Wealth Transfer

Thanks to an inflation adjustment, in 2012 the federal estate and gift tax won't kick in until $5.12 million. That means lifetime gifts must exceed that amount before a gift tax becomes payable. For those who die in 2012, the sum of lifetime taxable gifts and estate assets must exceed that same figure before an estate tax is payable.

In October, a key IRS interest rate (the Section 7520 rate) fell from 2.0% in September to 1.4%, the lowest rate ever. (The high point for the Section 7520 rate was 11.6% in May 1989.) As recently as last May, the rate was 3.0%. Very low interest rates favor some estate planning techniques, but others lose their allure.

The first step in estate planning is compiling an inventory of all current assets. Financial records, life insurance policies, real estate interests, bank accounts, brokerage accounts, retirement accounts, collectibles...the list is extensive and can be exhausting. In the digital age, this first step needs to include more than paper.

Trust-based wealth management plans are growing in popularity. According to one recent survey, more than half of families whose wealth exceeds $5 million already employ a trust for asset management. More than a third of families whose wealth falls into the $1 million to $5 million range have a trust.

Morrison was concerned that his $300,000 term life insurance policy might not be enough protection for his family. He broached the issue with some golfing buddies who were financial planners. They were able to get him a new $1 million policy with premiums that were not higher than the policy he surrendered.

DEAR TRUST OFFICER: With the new $5 million estate tax exemption ($10 million for married couples), isn't it true that most people don't have to worry about estate planning any more? AFFLUENT, NOT RICH

DEAR TRUST OFFICER: I understand that the federal estate tax exemption is now $5 million. What about gift taxes? -GENEROUS GRANDPARENT

In news coverage of the debate over estate taxes, you may have heard something along the lines of "In 2009 the federal estate tax exemption was $3.5 million, or $7 million for married couples." Strictly speaking, that was not quite accurate. Yes, with some basic estate planning and given certain assumptions about who owns what and who dies first, married couples could achieve a doubling in the value of the federal estate tax exemption. But without that estate planning, a couple would most likely would lose one of their exemptions.

DEAR TRUST OFFICER: I understand that the federal estate tax exemption is now $5 million. That's well above my wealth level. Do I still need a trust in my will? -DODGED THE DEATH TAX

Advent of a kinder, gentler estate tax. The December bipartisan compromise over extending the "Bush tax cuts" included somewhat controversial taxpayer-friendly changes to the federal estate tax. The amount exempt from this levy was set at $5 million. It had been $3.5 million in 2009 and would have gone to just $1 million in 2011, absent the compromise. In addition, the top estate tax rate was set at 35%, down from the 45% rate in 2009 and far less than the scheduled 55%. The 5% surtax on estates over $10 million was not renewed.

DEAR TRUST OFFICER: Has Congress fixed the estate tax mess yet? PROCRASTINATING TESTATOR

Duncan Bannatyne is a British multi-millionaire businessman and author. He established a trust for his daughters, and each receives the equivalent of $545 per month from it. Apparently, Bannatyne is the trustee, and he retains broad discretionary control over it. When he discovered that one daughter had begun smoking, he cut off her trust distributions.

As it turned out, one of the best strategies for minimizing the estate tax burden on the family fortune was to die in 2010 - just ask the heirs of billionaires George Steinbrenner and John Kluge. Notwithstanding repeated calls to restore the estate tax retroactively to the first of the year, Congress has taken few concrete steps, and it won't resolve the issue before the election.

James Guyton sold his Florida chicken farm on January 20, 2000, for $190,000. After paying off two mortgages, he placed the net proceeds of $99,735 into a joint checking account with his son Timothy.

This year, the federal gift tax applies at the historically low rate of 35%, when lifetime taxable gifts exceed $1 million. Next year, the rate is scheduled to zoom up to 55%, in tandem with the return of the estate tax.

When actor Gary Coleman died in May from a brain hemorrhage at age 42, he had an estate plan in place. In fact, it appears that he had three of them.

Do I still need a marital deduction trust in my will for my wife? -CONCERNED HUSBAND. Most likely, yes. If your current will includes a trust for a surviving spouse, you will want to keep it.

Mary and Joseph Artalls were family farmers. In 1976 Joseph created a corporation to hold the farm's land. He died in 1998. Two of their children participated in the operation of the farm. In 2001, a limited liability company (LLC) was formed to own the farm assets exclusive of the land, such as livestock, equipment and supplies. The participating children bought out the interest of the nonparticipant, so that they each owned 25% of the LLC and Mary owned 50%.

We refer in our headline not to the Hollywood deal-maker or the secret employee of a clandestine service, but to the idea of delegating one's responsibilities to an institution staffed with professionals ready to work on behalf of others - an agency relationship.

