Orlando Florida Estate Planning Attorney Linda Solash-Reed P.L writes about issues related to Estate Planning, Elder Law, Florida Medicaid, Special Needs Planning, Long-term Care Planning, Estate Taxes and Inheritance, Guardianship, and Probate Administration.
Some business owners prefer to retain control over their businesses until they pass away. Others would rather retire and let younger family members assume ownership. There are a couple of different options to do that.
Business succession planning is sometimes considered merely part of the general planning for the owner's estate. However, many people who have family businesses prefer to have younger family members run the business long before the current owner passes away. Those owners seek options for other family members to gain ownership of the business in a cost-friendly way.
Gifting – A business owner can take advantage of the gift tax exemption and give stock in the company to other family members. This would need to be done with a careful plan over many years as the individual gift tax exemption in a single year is only $14,000. Owners must also be aware of the lifetime gift tax exemption of $5.45 million (double for married couples), which makes gifting an entire business away only an option for smaller companies.
Grantor Retained Annuity Trusts – These are fairly complicated trusts that should only be considered with the advice of an attorney. They allow a business owner to transfer ownership to the trust and receive an annuity for a set period of time. After that time runs out, the assets in the trust transfer to the trust beneficiaries.
Whatever you do, this kind of planning should only be undertaken with the advice and assistance of a qualified estate planning attorney.
The basketball season for the Oklahoma City Thunder is over after the team lost in the Western Conference Finals to the Golden State Warriors, but the team is still part of an ongoing estate battle.
Aubrey McClendon was at one point one of the most important men in the oil and natural gas industry in the U.S. However, by the time he passed away in a car crash in March of 2016, like many other people in the industry, he had fallen on hard times as commodities prices fell dramatically in the past few years.
At the time of his death McClendon owned a 20% stake in the Oklahoma City Thunder NBA franchise. Because of the decrease in value of McClendon's business interests some of his creditors believe that basketball team ownership stake might be the estate's most valuable asset. This has caused them to intervene in the estate case.
The creditors fear that the estate will sell the ownership stake to McClendon's widow at less than market value and they are asking the court to make sure that does not happen. Attorneys for the estate suggest that the creditors are jumping the gun as the stake has not been sold yet and any sale would have to meet with the approval of the NBA.
Many state legislators share the common concern that if they increase taxes on their wealthiest residents, those residents will move to lower tax jurisdictions. However, data suggests that there is little basis for that concern.
No one likes paying taxes. Most people given the option to pay fewer taxes would choose to do so. This creates a dilemma for state governments in the U.S. where people can freely move to other states. Legislators often fear that if they raise taxes on their wealthiest residents, those residents have the means and ability to move to other states that have lower taxes.
The possibility of this happening is guaranteed to be mentioned in any legislative debate about the appropriate amount to tax the wealthy.
A new study looked at 13 years of data and concluded that very few wealthy people move to pay lower taxes. The study found that rich people move because of taxes only 2.2% of the time. In fact, millionaires move to different states at a lower annual rate than the general population.
People who only make $10,000 a year are more likely to move to another state than are millionaires. The reason for this is that wealthy people are not normally idle. They are employed or own their own businesses. They cannot simply pick up and move.
This study looked at income tax rates. It will most likely be cited in estate tax debates as well. That could be a mistake as once the wealthy retire it stands to reason that it is easier for them to move.
For some people picking someone to be the administrator of their estates is an easy process of choosing a reliable family member or friend. However, people who do not have reliable family or friends need to know where to look to find an executor.
Picking someone to be the executor ("personal representative" in Florida) of your estate is an important decision. You need someone who can reliably handle the financial details in a timely manner. You also need someone who can be trusted to faithfully carry out your wishes to make sure everything goes where it is supposed to go.
The majority of people choose a close relative or a friend as an executor. But, what if you do not know anyone who you trust enough with the task?
If you do not personally know someone who would make an appropriate executor, then you can seek the services of a professional. For example, some estate lawyers serve as advisors to executors and they are also capable of acting as executors themselves. Some banks and trust companies are also willing to administer estates.
Even though you might not know an estate attorney well, there is little reason to worry that the attorney will mishandle your estate. The attorney acting as executor is required to document everything and make an accounting for the court. Additionally, the attorney has a professional reputation to protect and maintain.
If you do not know someone who can serve as the executor of your estate, then start by asking if your estate planning attorney is willing to act in that capacity. Even if the answer is no, the attorney is likely to know another professional who offers the service.
A recent ruling by a New Jersey tax court illustrates that the legality of same-sex marriage does not solve all estate difficulties for same-sex couples who were not able to get married previously.
In 2004 New Jersey passed a domestic partnership law giving same-sex couples who registered as domestic partners some of the legal protections married couples enjoy. For example, the law exempted a surviving partner from paying the state's inheritance tax, but not the estate tax.
New Jersey is one of the few states with both taxes and requires that the higher of the two be paid. Long time partners Rucksapol Jiwungkul and Maurice R. Connolly Jr. registered as domestic partners in that same year.
In 2007 New Jersey passed a civil union law exempting same-sex couples from both the estate tax and the inheritance tax. Jiwungkul and Connolly did not enter into a civil union as a matter of principle.
Six days before the planned wedding Connolly passed away unexpectedly. Jiwungkul was the executor of the estate. In that capacity he paid approximately $100,000 to the state for the estate tax.
Later he filed an amended tax return and asked to have the amount refunded, claiming that he should be exempt from it. The state refused and the case went to tax court.
