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Estate Planning Using a Will: Pros and Cons

Posted on: March 24, 2017 at 4:15 am, in

An Estate Plan is a plan, clever enough for your unanticipated life events and dull enough to think your heirs merited what you left them. Most people perceive a “will” as their estate plan in its entirety. Many also believe that a properly executed will naming heirs to your assets is enough to overcome the challenges deserving of who get’s what after your death in satisfaction of what they think you owe them. Not to exclude the IRS and other agencies.
After the widespread litigation and underemployed lawyers, a will in its simplest description, is nothing more than a wish list of their dreams because it’s easier than self-deceit. A will can be contested, must be probated (made public) so that the wish list can be challenged by heirs, and all potential real and unexpected creditors. The cost, time delays, and subsequent clearance of all real and not so-real challenges to the probate process. A will, properly drafted or not, is worth the flush of toilet paper, says Rocco Beatrice, Managing Director for Estate Street Partners, Boston.
— Your beliefs may come into play when determining if you were in your “right mind” when you drafted your will. —
In (RE Honigman: Court of Appeals of New York, 1960, 8 N.Y.2d 244, 168 N.E.2d 676, 203 N.Y.S.2d 859): A husband cut his wife out of his will because he believed that she was cheating. After he died, the wife argued that he was suffering from insane delusions, but the court did not believe her argument. She then appealed the verdict and had the will overturned to collect the assets.
— Even when the court grants your wishes as you wrote them, your family may spend a lot of time, money and emotion sorting things out —
Gilmer v. Brown: A woman who was advancing in age and who had been financially taken advantage of decided to obtain a guardian to safeguard her money. After a guardianship had been set up for her, she executed a will. At her death, the family challenged the will saying that she did not have the capacity to enter into a will because she had a guardian. The court case continued for years tying up the estate. Finally the appellate court ruled that the standards for capacity are not the same as the standards for guardianship and the estate was finally passed through the will.
— Maybe just being elderly can bring your wishes into question —
In Re Estate of Marsh: An elderly woman with alzheimer’s disease wanted to some of her assets to a person who had helped her buy a condo. Her family began to fight over this and she decided to write a second will leaving the assets to her son and daughter-in-law and none to her daughter or husband. She wrote that she hoped that this would stop the fighting. At her death, her husband probated the will. The daughter and son contested the will saying that she was incompetent to sign a will and/or she had been unduly influenced by her son. The mere fact that the woman had alzheimer’s disease and that her son had voiced his wishes to receive assets from the sale of the condo was enough for the appellate court to sent the case back down to the lower court to be retried.

A good estate plan, must:

  1. Eliminate potential frivolous lawsuits from known present, past, and unknown future potential creditors, including IRS and other government, or quasi-government agencies i.e. Medicaid.
  2. It must consider the income tax consequences up to and after the death of the individual’s accumulated wealth. It must be able to reduce, if not eliminate, the gift tax consequences, the income tax consequences, the estate tax consequences, future generation income and ad-valorem taxes, and must be flexible enough to accommodate future legislated assaults.
  3. It must consider your family dynamics of present and future generations. Age of the individuals owning the assets, minor children, future generations, provision for incentives for how, when, and circumstances of distributions. What if you have a rocky marriage, second marriage, minor children requiring guardianship, ungrateful or problem children, children of a prior marriage, rocky marriages of your adult children, financial capability of your children, legal entity ownership of your assets, higher than normal risk of owned businesses, complicated financial arrangements, future income streams, your personal needs and desires.
  4. It must consider government present legislation and compliance, future legislative proposals, regulations, taxation, and other general assaults on your wealth.
You get what you pay for. A will is cheaper than a full blown estate plan requiring professional due care addressing past, present, and future considerations. A will can cost you anywhere from $250 to $2,000 but changes nothing, because title to your assets remains with the most exposed individual, you. Anything titled in your name, or associated, or remotely connected to your name, is subject to a frivolous lawsuit or worse, judicial or legislative confiscation i.e. Medicaid, taxation, or regulation. That’s why I state, a will is not worth the paper it’s written on.

