAT rules. It is instead intended to create small business tax relief.

However, as mentioned, GRATs have proven to be a highly efficient technique for transferring wealth while minimizing gift taxes, provided that the grantor survives the GRAT term and the trust assets do not depreciate in value. And, taxpayers have become skilled at maximizing the benefit of this technique, by minimizing the term of the GRAT (thus reducing the risk of the grantor’s death during the GRAT term). Many clients use a term as short as two years.

Under the current bill, now also before the Senate, the minimum term would be ten years. This, of course increases the risk that the grantor might die during the term and the benefit to the family would be lost.

So, while the GRAT will remain a valuable planning tool. The days of the short term GRAT might be limited. If you find yourself moving toward a public offering, a land development plan or some other planning that might produce large value increases, be sure to consult your legal and tax advisers about all of your options in the face of this pending legislation and the appearance that it will pass both houses.

David Frees III, Esquire

David Frees writes on GRATs and other sophisticated estate planning techniques and actively helps affluent families and individuals in Pennsylvania to implement sophisticated estate and estate tax planning.

For more information on GRATs and related estate and asset protection planning call 610-933-8069. Law offices in Phoenixville, Malvern, and West Chester Pennsylvania.

David M Frees Esq on Pennsylvania Inheritance Tax, The Federal Estate Tax and What Worries You?

For the next few months, there is no federal estate tax. Many states ( including Pennsylvania) still have an inheritance tax, and the federal gift tax laws remain in effect. But soon, estates of more than 1 million dollars will be subject to the federal estate tax with a starting marginal rate of 42%. The top rate (after January 1st 2011) will be 55%.

Opponents of the federal estate tax call it the death tax. And those who support the death tax call the opponents shrewd liars (click here for the recent estate tax piece in the Atlantic)

But, interestingly enough, in an article where the author calls opponents of the death tax “liars” he also distorted the truth. In the Atlantic article, the author claims that the first $3.5 million dollars of each American’s estate will be free from tax.

But, unless Congress acts soon, the tax will start after the first $1 million dollars and that will include insurance and retirement accounts as well as the value of your home.

We’d like to know what you think about the federal estate tax? Please leave a comment below and tell us what you think.

And, if you have questions about the Pennsylvania Inheritance Tax, or concerns about the Federal estate tax and what to do about it, feel free to post them below in the comment section or to email them to dfrees@utbf.com

David Frees, Esq. helps affluent families and individuals to achieve their estate planning goals and objectives in the areas of will, trusts, estate tax and inheritance tax planning. The firm also works with clients facing nursing home and elder law issues.

The firms offices are located in Malvern, Phoenixville, and West Chester and serve many surrounding communities such as Exton, Berwyn, Collegeville, Downingtown, Devon, Wayne and others.

For a complimentary appointment or phone conference call 610-933-8069 and mention PAEstatePlanners to qualify.

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.

As most readers know, the federal estate tax (FET) was repealed for one year at the end of 2009 and it is looking less and less likely that there will be a retroactive application of the FET. However, there is still a gift tax, presently 35%, if you give away more than $1 million in assets during your lifetime. Additionally, the federal estate tax is likely to be reinstituted in 2011 so we should continue to consider ways to transfer assets without using any of our credit against the federal estate tax or gift tax. Check out this Forbes Magazine article on 5 ways to make gift tax free gifts.

Please contact Douglas L. Kaune, Esq. any time at 610-933-8069 or dkaune@utbf.com to discuss your particular your estate planning questions and to review these or other gifting or transfer strategies.
Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning
Unruh, Turner, Burke & Frees, P.C. is a full service law firm with offices in Malvern, Phoenixville, West Chester, Pennsylvania and serving Royersford, Paoli, Frazier, Chester Springs, Downingtown, Radnor, Chester County, Montgomery County, Delaware County, Bucks County, Berks County, Philadelphia County Pennsylvania (PA).

As we have discussed frequently, the Federal Estate Tax system is in a state of change in 2010. Frequently lost in the discussion of revocation of the Federal Estate Tax is the new Modified Step-Up In Tax Basis for Capital Gains. Prior to January 1, 2010 all capital appreciation assets owned by a decedent at the time of his or her death received a full step-up in basis. The new basis for those assets was the value on the date of death. Therefore, no capital gains had to be paid by the beneficiaries unless the inherited assets were sold for an amount in excess of the date of death value. The new law is much less forgiving and can open estate beneficiaries to a significant capital gains tax that was not previously a concern. Read about the 2010 federal estate tax and modified/partial step-up in tax basis rules by clicking the link here. Your estate planning should now include a comprehensive look at your capital appreciation assets to help insure the maximum capital gains tax protection for you and your beneficiaries.

Please fcontact Douglas L. Kaune, Esq. any time at 610-933-8069 or dkaune@utbf.com to discuss the appropriate planning to help protect your estate and the beneficiaries from a significant capital gains tax that might now apply.

Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning
Unruh, Turner, Burke & Frees, P.C. is a full service law firm with offices in Malvern, Phoenixville and West Chester Pennsylvania (PA) also serving surrounding areas such as Newtown Square, Wayne, Media, Paoli, Valley Forge, Exton, Chadds Ford, Counties Served: Chester County, Montgomery County, Delaware County, Bucks County, Berks County, Philadelphia County Pennsylvania (PA).

By: David M Frees III One of the best planning techniques for those with estates of 1 million dollars or more, and especially those with appreciating assets, Short term GRATs, might be a thing of the past soon. House Bill 4849 just passed the US house of representatives on March 24th and would make the minimum term for Grantor Retained Annuity Trusts a minimum of ten years. However, short term GRATs are one of the most powerful and effective estate planning techniques currently available for American Families.

So, if this bill, or a similar bill passes the Senate, a very powerful technique for moving assets from one generation to another without estate or gift taxes will be lost to the American tax payer and to all Pennsylvania residents doing federal estate tax planning.

If you’re interested in GRATs, just search our site for the many articles and information that we have published on this topic. But, as a brief review, GRATs allow you to move a higly appreciating asset out of your estate without paying gift taxes. However, if you die during the GRAT term (which currently can be as little as two years) the assets come back into your estate and get taxed at their current value.

Congress believes that this technique is so effective for tax payers, that if they eliminate short term GRATs, that it could result in significant revenue generation through higher estate taxes.

According to a group called Citizens for Tax Justice, this provision of the bill would raise an estimated $4.5 billion in 10 years…” This group is a lobbying organization that describes its mission as “requiring the wealthy to pay their fair share.”

So, be aware that 2010 may be the last year for the short term GRAT.

If you need assistance in setting up a GRAT, or want to know more about the many advantages of a short term GRAT before they are eliminated by Congress, please feel free to visit this site or to call David M. Frees III at 610-933-8069 or by email at dfrees@utbf.com.

For a free book on GRAT techniques, from Bernstein’s research group, click here.
For a free telephone consultation or appointment for estate planning including GRATs call Donna, Denise or Beth to set up the appointment and mention offer code: GRAT

David Frees and Unruh, Turner, Burke and Frees maintain law offices in Malvern, Phoenixville, and West Chester Pennsylvania and serve many surrounding communities including Wayne, Devon, Berwyn, Radnor, Exton, Chester Springs, and others.