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

David M Frees III Federal Estate Tax Video

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.

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David M. Frees III on What To Do About The Federal Estate Tax Problem

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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There is a lot happening in the normally calm, cool, and collected world of the estate tax, and estate planning. The Wall Street Journal Article on the latest failure of Congress to act on Federal Estate Tax issues actually called the situation “frenzied” and not without reason.

While we, as your advisers, are keeping our usual cool and focused demeanor, there are reasons to be cautious and to keep an eye on this situation if you have total assets (husband, wife or single person) of over one million dollars including your life insurance.

We are bringing you news and analysis as soon as it breaks and we have a chance to crunch the numbers, read the bills, and think about the unthinkable (or previously believed to be unthinkable) a year without the federal estate tax.

That’s right, Congress has fumbled the ball and an extension of the bill seems almost impossible at this point. But, many members are threatening to reenact the law after the holiday break and to have it apply retroactively to January 1, 2009.

There are a few unexpected consequences of the federal estate tax going away and this Wall Street Journal Article has a good quick review and a couple of important alerts.

Stay tuned for more news and information as it becomes available.

David M Frees III
610-933-8069

David Frees focuses his practice in the following areas of law: estate planning, estate administration, asset protection planning and wills, trusts, and related topics.

Frees is a Phoenixville lawyer, Malvern Lawyer, and West Chester Lawyer, with offices throughout Chester County, Pennsylvania.

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David M Frees III, Esquire has just been awarded AVVO’s highest lawyer and attorney rating of 10.0. Frees heads the Trust, Estate, and Wealth Transfer Section of Unruh, Turner, Burke and Frees with offices in Phoenixville, Malvern, and West Chester, Pennsylvania.

Frees whose practice is limited to trusts, wills, estates, probate, asset protection, and estate planning helps families and individuals to create effective estate tax, asset protection, and business succession plans.

Frees has received AVVO's highest ranking of 10.0 Superb

However, Frees notes that “The firm has lawyers that work in many different areas so that our clients’ needs ranging from personal matters such as estate planning, personal injury and related matters are well protected and served by the firm. And, many other firm practice areas help clients in their business, real estate, and related commercial matters.”

“I am honored to receive AVVO’s highest professional rating. AVVO is one of the premier lawyer search and referral sites on the internet and rates lawyers on a variety of factors. I regularly publish legal guidelines and answer estate planning, will, trust, and probate questions for AVVO users and I believe that it is a powerful tool for consumers.”

Thanks to everyone, including my partners and associates, my support staff, and the other lawyers and clients who have helped me to achieve this honor. I have a great team of people that I work with and great clients that we serve.”

Frees’ offices provide trust, estate, and estate planning services to the entire Philadelphia region, including but not limited to Chester and Montgomery Counties, Berks, Bucks and Lancaster Counties and many communities such as Ardmore, Devon, Berwyn, Paoli, Malvern, Willistown Township, Charlestown Township, East Pikeland, Schuylkill Township, and Doylestown

More information about AVVO rating and search services for Pennsylvania residents can be viewed by clicking this link.

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First a few preliminaries on the Grantor Retained Annuity Trust or GRAT.

What is a GRAT? GRAT stand for Grantor Retained Annuity Trust. It is a special trust where you can make a gift and get the original amount back over a period of years and the growth of the asset remains in the trust – usually, for children.

Why do people do GRATs? GRATs are often used in times of low interest rates, and low asset values to move substantial growth in an undervalued stock, family business, or even real estate, out to the next generation.

Can you give an example? Yes. Mrs Walton (Sam Walton’s wife) contributed a substantial amount of Walmart stock to a GRAt for her children. The trust had to pay her back the stock (or cash) plus interest over a peiod of years. However, because her stock rose so much in value, even when she was paid back, a great deal of wealth remained in the trust for her heirs. She paid no gift tax becasue the GRAT was structured, so that at the time of the transfer, there was no gift.

Should I get my GRAT done before the end of the year? Well, a GRAt is an irrevocable trust. So, you should thoroughly and completely understand the GRAT before you sign and fund it. However, in the current economic environment, a GRAT can be a very powerful estate planning tool.

GRAts are complicated to set up but once you go through the process, they are fairly easy to use and to administer and the payoff to your heirs can be huge.

Since you must out live the term of the GRAt for it to work it’s magic, careful consideration should be given to how fast the GRAT should pay you back. But, once you know that the GRAt is for you, the sooner you fund it the better.

For more information on GRATs, sign up to get alerts when we post new articles.

Thank you for being a reader and please post your comments or questions below.

David M. Frees III on GRATS - Grantor Retained Annuity Trusts

David Frees’ AVVO Rating 9.8 “superb”

For a consultation or phone conference call 610-933-8069
By email: dfrees@utbf.com

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