Tag: estate

How Could SLATs Be The Best Planning Tool For You?

Do you and your spouse have a Florida estate plan?  Are you wondering if a Spousal Lifetime Access Trust, commonly referred to as a “SLAT,” is an estate planning tool that you should add to your estate plan? Are you aware that SLATs will allow you to remove up to $11.6 million from your estate and place it in an irrevocable trust for your spouse? Your spouse will then be able to use and access these funds during his or her lifetime.  You need to know that one of the primary benefits of a SLAT is that it allows your spouse to use distributions from the irrevocable trust while you are both living while simultaneously avoiding the estate tax and isolating those assets from creditors.

With a SLAT, however, there are a few precautions you should consider taking in order to obtain the estate planning and asset protection benefits of a SLAT. To begin, you should be sure that there is no express or implied agreement that the party gifting the assets in the trust will get those assets back. It should be clear that the assets in the trust will not be returned to the grantor or the trust will not be viewed as “irrevocable.” Next, the SLAT should not allow the funds in the trust to be used to pay the creditors of the grantor. Be mindful that if the trust allows for such payments, it may not qualify as a SLAT and there may be resulting tax consequences.  Lastly, even though the beneficiary of SLATs cannot agree to return the funds to the grantor, the beneficiary can distribute the funds to their children, which will allow the assets to remain in the family if the beneficiary spouse should pass away while the trust remains funded.

We would highly recommend that you see your Florida estate planning attorney to find out if you and your family would benefit from a SLAT. Your Florida estate planning attorney can review your finances and your estate planning goals to help make recommendations regarding the best estate planning vehicles, including SLATs, to preserve your assets for your family and minimize any adverse tax consequences.

Elder and Estate Planning Attorneys, PA, is a law office small enough to provide personal service but large enough to provide service in Jupiter, as well as Palm Beach, Martin, St. Lucie, and Indian River Counties in Florida. Our law firm will guide you through legal challenges involving elder law, estate planning, trusts, veterans benefits, real estate, and more. We encourage you to contact us and schedule a meeting with our attorneys.

Common Myths about Estate Planning

No matter what your age, Estate Planning is essential to distributing assets according to your wishes and not that of the government’s laws and statutes. Estate Planning is very complicated where myths abound and they can be harmful to you and your loved ones. Below is a list of common myths about estate planning.

 

If I have a valid and thorough Last Will and Testament, probate will not be required, and my assets can be transferred immediately to the beneficiaries of the Will. In fact, having a Will forces probate in most circumstances and the assets may not be transferred to the heirs for months or years. Most importantly, depending how title is held, real estate must be transferred through a probate and generally is not a good idea to add your children to your deed unless they live with you, are adults and you intend them to inherit the property to the exclusion of others.

 

Probate is a proceeding involving the court which forces the transfer of title from the decedent’s name to your living beneficiaries. Probate is filed in county in the state of your legal residence as well as any state where you own real property. The length of time to complete probate varies from state to state, but can take six months to two years, on average. At a time of emotional trauma from the death, probate adds confusion and frustration to the heirs and is public record which means available for review by anyone, not just your heirs.

 

I do not need a Last Will and Testament if I have a small estate. Many people also believe that if there is no Will, all the decedent’s assets will be distributed to the surviving spouse. In Florida, if you die without a will, your spouse gets the first $60,000 and the statutes dictate where the rest of your assets go and who will administer your estate. That means Florida Statutes may not distribute your assets to the people you want to have them.

 

If my assets do not exceed $600,000, I will avoid probate. The law used to be your asset was taxed 55% for any assets exceeding $600,000.00 for Federal estate tax purposes. This is old law. However, the law was amended late last year changed the limits again. First, as the law stands now, if you die in 2010, there is no Federal estate tax but there is a modified step up in basis of assets inherited. That is how the several billionaires who have died this year have transferred assets without Federal estate taxes but the heirs inherit assets without the benefit of the step in basis (which used to be the value of the asset at the time of death). Therefore selling inherited assets that have increased in value since purchase will now be subject to a 15% capital gains tax in 2010 and 20% (or more) if sold after 2010. But the law which was passed earlier this century sunsets (ends) on December 31, 2010 which means the law is set to change in 2011. For those persons dying on or after January 1, 2011 there is no Federal inheritance tax for the first million dollars of assets but for each $1 above 1 million, heirs are taxed at the 55% tax rate. The unlimited marital deduction will still exist so married couples can transfer assets between spouses without Federal estate tax but the assets are taxed when the last spouse dies. If you die in the year 2010 under the current law, you can transfer an unlimited amount of assets to your heirs (does not have to be spouse) and the transfer is not subject to estate tax. However if you die after December 31, 2010, your heirs will taxed at the 55% tax rate.

 

Most importantly is to understand what assets are included in your estate for Federal estate tax purposes and what is transferred without probate. Generally, assets owned even held jointly with another person are considered in the taxable estate even though the assets may pass by operation of law (without further legal action or probate). In addition, you must consider and plan for the way in which taxes are paid if due. If estate taxes are due, typically your heirs must liquidate the very assets they are inheriting to pay the estate taxes so you are not transferring the assets you want them to inherit. No matter where you stand economically, you need to plan your estate to take advantage of estate planning vehicles to limit the exposure to estate inheritance tax and transfer the assets to whom you want to transfer. We should recognize all of us will die someday; we do not know what day that will be. For now, because the law will revert back to pre 2001 tax levels and rates, if you have over $1,000,000 in assets, your estate will taxed unless proper planning is in place.

 

A Will covers all my assets. Wills do not cover assets held as joint tenants with right of survivorship, retirement plans, annuities, life insurance, and other financial accounts with payable on death or transfer on death designations and named beneficiaries.

 

I can do my own estate plan. Estate planning is more than just creating documents. It requires understanding the whole picture and how legal documents work in concert with the assets at the time they are needed and what form documents do not contain. And you should not allow a minor to inherit assets outright because that may require a court supervised guardianship.

 

Only the wealthy need to worry about estate taxes. In fact, in Florida, any estate exceeding $1 million is subject to estate taxes as of January 1, 2011.

 

I do not need estate planning because I hold all my assets jointly with another. In fact, this is one of the worst ways to plan you estate. The asset may be exposed to estate and gift taxes; it does not avoid probate, just delays it until the last owner’s death; it may result in estate, gift and capital gains taxes; it is subject to the creditors of all owners except a home if the other owner claims it as their homestead; and it will result in the transfer of the property to the joint owner when one owner dies, even if that was not intention.

 

You cannot afford to rely on myths when it comes to your estate. Talk to a lawyer who practices in estate planning and knows how the laws of inheritance work and how to avoid the unintended consequences. Investigate the law and how it affects your facts, plan carefully and execute a plan to provide you with peace of mind and security for your loved ones.