A good estate plan will:

  1. Reposition your ownership / legal title to your assets.
  2. Eliminate probate.
  3. Eliminate or reduce frivolous lawsuits.
  4. Eliminate estate taxes.
  5. Eliminate the Medicaid spend-down provisions and related state recovery.
  6. Reduce your current and anticipated future income tax liability.
  7. Take advantage of current reportable gift-tax exclusions ($5,250,000 for 2013) and anticipate compliance or the elimination of future law changes.
  8. Dictate from your grave, the disposition and use of your assets.
  9. Provide incentives for your children or other heirs.
  10. Be flexible to make changes as they become necessary to be in compliance with new laws and regulations.
  11. Be in compliance for the next 100 years.
  12. Provide a back-up exit plan.
The largest benefit of a will is it is an efficient way to choose a legal guardian for a minor child, therefore those with minor child should include a will as a part of their estate planning. Hire a professional to do your estate planning. One that has the intellect to distinguish a robotic, one size fits all, copy and paste, … to experience gained by gray haired experience and creativity driven by hunger, love, pain, and fear.
A comprehensive estate plan is imagination meeting reality.
Protect your assets for yourself and your children and beneficiaries and avoid tax dollars. Assets can be protected from frivolous lawsuits while eliminating your estate taxes and probate, and also ensuring superior Medicaid asset protection for both parents and children with our Premium UltraTrust Irrevocable Trust. Call today at (888) 938-5872 for a no-cost, no obligatioin consultation and to learn more.
Rocco Beatrice, CPA, MST, MBA, CWPP, CAPP, MMB – Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an “AA” asset protection, Trust, and estate planning expert.

Estate Planning End-of-Year Logjam: Estate Planners Brace for the Onslaught

Posted on: March 24, 2017 at 4:08 am, in

Estate Planning End-of-Year Logjam: Estate Planners Brace for the Onslaught

If estate planning or asset protection crossed your mind the last few years, now is time to do something. A few hours could save your family millions as the marginal estate taxes and gift taxes are dramatically increasing in 2013.

“If you want to take advantage of this year’s gift tax reduction, I suggest you run, not walk to a competent estate planner,” warns Rocco Beatrice, Executive Manager of Estate Street Partners. The $10,240,000 gift tax exemption for couples ($5,120,000 for a single person) in 2012 is unprecedented. How unprecedented? At 12:01am on January 1st, this same exemption drops to $2,000,000 ($1,000,000 for a single person). “It seems that the smart business person is also a procrastinator when it comes to estate planning. All year I have talked to people who told me they need an estate plan but with the year ending, they are just coming through the door now,” proclaims Mr. Beatrice.
The people that are streaming through the doors are anyone with more than $1,000,000 in assets. In 2012 a couple can not only give more, but if they go over, the tax rate is only 35%. In 2013 any gift over $1,000,000 will incur a 55% tax rate. “With a house, investments and savings, people who don’t consider themselves wealthy go over that magic two-million mark. Without gifting their money this year, their estate could be taxed 55%, and that is not a small number. These are the forward-thinking people making calls and appointments,” explains Mr. Beatrice.
Estate planners offer many different strategies, but arguably the number one strategy to take advantage of the current large gift tax exemption is an irrevocable trust. These trusts are sophisticated instruments with many nuances that are written specifically for each client. They allow the grantor (person funding the trust) the ability to gift assets under the tax exemption for this year, but the assets are held for the beneficiaries, sometimes for many generations. Because of their sophistication, they take time to draft, time that clients and estate planners are running out of.
“There are only so many trusts that can be drafted before the end of the year. The deadline is looming and the number of hours in a day is finite,” opines Mr. Beatrice, “At some point, I think I am going to have to turn people away.” Some experts believe that when competent and meticulous estate planners begin turning people away, they will go to their local general practice lawyer or even a lawyer practicing in an unrelated area. “A trust drafted the wrong way may not accomplish what you want it to do,” warns Mr. Beatrice. “An extremely poorly drafted trust can cost you more money, time and effort than it saves. People need to be careful who it is that is drafting their trust.”
An irrevocable trust can accomplish many different goals all at the same time. Funded sooner rather than later, it allows a person to qualify for Medicaid when the time comes for nursing home care. A trust can protect assets in the event of a lawsuit or bankruptcy. It also provides a roadmap for how a person would like their funds used after they are gone. A trust can even provide for the care of a beloved pet. “People calling up trying to take advantage of the gift tax exemption are discovering all of the options open to them. This is great for them, but these requests add to the time it takes to draft them,” explains Mr. Beatrice.
So as 2012 comes to a close, those in the know are lining up to make sure that they preserve as much of their estate as they can. A metaphoric logjam at the doors of estate planning offices may prevent them from savings thousand to millions of dollars or force them into the offices of lawyers with little-to-no experience. “I don’t think people even realize what they are worth. If you add up your assets and the result is over $1,000,000 your best option is to make estate planning calls now. Even if you have a new business set to grow, you can put it in a trust now and let it grow estate and gift tax free. You won’t have to worry about it later,” urges Mr. Beatrice, “2012 is a great year to estate plan, but its coming to an end quickly.”

