Orlando Estate & Elder Law

When Your Estate IS a “Work of Art”

For many owners of artwork or decorative collectibles, scenario planning works well for individual or a small number of items.

Estate planning is a process, not a “one-and-done” event. Sometimes anticipating future curveballs in life may necessitate weaving scenario planning into your estate planning.

As the expression suggests, scenario planning requires thinking through “if, then” events. A recent example of such planning comes to us in the form of the Ilena Sonnabend estate and the Rauschenberg painting, “Canyon.”

If you have been following this saga in the press, then you know “Canyon” is a (very!)  mixed- media work  that features the preserved remains of a bald eagle. Before you rush out to acquire a similar piece for your own collection, be forewarned: It is only legal to own such “media” with special permission, and it is outright illegal to sell it.

Hoping to make the best of that odd twist of legal fate, estate advisors counted the work as an asset without value for estate tax purposes upon Sonnabend’s passing. Unfortunately for the estate, the Art Advisory Panel cried foul and pegged the value at $65 million, even if it couldn’t be sold in the U.S.

While a chorus of critics rose up against the heavy-handed IRS for this draconian valuation, a recent article in Forbes has a different take. Titled “'Canyon' Controversy - Blame The Advisers Not The IRS,” the author blames the estate advisors and the lack of scenario planning.

The estate advisors were giddy to exploit the apparent lack of resale value of the art piece. They failed to consider another "if-then" scenario. As the article notes, this case should serve as an example to estate advisors and their clients regarding the value of scenario planning, especially in the current economic, tax and political climate.

Reference: Forbes (July 24, 2012) “"Canyon" Controversy - Blame The Advisers Not The IRS”

 

Rules Can Keep Your Family Business and Family Together

Can you imagine spending half of your working life in a family business, beside your mother, father, and brother, and all getting along? And then spending the next half of your work life with your brother, your spouse, your four sons and three nephews, and still all getting along?  I pinch myself. We have been able to create an environment of mutual respect and trust, one where we can function as a team that shares the emotional and intellectual challenges of business along with its financial rewards.

Given the experience of some of my clients, it would take the Imagineers at Disney to create such a family business.  Yet it can happen in real life, according to a recent report.  One successful trick that CNNMoney recently highlighted is the power of rules.

The article, titled “Family business: How to pass the baton,” is a story about the Mitchell family and the rules they developed to keep their family, as well as their business, intact. As the article illustrates, rules are a way of promising to yourself and future generations that you’ll maintain a strong shareholder’s agreement, operating agreement, or other founding document of the business itself.

So, what guidelines will help keep your family together and in business at the same time? For some practical ideas, consult the original article for the “Mitchell” rules and consider how they might work for you family business. 

Reference: CNNMoney (July 9, 2012) “Family business: How to pass the baton”

 

Filing a “Protective Claim” for Same-Sex Estate Planning

Which taxes qualify for the protective claim? Estate taxes, income taxes, even gift taxes. In fact, any time you feel you overpaid a tax you can file for a refund, if you have a good reason.

The legality and constitutionality of same-sex marriage has not been far from the news or the estate planning of some who are affected. This particularly is true after the ruling of U.S. District Court Judge Barbara S. Jones in Windsor v. United States.

When it comes to “same-sex” estate planning, there are significant tax burdens at play. However, according to a recent article in MarketWatch titled “Ruling poses tax issues for same-sex couples,” that doesn’t mean that you have to consider the protective claim.

So, what is a protective claim? Any form of taxation is subject to a sort of protective claim. All that is required is that you pay your tax and then file an amended return. It should be filed on the basis of what your return should be if current litigation is decided in that favor.

Still, the stakes are simply that much higher in this case with the many tax benefits that marriage as a federally-recognized institution brings. Some may consider it premature, but, in the case of either income taxes or estate taxes, taking the defensive position of a protective claim may be worth it. At the very least, there’s nothing to lose.

Reference: MarketWatch (July 10, 2012) “Ruling poses tax issues for same-sex couples”

 

The Clock is Ticking on a Gift Tax Exemption Bonanza

TIME may — or may not — be running out for one of the biggest tax breaks for wealthy Americans: the chance to give up to $5.12 million to heirs tax-free and then pay a comparatively low 35 percent rate on any gift above that. The break is scheduled to expire in six months, but no one will hazard a guess about its fate because it is just one of many tax and spending measures expiring at the same time.

A few poignant reminders never hurt anybody, especially when the issues are this pressing. Case in point: There are fewer than six months remaining to make use of the $5.12 million gift tax exemption.

