Common superstition says that famous deaths come in threes, but the death of New York Yankees owner George Steinbrenner on July 13 makes four billionaire deaths in 2010. It’s hard to deny the significance of such events in a year when there is no estate tax.

According to the Associated Press Steinbrenner’s family is set to receive a tax break of “about $328 million” because of the estate tax repeal this year. This number, along with the millions of dollars saved (that would otherwise have gone to pay estate taxes) by the families of Dan L. Duncan, Walter Shorenstein, and Mary Janet Morse Cargill may inspire Congress to take action on the issue of the estate tax before the year is over. The Washington Post quotes Senator Bernard Sanders of R.I. as saying, “In the midst of this terrible recession, the idea of giving billionaires a massive tax break is obscene… Already we have four billionaire families who are not paying taxes — Steinbrenner’s being the last one. Many billions are being lost. We have to address that reality right now.”

Although there is still some talk of the possibility of the estate tax being reinstated retroactively, most lawmakers and attorneys agree that the further into 2010 we get the less likely this becomes. But missing out on the estate taxes of four billionaires has to hurt, and the members of Congress are not likely to drag their feet much longer. One way or another, we can soon expect to see the issue of the estate tax become a hot topic of debate in Washington. Our firm will keep you abreast of any changes to the law that could affect you, your loved ones, or your estate.

2010 has been anything but ordinary as far as the estate tax is concerned. First there was the unexpected repeal of the estate tax (unexpected not because the repeal was unplanned, but because nobody expected it to actually happen), then the idea that congress could reinstate the estate tax and make it effective retroactively, and now there are rumblings that certain Senators are considering a prepaid estate tax!

According to this article in the Christian Science Monitor, “News reports suggest that the Senate may soon consider restoring the estate tax with an option allowing people to prepay their tax before they die. Details are apparently still in flux as senators negotiate. We—and maybe they—don’t know yet what they’ll propose for the basic estate tax but it’s unlikely to be harsher than the 2009 version.”

If something like this gets passed, a visit to your estate planning attorney will be more important than ever, especially if you have the wealth to protect and the means to spend some money now to save a lot of money later.

Of course, this is all just speculation right now, but even the idea of prepaid estate taxes tells us just how much the government is counting on that revenue—one way or another. If you were under any illusions that the repeal of the estate tax might turn into a permanent thing this should be more than enough to convince you that the estate tax is here to stay.

Usually on this blog I write about how to protect your real estate; how to keep business property profitable and how to pass personal property on to the next generation.  But every once in a while the market plays tricks on us, and property you thought would be a good investment ends up weighing you down.  What do you do then?  How do you turn unproductive property from a liability into an asset?

During the recent downswing of the real estate market, many people found that holding on to unproductive property was becoming a financial hardship. Although the market seems to be on the rebound, not all property is rebounding as quickly—or as strongly—as we’d like.  And yet many people are reluctant to sell their property at a loss. The good news is that there are ways to get the most out of property that no longer serves your family or your business (although it may not be the ways that you think), these include:

• Giving the property as a charitable donation
• Transferring the property into a charitable “lead” trust
• Keeping the property in a retained life estate.

If you think you might like to look further into leveraging your property—for charitable purposes or otherwise—please contact us for more information. Our office can answer your questions about the tax advantages of making a charitable donation of property; or alternatively of keeping the property, but holding it in a separate protective entity such as an LLP or FLP.

When considering your estate, your real property is likely your greatest asset. Let our firm help you decide how to make the most of your real estate, whether you choose to leverage it now or keep it safe for the future.

What is a QPRT?

Chances are you’ve never heard of a QPRT (Qualified Personal Residence Trust.)  QPRTs are not as familiar as the Revocable Living Trusts (RLT) used by estate planners, and they’re not as prominent as the Irrevocable Life Insurance Trusts (ILIT) recommended by many financial planners; but for the right family and situation, the Qualified Personal Residence Trust can be the perfect solution to your concerns about how to transfer ownership of your home. Think about these questions:

• Would you like to protect your personal residence or vacation home from creditors and lawsuits?
• Would you like to pass your property to your children with as little estate tax or gift tax as possible?
• Would you like to continue to live in your home, but know that it will pass smoothly and tax-free to your children when you no longer need it?

