Every client should review his or her Florida Revocable Trusts at least every five (5) years. This will ensure it is up-to-date with current Florida the law, Federal Estate tax exemption amounts, and meet your goals.
Do you have the right successor trustees? Typically you will be the trustee of your own revocable trust with your spouse as co-trustee (if you're married). Trusts should name one or more successors in the event the original trustee or trustees are unable to serve. Make sure that you still want the successors you originally named. Also, do you want them to come on and begin acting as trustee now? And if you and your spouse are co-trustees, do you want the successor or successors to step in when the first of you becomes incapacitated or passes away, or not until neither of you can serve.
Who can remove trustees? While you are alive you can always change the current and successor trustees of your Florida Revocable Trust. However, do you want anyone else to have this authority after you are incapacitated or deceased.
Can the surviving spouse change the beneficiaries and ultimate distribution of trust assets after you have passed away? Many trusts give surviving spouses a power to redirect trust assets at their death. This can be important to provide for flexibility to respond to changes in family circumstances. However, this typically doesn't make sense in second marriage situations.
Does your trust protect your children and grandchildren from lawsuits and divorce? You have the ability of drafting your trust to continue for your children's lives to provide creditor and divorce protection.
Have you funded your trust? Most Florida trust documents don't accomplish all that was intended because the decedent died with their assets still titled in their names. Avoid probate, protect your assets from guardianship reach, and make sure that the estate tax protections in your trust operate as planned through retitling assets in the name of the trust.
Who is named as beneficiary of your retirement plans and other investments? Often clients spend hours with their attorneys crafting an estate plan to match their goals and then circumvent it through naming individuals as beneficiaries of retirement plans and investment accounts. Make sure these are all coordinated to accomplish your objectives.
At what age will children and grandchildren receive their inheritance? Most trusts provide that funds will remain in trust until those inheriting reach a certain age, often 21. However, your Florida Trust can be drafted to establish any age you choose and even permit them to withdraw a portion of the trust at set ages (one-half at 25 and the balance at 30, or a third each at 25, 30 and 35). This doesn't mean that they can't benefit from the trust assets in the meantime, but that distribution decisions are made by the trustees until children and grandchildren have more financial experience.
Does your trust have provisions providing for maximum tax deferral if it is named the beneficiary of a retirement plan? While you may choose to have your retirement plans go directly to your heirs, the simplest approach, or your trust. However, if it is going to your Florida Revocable Trust it must have special provisions to stretch out the annual required distributions for as long as possible.
Is your trust up-to-date for estate tax purposes? Congress and many states have changed the estate tax laws several times in recent years. If your trust is more than five years old, or if you lived in a state other than Florida when it was drafted, it should be reviewed by an estate planning attorney to make certain it is still current.
The elderly widow wasn’t asking for much. Just a little protection so she could live out her life as she’d planned. So that she could go out to lunch with friends or buy a new hat or new teeth. Instead, Marie Long was protected right into the poorhouse. In just four years, the woman who came into Probate Court with $1.3 million in assets was left penniless, her life savings sucked up by the very people appointed to watch over her — all as the judge looked on. Or away, more likely.
As a result of what happened to Marie Long, laws were changed and reforms were enacted in the hope of better protecting the most vulnerable among us. All that is, except for Marie.
Now, at long last — and with no thanks to the courts —Marie Long, at 92, has a little of her own back. “She should have enough to live a decent life,” her longtime attorney, Jon Kitchel, told me. I first met Marie in October 2009, not long after she was moved into a Phoenix nursing home that accepts welfare clients. She was soft-spoken and at a loss for words as to how she had come to such a fate.
Marie had no children to look after her in her old age. Her daughter died of cancer long ago at age 16. The following year, her 20-year-old son was killed in Vietnam. When her husband, Cliff, died in 2003, Marie was in good financial shape. But a stroke in 2005 and a family dispute over where and how she would live landed Marie under the “protection” of Maricopa County’s Probate Court.
By 2009, her $1.3 million estate was gone, much of it sucked up by attorneys and fiduciaries under the not-so-watchful eye of then-Commissioner Lindsay Ellis. Ellis ruled that those attorneys and fiduciaries were justified in helping themselves to more than $1 million of Marie’s money. She lambasted Marie’s lawyers — Kitchel, Pat Gitre and Marie’s nephew Dan Raynak, people who for years volunteered their services to help Marie as her accounts dwindled.