If you have not noticed, communication between Congress and the White House is rather contentious. After all, it is an election year and the stakes are high regarding the future of our country. Who will control the levers of power in 2013? That question will not be answered until November 6. In the meantime, the future of the gift tax (and the estate tax) hangs in the balance.

Against the backdrop of this uncertainty, one known is that the $5.12 million gift tax exemption is available through December 31, 2012. That amount (or $10.24 million, if married) is yours to give – in liquid assets, unappreciated stock, real estate, or what have you – but only until the end of the year. The New York Times recently addressed this issue in a recent article titled “To Give or Not to Give, Up to $5.12 Million.”

In the end, you may find yourself in this very real tax predicament. You could be stuck between the known and the unknown, 2012 and 2013 gifting exemptions, or, a rock and a hard place.

Reference: The New York Times (June 22, 2012) “To Give or Not to Give, Up to $5.12 Million”

 

Depressed Seniors Fall in (Medicare) “Doughnut Hole”

Depressed Medicare beneficiaries in the so-called coverage doughnut hole were more likely to cut back on their antidepressants than those who had full insurance coverage, a study has found.

Even with the Affordable Care Act (ACA) well in place and affirmed by the Supreme Court, the costs paid and lifestyles lived by many are being tied to the “doughnut hole.” This especially is true for seniors taking anti-depression medications.

As recently reported in Med Page Today, a new study by Yuting Zhang, PhD, of the University of Pittsburgh, Medicare may not fully cover depression medications for seniors, despite the ACA. The article is titled “Antidepressants 'Fall' Through Doughnut Hole.”

If you are unfamiliar with the “doughnut hole” issue, you are not alone. It is the coverage gap created by Medicare Part D. For those whose income is at the lower end, there tends to be coverage. Likewise, for those who have an upper-end income, there is still coverage… with a gap in between.

According to the new study, and sheer intuition, patients that fall within the doughnut hole are associated with a significant drop in medication use – 12% on average. That is always relevant, but perhaps especially so in the case of depression medication. While discontinuing any prescribed medication is never advisable, it is often easier to justify foregoing depression medication than other medications.

I certainly recommend reading the original article for more details regarding this study, should this issue be relevant to you or someone you love.

Reference: Med Page Today (July 5, 2012) “Antidepressants 'Fall' Through Doughnut Hole”

 

Estate Planning for the Military Family

Members of the armed forces about to be deployed have a lot on their minds, but one thing on the checklist needs to be making sure their legal and financial affairs are in order.  With a little planning, servicemen and women deployed overseas can serve their country with the peace of mind that comes from knowing that their family and their future security are provided for.

For too many of us, the necessities of estate planning are easy to delay. However, for a military family, the exigencies of the present are too great to ignore. Proper planning is an immediate concern.

How can military families properly plan? A recent Forbes article titled “Make a Legal and Financial To-Do List Before Military Deployment” sheds some practical light.

Essentially, military plans always are based on battlefield “contingencies.” Whether over there or on the home front, changes on the “battlefield” are hard to predict. For example, for a deploying soldier (sailor, airman, marine or coast guardsman), have you secured enough life insurance to provide for your family? If yes, does your life insurance specifically carve out war, war-risk, service casualties, and the like as exclusions? Regardless, make sure you maximize any government-offered life insurance, as it does not exclude such risks.

Ultimately, do not ignore making proper estate plans as well. Be sure to coordinate your estate planning with the beneficiary designations on your life insurance and other assets. While a Legal Assistance Officer in your local Judge Advocate General’s Office can assist, most state bar associations have attorneys who will assist you at little, if any, financial cost.

Reference: Forbes (June 28, 2012) “Make a Legal and Financial To-Do List Before Military Deployment”

 

Estate Planning – The Human Factor

Estate planning tends to focus on minimizing taxes, especially for high-net-worth individuals, but personal problems may be more pressing for many clients. For such people, the success of the planning process hinges more on dealing with their issues than with their legal, tax and technical matters.

Of the three essential elements to any estate plan, namely, the legal, the financial, and the human factor, the latter can be the most difficult. This challenge was the subject of a recent article in Financial Planning appropriately titled “The Human Factor.”

Generally speaking, the human factor in any estate plan is the sum total of your personal, interpersonal, and family relationships and problems. Planning for these matters means taking everything you know and everyone you love into consideration. While the details will vary according to your own unique circumstances, the Financial Planning article provides some practical guidance.

For example, have you considered the needs of yourself or your spouse (if married), should old age catch up with you physically or mentally? What about the potential of a likely heir having spendthrift tendencies or a substance addiction? Have you given thought to heirlooms and other items of tangible personal property that could trigger family feuds in the absence of clear inheritance direction?

Is that all? Hardly. It does, however, help to get you (and me) thinking about the “human factor” when it comes to our estate planning.

