Wealth Preservation, Trusts and Estates

Do End Of Year Gifts To Children and Grandchildren Still Make Sense?
By: David M. Frees III

In the last few days of 2010 Congress passed, and the president signed, a new bill governing federal estate and gift taxes.

Since we are so close to the end of a calendar year, many people are calling and asking whether or not to make their traditional end of year gifts.

General Thoughts On Gifting and Gifting Before The End of 2010

In general, you should not make gifts that will negatively impair your personal lifestyle. This is especially true when you are retired and on a fixed income.

However, many clients find that they are fortunate enough to be building estate value even though they are comfortable in their retirement. In these cases, or even in cases of smaller estates, where you want to preserve assets and protect them from the nursing home spending, gifts may be a valuable end of year planning strategy.

This article deals predominantly with gifts where you have sufficient funds to avoid medicaid and nursing home issue. If you desire to protect
your assets from nursing home costs, click here.

For those who want to continue making gifts to family members, there is some very good news in the new estate tax law.

Here is a quick review of the new federal estate tax law and rates.

Strategies For End of Year Gifting and Gifts in 2011:

Since the federal estate tax rate will be the same for the next 2 years, and since five million dollars will be covered and tax free at death (or even during lifetime) for those same two years (before we fall back again to only $1 million dollars) large gifts do not need to be made before the end of 2010 unless very large gifts are being made to grandchildren.

Annual gift tax exclusion gifts (currently $13,000.00) per person can be made before December 31st and again after January first (for 2011) without using any of your lifetime or death exemption. Note that this amount might adjust again in the future.

These annual gifts can be made to children and grandchildren and can be made to the spouses of your children and grandchildren as well. If you are married, both you and your spouse can make these gifts and effectively double the amount that can be given without filing a gift tax return or paying any tax.

In addition, greater amounts can be paid directly to a school or for medical purposes in certain circumstances as well.

In short, make gifts of up to the $13,000.00 per person annual gift tax exclusion amount before the end of the year. In 2011 gifts in excess of this amount will either be taxed (at the historically low rate of 35% for the next two years)

Since the effectiveness of gifts can vary widely from person to person, and because there are better and worse ways to make gifts depending on your personal circumstances ask your lawyer and/or tax adviser to consider your personal facts and circumstances when advising you on the use of gifts, paying up insurance policies, or the use of trusts, annuities, and other gifting strategies.

David M Frees III
Unruh, Turner, Burke and Frees
Offices serving Malvern, Phoenixville, Devon, Wayne, West Chester,
Chester Springs and many surrounding communities.

Share and Enjoy

Do End Of Year Gifts To Children and Grandchildren Still Make Sense?
By: David M. Frees III

In the last few days of 2010 Congress passed, and the president signed, a
new bill governing federal estate and gift taxes.

Since we are so close to the end of a calendar year, many people are
calling and asking whether or not to make their traditional end of year
gifts.

General Thoughts On Gifting and Gifting Before The End of 2010

In general, you should not make gifts that will negatively impair your
personal lifestyle. This is especially true when you are retired and on a
fixed income.

However, many clients find that they are fortunate enough to be building
estate value even though they are comfortable in their retirement. In these
cases, or even in cases of smaller estates, where you want to preserve assets
and protect them from the nursing home spending, gifts may be a valuable
end of year planning strategy.

This article deals predominantly with gifts where you have sufficient funds
to avoid medicaid and nursing home issue. If you desire to protect
your assets from nursing home costs, click here.

For those who want to continue making gifts to family members, there is
some very good news in the new estate tax law.

Here is a quick review of the new federal estate tax law and rates.

Strategies For End of Year Gifting and Gifts in 2011:

Since the federal estate tax rate will be the same for the next 2 years, and
since five million dollars will be covered and tax free at death (or even during
lifetime) for those same two years (before we fall back again to only $1 million
dollars) large gifts do not need to be made before the end of 2010 unless very
large gifts are being made to grandchildren.