A recent IRS private letter ruling provides a timely reminder on the importance of understanding your will.

Glen W. Bell, Jr., started selling tacos from his hot dog and hamburger stand in 1952. The idea of popularizing Mexican food was a big success. In 1962 Bell opened the first Taco Bell restaurant, and in 1964 he began franchising it around the country. The chain so prospered that Bell was able to sell it to PepsiCo in 1978 for $125 million in stock.

The 2008 Economic Stabilization Act extended the window for tax-free rollovers from IRAs to charity, but that opportunity evaporates at the end of this year. Until then, owners of traditional IRAs and Roth IRAs who are at least age 70.5 may transfer up to $100,000 from their IRAs without having to report the gift as taxable income and pay tax.

The Grantor Retained Annuity Trust (GRAT) has been getting quite a bit of attention from estate planners recently. The reason is that low market interest rates create a window of opportunity for passing assets to heirs without incurring much, if any, estate or gift tax.

The federal estate tax needs to be changed, that much everyone agrees upon. Today the federal estate tax exemption is $3.5 million, which means that with some careful planning married couples can shelter $7 million from taxation over two deaths. President Obama has proposed freezing those rules, as it would keep this tax targeted to the most affluent Americans.

The standard rule for valuing estate assets is to use the fair market value on the date of death. If the value is high enough, a federal estate tax will be due. A long-standing choice permits an estate's assets to be valued instead at an alternate valuation date, six months after the individual's date of death. It's a decision that an executor makes on the federal estate return, and it can be essential during down markets, such as we have experienced recently. Paying a death tax on evaporated gains on stocks or real estate can be just about impossible, because selling the assets may not yield enough to cover the taxes due.

If estates consisted only of cash and marketable securities, determining their values and death taxes due would be simple. But estates often have assets that are very hard to value, and much estate tax litigation with the IRS concerns getting that value right.

In light of recent economic and market events, many people have rethought and, perhaps, adjusted some financial goals. It's unlikely, however, that they have undertaken a major reassessment of the values and ideals that they live by.

Much of the attention surrounding the current financial crisis has focused on the implications for large businesses. Less emphasis has been placed on the impact that the turmoil has been having on family-owned enterprises.

Logic and emotion may suggest that now is not the time to give anything away. Yet, although there hasn't been much to applaud in the financial news recently, an environment of depressed asset values and low interest rates actually may make it a good time, from an estate planning perspective, to consider some of your options.

The 2008 Economic Stabilization Act that became law in October included extensions of tax breaks that had expired at the end of 2007. One of them, the revival of tax-free rollovers from IRAs to charity, may deserve your immediate attention.

Jerry Orbach was best known as Detective Lenny Briscoe on TV's Law and Order, a role that he played for 12 years. A multifaceted actor, Orbach's extensive career dated back to 1955 and included several TV series and films. Less familiar to many than his TV and film career, however, was his remarkable -and award-winning-stage career, which included 13 Broadway and off-Broadway shows, many of which featured his talents as a musical comedy performer.

In a desire to be fair to everyone, some parents assume that the solution is an equal division of what they own among their offspring. Too many times chaos ensues. Here are the stories of two families with whom we are familiar. They are based upon real situations, but the names are fictitious and some facts slightly altered.

Many professionals have witnessed unintended results when people remarry without making adjustments to their estate plan.

If you own a traditional IRA, it may be one of your more important estate assets. Your IRA will pass to whomever you have named as its beneficiary. When it's a substantial sum, there is the opportunity for continued tax deferral, as well as a source of income for many years and, perhaps, for more than one generation, through a technique known as IRA

Most people are collectors of some kind. Some own art that has been passed down through generations, and their collections may be worth millions of dollars. Others start collections based upon their special interests-as common as coins and stamps or as unusual as musical wind-up toys and fishing lures.

Incapacity can befall anyone at any time. For the healthy, it may be the result of a sudden illness or injury. For older people, the onset of incapacity may be slower, the progression of an illness such as Alzheimer's disease or just part of the normal aging process. The best way to protect your family and assets in the event that disability strikes is to take the necessary steps when there is no doubt that you are fully capable of acting on your own behalf.

Although a will serves as the foundation of your estate plan, very often a trust arrangement, either established during your lifetime or in your will, serves as a versatile financial management tool to meet a wide variety of your planning objectives.

The long-term financial security of your family demands that you establish and maintain a soundly crafted estate plan. An estate plan provides an orderly way to distribute your accumulated wealth to your heirs in the manner and amounts that you wish.

Life insurance provides protection when children are young and major expenses lie ahead. In one's later years, however, the need for life insurance may diminish. For some, continuing to pay regular premiums may seem an unnecessary expense. But one's choices are limited. One can, of course, let the policy lapse or turn it in for a low surrender value.