Reference: Financial Planning (July 1, 2012) “The Human Factor”

 

Family Limited Partnerships – Worth Another Look (Especially This Year)?

A family limited partnership was once a rather esoteric way for wealthy families to centralize the management of real estate and various pots of money. But this is not a normal tax year.

Sometimes managing family assets is like, well, running a business. Then again, some families actually do run their families like businesses and have enjoyed significant tax advantages by doing so through the use of the Family Limited Partnership.

A recent article in The New York Times titled “In an Unusual Tax Year, the Wealthy Turn to Partnerships” explores the power of the Family Limited Partnership (FLP). Properly structured, the FLP binds the family into a business arrangement (which is not always a good thing for a family) and, in doing so, allows for the longevity of a business entity, the decreased valuation allowable to private companies, and the simple ability to pool resources for higher investments.

When used correctly, there is much to be said about the FLP structure. On the other hand, there also are limitations and even outright warnings. For one, no business can safely exist without a purpose, and to form your FLP without a discernible purpose beyond avoiding estate taxes will certainly raise the ire of the IRS. Furthermore, as already intimated, it means the family must act with the swiftness and assurance of a business in their investments. Unfortunately, not all families are capable of acting like a “business.”

In the end, we face an uncertain and unpromising future in estate and gift laws (and a veritable “fiscal cliff” as a nation for related reasons). Nevertheless, at present we have extremely favorable lifetime gift tax exemptions ($5.12 million) for the remainder of 2012.

This may be the perfect storm to consider harnessing this powerful tool to generate some security for your family and family investments.

Reference: The New York Times (July 6, 2012) “In an Unusual Tax Year, the Wealthy Turn to Partnerships”

 

Disaster Looms Without an Estate Plan

In Beckwith v. Dahl (May 3, 2012), the California Court of Appeal, Fourth Appellate District, joined the majority of states in recognizing the tort of intentional interference with expected inheritance (IIEI).

In the darker and more unfortunate corners of estate law, one doesn’t need to look far to find family squabbles, double-crossing, and intrigue. Accordingly, in a majority of states the courts have a term to describe those who would throw a monkey wrench into an inheritance. It is the tort of “Intentional Interference with Expected Inheritance,” or IIEI for short.

The tort of IIEI was been recently recognized in California with the case of Beckwith v. Dahl (May 3, 2012). In fact, of the 42 states to consider the tort, 25 states (including Florida) have adopted it. While that is a majority, vast stretches of the country still have no specific legal context for the types of unfortunate fights that cripple so many families and level so many estates.

Still, it should be noted that the vast majority of estate difficulties giving rise to IIEI issues result from unplanned estates. I recommend reading the analysis of this California case in a recent Forbes article titled “California Joins Majority Of States In Recognizing Tort -- Intentional Interference With Expected Inheritance.” The Beckwith case is yet one more example of a will never being committed to paper. In that case, the would-be planner had very specific concerns to address in the form of a same-sex relationship. However, due to his lack of estate planning, his partner was disinherited due to the prevarications of a family member and certain legal defaults.

In general, the teaching point here is the old saying that “failing to plans means planning to fail.” 

Reference: Forbes (June 30, 2012) “California Joins Majority Of States In Recognizing Tort -- Intentional Interference With Expected Inheritance”

 

Government Now Tracks Time Spent Providing Elder Care

Every day, Bureau of Labor Statistics interviewers ask Americans to detail how they spent the previous 24 hours, how many minutes and hours they devoted to everything from shopping to child care to phone calls. The results, culled from 12,500 respondents, make up the American Time Use Survey. It began in 2003, but only last year did the bureau start asking about a key activity for millions of people — elder care.

There’s rarely a shortage of personal stories about giving care to an elderly loved one. While there has been some private sector data on the subject, now there is official governmental information directly from the Bureau of Labor Statistics.

The Bureau is the very same agency that publishes information on the Consumer Price Index, the Producer Price Index, and just about every government statistic, including the American Time Use Survey. This survey works to quantify how much time Americans devote to various tasks – and have to devote to those tasks in the first place. Interestingly, the survey has begun to include the activity of providing unpaid care to someone over age 65 “because of a condition relating to aging.”

As reported in a recent post in The New York Times - The New Old Age Blog in an article titled “New Numbers on Elder Care,” the Bureau has wanted to track this activity since 2003. Nevertheless, the addition is fairly recent and the results for 2011 have been published. The summaries shed light on the experiences of many Americans.

One of the key lessons to learn is that it is never too early to plan for the caregiving of elder ones loved ones.

Reference: The New York Times – The New Old Age Blog (July 5, 2012) “New Numbers on Elder Care”