Wealth Preservation, Trusts and Estates

If you are a Pennsylvania resident, your estate is subject to many death taxes including the Pennsylvania Inheritance and Estate Tax as well as the Federal Estate Tax. If you have been watching the news, you know that one of those tax systems – the federal estate tax is due to expire quite soon.

Why?

Congress has yet to act on the pending repeal of the federal estate tax. But, the pressures on our tax system are so great that most commentators feel that they must keep the tax in place. If Congress allows the tax to temporarily lapse, it appears that they might then re-enact it retroactively to the start of 2010.

In addition to being confusing to taxpayers, and raising a difficult constitutional issue, this makes rational estate tax planning almost impossible.

In any case, the question of repeal or repair of the federal estate tax (also known to its detractors as the “death tax”), will almost certainly be the next political hot potato after health care reform is resolved.

Have you made up your mind yet? We try to present many different views on this issue and we welcome your comments. We also encourage you to contact your Congressional representative and Senator to demand action on this vital issue.

Here is an article from the Heritage Foundation on 7 reasons to repeal rather than reform the federal estate tax.

Please leave your comments below.

David M. Frees III
Chairman: Trust, Estate and wealth Preservation Section
Unruh, Turner, Burke and Frees

Offices in: Phoenixville, Malvern and West Chester

wills trusts estates powers of attorney and living wills
estate planning

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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 Frees is an attorney who focuses his
practice on wills, trust, estate planning, and related
issues.

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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Are you considering making end of year estate planning gifts to children, grandchildren or great grandchildren?

Curious about how much you can give without paying gift tax? This brief video tells you how much you can give without paying taxes.

Want to avoid the mistakes that people make that can actually cost your heirs money?

Need to know whether or not you need to file a gift tax return? Click here to get your answer to the question “How much Can I Give Without Filing A Gift Tax Return?”

I just published an article on The Five Most Common Mistakes that People Make with End of Year Estate Planning Gifts, and How to Avoid Them. Be sure to read this article and the two additional artciles on gifting that will be published in the next few weeks.

Make sure that your gifts work, that they count, and that you maximize them without making some of the horrible mistakes that can cost your heirs dearly. Read: End of Year Gift Tax Mistakes and How To Avoid them.

David M. Frees III
Offices: West Chester, Phoenixville, Malvern
Serving Chester County, Montgomery County and
All of the Counties in the Greater Philadelphia Area

For appointments call: 610-933-8069
dfrees@utbf.com
Please leave your questions and comments below.
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publications.

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If you are over 70 1/2 and have an IRA you may have missed the change in the law that said that you don’t have to take required mandatory minimum distributions this year. well, if you have taken your RMDs for this year and want to put them back, then there is some good news for you.
Click this link to see my brief new article on an important legal change about IRAs and RMDs (required minimum distributions) that might make a big difference to you.

Remember, that as the end of the year rolls around, to check your IRA, 401(k), and life insurance beneficiary designations to make sure that they are still current and that they match your planning. You will thank us if you find your ex spouse or the wrong beneficary listed.

David M. Frees III, Esquire
Are you over 70 1/2? Do you have an IRA?
Enhanced Estate planning might be better but
not much more expensive than a simple will.

Discover how you can protect your legacy and your
heirs from law suits, divorce and, death taxes.
610-933-8069

For a Free report visit our blog at www.PaEstatePlanners.com

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