Unlike an IRA, a 401k will automatically transfer to a surviving spouse no matter who the designated beneficiary is.

Irrevocable Life Insurance Trust, also called ILITs, are ideal vehicles for sheltering insurance proceeds from your taxable estate so long as the policy need not be adjusted or tampered with by the subject to whom the payout on death is based.  If a person is using the life insurance policy as an investment vehicle, there is a good chance that they will want to spend down that policy’s accrued value later in life.  The ILIT will not permit that. 

In that scenario, we usually recommend taking the accrued value out as a loan immediately and then transferring the new $0 cost basis policy into the ILIT or purchasing a new term policy through the ILIT and using that benefit to offset the tax consequence of the whole life or universal policy.

For more information on the estate tax and protecting your family’s financial future, please contact the estate planning attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com.  Let us protect what you value most.

For South Florida couples that are unmarried or same sex, unique estate planning issues need to be faced.  In Florida, unmarried unions are not legally protected which makes living trusts the estate planning vehicle of choice for most of the GLBT community.  Your South Florida estate planning attorney can fully inform you of the benefits and drawbacks of each estate planning option, but this article will discuss the advantages of having a living trust in place.

A South Florida living trust, in conjunction with a financial power of attorney, will provide your partner with the ability to manage your assets in the event that you become disabled or incapacitated.  Powers of attorney, health care surrogates, and living wills are ancillary documents that can insure that your partner will be in charge of all legal, financial, and medical decisions in the event of your disability or incapacitation.  Without these documents in place, your partner may not even be able to visit you in the hospital, much less make those important decisions about your care or treatment.

A South Florida living trust is superior to the antiquated last will and testament because wills are significantly easier to challenge than trusts, which makes for a very sloppy division of assets if any of your friends or family were not completely supportive of your life style or your choice of partner.  Moreover, if you distribute your assets via a will, a notice of the proceeding must be given to your closest legal heirs, providing them with an opportunity to object and instigating the fights previously talked about.  While South Florida trusts are protected from public viewing, a will is a public record, which eliminates privacy and aids in disputes.  Even if you are 100 percent certain that no one in your family will challenge your will, the avoidance of the probate process alone is worth having a trust in place.  Many people incorrectly believe that having a will avoids probate.  In actuality, all wills must be probated and the legal process will be time consuming possibly delaying the surviving party’s access to needed funds for over two years.

Many South Florida unmarried couples believe that these problems can be avoided by simply putting their partner’s name on their assets, or joint tenancy, until they learn of the many pitfalls.  For appreciated assets, such as stocks and real estate, there are tax disadvantages to receiving assets from a joint tenant.  While inheriting from a will or trust at death eliminates taxable capital gains for the survivor, joint tenancy only eliminates one-half of those capital gains since you are only “inheriting” one-half of the property.  Moreover, you may be exposed to the debts and liabilities of your partner.  An even worse result of this type of “title” planning is that you lose control over where the assets go after your surviving partner dies.  Perhaps your goal is to provide for your partner for life, but then to control where the unused assets will go after he or she passes.  Only a South Florida living trust would provide you with this ability.

For more on the benefits of living trusts, please contact the South Florida estate planning attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com.  Let us protect what you value most.

Estate Planning Information for Cohabitating Unmarried Couples

Living together while remaining unmarried has never been more popular. Over 6.4 million opposite-sex unmarried couples currently live together.  This translates into 12.8 million people. There are an additional 750,000 same-sex unmarried couples in the United States which translates to an additional 1.5 million people. This is a whopping 92% increase since 1990. Over half of all unmarried households have children. If you are part of a cohabitating unmarried couple, it may be comforting to know that you have plenty of company. However, this doesn’t mean that you can ignore how the law affects your relationship. Here are some tools that unmarried and same-sex couples can use to avoid the “grave” danger of intestacy.

Domestic Partnership Agreements: Domestic partnership agreements set out the parameters of a relationship and specify the rights and responsibilities of each partner. They are similar to prenuptial agreements and are well-advised for unmarried couples who live together, be they same-sex or opposite sex.

