Estate Tax News: Pressure on Congress To Act On The Federal Estate Tax

Many wealthy individuals are appearing before congress to pressure action on reinstating the federal estate tax. The latest news on the federal estate tax

Almost half of American Households Pay No Income Tax

More news, sources and information on why 47% of American households pay no income tax.

What Life Insurance Salesmen Are Saying About Estate Taxes Behind Your Back?

Estate planning for Pennsylvania residents just got harder thanks to the uncertainty created by Congress. Estate planning attorney David M Frees found a great article so that you can see what the insurance sales industry is saying about life insurance and estate planning behind your back...

Estate Tax, Lobbiests, and New Information for 2010

New information on the estate tax, lobbying congress and changes for 2010 and 2011 from Pennsylvania estate, and trust lawyer - attorney David Frees

What Happens To Estate Planning As Marriages Are Replaced By Cohabitation?

As fewer young couple choose marriage and more chose cohabitation, the need for estate and tax planning become greater and couple need to be even more careful.

What Happens To Estate Planning As Marriages Are Replaced By Cohabitation?

As fewer young couple choose marriage and more chose cohabitation, the need for estate and tax planning become greater and couple need to be even more careful.

Gift Tax Myths and Realities For 2010.

The federal estate tax is dead. Think the gift tax is gone. Think again before making that gift and make sure to do it right. Attorney David Frees reviews some of the myths and realities about the gift tax in 2010.

Congress has Created A Very Big Mess. What do You Do About Your Will or Trust Now?

Pennsylvania Will, Trust, and Estate lawyer David Frees and Forbes Magazine on the estate planning turmoil created by Congress' failure to act on Estate Taxes. Decisions now have to be made very quickly and many wills simply will not work properly.

Why Congress' Failure Today On Estate Tax Reform Might Really Hurt You.

Congress has failed to act to extend the federal estate tax. But, your documents might not work properly, and there is now a hidden tax that might even be worse for your family.

David Frees Achieves AVVO's Highest Rating 10.0

David Frees a Pennsylvania lawyer whose practice focuses on wills, trusts, estates, estate planning and probate has achieved AVVO's highest lawyer rating of Superb or 10.0

Estate Tax or "Death Tax" Revisions Pass The US House - What Will You Do?

What do Pennsylvania residents need to know about the estate tax bill that just passed in the house and how will your documents change?

Asset Protection Trusts Just Got Better - Does Your Trust and Estate Planning Layer Know This?

The IRS has just issued an important PLR (Private Letter Ruling) on the estate taxation of asset protection trusts. If you have or are considering an domestic asset protection trust from one of the 12 states that permit them, then it is vital that you review this new information with your will, asset protection, or estate planning attorney and tax advisers.

Will The Federal Estate Tax Ever End? Probably Not But Here is News on The Death Tax

In this brief article, get the latest news on the reform or abolition of the federal estate tax and specifically the new bill HB 3905 from will, trust and estate lawyer David M. Frees III.

Does Pennsylvania Have A Tax On End of Year Gifts to Children and Grandchildren?

Are your gifts to children and grandchildren at the end of the year for Federal estate tax planning also subject to Pennsylvania gift taxes? There is no gift tax in Pennsylvania but there is a one year recapture for gifts made within one year of death and Pennsylvania does have an inheritance and estate tax.

Estate Planning, Gifts, and the End of the Year - Beware of A Common and Horrible Mistake

End of Year Gifts: 
Avoiding the Mistakes and Maximizing the Benefits to Your Children,
Grandchildren and Heirs

David M. Frees III  Wills, Trusts, and Estates
Law Offices:  Phoenixville, Malvern,
and West Chester - Pennsylvania

Many clients wonder about making gifts for estate planning purposes at this time of year.  This article will review some of the most common mistakes people make with respect to end of year and holiday estate planning gifts and how to avoid them. 

And, unless you're very careful, you might make one of these gifting mistakes that can really cost your family. 

