Posts Tagged ‘estate tax’

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More Talk about Estate Taxes

Sunday, December 4th, 2011

House Representative Jim McDermott, a Democrat from Seattle, introduced the Sensible Estate Tax Act of 2011 just before Thanksgiving.  With the President and Congress arguing about payroll taxes, this proposal has been largely out of the news. 

Rep. McDermott’s proposal would return the estate tax exemption to the 2001 level, adjusted for inflation, with a 55% tax on assets exceeding the exemption.  If passed, that would make for a $1.3 million exemption.  As it stands right now, if Congress fails to act, the $5 million exemption that was enacted into law on Dec 17, 2010 will revert back to $1 million on January 1, 2013, with a 55% tax on assets exceeding the exemption. 

I checked a bit on how much tax revenue is generated from the estate tax relative to total federal revenues.  The federal government can count on $40-50 billion in estate tax revenue if the exemption reverts back to $1 million according to the Congressional Budget Office.  That’s pennies, really, when you realize that the federal government collects over $2 trillion (yes, that’s trillion with a “t”) in revenues each year.

So, what’s the fuss with the estate tax talk?  Well, we are approaching an election year and have hundreds, maybe thousands, of individuals protesting corporate America with the “Occupy” movement.  It only makes sense to publicize the dreaded death tax to stir emotion and sell newspapers. 

Asking a very small percentage of America to pay additional taxes at their death has always seemed odd to me, especially since the estate tax is really a tax for the uninformed.  For those families who have the willingness to engage in planning, sometimes long-term planning, they can create legally and ethically transfer significant wealth with little or no estate tax.

Are you worried about how the estate tax might affect your family?  Give me a call - I can help.

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Florida’s New Power of Attorney Statute

Tuesday, October 11th, 2011

On October 1, 2011, the new Florida Power of Attorney Act went into effect.  This new law replaces the “old” law and applies to powers of attorney created before or after that date.  As a reminder, power of attorney allows an individual (called a principal) to delegate to an agent (or attorney-in-fact) the authority to act on his or her behalf.

Some of the changes in the law include:

1.         Springing powers of attorney are not longer permitted to be created with the exception for military powers. These types of powers of attorney become effective only upon the happening of a certain event, such as incapacity. Springing powers of attorney created before October 1, 2011 continue to remain valid.

As an alternative to the springing power of attorney, a durable power of attorney with an escrow agreement could be used. By naming someone, such as your attorney, to hold any estate plan document, including a part of attorney, that escrow agent can deliver that document upon the happening of an event, such as credible evidence of incapacity.

2.         The filing of divorce triggers revocation of a spouse’s authority to act under a power of attorney.  Previously, a power of attorney needed to use the specifically revoked when parties divorced.

While executing a revocation is no longer necessary, prudence suggests the continued used of formal revocations as a protective measure.  Furthermore, a revocation can be recorded in the public record so as to provide a form of notice to third parties of the revocation.

3.         Often, a client would wish to name multiple agents to act on his or her behalf. Under the old law, if multiple agents were named, they were required to act by majority unless the power of attorney stated otherwise. The new law provides that multiple agents named to act at the same time can act independently unless the power of attorney specifies otherwise.

We suggest that clients who wish to name multiple agents always specify if those agents must work together or if they can work individually.  Often, it is beneficial to name one individual to act so that conflicts will not arise.

4.         A general grant of authority under “old” powers of attorney will no longer be effective. Rather, the power of attorney must specifically list the authority be granted, such as the power to buy and sell securities or access a safe deposit box.

If you have a specific authority that you wish to grant upon an agent, such as the power to sell your home, you can do so with a special or limited power of attorney.  These powers of attorney allow for a limited action by your agent, and once completed, will terminate on their own.

Fortunately, an “old” durable power of attorney drawn by our office is not negatively affected by this new law and will remain beneficial for you and your family. Of course, this law change reminds us that a periodic review of your estate planning documents is critical to make certain that your wishes are honored in a timely and efficient manner.

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Money Issues of Surviving Spouses

Monday, September 19th, 2011

That’s the title of a recent article by Tom Lauricella  in the Wall Street Journal.  This article talks about some of the very important issues that face a surviving spouse when his or her spouse dies.  If you are married, I would encourage you to read this article.  You should also consider these pieces of information:

1.     In many marriages (mine included), only one spouse handles the finances.  This is probably efficient and works well, but when that spouse dies, how will the survivor know what to do?  One of my clients recently lost her husband, who was also a client of mine.  He was ill for some time and before he died, he made a list of action items for her.  It was a very loving gesture, since most widows or widowers are in a “fog” after a spouse dies.  If you have not made this list, that’s ok.  However, you should consider having your financial information organized in a place where your spouse can find it.  That way, he or she will not have to search through your house at a very difficult time.

2.     My grandfather was an estate planning attorney for over 60 years.  During his practice, he obviously learned a few things, and he was kind enough to share some of those pearls of wisdom.  One of them was to not allow a surviving spouse to make any major decisions for at least six months after death.  This might include selling the family home or making significant estate planning decisions.  I don’t know if six months is the right amount of time, but I have witnessed that fog and know that it takes time to mourn.  Often, decisions made in haste cannot be taken back and may delay or impair the healing process.

3.     Don’t be afraid to ask for help.  Actually, your loved ones want to help, but do not always know what they can do.  Maybe they can take you to the DMV to retitle the car or to the bank to retitle your accounts.  You should also ask for help from your professional advisors.  While everyone’s situation is unique, many of the things that need to be accomplished after death have been done before.  We can help!

4.    Perhaps most importantly, allow yourself to mourn.  Losing a loved one is hard.   However, you do need to go on living as your spouse would have wanted.

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