Categories

Estate planning is a task that lends itself to procrastination.

For parents of a developmentally disabled child, planning is even easier to put off – but more crucial to do.

“It’s an emotional issue,” said Patty McMahon, information and referral coordinator for Arc of Southwest Ohio, an advocacy and service agency for people with intellectual and developmental disabilities. “Families get stuck in the crisis of the day or the moment and try not to think about what’s going to happen when they’re no longer there to take care of their child.”

In fact, 62 percent of parents or caregivers don’t …

If you would like to begin planning your estate, contact Don Thompson today at 312-201-1436.

The estate tax overhaul enacted by Congress last December allows each of us to transfer up to $5 million during life or at death to our children or other heirs, tax-free. That’s up from a $2 million estate tax exclusion as recently as 2008, and means that few families will end up paying the 35% federal estate tax.

But that doesn’t mean less-wealthy folks can simply ignore the new law. Married couples in particular need to get acquainted with a special new break for widows and widowers to make sure they are prepared to take advantage of it. Starting this year, a surviving spouse can add any unused estate tax exclusion of the spouse who has just died to his or her own $5 million exclusion. This dramatic change enables spouses together to transfer up to $10 million tax-free.

As of now, this new spousal “portability” (as tax geeks call it), applies only to deaths in 2011 and 2012. It will expire, as will the $5 million exclusion, on Dec. 31, 2012, if Congress doesn’t act before then. But note: President Obama’s proposed budget for fiscal 2012 would make portability permanent. And portability for married couples has so much support that no matter what political currents bring, it is probably here to stay.
read more…

The big news for estate planners in the U.S. tax legislation passed last year isn’t the $5 million estate-tax exemption — though that number is far higher than expected — it’s the $5 million lifetime gift-tax exclusion. That is so much higher than it has been historically, and provides so many opportunities for estate planning for the ultra-rich, that planners for high-net-worth clients are salivating.

“I don’t think anybody in Congress realized this,” said Michael Gooen, a tax and estate attorney at Lowenstein Sandler. The point is that not only will the $5 million estate-tax exemption ($10 million for a couple) remove the vast majority of formerly taxable estates from the estate tax, but rather that the higher gift-tax exclusion means that people with far larger estates than that — think $50 million, $100 million, and up — have the ability to shift assets out of their estates tax-free while they’re alive. “You are going to see a flurry of estate planning,” Gooen said.

To understand what a big deal these new rules are, go back to the history of the estate and gift tax. The estate-tax exemption had been steadily rising since the Bush tax cuts went into effect, from $675,000 in 2001 to $3.5 million in 2009; after the oddity of no estate tax in 2010, the tax was due to return with an exemption of $1 million in 2011. The gift-tax exclusion, meanwhile, went from $675,000 in 2001 to $1 million in 2002, and had stayed at that level ever since. In both cases, the maximum tax rates levied on amounts above those figures had dropped from 55 percent to 45 percent in 2009. The gift tax fell further, to 35 percent, in 2010. For 2011 and 2012, the estate tax and gift tax have the same exclusions and rates: $5 million and 35 percent. That means wealthy people, who might face the estate tax in 20 or 30 years, or more, can get vast assets — and, more importantly, the appreciation on those assets — out of their estates while they are alive.

“We’ve started calling it the Christmas miracle. It is unprecedented, and the opportunities that we have for people are spectacular,” said Andrew Katzenstein, a partner in the personal planning department at Proskauer in Los Angeles. “It takes everybody closer to estate-tax repeal without using the word ‘repeal’.”
read more…

The just-enacted Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010 makes great strides against the Federal estate tax burden that otherwise would have taken hold January 1, 2011.   The “exemption equivalent,” the amount of property an individual can leave free of estate tax, increases to $5,000,000.  The top estate tax rate is capped at 35%.  And the Act includes an unexpected provision to help a married couple make full use of each spouse’s exemption equivalent.

When a spouse dies, the surviving spouse succeeds to sole ownership of the couple’s marital property.  By virtue of the marital deduction, there is no estate tax.  At the surviving spouse’s death, the property passes to the couple’s children.  But there is no marital deduction at the surviving spouse’s death, and the surviving spouse’s estate is fully subject to estate tax except for that spouse’s exemption equivalent, $5,000,000.  The exemption equivalent of the first spouse to die is wasted.

To be assured of making use of each spouse’s exemption equivalent, each spouse needed a revocable trust, funded with at least the exemption equivalent amount of property.    Each trust would provide that if the settlor (creator of the trust) leaves a surviving spouse, the trust breaks into a marital trust and a credit shelter trust.  The credit shelter trust receives the first amount of property in the settlor’s revocable trust at his of her death up to the exemption equivalent in effect at his or her death.  All of the income of the marital trust is distributed to the surviving spouse.  The surviving spouse may be given the right to withdraw principal from the marital trust.  At the surviving spouse’s death, the remaining property in the marital trust passes either (1) as appointed by the surviving spouse, if the marital trust is a “power of appointment” trust, or (2) to the persons designated in the settlor’s trust document, if the marital trust is a qualified terminable interest property  (“QTIP”) trust  and the settlor’s personal representative has filed a QTIP election for the marital trust with the IRS.

Read full story or contact Chicago estate planning lawyer Don Thompson for help with planning an IL estate.

Many individuals are concerned about asset protection. By doing estate planning, they can often increase their asset protection.

The key to effective asset protection is to structure your affairs to minimize exposure to potential lawsuits prior to a threatened claim. If steps are taken to manipulate assets after a threatened claim, there can be potential problems with fraudulent convey- ance laws.

