Wealth Preservation, Trusts and Estates

The Romney’s 2010 tax return (which is quite  lengthy and can be viewed in it’s entirety by clicking Mitt Romney’s Tax Return) gives us a few hints about trust and estate planning techniques of the wealthy that may have relevance for you – even if your net worth is closer to 1 million dollars than 150 million.

Article By: David M. Frees III, JD

As a matter of side interest, the Romney’s assets were held in a “blind trust” which arguably eliminates or minimizes conflicts of interest for a politicain or officeholder since they no longer know what investments are held by the trust and make no direct investment decisions.

However, the existance or not of a blind trust makes no difference from an estate tax planning perspective.

Why?

Any trust which allows you to continue to use the assets, and/or to control or revoke the trust will generally be included and taxed in your estate.

So what can we tell from his income tax return that might hint as his estate planning and why do you care?

Well, you should care if your assets, including real estate, IRAs and life insurance, business interests and investments exceed $1 million dollars since at the end of this year the amount that can be passed to your heirs without federal estate tax falls back to only $1 million dollars.

And, to make matters worse, the effective rate rises again from 35% to 42-55%.

Since Romney presumably has paid for some very  savvy lawyers, there might be a few lessons here that could matter to you and should be reviewed with your own lawyer before the end of the year.

First, there appears to have been a Grantor Trust established as the return shows income from a trust reported on his return.

If you own a business, certain types or real estate, and other assets and your estate exceeds certain limits, a Grantor Trust, or the sale of assets to a defective grantor trust might be an excellent way to transfer the asset and the growth on the asset out of your estate and further benefit the next generation by continuing to pay all of the taxes due on that income.

It also appears that the Romney’s funded a CRUT or Charitable Remainder Uni-Trust.

The CRUT can be an excellent way to transfer appreciated assets, to get a charitable deduction, and to retain income from those assets for some period of time.

There are lawyers, financial advisers, and accountants who advise the use of these trusts for tax planning alone.  Personally, I believe that they are best suited for those clients with a true charitable intent.

But, if you need income but would like to make a sizable gift to a charity that is important to you, consider and discuss this technique.

The 203 page return reveals the truly complex and seemingly insane level of energy required to comply with the intricacies of the Internal Revenue Code but I’ll take lessons and get ideas for my clients wherever I find them.

If you need information about Grantor Trusts, GRATs or CRUTs or any other planning techniques to protect your surviving spouse or herirs, we are pelased to offer a consultation to determine if you would benefit from an enhanced estate plan.(TM)

Please feel free to call 610-933-8069.

By:  David M. Frees III, JD

dfrees@utbf.com

Share and Enjoy

If Your Spouse Dies in 2011 or 2012
You May Think That There
Is No Estate Tax Return Due

You Might Right And You Might
Be Surprised To Know You Should
Still File

Most people now know, that if they die during the calendar
year 2011 or 2012 that there is a five million dollar exemption
from federal estate taxes.

And, it would be logical to therefore assume, that if you lose a spouse
during 2011 or 2012, and if your spouse’s assets are less than
five million dollars, that you would not need to file a return.

In fact, that’s true.  You don’t have to file.

But, because of something called federal estate tax
PORTABILITY, you will certainly want to.

If you fail to file, then you do not “inherit” your deceased
spouse’s remaining credit amount.

Perhaps an example will help to make this strange idea
of portability a bit clearer.

If spouse A passes away and has three million dollars worth
of assets that pass directly to surviving spouse B who has
his/her own assets of one million dollars and they
also have 2 million of joint assets, the surviving spouse
ends up with assets totaling six million dollars.

However, if the surviving spouse fails to file a federal
estate tax return at the death of the first spouse, she only
has her own five million dollar exemption.

That amount will not cover the six million dollar estate
that she will have at her death.  One million dollas will
be taxable.

To avoid this result, all the surviving spouse has to do
is file the federal estate tax return at the death of the first
spouse.

Now this type of return can be expensive – as hiring
lawyers almost always is.  They are complicated, they are
time intensive, they require obtaining extensive amounts
of information about assets and their valuation, but
by filing the return she inherits the five million dollar
exemption of the first spouse and this alone might save
their children or heirs hundreds of thousands or even
millions of dollars of federal estate tax at the death of the
second spouse.

Complicated.  Yes.  Oversimplified here?  Yes.

