Wealth Preservation, Trusts and Estates

The Estate Tax Returns in 2011 - Can Your Get An Extension To File A Return?

Can You Get An Extension To File A Federal Estate Tax Return (Form 706)?

In 2010 there is no federal estate tax and the IRS is not currently accepting the form 706.

In case you’re wondering why anyone would file an estate tax return when there is no estate
tax, that’s another story for another time.  But, in just a few more weeks the federal estate tax will come
back with a vengeance.

On January 1, 2011, the IRS will again begin accepting estate tax returns for descendants dying after
that date.  And, they will be taxing your estate (including life insurance) for every dollar over $1 million.
Additionally, the tax rate will return to a top marginal rate of 55%.

Many clients find, that because of the complexities of the estate, or the lack of ability to get accurate
appraisals, or because of a lack of clear record keeping by an aging relative, that hey are not in a position to file the return
within the nine months permitted by law.  The good news is, that there is also a provision for an automatic extension of up to six months.

Note, that this extension is merely to file a return and is not an automatic extension of time to pay the tax.  In addition, a federal court recently
held that the IRS failed to grant an additional extension (when the extension was requested after the due date for the return).  However,
there are a number of important limitations cited in this case.  But, this ruling  in favor of the tax payer might give you a basis for
requesting an extension other than the automatic extension of six months.

In any case, file requests for extension in a timely manner to avoid the litigation costs experienced by the estate in this case.

To review the case and the federal courts ruling on extensions to file a federal estate tax return, click here.

David M Frees focuses his practice in the areas of trusts and estates, and probate.  He also works with many closely held

family businesses in the areas of succession planning and asset protection planning. 610-933-8069

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Frees has received AVVO's highest ranking of 10.0 Superb

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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As fewer and fewer young Americans choose to enter into marriage, the issues of estate planning become more complicated. Since married couples in Pennsylvania benefit from a zero tax rate on inheritances, and on protections for the surviving spouse under the state intestate law, that do not exist for unmarried couples, making sure that you have done your planning is more important than ever.

For more information on estate planning for unmarried couple click here.

David M. Frees III
David Frees is a local lawyer practicing in the areas of trust, estate, estate planning and asset protection law. He has law offices in Malvern, Phoenixville, and West Chester. His firm is Unruh, Turner, Burke and Frees.

To update your estate plan, will, trust or living will please call 610-933-8069 for a consultation by phone or in person with David Frees. Pennsylvania residents can qualify for a free consultation and a reduced fee by mentioning this code: UTBF2010.

Frees has received AVVO's highest ranking of 10.0 Superb

Communities Served: Malvern, Phoenixville, Downingtown, Exton, Collegeville, Devon, Berwyn, Ardmore, Wayne, Chester Springs, Edgemont, Willistown Township, Paoli, and many surrounding areas.

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David M. Frees III on a 2010 TO DO List.

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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Historically, executor fees in Pennsylvania and how much can be charged by an executor, have been governed by fee guidelines as opposed to state statutory fees. For a review of a common fee guideline, see my article on the Johnson Estate Guidelines on Executor Fees.

As a result, the probate courts have always had the ability to review and to reduce fees that the judge felt were unreasonable. Courts have been especially willing to do this in cases involving disabled persons and minors.

Likewise, the family and beneficiaries have often requested that an executor charge lower fees than might be permitted where the estate administration is simple. This does occasionally result in some tension with the executor as beneficiaries who have never been an executor assume that all estates are simple. The reality is, that , estates with businesses, closely held stock, real estate and/or many beneficiaries can be very difficult and time consuming.

But, if you would like to know the identity of a very powerful party that has an interest in reducing executor’s fees then see my recent article in www.paestateplanners.com. To see the article on executors fees in Pennsylvania just click this link.

David M. Frees III
David M. Frees III writes extensively on the issues facing executors and trustees and advises banks, trust companies, and individuals on the issues involved in estate and trust administration in Pennsylvania.

For an appointment or telephone consultation call David’s assistants/paralegals at 610-933-8069

David M. Frees on Executor Fees

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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.

David M. Frees III on Estate Planning Dangers and Opportunities

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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Many of our clients have expressed an interest in the Federal Stimulus Package. Now that it has become law, we have a link for you to visit and read the text (over 1,000 pages of it). You can also leave feedback and comment. Beware, that this stuff can put you to sleep so we strongly advise against visiting the site prior to operating a vehicle or heavy machinery. In fact, the more we think about this, visits should be limited to evenings and perhaps periods of insomnia.