2010 Tax Laws: Estate Taxes, GRAT, Life Insurance, Trusts

Posted on: March 24, 2017 at 4:07 am, in

Estate Street Partners offers advanced financial advice to ensure maximum asset protection from lawsuits, divorce and Medicaid spend down

Click the following link to read Part 1 of our article 2010 Tax Act: Estate Planning & Asset Protection. We discuss in Part 1: How does the 2010 tax laws by Obama affect estate planning for 2010, 2011, 2012?

Start Your Estate Planning

Many clients who have learned that the Tax Act will only last two years will wait until the end of 2012 to plan. This is not a good idea. Time and economic fluctuations concern the estate-tax laws and have an effect on the ability to meet estate planning objectives. Family loans, GRATs (Grantor Retained Annuity Trusts) and charitable lead annuity trusts (CLATS) are affected by interest rates. Since December the interest rates have risen dramatically and long-term interest rates were 3.53%. For the same types of transactions in January, the interest rates were already at 3.88%. Additional spikes over time will erode the advantages that planning strategies could obtain. When estate planning, time is of the critical. It is suggested that planners urge clients to act as soon as possible to avoid the implications of higher interest rates in the future.

How the new 2010 Obama Tax Laws Affects Estate Planning Strategies

Clients are questioning how this new tax law will change my estate planning steps. There are a few things that planners should tell their clients in this regard:

GRATs (Grantor Retained Annuity Trusts)

GRATs (Grantor Retained Annuity Trusts) will remain a good, potential planning strategy for those with a high net worth. Many financial planners believed that GRATs would be eliminated or restricted, but they were not axed in the new tax law. However, the restriction or elimination of the GRATs (Grantor Retained Annuity Trusts) will in effect after December 2012. High net worth clients who would benefit from GRATs should plan on using them while they can. Financial advisors must also help clients evaluate GRATs and understand what the advantages and disadvantages are of using GRATs in comparison to gifts of installment sales to grantor trusts when considering the five million dollar tax exclusion. If the assets that are inside the GRAT do not surpass the federal interest rate or if the taxpayer should decease while the annuity term is in effect, this estate planning strategy will not be fruitful. With an absolute gift, actual growth will lie outside of the estate and an installment sale to grantor trust will generally surpass a GRAT (Grantor Retained Annuity Trust) since the interest rates that are used are lower. In this case, the estate planning strategy can still be beneficial even if the client were to decease before the load of the installment sale is fully paid back and, opposite to the effects of a GRAT, the GST (generation skipping transfer) can be . Unlike a GRAT, the taxpayer’s exemption can be beneficially exploited.