But the basic theory is simple.  If a spouse passes away in
2011 or 2012 be sure to seek advice from a knowledgeable
a lawyer who keeps current in these matters about the need
to file a federal estate tax return.

For more information on this important topic read FORBES
on the federal estate tax and portability.

by:  David M. Frees III, JD
610.933.8069

dfrees@utbf.com

Share and Enjoy

As many of you know, the present Federal Estate Tax Law allows for a surviving spouse to carry forward the Federal Estate Tax Exemption available to his or her deceased spouse at his or her death.  To garner the benefits of this “Portability” provision, the Internal Revenue Service (also referred to as “IRS”) does not require a surviving spouse to establish a credit shelter trust like those utilized in many estate plans in years past.

Now that you know that the Portability provision exists, we can tell you the mechanics of making the proper election.  The IRS Notice 2011-82 issued on September 29, 2011 explains that the executor of the first decedent spouse’s estate must timely file a Form 706 “on which the executor computes the deceased spousal unused exclusion amount ["DSUEA"] and makes a portability election.”

The Internal Revenue Service makes it clear through its statement that “most (if not all) married decedents dying after December 31, 2010, will want to make the portability election.”  Although the surviving spouse or other executor of the surviving spouse’s estate might have to do a bit more work to prepare and file the federal estate tax return, the benefits for the future generation could be significant.  It is calculated that the additional $5,000,000 of federal estate tax exemption resulting from the portability election could result in a federal estate tax savings of $1,750,000.

Again, we believe it is important for virtually all surviving spouse’s to file for the Portability of their deceased spouse’s estate tax exemption.  While a surviving spouse’s estate value might be under the present $5,000,000 exemption per person, one of the following could happen:

1)  The surviving spouse’s estate value could rise significantly and ultimately exceed his or her exemption at his or her death.

2)  The Federal Estate Tax Exemption could be reduced below the surviving spouse’s estate value.

3)  There could be a rise in the estate value and a decrease in the exemption amount.

Regardless of which of those occurs, the extra $5,000,000 of exemption that could be carried forward from the decedent spouse would go a long way toward protecting some or all of the second deceased spouse’s estate from the 35% tax that now would apply.

While the preparation and filing of the Form 706 can be complex and time consuming it is likely well worth the effort when considering the potential tax savings.

IMPORTANT NOTE: For decedents dying on January 1-3, 2011, the deadline for filing a 706 is Monday, October 3, 2011. You may secure an automatic six-month extension by filing Form 4768 by the original due date for the 706.

Click on the link below to view or download a copy of this important Notice. http://www.irs.gov/newsroom/article/0,,id=246604,00.html

To read our article on the Federal Estate Tax’s Future click here

Will the Federal Estate Tax Law Be Modified in 2012? Obama Gives Us A snippet of Insight.

For assistance in preparing and filing a Form 706 and making the necessary Portability elections, please contact Douglas L. Kaune, Esquire at 610 933 8069 or dkaune@utbf.com.

Share and Enjoy

Ross along with a small pro- agriculture group of legislatures wants to eliminate the federal estate tax. In the past year there has been a surge of enthusiasm for the repeal of the federal estate tax as congress tried to figure out what do for 2011 and 2012.

This past  December  congress approved legislation that provided $5 million per person exemption from the estate tax and set the top tax rate at 35% for 2011 and 2012. Previously the highest exemption was $3.5 million.

Ross says “…it is unfair and punishes those Americans who work hard over  their lives.”

The federal estate tax may affect farm families and small business owners and a growing number of people feel like United States Representative Mike Ross that it is just plain unfair to be taxed twice.

Read the entire brief article Ross Wants To Bury ‘Death Tax’ For Good by clicking here

The federal estate tax may be in place for 2011 and 2012 but after that it is up to us to decide its future both the costs and benefits of having the tax or eliminating it.

Share and Enjoy

Think Your Estate Is Now Protected From Federal Estate Tax?
According To The Tax Lawyers Studying The New Law -
Think Again

The Heckerling Institute is one of the premier estate planning programs
and “think tanks”dedicated to effective estate planning.  The lawyers
appearing  at the institute and those in attendance focus on planning
to minimize federal estate taxes and on issues of how to protect assets
and estates of all sizes for the benefit of your heirs.

After the first day of this five day intensive, David Frees’ review was
that all speakers and presenters agreed, that this year, with changes to
the federal estate tax laws being both radical and profound, the Institute
is more important than ever.