A QPRT is one tool that can help you accomplish all of these goals by taking the property out of your taxable estate and putting it “in trust” for a specified number of years before ownership is transferred to the beneficiaries. During the specified number of years the grantors retain the right to live in the home and continue to take responsibility for maintenance and upkeep; however, at the end of the term the value of the “gift” to the beneficiaries is not based on the current market value of the property, but on the much lower actuarial value of the property as determined by the IRS actuarial tables.

In this way, creating a Qualified Personal Residence Trust is a useful way to give property to your children without incurring high estate taxes or gift taxes—and it allows you to continue living in your residence until a time of your choosing.

Setting Up A QPRT

Before you set up a QPRT you’ll need to decide 3 things:

1. Who will serve as the initial trustee(s)?—This will usually be the property owners—the people who will continue to use the property until the end of the term.
2. How long will you want to continue to live in the home?—This should be a length of time that is useful to the grantors, but not so long that the grantors are likely to pass away before the end of the term.  If the grantor dies before the end of the term the entire value of the property will end up being included in the taxable estate.
3. Who will be the ultimate beneficiaries of the trust?—This is most often the grantor’s children. But have caution when choosing your beneficiaries, once the term is over the property belongs to the beneficiaries, who may or may not choose to allow the grantors to continue their residence in return for fair market rent.

Once you’ve answered the above questions you’ll want to talk to an experienced attorney who can help you safely set up your QPRT.

What are the benefits of a QPRT?

The main benefit of a Qualified Personal Residence Trust is that it allows you to give a gift of significant value to your heirs without incurring heavy estate or gift taxes.  A QPRT removes a valuable piece of property from your taxable estate while allowing you to continue to enjoy the benefit of living in it.  Mom and dad have the security of knowing they won’t be kicked out of their home, while their children rest easy knowing that the inheritance of the family property is a foregone conclusion.  Additionally, during the time that it is in trust, the property is safe from lawsuits or creditors because it is not yet officially owned by either the grantor or the beneficiaries.

Are there any drawbacks to creating a QPRT?

A QPRT will not be the right solution for everyone. First of all, a QPRT will not be of much benefit if your property is still mortgaged.  Secondly, if the grantor dies before the term of the trust is up the property goes right back into the taxable estate and any benefits will be lost.  Thirdly, due to the exacting nature of the IRS rules and regulations, the creation of a QPRT requires the help of a knowledgeable and experienced attorney or tax planner—this is not a trust to attempt on your own!

Do you own a home?  If so, do you know what is going to happen to that home when you die?

Perhaps you want your spouse to have the house when you die.  Or maybe you plan to leave it to your kids. The question is: how is that transfer of ownership going to take place?

If you own your home jointly with your spouse you are probably safe in assuming that title will automatically pass to that spouse when you die; no need for probate, no need to re-title, a joint tenancy transition is generally very smooth. Unfortunately, the real problems with joint tenancy appear when the surviving spouse passes away and your children or other heirs have to contend with the lengthy and expensive probate process. Not only this, but your estate will be subject to estate tax, your heirs may be forced to sell in a down market—or be prevented from selling in an up market—there are simply no guarantees without an effective estate plan.

The fact is—if you own a home, you need a trust.

Putting your home into a living trust essentially keeps it out of your probate estate.  A living trust is an entity that continues even after the grantor passes away, which means that the “owner” of the asset still exists, and probate is thereby avoided. When you pass away ownership is transferred smoothly and immediately to the beneficiaries of the trust. In this way, you can leave your home to your spouse and then to your children without having to go through the probate process.

Another benefit of living trusts is their flexibility.  Whether you want to transfer ownership to a spouse, hold the property for a certain number of years while your children mature, sell and divide the proceeds among your grandchildren, or leave it to a charitable organization, a trust can help you do it.