Ellis wrote that their “venomous” attacks challenging the six-figure bills forced the fiduciaries and lawyers on the other side to defend themselves. With Marie’s money, naturally. Later, we learned that Ellis, through her judicial assistant, sent advance copies of her ruling to select attorneys — the ones who wound up with Marie’s money. Two courts found that Ellis acted unethically, but that, they wrote, didn’t mean she was biased. The Arizona Court of Appeals called what happened to Marie “inexcusable.” Then, it did nothing to fix it.
Instead, the courts left the bulk of Ellis’ ruling intact, approving $840,000 of the fees and ordering a retrial on the remaining bills. The biggest remaining question: Was the law firm justified in collecting $230,000 from Marie in 2009? In recent weeks, awaiting court approval of their fees the parties reached a confidential settlement with Marie. It’s believed to be the second such settlement in the case, the first involving the now-defunct Sun Valley Group, which collected $430,000 from Marie.
Kitchel said he couldn’t tell me how much of Marie’s money has been refunded. But it will be enough, he says, to get her off welfare and give her financial independence. “She’s going to be just fine,” he told me. Not only will she be just fine, but others should be, as well. As a result of public attention to Marie’s experiences, vulnerable people are better protected when they go to Probate Court. It’s now easier for wards to get rid of fiduciaries they don’t like. For years, fiduciaries basically ran Probate Court, and if you tried to fire them, they got to spend a good chunk of your money fending you off.
In addition, Kitchel says, court accountants are no longer rubber-stamping the accounts but looking for padded billings. Judges are now looking out for the long-term sustainability of estates. “The attitude has changed, and I think that the courts are pretty sensitive to the light being shined on them,” Kitchel said. “I think that they’re doing things differently now and people are more sensitive than they were in the past, sensitive to how much is being charged to the cases.” Sensitive, finally, to little old ladies like Marie. A one-time millionaire who can now, after four years of probate-induced poverty, buy herself lunch.
If you don't think this can happen to you in Sarasota or Manatee County Florida you are sadly mistaken. This case further emphasizes the need to have your assets titled in the name of a Revocable Trust to avoid anyone, except the Trustee, from gaining access to the funds.
Article republished from the Arizona Republic newspaper
A commonly asked question is how often should I review my Florida estate plan? So why would your Florida estate plan need a makeover? The answer is that your Florida estate plan is a living document that changes with events impacting your life and should be adapted to meet your current situation. The bottom line is that it should reflect your current situation. In the event that something should happen to you, an out-of-date estate plan can cause contention and strife among beneficiaries. When deciding whether your estate plan needs a makeover, ask yourself the following questions:
Even a minor change in your circumstances can affect the legacy you leave behind to your loved ones. Everyone who creates an estate plan should make habit of performing an annual estate plan checkup.
Effective October 1, 2013, F.S. 732.806, went into effect and codified existing ethics Rule 4-1.8(c) as part of the Florida Probate Code. The Florida Statute makes a violation of the ethics rule an automatic basis for voiding any part of a Last Will and Testament, Revocable Trust or other written instrument making an improper client gift to the drafting lawyer or a person related to the lawyer. However, the restrictions on gifts under the new statute do not impact: (i) Gifts to a lawyer or other person if the lawyer or other person is related to the person making the gift; (ii) A written instrument appointing a lawyer, or other person related to the lawyer, as a fiduciary; or (iii) Title to property acquired for value from a person who receives the property in violation of the restrictions on gifts.
It is hopeful this new Florida Statute will prevent the abuses of the past.
A recent announcement by the Social Security actuaries that the Social Security Retirement Trust Fund will run out of money in 2034 has once again given rise to a round of concerned citizens asking: Will Social Security be there for me?
The answer to the question depends on what "be there" means.
Will the benefits be there at their current levels of purchasing power? Not necessarily. Will there be some benefits for workers who will retire in the future? Almost certainly. Should I alter my decision about when to claim Social Security benefits based on the actuaries' announcement? No.
Forecasting what will happen to Social Security is a bit different from forecasting other elements of workers retirement plans, since, unlike 401(k)s and private pensions, the Social Security Trust Fund doesn't invest in the stock market. (I have argued in another article that this is a good thing.) Uncertainty about the future of Social Security benefits is largely a political question. Balancing the system to guarantee full benefits beyond 2034 will require a reduction in benefits or an increase in taxes.