And, added Frees, “There are many many opportunities for estate tax
planning, gifting, and other planning techniques but some may be here
for a limited time only AND, many surviving spouses must now
file returns who never had to before.” Under the new law, if a
surviving spouse fails to file a 706 (estate tax return) he or she will not
inherit the deceased spouse’s remaining exemption and this can mean
much higher taxes for many families.

With several of the changes in the new law, there are unprecedented
opportunities to make gifts, to pass on wealth, to protect assets, and to
carry out your estate planning goals.  However,  according to most of
the high level estate planning lawyers in attendance, there is a mis-
perception among many people that real planning is now automatic.
and that planning, wills, trusts and good powers of attorney are no
longer needed.

However, many of the provisions of the new law may be a use it or
lose it proposition since they expire in 2 years and many people mis-
understand the “portability provisions”of the new law.

According to David Frees “Many people think that they can rely on
“inheriting” their spouse’s exemption to shelter even more assets for
their heirs. But, trusts and flexible disclaimer plans remain vitally
important to avoid taxation, lose of family wealth to nursing homes,
protection from divorce, and to making sure that taxes are minimized
and estates are protected from state inheritance taxes and even federal
estate taxes.”

Stay tuned for more specific tools and ideas for estate planning such as
new uses for the QPRT (Qualified Personal Residence Trust) and other
ways to protect assets for the next generation while protecting yourself
and a surviving spouse.

David Frees is Chairman of the Unruh, Turner, Burke and Frees -
Trusts, Estates, and Wealth Preservation Section.

He can be reached at 610-933-8069. or at dfrees@utbf.com

Share and Enjoy

End Of Year Gift Tax Planning Just Got Harder
By:  David M. Frees III

Were you planning to make gifts at the end of this year knowing, that since Congress has failed to act, the federal estate tax returns with a vengeance at 12:01 on January 1, 2011?  Are you one of the families who are tired of waiting for clarification and are willing to pay a thirty five percent tax for gifts before the end of the year?

Well, while tax payers and planners alike have been complaining about the unjustness of uncertainty in the law and financial writers and taxpayers have been begging for clarification, Congress has been failing to provide any real guidance.

And now, to make matters worse, the Baccus bill, while suffering a temporary  defeat just a few days ago, has raised the specter that Congress has suddenly awakened to the idea that many wealthy families are planning gifts at the end of the year and are willing to pay gift taxes at a rate of 35% to avoid higher tax rates in the future.

While the bill was defeated on  a procedural basis, many are now worried that Congress is even considering a bill that would be effective retroactively to December 2, 2010 and would foil the end of year planning that has resulted from Congresses repeated failures to act.

If you’d like to know more about the status of this bill here is a great blog on the Baccus Bill and the federal estate tax by Forbes.

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

610-933-8069

Share and Enjoy

What You Need To Know About The End of The Year and Estate Planning In 2011 Part One of Ten

Click here to read more about estate planning, wills, trusts, gifting and the changes to the federal estate tax in 2011.

David M. Frees III – Pennsylvania SuperLawyer and AVVO Top Rated Lawyer
Chairman: Unruh, Turner, Burke and Frees
Trusts, Estates and Wealth Preservation Section

Contact Information:
610-933-8069
dfrees@utbf.com

David Frees’ practice focuses on wills, trusts, powers of attorney and living wills as well as family business succession planning,
and related issues such as asset protection planning.

His law offices are located in Phoenixville, West Chester, and Malvern Pennsylvania.

These offices serve many communities such as Ardmore, Berwyn, Malvern, Exton, Devon, Chester Springs,
and surrounding areas

Share and Enjoy

We have had a lot of discussion here and with clients about the future of

the federal estate tax. We have not talked as much about the generation-skipping tax (GST) which was also repealed for 2010. This presents an opportunity for grandparents and great grandparents to pass wealth to future generations that was not previously available.

Generally, the GST is intended to prohibit people from transferring property to generations beyond the next in line without paying significant tax. The IRS does not want someone to be able to give all of their wealth to grandchildren or great grandchildren because they want to be able to tax as many generations as possible.

