As we mentioned in part one of this article, as of November 17, 2011, legislation was proposed that, if enacted, would change the federal estate tax related laws.  The proposed legislation is called of H.R. 3467, The Sensible Estate Tax Act of 2011.

We continue; in addition to changes in the federal estate tax, gift tax, portability benefit, and pick-up tax, the proposed legislation would make the following changes:

Valuation Discounts and Minority Interest Discounts

Under current law, family limited partnerships are used to provide asset protection and to compress the value of underlying assets.

The new law would eliminate the use of valuation discounts as to non-business assets; and, there would be no valuation discounts for minority interests, if the other owners are family members.

Grantor Retained Annuity Trusts

The new law would require grantor retained annuity trusts to have a minimum 10 year terms and the annuity cannot be reduced during the term.  Furthermore, the remainder interest (at the time assets are transferred into the trust) must be greater than $0.

Generation-Skipping Trusts

Some generation-skipping trusts are used to avoid the federal estate tax and generation-skipping tax for generations (or even, forever, if sited in a state that has abolished the rule against perpetuities.)

The new law would end trusts when they attain have been in existence for 90 years.

There is no guaranteed that this new proposed law will actually become law.  In fact, there a competing law was introduced in March 2011, The Bipartisan Death Tax Repeal Permanency Act.  That proposed law would totally eliminate the federal estate tax and set the gift tax exemption at $5 million with a 35% top gift tax rate.

There is sure to be much discussion and the future of the federal estate tax related laws is unclear.  The only thing that is clear is that the current law is extremely conducive to the transfer of and protection of wealth.  Now is the best time to consult with a qualified estate planning attorney to take advantage of current law before it’s too late.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

As of November 17, 2011, legislation has been proposed that, if enacted, would change the federal estate tax related laws.  The proposed legislation is called of H.R. 3467, The Sensible Estate Tax Act of 2011.

In a nutshell, the proposed legislation would make the following changes:

• Federal Estate Tax and Gift Tax Exemption and Rates

The federal estate tax and gift tax are unified; they have one exemption that can be used during lifetime or at death.  The exemptions are the same and the tax rates are the same, regardless of whether assets would be transferred during lifetime or at death.

The federal estate tax (and gift tax) exemption, now $5 million in 2011, is indexed for inflation and is set to increase to $5.12 million on January 1, 2012.  The current tax rate is 35%.

The new law would reduce the federal estate tax exemption (and gift tax) to $1 million on January 1, 2012.   Then, beginning January 1, 2013, the exemption would be indexed for inflation (starting from the year 2000.)

The new law provides for the estate tax rate (and gift tax) to be increased to 55% on January 1, 2012.

• Portability of Federal Estate Tax Exemption

For 2011 and 2012, portability is in place.  Portability means that if certain conditions are met, that married couples do not need AB trust planning and don’t need to be concerned about how their assets are owned to qualify for a double exemption.

The new law would continue portability (which would otherwise end January 1, 2013.)

• State Credit for Federal Estate Taxes Paid

Currently, California (and other states) doesn’t have a “pick-up tax.”  A pick-up tax provides a state credit for federal estate taxes paid, allowing California to share in the federal estate tax revenues.

The new law would reinstate the pick-up tax.

Please continue reading at Part 2 of 2, Will there be Changes in the Federal Estate Tax Law??  In part two, we will explore how the proposed law would change valuation discounts, minority interest discounts, grantor annuity trusts, and generation skipping tax planning.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

A living will is an advanced medical directive; this means that you make a medical decision in advance.  You give or withhold informed consent for a particular potential future medical situation.  A living will is effective if your doctor has a copy and you are in an end-state medical condition such as an irreversible coma or persistent vegetative state.

The benefits of a living will are that you stay in control of your health care decisions in an end of life medical situation; you take a huge burden off the shoulders of your health care power of attorney agent; you don’t run up medical bills for medical procedures that won’t help; and, you prevent family discord by making the decision yourself.