The law in the case was clear. As Jiwungkul was a domestic partner he was not entitled to the estate tax exemption. The court could have granted him an exemption by citing extraordinary circumstances, but the judge declined to do so.
The case illustrates that same-sex couples still need to be mindful about what different legal statuses mean for their estates.
The ongoing battle between Tom Benson, his daughter and his grandchildren took an interesting turn when excerpts from a deposition were filed in federal court. In them, Benson claims the daughter and grandchildren tried to kill him.
For the last year Tom Benson, the owner of the New Orleans Saints and Pelicans, has been in a bitter fight with his daughter and grandchildren. The fight began when Benson announced in January 2015 that he was planning to leave his entire estate to his third wife and cut the daughter and grandchildren out completely. Their response was to file a lawsuit in Louisiana state court alleging that Benson was incompetent.
They lost that case. However, they have also been pursuing another lawsuit against Benson in federal court, which was triggered when Benson transferred ownership shares of his professional sports teams out of a trust set up for the benefit of the daughter and grandchildren. Benson is allowed to transfer the shares as long as he substitutes assets of equal value for them. So far, he has allegedly only offered to replace the shares with promissory notes.
A deposition taken of Benson in the state court case was supposed to be under seal, but portions of it have been leaked to the public as the trustee attached them to court filings in the federal case. In the deposition Benson stated that he wants to leave nothing in the trust.
The reason he gave for this was that his daughter and grandchildren tried to kill him. When asked how they did that Benson claimed that they picked on his wife when he was not feeling well.
This case is likely to get even more interesting over time.
Only two weeks after Sumner Redstone successfully defended himself against one attempt to declare him incompetent to handle his own affairs another battle over the same issue has begun.
The effort by Sumner Redstone's ex-girlfriend to have the media mogul declared unfit to handle his own affairs ended abruptly when a judge dismissed the case. That case was always something of a sideshow. If the ex-girlfriend would have won her case, she would have eventually inherited a fortune, but the real story is what will happen to control of Viacom and CBS when Redstone passes away.
Redstone has majority control over both companies through his theater chain, National Amusements.
The issue arose when Redstone removed Philippe Dauman, Viacom's CEO, from the trust that will control Redstone's businesses if he is declared incompetent or passes away. Dauman and the board claim the move was made after undue influence by Redstone's daughter as she is trying to gain control of the companies for herself.
A lawyer who works for Redstone claims the move was made because Redstone is dissatisfied with Viacom's performance.
As for the challenge presented by Redstone's ex-girlfriend? It was expected to be public and bitter. This challenge, however, presents much more important questions about the future of Viacom and CBS than the last one.
Prince is not the first famous person to pass away unexpectedly without an estate plan.
With Prince's estate in the news the public is getting a close look at what happens when a celebrity passes away without having created a will. Prince, however, is not the first star to lack an estate plan. It has happened many times before.
Jimi Hendrix – His entire estate went to his father who subsequently left it to his own adopted daughter and cut his biological son out of the estate. The son and daughter have faced off in court several times.
Billie Holiday – When she passed away she was broke. What little she had became the property of her estranged husband. That entitled him to receive royalties from her work.
Bob Marley – The singer passed away leaving behind a widow and nine children. The family has engaged in a series of lawsuits over the estate.
Amy Winehouse – Her parents inherited her entire estate. They later had to take out loans to deal with the expenses of handling her complicated finances.
Martin Luther King – Decades after his assassination his three surviving children have gone to court several times to settle their many disputes over their father's legacy.
Tupac - After his death the rapper's mother and father fought over the right to inherit his estate. Eventually, his mother set up a trust that manages his legacy.
In the developing saga to settle Prince's estate two more people have come forward claiming to be his heirs.
When news broke that the musician Prince did not have an estate plan experts were quick to predict that there would be multiple claims made for a share of his fortune by people claiming to be related to the musician. It appears that claimants are wasting little time in proving the experts right.
Both new claimants say they are the child of Prince's deceased half-brother Duane Nelson who passed away in 2011. One woman claims to be Nelson's daughter and his only living heir. However, the other claim was submitted by a woman who states that she is the mother of Nelson's 11 year old child.
If the claims can be proven, both would receive a share of Prince's estate unless someone else can prove he or she is Prince's child.
Many people might wonder whether the media coverage of Prince's estate is worth following. It should be.
Rarely do we get the opportunity to see what happens when a wealthy person dies intestate. The multiple claims of the musician's would-be heirs and the expected estate tax bill the estate pay should lead to valuable lessons about the importance of getting estate plans signed without delay.
A family limited partnership can be used to lower your tax burden and transfer wealth to future generations of your family.
One reason people seek the advice of estate planning attorneys is to lower their potential estate tax burdens in a way that does not limit their ability to manage their assets. People might be aware, for example, that the gift tax exemption allows them to give assets to family members, which lowers the value of their own estates. However, it has the drawback of losing control over the gifted assets.
With proper estate planning people can take advantage of the gift tax exemption and retain control over the gifted assets.
In a family limited partnership the general partner owns a 1% share of the partnership and the other 99% is given to other family members. The general partner, however, has full control over the management of the partnership and its assets.
Because ownership is limited to family members assets transferred through a family limited partnership receive a discount for gift tax purposes. Essentially the gift tax exemption can be stretched further than if assets are given away directly.
The family limited partnership can be used to give family members extra income now or to allow wealth to grow for later use.