In the worst case scenario, assuming Congress makes no changes, the trust fund will be exhausted in the early 2030s. At that point only, the only remaining revenue source will be the contributions of those then working. Under these circumstances the system will be unable to pay more than 75% of the promised benefits. Social Security will "be there,” but the benefits, while higher in face value because of the inflation protection built into the system, won't be able to purchase the same goods and services that benefits do today.
This worst case scenario need not occur. The pain of either of these actions is lessened if they are implemented over a long period. Even in this politically charged environment, it is not beyond the realm of possibility that Congress will make adjustments to rebalance the system, as it did in the 1980s on the recommendation of the Greenspan Commission. At that point changes were made in anticipation of the baby boomer retirements that are now hitting the system.
Even if the worst case does occur, would it be prudent to adjust the timing and circumstances under which Social Security retirements benefits are claimed? Here the answer is a clear "no".
The Social Security Claiming Guide, which is published by the Center for Retirement Planning at Boston College, makes the following statement after evaluating the most widely discussed proposals for rebalancing the system: "None of these proposals give you more if you claim early. If you are affected, you'll get less no matter when you claim."
This is followed by the statement: "Nearly all proposals to fix Social Security would also protect those age 55 and older," a notion supported by Paul Ryan, who has recommended radical changes to Medicare, but no change in Social Security for people over 55. The one exception is the Obama proposal to use a different measure of the cost-of-living to adjust benefits to inflation. As Retirement Mentor Jason Fichtner has pointed out, this would decrease benefits by a small amount. At present, the House has rejected this idea, although it may be part of future budget negotiations.
Since Social Security doesn't suffer from the uncertainty of stock market fluctuations, Social Security is still the strongest component of most financial plans for retirement. The future, by its nature, is uncertain. At this point there is no reason to alter a well thought out strategy for claiming Social Security benefits.
I place my bet that Social Security will be there for me at a substantial percentage of current purchasing power long before I would have confidence in my 401(k) or my private pension.
Reprinted article from the NY Times on July 4, 2013.
The new law clarifies the statute and provides that a property owner who rents out their homestead for more than thirty (30) days per year for two consecutive years will lose the homestead exemption tax benefits on that property.
The increase in the Federal Estate Tax Exemption ($5,125,000 in 2013) and matching Federal Gift Tax Exemption have made the “kiddie tax” a radar issue for many families. The kiddie tax was enacted to prevent individuals from avoiding federal and state income taxes by shifting investment assets into their children’s names. Once the transfer is completed, the child becomes the legal owner of the asset(s) and its income and gains are taxed at his or her lower income tax rates (typically 10% or 15% for ordinary income from interest and short-term capital gains and 5% or less for long-term capital gains and dividends). That's a significant difference from the income tax rates that high-bracket parents pay (as high as 39% plus on ordinary income and 15% on long-term gains and dividends).
In 2013, “children under age 20 and full time students living with the parents will pay income taxes at the parents highest marginal tax rate on all unearned income above $2,000.” But there are methods of avoiding the kiddie tax or at least minimizing it. The following is a non-exclusive list of methods to avoid the kiddie tax and ensure that the unearned income the child receives does not exceed $2,000: (i) limit gifts to assets that are non-interest bearing or that pay no dividends; (ii) create a 529 savings account (if the assets are used for qualified educational expenses, all gains and income are tax-deferred and then tax-free); (iii) U.S. savings bonds and tax-deferred annuities; and (iv) interests in wholly owned entities. Regardless of the method selected, individuals should always be aware of the risk of transferring assets to children and strongly consider the use of a trust to control the flow of money.
An unexpectedly huge
collection of inheritance taxes in Connecticut, along with a spike in income tax revenue, helped turn a budget deficit into a surplus. The simple reason, "a lot of wealthy people died this year,'' said Connecticut officials. The state's inheritance and gift taxes have been combined into
one category since 2005, and this year's total is more than double the level of
seven years ago. The numbers also increased because wealthy individuals made
huge transfers of wealth as gifts in December in order to avoid the higher
federal gift tax rate that increased to 40 percent, up from 35 percent, on Jan.
Recently, Consumer Reports did a survey about the common financial mistakes people make. Below are the seven most common pitfalls.
Every Sarasota, Bradenton and Lakewood Ranch resident should act to ensure they are not adversely impacted by one of these pitfalls.