Annual gift tax exclusion gifts (currently $13,000.00) per person can be made
before December 31st and again after January first (for 2011) without using
any of your lifetime or death exemption. Note that this amount might adjust
again in the future.

These annual gifts can be made to children and grandchildren and can be made
to the spouses of your children and grandchildren as well. If you are married,
both you and your spouse can make these gifts and effectively double the amount
that can be given without filing a gift tax return or paying any tax.

In addition, greater amounts can be paid directly to a school or for medical
purposes in certain circumstances as well.

In short, make gifts of up to the $13,000.00 per person annual gift tax
exclusion amount before the end of the year. In 2011 gifts in excess of this
amount will either be taxed (at the historically low rate of 35% for the next
two years)

Since the effectiveness of gifts can vary widely from person to person, and
because there are better and worse ways to make gifts depending on your
personal circumstances ask your lawyer and/or tax adviser to consider your
personal facts and circumstances when advising you on the use of gifts,
paying up insurance policies, or the use of trusts, annuities, and other gifting
strategies.

David M Frees III
Unruh, Turner, Burke and Frees
Offices serving Malvern, Phoenixville, Devon, Wayne, West Chester,
Chester Springs and many surrounding communities.

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

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

If you have children between the ages of 18 and thirty, chances are that they don’t have a will.  And, there are many reasons why that might be a bad idea.  For example, many of our adult children have children of their own but have not done a will to name a guardian, executor and trustee to care for those children, or their finances. In addition, if you have left a child or your children assets outright (and not in trust) then that child’s will may control what happens to those assets rather than your own will.  For more information on when, why, and how to get your adult children to do a will, trust, or power of attorney, visit out new article on Estate Planning, Wills and Trusts for Children at http://www.PaEstatePlanners.com.

For more information on scheduling a family will clinic to update your own planning and to get your children to complete or update their planning call 610-933-8069 and mention the offer code:  FAMILY WILL REVIEW to qualify for a free review.

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

David and the firm maintain law offices in Malvern, Phoenixville, and West Chester Pennsylvania which serve

the Main Line, and many surrounding communities such as Devon, Exton, West Chester, Ardmore and others.

Share and Enjoy

Family Limited Partnerships, The IRS, and Your Estate Planning
By: David M. Frees III, Esq.

Many affluent families use family limited partnerships as part of their business succession planning, business continuity plans, and as a legitimate part of estate planning.

Limited partnerships allow a person or family own owns real estate, a family business, or even concentrated positions of publicly traded stock companies to accomplish a number of important things. By using a FLP (Family Limited Partnership) the family can divide the ownership of the company or assets from the management. So, a senior generation can continue to operate the business and mentor the next generation while allowing growth in the value of the company to occur in the children’s names.

The interests in FLPs are easy to divide and different family members can own different fractions of the total asset base or business.

The FLP can help to prevent a dissolution of the company upon the death of a senior family member and can provide for continuity of management.

And, when done properly, and when carefully documented, the FLP structure can result in a diminished value of the gift to children or grandchildren.

FLPs can be used in conjunction with both trusts created during your lifetime, or under a will and can also offer some significant asset protection.

The new York Times recently published a great overview of the pros (some of the benefits mentioned above), the cons (IRS scrutiny for one), and what to do to make sure that the FLP works as intended.

Click here to read this great NY TIMES article on Limited Partnerships and the IRS.

Unruh, Turner, Burke and Frees maintain law offices in Phoenixville, Malvern, and West Chester, Pennsylvania.

Share and Enjoy

No Will? That’s Called Intestacy.
But Don’t Worry.
The State Of Pennsylvania Has Done One For You.
How Do You Think That Will Work?

If you have a will and it’s more than a few years old, you may have to have it reviewed because of the volatile situation with the estate tax. However, if you have never done a will it may be time. Most people don’t realize, that when they fail to create and to properly execute a will, that the state of Pennsylvania will do one for you.