If you have rental or investment property you may want to consider an LLC or FLP in combination with a living trust as a way to own the property, avoid probate, and easily transfer ownership when you die. For more information about the best way to hold your property, contact my office today.



“No one wants to think about dying. But refusing to look at the documents that will determine where your money goes when you pass away will not make you live longer. It will just make sorting through everything more difficult for your heirs.”

So begins Paul Sullivan’s recent article in the New York Times, and we must admit, we couldn’t have said it better ourselves. Most people simply don’t want to deal with what they imagine will be a mountain of decisions and paperwork to create an estate plan, and they especially don’t want to think about their own death. It’s not that they truly believe avoiding it will help them live forever, it’s just that they know they aren’t going to die tomorrow or next week, so estate planning really isn’t a high priority… yet.

It’s time now for some straight talk. Any one of us—including you—could die tomorrow. Or next week. You could be in a car accident, your plane could crash, or you could simply be in the wrong place at the wrong time. If and when that occurs, what will happen to your spouse and children?

There are two answers to that question:

1. If you have no planning in place your assets will likely go through a lengthy and expensive probate process, losing some value in the process, eventually to be divided amongst your closest living relatives. If you are married your spouse may have to fight your parents about your wishes regarding burial and memorial. And if your spouse dies with you in that terrible car crash your children will be raised by whichever faintly qualified relative steps up to the plate—your parents? Your in-laws? Your 23 year old sister? And if nobody steps up…
2. If you DO have planning in place your assets will transfer quickly and smoothly to the beneficiaries you’ve named, in the amounts you have specified. If you have a spouse that person will be taken care of, while perhaps some of your estate is set aside for your children’s education, or to help them buy a home. Your children will receive their inheritance at a time of your choosing; when you feel they will be ready for the responsibility. Your parents and your spouse will know exactly how to arrange your burial and memorial, and will feel a sense of peace and closure knowing that they are following your wishes.

These are hard truths, and no one denies that they are difficult and uncomfortable to consider, but the heartache that can result from neglecting to think about these things is even more painful to imagine.

When it comes to estate planning there are two major vehicles for the distribution of property: A will and a trust. Both are very useful tools and can accomplish specific goals—but how do you know which one is best for your family? Which document you will need depends on a number of factors, some of which may seem completely irrelevant at first: the size of your estate, your goals for that estate, the age of your children, your marital status, your retirement account, and many, many more. But the first step to understanding which tool may be right for you is to understand what each document does.

A Will: A will is a formal declaration of your wishes.  It is a document you create to declare the extent of your privately held property (it does not cover jointly owned property) and what your wishes are for the distribution of that property.  You name an executor to carry out your wishes, and you can even include a nomination of guardian for young children in your will.   A will does not go into effect until after you die; before then it is simply a piece of paper containing your private wishes.  However, once you have passed away your will no longer remains private, it now becomes a matter of public record, available to anybody who would like to view it, and overseen by the court in a sometimes lengthy and expensive process called probate.

A Trust: A trust is a far more extensive tool than a will.  In fact, there are many different kinds of trusts, each of which may be used for specific situations.  Most trusts created for estate planning purposes are revocable living trusts (or RLTs.) An RLT is a document created not simply to distribute your property, but to own your property on your behalf, to be invested and spent for your benefit or the benefit of your named beneficiaries.  As such, a trust takes effect as soon as you sign it and your property is protected by and subjected to the trust parameters as soon as you place them in the name of your trust. There is a lot of flexibility available with a trust, and yours can be created to fit your unique situation.  Most RLTs name the trust creators as the initial trustees, nominating individuals or banks to take over as trustee when the creator becomes incapacitated or passes away.  The benefit of a trust is that when the creator passes away, property is not merely distributed and that’s the end of it; the creator can instruct the trustee to distribute the money slowly and in any number of ways, even to the extent of creating new trusts for each beneficiary.  Trusts can last for generations, as evidenced by the enduring Kennedy trusts.

Wills and trusts are necessary tools in estate planning, each one working in unique situations.  Your attorney will be able to tell you which one is best for your family.