If transfers are made to grandchildren this year, there is no GST. However, a gift tax of 35% would still apply for transfers in excess of $1 million. If the law as presently written goes into effect, the gift tax will rise to 55% in 2011. The person making the gift to grandchildren or other skip recipient will not owe GST on the first $1.06 million, but will owe both gift tax and GST on the dollars over the $1.06 million.
The changing tax laws could make gifting in 2010 significantly more powerful than making like gifts in 2011. It is important for you to be ready to make gifts before the end of the year to take advantage of historically low gift tax and GST rates.
Take a look at this article to learn more about the GST Repeal.

For questions or to review important Estate Planning opportunities please contact Douglas Kaune, Esq.
Doug is a Partner with Unruh, Turner, Burke & Frees, P.C. which is a full service law firm with offices located in Malvern, Phoenixville and West Chester, PA and also serving clients in surrounding towns and communities such as Collegeville, Royersford, Pottstown, Paoli, Exton, Downingtown and Media.

Share and Enjoy

Capital Gains Taxes For Trusts, Estates, and Beneficiaries of Estates in 2010 Are The Subject of IRS Attention. By: Attorney David M. Frees III

If you inherited assets from a trust or an estate where the decedent died during 2010 you probably thought that you were spared the worries and expenses of the federal estate tax. And strictly speaking, it appears that you’d be right. But, you may not have completely dodged the tax bullet and even the IRS hasn’t weighed in yet on exactly what you need to do.

Congress unexpectedly allowed the federal estate tax to lapse at the end of 2009 and despite regular threats to impose a retroactive estate tax, it appears that there will be no federal estate tax for this year.

However, since most lawyers, accountants and financial advisers expected Congress to address the situation and even the IRS held off, there are now many unanswered questions about the tax returns for these estates and their beneficiaries.

In particular, there are numerous unanswered questions about the new carry over basis rules and what they really mean for estates and beneficiaries who inherit assets and later sell them.

For more information on the IRS and the tax issues facing trusts, estates, and their beneficiaries from the Wall Street Journal click this highlighted link.

David Frees and Unruh, Turner, Burke and Frees’ Trust, Estate, and Wealth Preservation Section assist families and individuals with their trust, will and estate planning needs ranging from the simple to the highly complex.

David can be reached for consultation at 610-933-8069 or by e-mail at dfees@utbf.com.

Share and Enjoy

Avoiding The Federal Estate Tax – In 2010 and Beyond
What You Need To Know and Do In Your Estate Plan To Be Ready For 2011

The federal estate tax is currently not in effect.  However, it will return at rates and in amounts
that have not been seen for some time.  As of January 1, 2011 the IRS will be taxing all estates
of over 1 million dollars at rates of 42% to 55% depending on the size of the estate.

However, five billionaires have died since the federal estate tax was eliminated at 12:01 on January 1st 2010.
and as a result, their families will likely owe no tax as opposed to more than half of the estate value.
Since the federal estate tax ranges (when it is in effect) from a rate of 42% to 55% the federal government
has failed to collect billions in tax that it might otherwise have charged the billionaires’ estates.

The the deceased billionaires include, among others,  Mr Bell, the founder of Taco Bell, George Steinbrener, who
needs no introduction, and philanthropist and media billionaire Mr John Kluge.

Kluge, who was well known in media circles, was the oldest member of the Forbes 400 Richest List
and had a net worth estimated to be in excess of $7 million dollars.

For more information on the federal estate tax click here.  For more information on Mr. Kluge, see the
The New York Times which carried an article on Mr. Kluge as well as USA Today, The New York Daily News, and
CBS news.

So short of dying in 2010 what do you need to know and to do before the tax is imposed on your family?

First, stay informed.  When you register for any one of our reports, you’ll be added to a list of smart consumers and you’ll
receive updates through our articles on what Congress is doing about the federal estate taxes. You can also peruse our articles, blogs, videos and checklists
that we provide at www.utbf.com/trust-estate and www.PaEstatePlanners.com.

Next, understand that even if your wills are designed to save on Federal estate taxes, they may no longer work properly and you might need to do more planning
to be prepared for 2011.  Just get advice that applies to your situation.

Finally, be an informed consumer about the options and planning techniques often used by those with larger estates but which might also work for
families with more modest affluence who will be taxed after January 1, 2011. Click here for a selection of our reports for executors, trustees, and those doing estate planning.

David M. Frees III has been awarded the AVVO lawyer rating services highest rating of 10.0 – Superb.

dfrees@utbf.com

610-933-8069

Law Offices In Malvern, Phoenixville and West Chester

Share and Enjoy