This article will set forth a few techniques that are important for preserving and planning an estate while emphasizing asset protection.

It is crucial to review insurance coverage to be certain that it is adequate. Personal liability umbrellas are relatively inexpensive and are a must.

If you own rental property, investment real estate or business assets you should strongly consider forming a business entity such as a corporation – either an S Corporation or C Corporation – or limited liability company. By forming a business entity, you can shield your personal assets from claims.

This is especially important if you have employees. Without a business entity to separate your business affairs and your personal assets, your personal assets would be subject to claims resulting from misdeeds of your employees.

An important form of asset protection and estate planning is the separation of assets between spouses.

Often, it is advisable for one spouse to own the business interests and the other spouse to own the assets that are less subject to potential creditors. If something does go wrong for the spouse involved in the business, the assets owned by the other spouse should be protected.

An important form of asset protection is to own assets that are exempt from creditors’ claims. Significantly, personal residences, qualified retirement plans, life insurance and annuities can be exempt from creditor claims.

Because most individuals want to protect their assets, it is important to coordinate asset protection efforts with estate planning. By coordinating these efforts, the family’s assets will be better protected from creditors and estate taxation of the assets can be minimized.

For help with IL estate planning contact Chicago estate planning lawyer Don Thompson.

Source

When you think about what the outcome of the highly political battle over the estate tax  might be, just remember: Last year’s common wisdom that lawmakers would not allow the estate tax to expire for one year proved wrong. Even after the deaths of billionaires including George Steinbrenner; Janet Morse Cargill of the family that founded Cargill; Texas pipeline magnate Dan Duncan; and California real estate mogul Walter Shorenstein, the gap year has continued without any clarity.

Talk to estate attorneys and advisors and they laugh at their own predictions for the estate tax, whether past or future. With so many competing proposals, and heated rhetoric on both sides, it’s hard to see what will happen in the 13 weeks remaining till yearend. “It’s been an experience not unlike the market experience, where fear has taken hold and analytics have taken a backseat,” says Frank Dubreuil, national managing director at Bernstein Global Wealth Management in San Francisco.

The issue is, of course, that if Congress doesn’t act, either before yearend or retroactively in 2011, the estate tax will come back at a level that no one seems to want. Where the exclusion was $3.5 million (that’s $7 million for couples) in 2009 — a level at which it affected relatively few households — it will be $1 million (or $2 million for couples) in 2011. The tax rate would also rise, from 45% in 2009, to 55% in 2011.

Competing proposals in Washington place the exemption levels and tax rates all over the map, as Republicans (many of whom would like to permanently repeal what they refer to as the “death tax”) and Democrats (who want it reinstated) fight it out. The Obama Administration wants to return the estate tax to its 2009 level, with a $3.5 million exclusion and 45% rate.

Many states also levy their own estate taxes with a variety of rates and rules, which adds to the complexity for anyone trying to come up with a financial plan.
read more…

Last week I had a working lunch with “Bill,” a client who had sold a significant portion of his family-held business about two years ago.

Over the course of our discussion, Bill told me a close friend from his university days had called him last month. The friend’s father passed away back in March, leaving a sizable estate. Unfortunately, that estate was now in the process of an extensive legal battle, as four siblings (from two different marriages), a widow, and an ex-spouse bickered and fought over their share of the pie.

“What a mess,” Bill said, shaking his head as he waited for his grilled salmon. “When I go, I want things to be well-organized – easy to deal with.” Bill paused for a moment before looking at me and adding: “And I want everybody to know exactly what I want done with my money.”

Bill’s concern is well founded. In my experience, there’s a direct relationship between the size of one’s estate and the potential for conflict. The higher the stakes, the higher the chances for litigation.

Unfortunately, as I told Bill, there is no such thing as a litigation-free estate. Even the most well-organized, well-constructed estate may be challenged by disgruntled heirs or creditors. That said, there are things high-net-worth individuals can do to discourage litigation, and diffuse inter-family conflict before it leads to courtroom drama.

Read further or Contact Chicago, Illinois estate planning and probate lawyer to learn more from the best.

This is a written agreement entered before a marriage that usually deals with what happens to the parties’ assets and income in the event of divorce or death. For instance, it can specify what a surviving spouse gets on the death of the other spouse. It can increase or decrease inheritance rights.

To be enforceable each party should have separate legal counsel, each party should make full disclosure of all income, assets and other material facts, and no duress should be involved. This is also called a pre-nuptial agreement.

Visit Wills & Trusts Chicago

There are a variety of bank accounts which pass on death to a named survivor. During the life of the owner of the account the survivor has no rights. That is, the survivor cannot withdraw funds from the account like a joint tenant could.

A will does not affect these accounts. They pass to the person designated in the bank records regardless of any will or probate court action. Whether or not such an account has been created depends on the agreement with the bank. Sometimes these accounts are called "Pay on death" accounts. Sometimes they are called "Totten Trusts". Sometimes the account ownership designation merely says "X in trust for Y", although there is no trust agreement.   

Visit Chicago Wills, Estates &Trusts for more information.

Good article from Forbes about Estate and Gift Tax Planning with 10 tips.

Forbes.com has teamed up with the authors of Ernst & Young Tax Guide 2006 to develop a series of tips to help you avoid paying more tax than necessary. The circumstances of your situation will determine if you qualify, so review the tax code and check with your tax adviser.

Here are ten things you need to know about estate and gift tax planning.