Tag: estate-planning
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A Potpourri of Potential Pitfalls To Avoid with Qualified Domestic Trusts
In Florida, when one or both spouses are not U.S. citizens, special planning is needed for their estate. If the surviving spouse is not a U.S. citizen, they cannot receive a marital deduction for estate tax unless the property is held in a Qualified Domestic Trust (QDOT). This rule was created to prevent noncitizen spouses…
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Planning for Large Estates After TRA 97: A New Look at Some Old (Charitable) Friends
The Taxpayer Relief Act of 1997 didn’t actually provide relief for many rich people because the estate tax credit is only available for estates worth less than $10 million. This means that larger estates still face a 55 percent tax rate, just like before. As a result, estate planning techniques like life insurance trusts and…
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TRA 97 Is Not the Only Reason to Review Existing Estate Plans Involving Closely Held Stock
The Taxpayer Relief Act of 1997 provided a tax benefit for family-owned businesses, allowing an exclusion from a person’s taxable estate. This is important to consider when making estate plans involving closely held stock. There have been significant cases and IRS rulings that affect estate planning for closely held stock. In a hypothetical scenario, a…
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Estate Planning with Tenancy by the Entireties Property
Last New Year’s Eve, the IRS issued final regulations about disclaimers of tenancy by the entireties property, which was a cause for celebration for estate planners. However, there is still a problem in Florida that needs to be resolved before a surviving spouse can disclaim their interest in such property. This article will discuss the…
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A Practical Discussion on Advising the Lottery Winner
If someone in Florida wins the lottery, their advisors need to understand the tax issues related to their winnings. It’s important to plan ahead to save as much money as possible on income, gift, estate, and generation-skipping taxes. If a client wins, they should not sign the ticket until they figure out who owns it.…
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The Roth IRA: What a Great Deal!
The new Roth IRA is a way for taxpayers to save and invest their money for the future. They can put in a few thousand to millions of dollars and the money grows tax-free. When they take the money out, they don’t have to pay taxes on it, as long as the account has been…
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Planning to Maximize the Section 2013 Credit
The TPT credit, allowed by the tax code, is a benefit for estate planning and administration. It can help in filing federal estate tax returns and can be used to plan for maximizing its potential benefit. It’s important to understand how it works and to consider it in both estate planning and administration phases. The…
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Estate, Gift, and Trust Tax Changes Made by Taxpayer Relief Act of 1997
In 1997, the Taxpayer Relief Act made changes to estate and gift tax laws. It increased the unified credit for estate and gift taxes, meaning people could exempt more money from these taxes. The maximum federal tax rate also increased for very large estates. However, compared to previous tax acts, the overall impact of the…
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Why Relying on Cristofani to Draft Trust Withdrawal Powers Is a Crummey Idea
The IRS has issued new rules that restrict how people can use “Crummey powers” to avoid paying gift taxes. These rules clarify that a gift must be immediately available for the recipient to use in order to qualify for a tax exemption. This is important because it affects how much money can be given each…
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Making Principal Invasions under Florida Law when an Interested Party is Serving as Trustee
Sometimes, a client may want to name a family member, like a spouse, to be in charge of a trust they’re setting up. In the past, there were tax concerns and worries about fairness when a family member was named as trustee. But now, there’s a law in Florida that helps address the tax issue.…
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Generation-Skipping Transfer Tax: Its Bite Is Worse Than its Bark
Chapter 13 of the tax code has really complicated rules about the generation-skipping transfer (GST) tax. It’s a big deal because it can cause huge tax problems for families and their advisors. The GST tax rate is 55 percent and it applies to transfers of property from one generation to a generation two or more…
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Estate of Simplot: The Tax Court Applies a Significant Premium to Voting Privileges
The Simplot case involves the transfer of stock in a family-owned company after the founder’s death. The court ruled that a “premium” should be applied to the transfer of minority voting stock, and that the premium for a controlling interest would be substantially greater. This decision could impact estate and gift tax reduction strategies involving…
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The Use of Disclaimers for Flexibility in Planning for Qualified Retirement Assets