The failure to have a properly executed and legal will at the time of death makes you INTESTATE under Pennsylvania law. And, if you die intestate, the state automatically answers the following questions:

1) Who gets your estate – it may not be who you think.

2) When kids get the assets. Answer: 18. That doesn’t sound good does it?

3) Who takes care of the kids – a court appointed guardian chosen by the judge (think legal fees too); and

4) Who manages the kids money – again, a court appointed guardian but only until age 18;

5) Who gets to be the administrator (the executor under a will) – and there are classes of people who may not be qualified and who might fight about who gets to do it (again, think legal fees and administrator fees).

If you’d rather be in control of these and many other issues, thn completing and executing a valid will and/or will and trust is essential.

That process can be easy and inexpensive when compared to the high costs that often result from intestacy.

For a limited time, Unruh, Turner, Burke and Frees are offering a free will review or, if you have never had a valid will or trust, a free will consultation. And while there would be fees for completing an estate plan (including a will, power -of – attorney and medical power as well as a living will) there is no charge for the review or consult and there is no obligation on your part while this offer lasts.

To claim a free will review or a free will consult call 610-933-8069 and mention offer code: DaveFreesWillReview. Donna, Beth, or Denise will be happy to schedule you. (more…)

Share and Enjoy

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.

Share and Enjoy

By: David M. Frees III Pennsylvania Trust and Estate Lawyer

Is A Bank Ever The Best Trustee?

There are many reasons to set up a trust (either during life or under your will). Some people set up a trust to protect a young child from having access to money at a young age. Others use a trust to protect and to provide for a child with special needs.

Many trusts are established to provide income and assets to a surviving spouse and then to pass on the assets to family members such as children and grandchildren.

Some of our clients set up GRATs and or nursing home trusts to move assets to the next generation, or to protect them from being lost to a nursing home.

And, with each situation where a trust is the best solution another equally important question arises: Who should be the trustee of this trust?

There are many possible trustees to choose from. For example, you can select the following a trusts of your Pennsylvania trust:

you
a friend
a family member
a professional adviser
a bank or trust company

However, depending on the purpose of the trust, you may need to limit cases where you name yourself or family members as trustees since a trust is often taxable or reachable by creditors in a lawsuit, when a family member, spouse, or parent is the trustee. In fact, there is a specific section of the IRC (Internal Revenue Code) (Section 672) that will cause such trusts to be included in a beneficiary’s estate and then taxed.

So, it may be that you want to avoid family members or at least make them a co-trustee. Also, family members are often unaware of all of the new rules which apply to trusts under the UTA (Uniform Trust Act) and the Prudent Investor Rule. Family members also often fail to file income tax returns for the trust or to keep the trust records properly. Accordingly, family members might actually end up exposed to liabilities and law suits that they never anticipated.

But, if you want to avoid using a family member as trustee, what are the alternatives?

Friends, Advisers, and Banks.

And, while many families have family members and friends that will undertake the risks of being a trustee, and who will seek the right advice to make sure that they follow the new legal compliance requirements of trustees, it may be that a bank or trust company offers a viable alternative and may be the best choice.

Banks are well insured, are highly regulated, have procedures and specific policies, and they regularly file the returns and keep the records accurately.

I know that almost everyone has heard about a beneficiary that did not like their bank trustee, but banks can be the best choice and that can be especially true when a family member or friend is appointed as a co trustee or a trust protector and can fire and hire bank trustees to ensure that the bank is charging appropriate fees, getting good investment returns and is looking out after the beneficiary.

Of course, there are advantages and disadvantages to each approach. But make sure that you discuss trustee selection with your lawyer and accountant because the wrong choice of trustee can mean that the trust will not work to accomplish your tax and planning goals.

For more on trust protectors and trustee alternatives click here and watch for upcoming posts.

David M. Frees III, Esquire
610-933-8069
dfrees@utbf.com

P.S. If you would like to create a trust now or under your will, please call

Share and Enjoy

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.

Share and Enjoy