Whether or not we do it regularly, all of us know how to plan ahead: We plan for travel and vacation, we plan weddings, and we plan for natural disasters, for retirement, or what to make for dinner tomorrow night. Why is it, then, that so few of us will create a plan to help our families and loved ones when we die?

Part of the reason may certainly be fear and discomfort. Nobody likes to think about their own death, let alone talk about it with others; but neglecting to have this conversation now, while you are still alive, means that you are leaving the conversation for your loved ones to have later, when they are hurt and grieving. It also means that you are unfairly asking them to guess at what your wishes may have been, and make difficult decisions that should have yours to make.

This article by Michael O’Mara lists 10 things to for your family before you die. 10 things may seem like a tall order, especially when the subject is “the great hereafter”; but it seems a whole lot easier when you consider that 7 of the things listed are generally addressed as part of your estate planning with our firm—and we can help you with the other 3 things if you so desire.

You wouldn’t leave it for your children to pack your suitcase after you’ve left on vacation—don’t leave it for them to make your difficult decisions after you’ve passed away. Call our office to help you with your estate planning today.

Would you ever turn down an inheritance?

Your first reaction might be “Of course not!” But don’t speak too soon. Most estate plans are created at least in part to protect heirs (generally spouses and children) from the sometimes devastating blow of estate taxes; but with the estate tax in a confusing state of flux this year some of these plans won’t work as their creators intended—and heirs may end up looking for a way to protect themselves against the unintended consequences of well-intentioned estate plans.

This article in the New York Times explains what it means if you disclaim (or turn down) an inheritance, and when you may want to employ this tactic.

“Historically, lawyers have recommended disclaimers to repair estate planning oversights that bring negative tax consequences — as when parents left money to already affluent adult children. In such a case, the children could disclaim, so the inheritance would go their own children instead, rather than facing the possibility that this money might be taxed in their own estates.”

The article goes on to explain why some people might consider using this strategy this year, when—due to the expiration of the estate tax—“a formula clause could wind up allocating all the money to one [heir] or the other, rather than dividing it between the two.”

Although this is an interesting solution to be considered in some cases, there are no easy answers to the question of what to do when you are the beneficiary of an estate that has taken an unexpected turn. If you have any questions whatsoever about an inheritance—or about your own estate plan—call your estate planning attorney for help.

It’s that time of year when many high school seniors are starting to prepare for graduation and eventually to head off to college; these seniors are close to turning—or in some cases have already turned—eighteen. It’s almost time to spread their wings, leave the nest, and be on their own…

… Except that most 18 year old college freshmen aren’t actually ready to be on their own. They still rely on their parents for financial support, emotional support, credit card payments, physical transportation… even clean laundry! And just about all of them still rely on their parents’ medical insurance when they need health care. You would think, then, that you as parents would be able to make medical and financial decisions for these fresh 18 year olds when they need help… except you can’t.

Once your child is 18 you as a parent are no longer their legal guardian. No longer will you be able to easily call the shots in the hospital or doctor’s office. You may pay the credit card bill, but you may not always get a representative to talk to you if there is a problem with that credit card. Likewise you may not make decisions regarding their bank account, or have legal dealings on their behalf with their landlord. Not unless your child gives you permission, that is—written permission in the form of a durable power of attorney and/or a healthcare directive.

By naming you as his agent in a durable power of attorney and/or a healthcare directive, your brand new 18 year old is giving you the power to keep doing what you’ve been doing all along… be his loving parent and help with the tough decisions; or—heaven forbid—step in to take charge in case of an emergency.

Durable powers of attorney and health care directives are documents that can be easily executed by our office or your own trusted attorney. Creating one of these documents for the first time is a good opportunity to discuss responsibility with your child, and encourage him or her to begin thinking of these decisions that you have helped them make all these years as their own. We know, however, that this isn’t always an easy subject to discuss with your young adult. If your child is resistant to discussing this with you, perhaps he or she will be willing to discuss it with your family estate planning attorney instead. This is an important subject, not only for you as a parent, but also for your young adult’s safety and well being.