To ensure that your living will is effective, have it drafted by a qualified estate planning attorney, tell your health care power of attorney agents that you have a living will, tell your other loved ones as wekk, and show them all where you keep the living will and other important documents.

In addition to the living will, you need a health care power of attorney which appoints an agent to make health care decisions for you if you are unable to make those decisions yourself.  Your agent steps into your shoes for medical decisions when you cannot provide informed consent.  Your doctor decides when you cannot give informed consent.

You also need a HIPAA release which may be included in your health care power of attorney or may be a separate document.  The HIPAA release is required by federal medical privacy laws and authorizes medical personnel to disclose your medical information to your health care agent.

In addition, consider an organ donation authorization so your death in not in vain.  You can vastly improve the lives of burn and trauma victims and you can save up to 8 lives by being an organ and tissue donor.

If you don’t have an up-to-date living will and other advanced medical directives, consult with a qualified estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

In 2011, the Wall Street Journal reported $32.9 billion in unclaimed funds.  You can use estate planning to ensure your money doesn’t get lost and join the other $32.9 billion.  Some of these funds represent people who forgot to roll over 401ks when they left a job; and, much of the funds were unclaimed when someone died.  If your loved ones don’t know about your life insurance policies, bank accounts, and investment accounts, they can’t claim them when you die.  Estate planning and organization is the key to ensuring that your hard earned assets aren’t lost.  By the way, you can check for unclaimed assets at www.MissingMoney.com

When you engage in the estate planning process, you will be forced to make a list of your assets and consider how your assets are owned.  Proper asset ownership is an important key to an estate plan that works.

If you have a revocable living trust as part of your estate plan, you must fund your trust.  This means you transfer the title of your assets into the name of your trust and that you change the beneficiary designation on life insurance, annuities, and retirement plans to the name of your trust.

If you have a will-based estate plan, remember that your will only controls asses in your individual name.  If you die with assets in joint names with a spouse or someone else, your will won’t control these assets.

To ensure all of your assets are claimed at your death and your estate plan works, show your loved ones where you keep all of your estate planning documents, financial papers, certificates, and important papers.  Keep them together in a file and update your file quarterly when your new investment statements are released.

In addition, be sure to include a list of all online accounts (utility, phone, bank, investment, retirement, 529 plans, social media, email, blog, website, PayPal, EBay, photo sharing, and the like.)  Add your username, password, and PIN for each account.  Update frequently when you add another account or change a password.

Stay organized and keep your estate plan up-to-date so your loved ones find all of your assets.  As always, consult with a qualified estate planning attorney with questions or concerns.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

A move to a new state definitely calls for a review of your estate plan by a qualified estate planning attorney.  Most of your estate planning documents will be legally valid in your new state; however, they may not be honored.  In addition, other documents such as domestic partnership contracts may not be honored, if your new state does not recognize gay marriage, civil unions, and domestic partnerships.

What do you mean legally valid, but not honored?

State laws typically provide that estate planning documents valid in the state of execution, which do not violate any law of the new state, remain legally valid.  This is called “reciprocity.”

As frustrating as it may sound, not all legally valid documents are honored by medical professionals and financial institutions for fear of honoring an invalid document and being held liable.  Out of state forms will look strange and draw questions.  This is especially true of both medical and financial power of attorney documents.

Out of State Documents Cause Major Inconvenience

If your out-of-state estate planning documents are not honored, this creates a hassle for your loved ones.  They will need to hire an attorney and, perhaps, sue to enforce the documents.  Or, they’ll have to go through a court guardianship or conservatorship process.

In addition, if you die with an out-of-state will, your loved ones will need to hire two probate attorneys; one in your new state and one in your old state to interpret the state law your will is based upon.

Update When You Move to a New State

The best advice is to update your estate planning documents when you move to a new state.  Updating gives you the opportunity to develop a relationship with a local estate planning attorney so you and your loved ones know where to turn for help, when needed.  It also best ensures that legal fees and hassle will be kept to a minimum.  Perhaps, best of all, you’ll have peace of mind, knowing that your estate plan will work.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.