Charitable giving in the United States hit a new record in 2006-an estimated $295.02 billion, according to Giving USA 2007, published by Giving USA Foundation(TM) and researched and written by the Center on Philanthropy at Indiana University.

Real property–land and the home or other structures on it - often has special significance to the family that owns it, to the surrounding community or to the ecology of the area. It may: have played a role in a historical event; provide habitat for wildlife; command a magnificent view; or offer access to recreational or educational venues. It is only natural that owners might want to preserve the unique character of their property.

Five months into the new year, and the issue of federal estate tax repeal/revision still is unresolved. As it stands now, the transfer tax rate (for estate, gift and generation-skipping transfer tax purposes) is 45% for this year and through 2009. The current $2 million tax exemption rises to $3.5 million in 2009. For 2010, the tax is abolished altogether. But things revert back to 2001 levels in 2011-with tax rates jumping to as high as 55% and the exemption falling to $1 million.

Art museums rely upon donations from wealthy patrons and art lovers to extend and enhance their collections. Often, donors make their gifts by will. But lifetime gifts are fairly common as well. But, according to some museum administrators and collectors, a new rule included in tax legislation enacted last year, paints a cloudy future for certain lifetime gifts, referred to as gifts of "partial," or "fractional," interests in art.

The Pension Protection Act, enacted in August, included new rules that could have an impact on your charitable giving. Included among them was a provision permitting tax-free distributions (rollovers) from your IRA to charitable organizations. Because the opportunity has a limited life span, you'll want to start planning immediately. The following Q & A should be helpful.

The following is a fictitious account, with fictitious names, but one that, nevertheless, could be true. Stephen Smith married three times. He had a daughter, Sara, with his first wife, two sons and a daughter with the second. His third wife wasn't much older than his first child. At his death Stephen's beneficiaries included his surviving spouse, the two ex-wives and the four children.

Near-record philanthropy. Giving USA, an annual report on philanthropy, estimates that Americans donated $260.3 billion to charity for 2005, representing an increase of 6.1% over 2004 (2.7% after inflation). Approximately one-half of the $15 billion increase in total giving came in response to three natural disasters: the tsunami that struck the Indian Ocean area, the Gulf Coast hurricanes in the U.S. and the earthquake in Pakistan.

In May, after months of negotiation, a new tax bill became law-the Tax Increase Prevention and Reconciliation Act of 2005. A few of its key provisions are worth reporting.

Very often a retiring founder's chief concern is how to orchestrate the conveyance of a successful business while, at the same time, keeping peace in the family. Although each business and family is unique, there are a few typical situations that can affect a smooth transition of family enterprises.

According to Consumers Union, approximately 70% of adult Americans don't have even a simple will. The standard explanation that many people give for not planning is procrastination. It's easy to understand-coming face to face with one's mortality isn't a pleasant subject. Sometimes, too, people feel that a simple will drafted at the outset of their marriage, or when they bought their first home, still serves them in good stead today.

To create an estate plan that serves your unique needs and that will execute your wishes as to the distribution of your assets is an important and, often, a complex task. It's likely that you will need the assistance of skilled advisors from a variety of disciplines. Advisors who can employ the latest and most appropriate strategies and techniques available under current law to fulfill those needs.

Over the years our clients have recognized the many advantages of establishing a living trust with us. We would like to share some of the benefits of our living trust services with you and then meet with you to discuss how a living trust can be structured to meet your needs.

As the debate in Congress over the repeal of the federal estate tax continues, the question is: What should you do about your planning in light of the current uncertainties?

Your will is a thorough, logical way to plan and control how the assets that you own will be managed and distributed at your death. It will permit an orderly transition of your property to whom and in what manner that you choose.

The tragic situation of Terri Schiavo and her family has brought a heightened sensitivity to the need for all of us to make our wishes concerning health care known in advance of any illness or injury that might make us unable to communicate clearly. We offer this discussion as an aid in understanding some of the medical and financial

As important as a will is to the transfer of your assets, it does not necessarily control how all of your assets will be distributed to your beneficiaries. You are likely to have designated beneficiaries for specific assets during your lifetime. And just as you review your will, review of your beneficiary choices for these assets is extremely important.

One of your children is starting a new business. Or looking to purchase a first home but coming up short for the down payment. Or needs assistance with a child's college education. In some cases you may be reluctant. But very often your instinct will be to say,

In October, a key IRS interest rate (the Section 7520 rate) fell from 2.0% in September to 1.4%, the lowest rate ever. (The high point for the Section 7520 rate was 11.6% in May 1989.) As recently as last May, the rate was 3.0%. Very low interest rates favor some estate planning techniques, but others lose their allure.