Wealth Preservation, Trusts and Estates

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.

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We prepare special needs trusts for beneficiaries to help insure the recipient of inherited or gifted assets can continue to qualify for government or private benefits. Clients who are creating these

trusts often struggle to decide who they should appoint as trustee of the trust. We want to make sure that we select the correct person or entity because the trustee will make investment and distribution decisions that will impact the special needs beneficiary and remainder beneficiaries alike.

We can never be sure about how a trustee will do their job for years or decades to come. As a result, many clients choose to have a Trust Protector appointed. The Trust Protector oversees the actions of the trustee to make sure the trustee is doing a good job. Read the attached article to review some of the issues concerning the appointment of a special needs trust trustee and how the appointment of a Trust Protector can help insure a successful special needs trust.

By: Douglas L. Kaune, Esquire Partner with the law firm of Unruh, Turner, Burke & Frees, P.C.
Having offices in Phoenixville, West Chester & Malvern. Serving Chester, Delaware, Montgomery Bucks, Berks and Philadelphia Counties and the surrounding towns and municipalities. Please contact Doug with your estate planning and elder law questions and to schedule a consultation to review your particular case. PH (610) 933-8069 or dkaune@utbf.com.

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Just over a year ago I posted an article advising you of the birth of our son, James Douglas Kaune. I also took the time to emphasize the need to do proper estate planning to protect your minor children. Well, James is now 13 months old and his Birthday picture is shown on this posting. Time sure flies. James has been great fun and a joy to have in our lives. We are very thankful to have him!

In keeping with the estate planning for minors theme, I thought it was appropriate to remind you that if you have not prepared a proper Last Will with guardianship provisions and trusts for minors you should do so now to make sure your child or children are properly cared for if something happens unexpectedly. You should also remember to update your beneficiary designations on IRA’s, 401k’s, 403b’s and life insurance to properly make use of the trusts you create under your wills. These are very important items to take care of. I know it can be hectic with children, work and other obligations, but you will feel much better after you take care of this important checklist item. Here is an article with some additional considerations when estate planning for your children.

Contact, Douglas L. Kaune, Esquire with questions about your estate planning or other legal questions (dkaune@utbf.com)
Unruh, Turner, Burke & Frees, P.C. having Offices in Malvern, Phoenixville and West Chester, PA
PH (610) 933-8069
Fax(610) 240-9323
www.utbf.com

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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.

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IRA and 401(k) Distribution Rules For 2010 or How Do I Restart The Withdraws?

By:  Attorney David Frees with offices in Malvern, West Chester and Phoenixville, Pennsylvania

If you stopped taking mandatory IRA or 401(k) distributions last year you might be wondering if you can do the same this year.  The quick answer?  No.

Well then, the next question is: “If they only allowed me to skip distributions last year how do I start taking them again and are their any remaining effects from last years’s law change on how I calculate distributions?”

Again, for almost all tax payers, there is no change.  Your calculation method will be the same as before the 2009 one year change.  However, sinceyou skipped a year of withdraws, your calculation will be based on a larger number.  That’s it.  Fairly simple for a change.

However, there are two technical matters where you might need to pay special attention.

For more on how to calculate mandatory IRA distributions for 2010 see this brief article.

To update your estate planning for greater flexibility during these uncertain times, or for more information about the many options you have in using your IRA or 401(k) assets in your estate planning, call 610-933-8069 for an estate planning guide, or for an appointment.  Mention this code: 2010DavidFrees for a special discount and a frees cd of estate planning ideas to protect your heirs by David Frees.

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Attorney David Frees Presents Financial, Legal, and Lifestyle News and Tips

One of the best ways to safeguard the inheritance that you leave to the next generation, is through trusts. However, teaching children and grandchildren to be financially savvy is the true key to growing and maintaining family wealth across the generations. Here is a great and mature web site filled with up to date financial news and daily videos that I use to stay informed and as a teaching tool and resource for the kids.

For great financial news and resources visit www.Bloomberg.com.

David M. Frees III
Attorney David Frees has attained the highest AVVO rating of 10.0
dfrees@utbf.com
610-933-8069

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By: Pennsylvania Trust and Estate Attorney – David M. Frees III

Many wills and trusts are drafted to leave the maximum amount that can pass tax free to children or other heirs and the balance to the spouse. However, thanks to the failure of Congress to act, the estate tax has lapsed effective January 1, 2010.

This type of planning is especially common with our wealthy clients and also very common in cases where clients are in second marriages with children from prior marriages.

However, you should be sure to check your estate planning documents given this unexpected change. If the formula results in either too much going into trust, or in disinheriting a spouse, this will create undesirable results, and may result in numerous will challenges.