Life Insurance

There are some people who will deduce that a $5 million exclusion will allow them to annul their life insurance that is used to pay for the estate-tax encumbrance. People are advised not to make these deductions. The estate-tax rules are still there and may return in 2013. Financial advsiors should cautiously reevaluate life insurance coverage and take a look at forecasts in order to analyze the actual need for life insurance and to evaluate whether trusts that were originally grantor trusts should be changed to non-grantor. If the client has a life insurance policy that is not in trust, the $5 million exclusion could change insurance planning. Financing or split-dollar insurance could be undone by making a gift to an insurance trust. This trust would not be taxed on account of the new exemption.


For many years, planners have recommended the use of bypass and marital deduction trusts when planning. Many clients should have wills that will include these types of trusts. Planners need to take the time to explain to the client why the new provisions of the law are actually traps for unwary taxpayers. They should not be relied upon and traditional bypass trust planning remains important.
The 2010 Tax Act has changed estate planning completely, but these changes will only last for two years. Some clients who take advantage of this situation could benefit in many ways. Advisors should help all clients understand the changes that have been made and the opportunities that are now available as a result.

2010 Tax Act: Estate Planning & Asset Protection

Posted on: March 24, 2017 at 4:06 am, in

The 2010 tax laws will affect your estate planning strategies.

In 2010, President Obama signed into effect the 2010 Tax Act, which has been the most radical change made to the estate-tax system in many years. While the changes are generally positive, much of the advice clients have read or heard from media sources have not been entirely true. In order to preserve hard-earned wealth, estate planning has been an essential part of financial planning. Educating clients on these new options that are available as a result of the new law is important.

2010 Tax Act Changes by Obama

Through 2012, the estate and generation-skipping transfer and gift exemption amounts will stay consistent. These amounts will stay at $5 million and at $10 million with portability. Portability is the right that is given to a surviving spouse to use unused estate-tax exclusions of the deceased spouse. The gift and estate tax was originally set at 55% and that has been reduced to 35%, taking effect sometime in 2011. All clients need to be aware that these changes in the percentage are only temporary for 2 years. They will no longer be in effect after 2012. In 2013 the exemption will be $1 million and 55%. All advisors should be helping their clients to plan for the estate-tax ups and downs they will experience in the future. Without taking advantage of the changes, the result could have a huge effect on estate planning in the future. All well-to-do clients should evaluate the current risk of not taking advantage of the huge exclusion while it is available. If wealthy clients make gifts now, they can remove all future appreciation from an estate. This will allow for minimal tax damages in years to come.

Update Estate Planning Goals

People are urged to revise and review all of their estate plans and documents due to this new legislation. People should not assume that any of their existing papers will meet estate planning goals because many of them will not. The consequences that have resulted from the 2010 Tax Act are very far-reaching and may come as a surprise to many. The documents from recently signed wills, old irrevocable trusts, powers of attorney, insurance coverage, prenuptial agreements and business agreements must all be reviewed and revised if necessary. For the majority of taxpayers, corrective planning steps will be essential. Any person who sits idly by may soon find that they will dearly for this approach instead.
The next two years will be very important in regards to estate planning and wealth transfer. For taxpayers who are very wealthy (a high net worth), an intersection of excellent planning attributes, including discounts in valuation, low interest rates, the granting of a $5 million gift exemption and the retention of favorable rules for GRAT’s (Grantor Retained Annuity Trusts) may be available for a limited time. The years 2011 and 2012 will be the best time for professionals who are concerned about asset protection in the attempt to safeguard their wealth. Jonathan Blattmachr, one of the directors for Eagle River Associates and Alaska Trust Company states that the new tax legislation has “produced the ‘perfect storm’ for asset protection an estate planning.” The new but temporary $5 million gift exemption will provide a wonderful opportunity for all clients that desire asset protection to shift their wealth into domestic asset protection trusts and this can be done without worrying about a confiscatory gift tax.
The question is whether clients should make gifts in 2011 and try to avoid expensive estate planning down the road. Even though making large gifts is fairly simple, this plan could be inadequate. Financial and estate planners should help their clients to evaluate whether they will benefit from making large gifts now.
Click the following link to read Part 2 of our article 2010 Tax Laws: Estate Taxes, GRAT, Life Insurance, Trusts. We discuss in Part 2: How will the 2010 tax laws by Obama will affect estate planning strategies?