Archive for August, 2010

What’s Your Legacy?

Sunday, August 22nd, 2010

The word legacy means different things to different people.  Oftentimes, clients talk about a legacy in a financial sense.  In fact, legacy is a synonym for inheritance.  How about other forms of legacy?   

Legacy could include an opportunity to pass on your spiritual and ethical values and beliefs to your family and friends.  I experienced this type of legacy in a very powerful sense this week when I attended a funeral for a client’s father.  The stories told about this man were quite remarkable, as he understood that his mission in life included teaching his children about his faith, as well as, witnessing to others about his beliefs.  During his funeral, no less than ten people spoke about the profound impact he made on their lives.  What a wonderful way to be remembered!

The second type of legacy that comes to mind involves clients who tell me that their parents and grandparents are still living, many of whom are in their 80s, 90s and older.  This generation is often thought of as the greatest generation, having lived through the Great Depression and protecting our freedom in at least one World War.  One of my clients told me about her grandmother, who was in her 90s.  I had asked her how she thought the greatest generation, in particular women of that generation, expressed themselves and their love for their families.  She instantly agreed with me that it was through their wonderful cooking. 

Perhaps then legacy should include family traditions and recipes that are can be passed on from one generation to the next.  Of course, women of the greatest generation did not write down their recipes, as many things were a little bit of this and a little bit of that.  However, if you spent a few minutes with them, I bet you could come up with something that resembles a recipe that you can pass on as a part of your family’s traditions. My wife before her mother died spent time with her mother and grandmother learning about some of the wonderful family recipes that would have been lost had they not been memorialized in writing. 

You might be asking, “what does this have to do with estate planning?”  Planning your estate can be much more that how much money you leave your family.  It can include passing on traditions, many of which may be more valuable to your family then your stock portfolio.  My advice then is to do two things: first, spend time with your family and enjoy it.  If you are fortunate enough to have older family members who are still living, take advantage of their wisdom and experiences.  Second, take time to memorialize anything and everything about your family.  Make a family tree, take pictures, compose your family history and write out your recipes!

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Don’t forget your Beneficiary Designations!

Thursday, August 19th, 2010

The IRS recently issued a ruling that illustrates the importance of designating a beneficiary for an individual retirement account (“IRA”).  Generally, tax deferral is available if you designate a beneficiary on your account before you die.  If the account does not have a  designated beneficiary, however, it must be fully distributed within five years after death. 

If you die before distributions begin from your account (before you turn 70 1/2) and the account has a designated beneficiary, the balance of the account can generally be distributed over the designated beneficiary’s lifetime using his or her life expectancy as set forth in IRS tables.  Many times, this is referred to as a “stretch IRA.”   

If you are over 70 1/2 and have started receiving your minimum distributions, distributions continue to be made over your remaining life expectancy IF you have NOT designated a beneficiary.  If the account has a designated beneficiary, though, distributions can be made over your remaining life expectancy or the life expectancy of the designated beneficiary, whichever is longer.  For example, if you name your child as your beneficiary, she can use her life expectancy calculation to receive distributions.  If you named your father instead, he would use your life expectancy calculation.  Should you name more than one beneficiary on your IRA, then the age of the oldest beneficiary is used to determine the distributions. 

Normally, tax advisors recommend that their clients name individuals as beneficiaries of IRAs in order to stretch out distributions.  What happens, though, if you have minor child who would be your beneficiary?  You might not want to name him as beneficiary, but rather a trust for his benefit.   In that regard, distributions would need to paid out over a five year period, unless the trust included so called ”look through” provisions.  What this means is that we could look through the trust and at the beneficiary of the trust to use his or her life expectancy to stretch out those distributions. 

Since this is a very technical matter, it is important to communicate with your advisory team on your wishes for your family so that your estate planning documents and your beneficiary designations are properly coordinated.  If you have any questions or want to discuss these matters, you’re always welcome to contact our office.

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Tax Amensty

Tuesday, August 10th, 2010

Every year at this time, Florida Department of Revenue posts on its website its rules for amnesty for taxpayers to voluntarily pay overdue taxes with no penalty and reduced interest. 

Although most business owners do their best to comply with all revenue laws, mistakes to occur.  For these reasons, the Department of Revenues offers its amnesty program in an effort to make certain that when a tax that’s past due is discovered in some fashion, it can be paid without significant additional cost to the taxpayer.

Generally, you and your business are eligible for this amnesty program if your liability for tax, penalty or interest was due before July 1, 2010, you completed a tax amnesty agreement or your liability was not already covered by settlement or payment agreement.

In many cases, the amnesty program is designed to eliminate any penalties for taxes not paid over the last few years and reduce the interest to either 1/2 or 3/4 of what’s due, depending on what situation your tax may be due.

A list of eligible taxes include documentary stamp tax, sales and use tax, and insurance premium taxes.  Many other taxes are also listed on the Florida Department of Revenue’s website regarding the Florida tax amnesty program.

If you have any questions regarding the amnesty program because of an overdue payment amount, you can contact your accountant to discuss those matters in more detail.

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