Click here to see the Wall Street Journal review of this important estate tax issue for married couples.

David M. Frees III - Trust, Estate and Asset Protection Planning Lawyer*
610-933-8069

* Note, that in Pennsylvania, there are no professional designations for lawyers. The use of the expression trust lawyer or related topics merely indicates that the lawyer or attorney focuses his or her practice primarily in those areas of law. As a consumer, it is important to ascertain the level of experience that the particular attorney has in any area of law including trust and estate planning, asset protection, and probate law, and estate and trust administration.

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This is the time of year when we make resolutions and think about a new start. In that spirit, here are a few ideas for our clients, friends and advisers, that are worth considering for this weekend and for making your life a little better this year and beyond.

Now these are more related to making your life a little better than just focused on legal issues but we hope that you’ll enjoy and use them.

Here are just a few things that you can do, starting right now, to improve your business and/or your life. Some are quite simple and others take a little more effort. But all of these little ideas have a proven ability to make life better.

First, some big picture strategic ideas. Then, some very practical ideas for the new year.

Happiness and luck favor the prepared and open mind as well as a body in motion.

1. Even before you have finished all of your resolutions, start to take action right away even if only to set deadlines to do things. Action yields results and is the single most important factor in separating success from failure.

Happiness is a decision but can be affected by small things. According to the experts:

2. Get enough sleep, exercise (which makes sleep better) and make your bed- which your mother always told you to do. Apparently, this little thing shows your mind that you’re making positive changes.

3. Do you often feel overwhelmed? Again, some time management experts and many psychologists say: Make a list of three things and three things only that you WILL accomplish each day and write them down in the morning. Just three things. make them the most important and then construct your day so that you do them. Often, we have massive lists that just keep growing. That doesn’t make your life any easier so break off a manageable piece. Get three things done.

4. Don’t just simplify your TO DO list- simplify your life as well. It is amazing how each little bit of simplification makes life better. Have you ever had so much stuff that when you needed something, you couldn’t find what you needed? Was the stuff worth having? If you want to learn more about the process of simplification read a little of this blog each day. http://www.zenhabits.com

Good with the strategic stuff?

Try these on for practical life enhancing things:

5. Register your name, and any children or grandchildrens’ names as a domain name. For example, I bought my daughter www.JamieFrees.com so that she can also own Jamie@JamieFrees.com. To get the same discount deal that I do you can click here to register names as domain names.

And remember, that if the name is already taken, you can add a hyphen (www.Jamie-Frees.com) or add the middle initial. If you want more information you can also read my blog article on reserving children’s domain names by clicking here.

6. Check your credit report for identity theft, or any other
misinformation or errors that could harm your financial status and
options. You are entitled to one free check a year at
www.annualcreditreport.com.

7. While you’re at it, make photocopies of your wills and trusts, deeds, car registration,
credit cards, passport, drivers license, social security card, birth certificate, and other
important papers and keep these in a safe deposit box, off site, or at least in a fireproof
box rated for at least two hours.

8. Back up your computer, your other hardware, and your life. Most people don’t take the time to do this, and regret it later. But, there are a few things to do that can save you hours of time and millions of dollars of lost ideas, work, and effort.

First, copy your entire computer hard drive onto an external drive and do that today or tomorrow.

Consider using Mozy to do an external and regularly scheduled back up of your computer. And, for Mac owners – like me- start using Time Machine or SuperDuper.

Make sure that you also back up your family photos on an external hard drive, and consider using a service like Snapfish.com or Shutterfly.com

9. Want to start buying and eating healthier foods. Here’s a free e-book from the government on how to eat healthy:

http://www.health.gov/dietaryguidelines/dga2005/document/pdf/DGA2005.pdf

10. Is one of your resolutions to do more recreational travel? Consider automatically getting last minute low cast fares delivered right to your email account. This is especially good if if you’re retired and have flexibility. If you’re a client, you probably live in the service area of the Philadelphia International Airport – a US Airways hub. If so, you can sign up for US Airway’s E-Saver, and/or Southwest’s Ding, or any other airline program that offers last-minute travel options so you can take quick weekend getaways whenever you feel like it. Fares on these programs can be as low as $40 round trip.

11. Make an appointment to get a full physical checkup from your physician and a good dental examination with ex-rays from your dentist. Also schedule an eye exam with an ophthalmologist.

12. If you have a young family member that has decided to become a millionaire on their own, you can help them to find out exactly how much they want to be worth and why. To analyze how much they need to save and then how to invest try this tool recommended by author Neil Strauss, the author of Emergency-This Book Can Save Your Life. http://partners.leadfusion.com/tools/kiplinger/savings01/tool.fcs

13. Make the start of the new year a time to review your estate plan and wills. For issues to consider in reviewing your will and estate plan click here.