Last Will and Testament: When you die without a formal will, the state of Florida will provide a will for you and distribute your assets as they see fit. This is known as “intestate succession” and it provides the least amount of protection to your family. Same-sex or unmarried couples are not recognized by Florida intestacy statutes. Thus, upon your death, your partner will have no rights to your estate. The chance for a will contest may be greater in same sex and unmarried relationships, as family members may not understand the choices you have made.

Revocable Living Trust: A living trust may be a good option for same-sex or unmarried couples, due to its private and expeditious nature. A living trust also helps to avoid probate in multiple venues if you own property in more than one state. A living trust can hold both individual and shared property and goes into effect as soon it is funded. In a revocable trust, you (as the “grantor”) retain control over the trust and its assets while you are alive. If you do not wish for creditors to access the trust assets, an irrevocable trust is a better option. A pour over can supplement a living trust and should be used to distribute any property not previously placed into the trust.

Durable Power of Attorney: A power of attorney for legal or financial matters allows you to appoint your partner to manage your affairs, should you become unable to do so. It is also helpful as evidence of your testamentary intentions and the nature of the relationship, in the event of a will contest.

Living Will and Health Care Surrogate: A living will specifies your wishes for medical care and artificial life support. Without specifically declining artificial life support through a properly executed living will, the hospital must keep you alive by any means necessary, no matter how much it costs or what your true desire is. A health care surrogate designation should accompany the living will because it appoints someone to make medical decisions on your behalf in the event that you are unable to communicate your wishes and specifies your wishes regarding artificial nourishment. It is crucial to have the health care surrogate in place because your partner will have no legal rights regarding your care without one.

Joint Tenancy: Same sex and unmarried couples can benefit from owning real estate together as joint tenants with rights of survivorship, which means that when one partner dies the other can take sole ownership of the property even without a will. This designation can avoid estate taxes, capital gains taxes, gift taxes, and probate.

For more information about the legal rights and protections of unmarried couples, please contact the estate planning attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com.  Let us protect what you value most.

Since the Federal estate tax lapsed at the end of 2009, an opportunity arose for high-net-worth individuals to benefit from a rather confusing situation.  The Federal estate tax, also referred to as the “death tax”, was scheduled to be repealed for the year 2010 but no one in the industry expected Congress to allow this to occur.  Now, those who die this year will be able to escape a federal tax of up to 45% on estates valued at $3.5 million or more.  The tax is currently set to be reinstated in 2011 at a rate of 55%, which means that wealthy individuals better walk behind their children when descending the staircase for the time being.

For years, legislators in our nation’s capital have said they would make sure the estate tax law didn’t lapse by passing new legislation by the end of last year.  However, with the debate over health care reform bogarting most of the attention on Capitol Hill, Congress has yet to address the estate tax issue.  When Congress finally does get around to addressing the estate tax law issue this year, it is highly likely that they will make it retroactive to Jan. 1.  This could cause mass confusion for any estates probated or executed in the meantime as the Federal Government could come knocking to collect past-owed estate taxes.

Even if legislation is retroactive, this temporary loophole provides a once in a lifetime opportunity for high-net-worth individuals to leave massive amounts of money to their heirs at a much lower tax rate than they will undoubtedly pay once legislation is in place.  Specifically, with the expiration of the estate tax law, the generation skip tax also disappears. This means that during this time of no estate tax, individuals can gift up to $3.5 million to grandchildren and pay only gift tax on the money.  A good estate planning attorney will also add language that allows the individual to make a gift to grandchildren but stipulate that they can take the gift back if the law changes forcing additional retroactive taxes.

For more on how you and your family might benefit from the temporary repeal of the Federal estate tax, please contact our South Florida estate planning attorneys at 954-944-2855 or via email at info@wfplaw.com.

A wrong determination of whether a trust qualifies as a designated beneficiary of retirement benefits can cost the owner decades of tax deferral as well as 50 percent excise tax penalties. Our attorneys know how to provide the best asset protection and estate planning benefits for large retirement plans so that the valuable stretch out does not become a blow out. Most trusts are inadequately drafted to handle retirement plans, especially in light of the recent changes of the Pension Protection Act. New preparer penalties put an additional premium on determining whether the trust is likely to qualify.

Learn more about how to protect your retirement and reduce your estate tax consequences by contacting the Florida asset protection attorneys of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com.