Mistake Number One: The single biggest estate planning gift mistake?  Not making gifts when you can and should.  If you find yourself in the position of saving more than you spend each year during retirement, and, your estate exceeds the federal estate tax limit, then you might want to consider gifting to your heirs.  Since the top marginal federal estate tax rate is scheduled to return to 55% absent Congressional action, gifting can result in a major benefit to your heirs.

Mistake Number Two:  People also make fewer gifts than they can.  Currently, everyone can make gifts or $13,000.00 per year.  However, many people still believe that the old $10,000.00 number still applies.  Check each year, becasue the amount does adjust for inflation.

Mistake Number Three:  Married couples can also make double the gift amount by using both annual gift tax exclusions.  Many people believe that unless each spouse is able to make a separate gift, then they are limited to one.  However, if one spouse is able to make a gift of $26,000.00 the other spose can join in this gift by signing a "split gift tax" return.

Mistake Number Four:  Gifting at the end of the year so that the check isn't cashed.  This is a big one!  If you are giving cash, then it can be gifted up to the end of the year.  However, if you give a check, it must be cashed before December 31st.  This can result in you missing the entire year's gift tax exclusion so be careful and consider making gifts earlier in the year so that the receipient gets the investment growth on the asset during the year and it is out of your estate.

Mistake Number Five:  Failure to Leverage gifts is a serious problem.  What do I mean?  For example, you can give a gift of $13,000.00 of cash or you can give a gift of $13,000.00 of a strong but under valued stock.  If that stock rebounds in value to $30,000.00 then you moved much more value from your estate.

There are many more gifting strategies and tactics but make sure that you consider these important gifting mistakes before the end of the year and before you make gifts to your children and/or grandchildren.

Remeber to leave your questions in the comment area below.

If you need an appointment or telephone conference, call 610-933-8069 and ask for
David M. Frees III.  If David is not available or with another client, Donna, Denise, or
anyone of his paralegals or assistants can help you schedule it.

Time is Money - Making Your Estate Plan Efficient and cost Effective

Time is Money Part II of II                                                                         
By:  David M. Frees III, Esquire  Trust, Estate, and Weallth Preservation
Offices serving Phoenixville, West Chester and Malvern and the
entire Main Line, Chester, Montgomery, and Berks and Lancaster Counties

If you read the first installment of this series, then you already know that we are examining ways that you can work with your attorny and/or finanicial and tax advisors to make your estate plan more efficient and to avoid some of the many problems that delay estate and trust administration and create additional costs and fees for your heirs.  Review part I here.

Now more ideas for protecting your plan and your heirs:

5)  Make sure that you leave memoranda and instruction for your executors, trustees and heirs. 

Now lawyers disagree about this but I am a proponent of leaving instructions to the vrious peolple who will handle your estate and any trusts for children, grandchildren and other heirs.  Often, the disposition of personal effects can be a source of disput and delay.  So, anything that you can say to your heirs to prevent them from fighting, or by way of guidance should be helpful.

However, always make sure that your notes ad memos are intended to be informal and for guidance only to prevent them from conflicting with a carefully constructed plan. When you are going to use a binding memo, make sure to consult the lawyer drafting your will or trust to avoid these conflicts and to make sure that a binding memeo is properly drafted under your state's laws.

Finally, trusts - either created during lifetime, or under a will, can and often do contain very braod language giving the trustee or trustees very wide latitutde to decide on investments and/or distributions from the trust.  For that reason, non binding guidance can be vary valuable.

Use a memo to give guidance on when children should get distributions for cars.  Are you in favor of private, parachial, or public school.  What types of travel and education should be supported or encouraged?

6)  Make distributioms during your lifetime.

Distributions made during lifetime can and often are challenged once a person passes away.  However, these transefers of more difficult to challenge - especially when your capacity to make these gifts and your desire are documented by your lawyer.

However, if you can afford to, and do make lifetime gifts, make sure to consult your counsel to avoid or to minimize gift taxes and to make sure that there has been provision for the payment of taxes if you die within one year and the asets are reincluded in your estate for Pennsylvania Inheritance Tax purposes.