Estate planning attorneys help couples prepare wills and trust agreements to minimize estate taxes. They create a plan, called an AB plan, for married couples to use two unified credits and shelter up to $1,300,000 after both spouses pass away. The attorney also helps the couple retitle their assets and designate beneficiaries for their retirement…
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The New Limited Liability Company in Florida
In 1998, Florida stopped charging a tax on certain types of businesses called LLCs. This made lawyers reconsider which type of business they recommend to their clients. This article explains how the law changed and compares the benefits and costs of different types of businesses. In 1998 and 1999, new laws were passed in Florida…
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The New York (and Other States) Death Tax Trap
Many retirees move to Florida from other states and keep a home in their former state. These individuals, known as “snowbirds,” may face unexpected taxes on their properties in their former state. Changes to estate tax laws in 2001 and the creation of a new tax regime in 2010 could affect their estates. Before EGTRRA,…
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Estate of Thompson: Respecting the Formalities of the Family Limited Partnership
The article discusses the use of family limited partnerships (FLPs) in estate planning. It gives an example of a case where the IRS scrutinized the use of FLPs for tax purposes. In this case, a man named Theodore Thompson set up two FLPs with his children to reduce estate tax. However, the IRS determined that…
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Fiduciary Allocations of the Generation-skipping Transfer Tax Exemption
“Summary: A law firm is helping a company with a legal case involving a defamatory article. The company’s reputation and business are at stake, so the law firm is working hard to win the case for them.” The generation-skipping transfer tax exemption allows individuals to transfer assets to their grandchildren without paying extra taxes. If…
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Marriage, Minimum Distributions, and Mayhem: A Discussion of IRAs under Florida’s New Elective Share Statute
Starting from October 1, 2001, changes in Florida’s elective share statute have made estate planning with IRAs more complicated. Previously, IRAs and qualified plans were not subject to probate administration in Florida, but now they fall under the elective share statute. This presents new challenges for estate planning, especially when a decedent has significant IRA…
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The Economic Growth and Tax Relief Reconciliation Act of 2001: Estate, Gift, and Generation-skipping Transfer Tax Law Changes
The Economic Growth and Tax Relief Reconciliation Act of 2001 made temporary changes to the federal estate, gift, and generation-skipping transfer taxes. The act gradually increased the exemption amount for estate tax over eight years, eventually repealing the estate tax in 2010. However, the act also includes a sunset provision, which means the estate tax…
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Possible Tax Consequences Under Florida Durable Powers of Attorney
The power of attorney (DPOA) allows someone to handle another person’s finances and personal affairs. In Florida, some powers in the DPOA can have unexpected tax consequences, especially the power to give the person’s property as gifts. Different states have different rules about this, but in some states, the DPOA might allow the agent to…
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When Good IRAs Go Bad: Common Pre- and Post-mortem IRA Problems with Uncommonly Bad Results
An Individual Retirement Account (IRA) is a savings account for retirement. The rules for IRAs have changed recently, providing new opportunities for planning after the account owner passes away. The new rules allow for the IRA to be passed on to a spouse or other heirs, while still deferring income tax. However, it’s important to…
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Section 412(i) Defined Benefit Plans: Simplicity, Safety, and Power
A 412(i) plan is a type of retirement plan that is fully insured and guaranteed by the government and an insurance company. It is like a private social security plan. Employers may want to qualify their plan under §412(i) because it exempts them from certain funding requirements, making it less complicated and costly to manage.…
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Gift-splitting: The Intricacies of §2513 of the Code
The rules for gift-splitting for married couples are complex and can have unintended tax consequences if not done properly. Three requirements must be met for a married couple to elect to split gifts made to third parties. The gifts must also be ascertainable, meaning the portion of the gift to the third party must be…
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The Top Five Things Practitioners Need to Know About IRAs Now; A Discussion of State Law, Case Law, and Other Considerations
IRAs are popular retirement accounts that offer tax benefits. They have become a significant part of estate and tax planning, with trillions of dollars held in them. Most households in America have some sort of retirement account. Each state has laws that affect how IRAs are administered, and IRA trustees and custodians may have their…