14. Enter to win a great book for yourself or a child or grandchild. Leave a comment below with more suggestions for the new year. Or, enter to win a green reusable coffee cup by leaving a suggestion for how we can be even more environmentally friendly at the firm this year.

OK. That’s plenty for now.

Have other ideas, and resolutions that you want to share?

Leave a comment below and be entered to win a prize.

I have a great book for the winner who has the best and most practical life advice, resolution, strategy or tactic. Share one now and then get going. Enjoy 2010 starting with right now.

David M. Frees III, Esquire
David Frees has achieved AVVO’s highest possible lawyer rating.

610-933-8069
dfrees@utbf.com

P.S. Win a copy of Good To Great, or The Richest Man in Babylon. Lease a suggestion or comment below.

P.P.S. I cannot resist posting a photo of the Frees kids having a night out with Mom and Dad.

Enjopy your family this year and post a comment below.

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The last minute attempts to extend the federal estate tax have failed. As a result, the impossible -no estate tax in 2010- now seems likely. According to the Wall Street Journal, Congress is considering a bill early in the new year, to apply the estate tax retroactively.

However, this current state of affairs leaves many Pennsylvania families without guidance on what to do with their estate planning, wills, and trusts, and with a profound sense of continued uncertainty. If you are concerned, that your will, trust, or other estate planning documents might no longer work as expected, then read on.

“At Unruh, Turner, Burke and Frees we are encouraging clients to do the most flexible will and trust planning but not to ignore this terrible situation created by Congress.” said David M. Frees, Chairman of the Trust, Estate, and Wealth Preservation Section of the firm.” Many people think that if the tax lapses as scheduled, that they can then gift the bulk of their assets without paying gift or estate tax. “That’s a mistake,” according to Frees and his partner Doug Kaune.

For starters, the estate tax may be applied retroactively. Secondly, there are still limits on what you can gift without paying a tax. Finally, there is a hidden and dirty little secret in the law that will take effect on January 1st.

According to Frees, “It may be, that Americans will lose the step up in basis that they have always gotten when they inherited property from an estate. For example, if Mom paid $5.00 per share but it was worth $20 per share at her death, your tax basis currently steps up to $20.00. If you sell the stock for $25 per share, you only pay capital gains tax on the $5 per share. Under the new system, you would pay capital gains tax on $20 per share.”

This means, that many more families and estates will pay capital gains taxes even if fewer pay estate taxes. “This is a backdoor tax on many American families with smaller estates who would otherwise never pay estate or capital gains taxes.”

If this sounds complex, it’s because it is. Don’t assume that there is nothing that you can do. Be proactive and update your estate planning now. While you mat have to adjust it later, you should have a plan that will work regardless of the tax law debacle.

“So, if you have a plan that is more than a few years old, if your estate (including life insurance) is over 1 million dollars, or you have a plan with federal estate tax planning trusts under your will you should consider reviewing your plan with counsel to build in more flexibility during these difficult times and until Congress eliminates some of these uncertainties.”

Unruh, Turner, Burke and Frees maintain law offices with lawyers practicing estate, trust, estate planning and probate law in Phoenixville, Malvern, and West Chester, Pennsylvania and serve all of Chester County, Montgomery County and Berks, Bucks, and Lancaster Counties.

Are you concerned that the failure of Congress to pass an extension of the federal estate tax law might mean that you have trusts, or wills that no longer work correctly?

David Frees, Doug Kaune and the lawyers of Unruh, Turner, Burke and Frees can be reached at 610-933-8069 or email Mr. Frees at dfrees@utbf.com. Mention this article to receive a discounted consultation or will review in light of these circumstances.

Please also leave your questions and comments below.

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529 Plans For Pa Residents By: Attorney David M. Frees III

529 Plans come in many shapes, sizes, and colors. And, there is significant variation from state program to state program. If you would like to know the top five reasons to consider a 529 and get a great web based resource to help you to understand and to compare the different plans, then click here for my 529 Plan Article for Pennsylvania Residents.

The article reviews some of the estate planning, gift tax, income tax, and administrative issues involved with selecting a 529 plan.

Let us know your questions in the comments section.

David M. Frees III is a Pennsylvania probate, will, and trust attorney with offices located in West Chester, Malvern, and Phoenixville, Pennsylvania.
David Frees has an AVVO Rating of 9.8 and “Superb”

For a consultation to make sure that your estate planning documents are up to date, and coordinated with your 529 plans, call 610-933-8069. Mention this article to receive a valuable resource, our Enhanced Estate Planning CD.

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