A well constructed estate plan that acknowledges such gifts and such tax consequences is even more proof
that you were able to make such gifts, that the gifts were well thought out, enforceable, and complied with any formailties required by law.

7)  Consider a broad but carefully drafted Power of Attorney.

In the event that you were to become incapacitated, a well drafted power of attorney can be an important way of protecting your assets not only for you but for your heirs.  the modern and Enhanced Power of Attorney(TM) can provide for gifting to certain people, the ability to set up and to fund trusts, guidance on investment mix, and many checks and balances. 

For example, in the event your agent wants to make gifts while you are alive but incapacitated, you can require the consent of another special gifting agent. 

Such powers of attorney can also allow family memebers to be paid for providing medical and other services to you that help to keep you at home rather than in a nursing home.  And, if done properly, such contracts and payments do not consitute gifts for mediciade purposes and can protect your ability to qualify for government programs while still legally moving assets out.

Interested in more techniques?
Leave your comments and questions below ofr email them to dfrees@utbf.com

David M. Frees III, Esquire
David Frees works almost exclusivly in the areas of trust, estate, and will planning.
He also represents executors and trustees.

Frees maintains offices in Malvern, Phoenixville, and West Chester Pennsylvania.
These offices serve communities including Devon, Berwyn, Malver, Willistown Township,
Exton, Chester Springs, Downingtown and many others on and around the Main Line.

Time is Money - Making Your Estate Plan Efficient and cost Effective

Time is Money - Making Your Estate Plan efficient and Cost Effective Part I
By:  David M. Frees III, Esquire  Trust, Estate, and Weallth Preservation

Generally speaking, the longer a trust or estate stays open, the greater the likelihood of problems.  Of course, the estate or trust administration must last long enough to make sure that the bills are paid, the tax returns are filesd and claered by the government, and for certain administrative tasks to be performed.  But, many estates remain open for much longer than necessary.  And, as a result, costs and expenses rise.  So how do you build a plan that saves on time and money and limits the liability exposure of your heirs?

1) Make sure that your beneficiary designations match the beneficiaries of your will or trust.  If they do not, then make sure that you explain why and clarify who is supposed to get what. This is a common area of confusion and dispute.  Furthermore, make sure that you are clear on whether joint accounts are really intended to go to the joint account holder on your death or wether the account is simply joint for purposes of convenience.

2)  Make sure to review and discuss the tax clauses of your will and/or trust with your lawyer.  If one heir is getting a major asset such as a piece of real estate, then who pays the tax on that?  Is the tax paid by the estate or the heir?  Conflicts between heirs regarding taxation can be very costly.  And, if it is not clear and the esecutor or trustee has to seek court approval that can take time and adds expense.

3)  Make sure to consider an Interrorum Clause, also known as a "no contest clause."  These clauses state that if you are an heir under a will or trust, and you challenge the document, then your inheritance is eliminated.  This is a significant deterrent to expensive challenges and disputes.  Also find out if the law of your state permits you to go even further and to eliminate a gift if an heir challenges non probate transfers such as trusts.

4)  Be extra cautious about IRA, 401(k) and retirement plans.  Whenever possible, these plans should go directly to younger heirs capable of managing them and making good decisions.  This should ensure the ability of the heirs to take required minimum distributions based on his or her life expectancy.  In this way, you can delay the payment of inheritance taxes and they transfer automatically and without probate.  On the other hand, if they are payable to an estate (and many trusts) then all of the taxes are due right away and probate fees are also due and payable.

For more ways to get your estate lawyer to recognize that time is money check out part two coming soon.



David M. Frees III Wills, Trusts, Estates
Phoenixville, Malvern and West Chester Offices
Serving Chester County, Montgomery County, Philadelphia County
610-933-8069

What The Michael Jackson Law Suit Reminds You About Your Estate Planning

This brief story about the settlement of a lawsuit against the estate of Michael Jackson points out the need for comprehensive powers in powers of attorney, wills, and trusts allowing the fiduciaries (executors, trustees, and agents) to bring and to settle lawsuits, claims and litigation with or without court approval.  Is the powers clause of your will, trust, or power of attorney good enough or do you need to review that clause?