To see the Stimulus Bill click here.

Thanks to one of the advisers for our clients that send us this riveting information, Douglas R. MacGray, J.D., C.F.P. ® (610) 783-4265.

David M. Frees III

Do you know that very few wills actually work the way that the
person wanted due to the failure to coordinate assets and insurance with the will?
Want to avoid having your plan fail? Want the will and trust to work as you intended?

Then follow David M Frees III on Twitter for his regular hints, pointers and
updates that save his clients time, taxes, and money. Click Here.

Not into Twitter or technology? Need updates or information?
Call 610-933-8069.

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At Unruh Turner Burke and Frees, the Trust Estates and Wealth Preservation section has developed a number of valuable resources for our clients to both understand and to manage their federal estate tax liability. We represent many affluent and moderately affluent clients and families who want to minimize or eliminate this tax, reduce inheritance taxes, pass on vacation homes, real estate and family businesses.

And one of our most popular reports – How To Be an Executor In Pennsylvania is available to any clients or those considering our firm. Just call the office and you can receive this valuable resource. 610-933-8069 and ask for our Executor Paper. It contains over 13 pages of valuable information about the duties of executors in Pennsylvania and how to avoid getting into trouble or litigation. In fact, many executors don’t know that they are personally liable for many of their acts.

We also try to alert you to other resources that you can use as a savvy consumer of legal services. And if you enjoyed our brief articles or news alerts on Federal Estate Taxes, then you might also want the IRS consumer guide to the federal estate tax and related publications. These publications are available for download at no charge just by clicking this link.

If this guide raises more questions than it answers, you are not alone but it is a valuable resource, very complete and a great place to learn more. And, we are happy to answer any of your questions and to keep you advised of the expected changes in this vast body of law as those changes occur.

Pleas leave your comments and questions below and register for the RSS feed to get alerts when we update the blog.

David M. Frees III, Esquire

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Effective as of January 1, 2009, the federal estate tax has a new exemption amount.

Currently, estates are exempt if they are below $3.5 million Dollars. That’s the good news. The bad news is that many people may still be subject to the tax even though they think that they and their families are free of that very large burden.

First, the estate subject to that tax exemption includes assets such as the death benefit of most life insurance policies, retirement accounts, joint accounts, and many trusts and other assets as well as assets that pass outside of an estate by beneficiary designation. In other words, non probate or life insurance does not mean tax exempt. Also, if a married couple has assets and life insurance that exceed that number they may still need significant planning to eliminate the tax. The current top rate of the tax is 42% which is scheduled to return to 55%.

Also, the tax is currently scheduled to return to a $1 million dollar exemption in 2011. So individuals or spouses with assets that exceed $1 million dollars should still consider estate tax planning.

Congress is currently considering a change to the tax and may or may not make the $3.5 million dollar exemption “permanent.” See my earlier article on Obama and the estate tax. And, that would be great for clients. In that way, you only need federal estate tax planning when your assets exceed that amount.

However, if the tax no longer applies to you, then you can and should focus your planning and spend planning dollars on protecting your spouse in the event or remarriage and divorce, protecting your children and grandchildren from divorce and lawsuits, and in minimizing state death taxes. Our enhanced Estate Planning(TM) and Family and Friends Plans(TM) focus on these issues and how to avoid family disputes, how to pass on the personal assets and how to make sure that your family history, values and wisdom are also preserved.

These planning approaches were often made more expensive and complicated when the federal estate tax applies. So, elimination of the tax for you may open some new planning options without breaking the bank. And, gifting stock, real estate and other assets in a bad economy with low interest rates may offer real planning opportunities. See my article on effective planning in tough economic times.

For now, make sure that your plan really works and is coordinated with the way you hold your assets, and make sure that you have the right tax planning, the right executors and trustees. And, if for fun you want to see if the Federal Estate Tax applies to you, be sure to check out this little tool from SmartMoney. Just click the link.

But remember that an estate planning check up from your professional advisers, focused on you and your family is the best and that no general calculator will replace that personalized attention.

David M. Frees III, Esq.
Follow David on Twitter for more legal updates or for more information on family communications skills and business skills

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David Frees dfrees@utbf.com
Doug Kaune dkaune@utbf.com
Also be sure to leave us comments and questions below about what you want and what you need in these articles to help you get the most from your estate planning, for you and your family.

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