A well drafted powers clause will allow executors and trustees to do certain things without seeking court approval and may require court approval for other actions.

However, whenever you have trusted executors and trustees it is important to consider giving them the powers that they will need to act without constantly seeking Orphan's Court approval of business and related decisions.

David M. Frees III, Esquire

David is Chairman of the Trust, Estate and Wealth Preservation Section of
Unruh, Turner, Burke and Frees.

For a Free Report on The Ten Most Common Mistakes That Executors Make and How To Avoid Them
Call 610-933-8069 today.

He helps clients to draft wills, trusts, powers of attorney, and related estate
planning documents that carry out their desires with minimal costs, expenses,
and minimal family conflict and court intervention whenever possible.

What The Michael Jackson Law Suit Reminds You About Your Estate Planning

This brief story about the settlement of a lawsuit against the estate of Michael Jackson points out the need for comprehensive powers in powers of attorney, wills, and trusts allowing the fiduciaries (executors, trustees, and agents) to bring and to settle lawsuits, claims and litigation with or without court approval.  Is the powers clause of your will, trust, or power of attorney good enough or do you need to review that clause?

A well drafted powers clause will allow executors and trustees to do certain things without seeking court approval and may require court approval for other actions.

However, whenever you have trusted executors and trustees it is important to consider giving them the powers that they will need to act without constantly seeking Orphan's Court approval of business and related decisions.

David M. Frees III, Esquire

David is Chairman of the Trust, Estate and Wealth Preservation Section of
Unruh, Turner, Burke and Frees.

For a Free Report on The Ten Most Common Mistakes That Executors Make and How To Avoid Them
Call 610-933-8069 today.

He helps clients to draft wills, trusts, powers of attorney, and related estate
planning documents that carry out their desires with minimal costs, expenses,
and minimal family conflict and court intervention whenever possible.

Pennsylvania Inheritance Tax Rates

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How Will Your Executor Pay For Inheritance Taxes and Federal Estate Taxes?Part 1 of 2

When a person dies, the Executor of the estate has a very limited time to pay for the taxes due to the IRS with repect to federal estate tax and to the Pennsylvania department of Revenue with respect to inheritance taxes.  How long does the executor have to pay and where does the money come from?

Ideally, in a well planned estate, the decease party has made provision for the payment of taxes.  However, taxes are due within 9 months of the date of death (with a tax credit for early payment of any taxes paid to Pennsylvania within three months of the date of death.

As youcan see, that tax deadline of nine months comes pretty quickly and with federal rates of 42% or more, the liability can be substantial.  Generally, the following options for payment exist:

First, the estate can pay using available cash.  This generally requires advanced planning and most estates subject to federal estate tax will no be liquid enough to pay te full amount of cash within the nine month deadline.

Second, in a well planned estate, some life insurance can provide the liquidity to pay such taxes.  If your estate is subject to federal estate tax, you would want to have the insurance owned by an ILIT (Irrevocable life insurance trust).  In this way, the insurance will not be taxable and the trust can purchase assets from the estate to provide liquidity to pay taxes, or can loan the executor and the estate the funds to promptly pay the tax until the assets can be methodically liquidated without substantial discounts.

For more see Paying For Estate Taxes Part 2 of 2.

David M. Frees III, Esquire
David Frees is an attorney who limits his practice to trusts, estates, wills and related estate
planning strategies.   He has offices located in Malvern, Phoenixville, and West Chester.
His offfices serve clients throughout Pennsylvania, and Chester County, Montgomery County and Lancaster County including Chester Springs, Ardmore, Bala Cynwyd,
Exton, Spring City and Royersford.

How To Pay For Estate and Inheritance Taxes Part 2 of 2

Whether you're planning your estate, or you are the executor of an estate, you are concern with the issue of when death taxes must be paid and how you pay for them. Both Pennsylvania inheritance taxes and the federal estate tax liability are due within 9 months of the date of death.  For many estates, this deadline will create problems with the timely payment of the taxes.

In part one (Paying for Inheritance and Estate Taxes) we reviewed the ability to use liquid assets - often not sufficient to pay such a large tax laibility as well as the purchase of life insurance that when structured properly in an ILIT will be untaxed and will provide liquidity.

But what about estates where there a re many illiquid assets such as real estate and insufficient cash to pay?

Executors can sell assets quickly to raise the funds.  However, selling into a down market can be devastating and assets sold at a discount can never be recovered.  Also, the need to sell assets quickly canput you at a negotiating disadvantage even in a greta real estate or stock market.

For those reasons, assets can be used as collateral for loans to borrow the tax laibility so that assets can be methodically liquidated at more reasonable prices.  However, this involves tying up collateral and often a significan interest expense.

Finally, there are a number of sections of the IRC (internal revenue code) that allow for discounts of for the ability to pay taxes on closely held assets over extended terms.  However, these restrictions often mean that the particular assets in your estate may not qualify.

So, what are we to do?

Advanced planning and the use of ILIts, GRATs, and irrevocable trusts and gifting can significantly reduce the overall tax liability.  Furthermore, moving to more liquid investments through time and/or purchasing non-taxable assets such as life insurance can be combined to creat a plan that allows the executor to pay the taxes timely and to avoid fire sales, interest and penalties.

David M. Frees III
610-933-8069

David Frees Chairs the Trust, Estate, and Wealth Preservation Section of Unruh, Turner, Burke and Frees
with offices located in Chester County Pennsylvania.  His practice focuses on representing families interested in
preserving family wealth, closely held businesses, and the officers and directors of corporations in a full range of estate planning strategies.

A Victory For Family Limited Partnerships Against The IRS

A tax payer has won a seventh case (or at least achieved a partial victory) in a family limited partnership where the IRS was asserting a claim under section 2036 of the Internal Revenue Code.

I am including a link to analysis of the flp (family limited partnership) case but this analysis is somewhat technical.

The key points to take away from the series of cases related to family limited partnerships:
Avoid personal property which continues to be utilized by the creator
Carefully document the business purposes of the partnership
Observe the business entity and purposes of the FLP
Carefully select the assets to manage and to include

For more information on Famnmily Limited Partnerships as a tool to pass on wealth, to manage "gifted" property, and for providing creditor and litigation protection, follow this blog.

David M Frees III is an attorney practicing in the areas of Pennsylvania Estate Planning, Asset Protection Planning, Wealth Preservation and Estate Administration.  David's partners and associates practice in many related areas of the law.

610-933-8069
dfrees@utbf.com

Will Updates - Why Current and Clear Are Important - The Michael Jackson Estate

Updating your will and having clear instructions and information for your executors are vitaly important - as the Michael Jackson situation has revealed. 

According to the Wall Street Journal, Jackson's estate is highly complex.  His debts are over $500,000,000.00 dollars but his assets may exceed that by $200,000,000.00.  He has three children (from various complicated arrangements).  Currently, his mother is the guardian pending a hearing in July.

Yet, his last will was drafted in 2002 and it's location and existance were unclear.

His mother even petitioned the court believing that he might have died intestae (without a will).  Clearly, his family and executors did not have the information that they needed in the event of his death.

This situation points out the need to:
1) update your will regularly
2) have clear instructions for your executors in the event of your death
3) update guardianship provisions and trusts for children and minors
4) store your will in a safe place and let your executor(s) know its location

Michael Jackson's estate will no doubt have other lessons for us and we will keep you posted.  If you would like to read more about Michael Jackson's estate in the wall street journal click here.

David M. Frees III
Chairman:  Trusts, Estates and Wealth Preservation
Unruh, Turner, Burke and Frees
610-933-8069

Hitting A Home Run In Estate Planning

  Estate planning is the process of working with your legal, tax, and financial professional to arrange your financial affairs so that you have sufficient assets to meet your lifetime needs. This article breifly describes some essential estate planning techniques. With baseball season in full swing who doesn't like a baseball analogy. So step up to the plate  and round the bases with these financial tips. Covering all the bases will help you reach home plate and a successful retirement plan.
To read the article please click here.