Monday, December 13, 2010

Proposed Estate Tax for 2011- Maybe

With plenty of time left in 2010 (insert sarcasm tone), Congress is moving towards modifying the federal estate tax system. Here is a quick summary of where we are currently, where will be if they don't pass anything, and what the current bill ("Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010") would provide. (Disclaimer: this is the quick and dirty summary for discussions at holiday parties and should not be relied upon as an extensive analysis.)
  • What we had in 2009 - $3.5 million exemption per person, 45% tax rate
  • What we had in 2010 - No federal estate tax. "Carryover basis" on inherited assets, with limits.
  • What we will have in 2011 with no change - Federal estate tax for estates greater than $1 million, with a rate of up to 55%.
  • Under the current proposed bill - $5 million exemption, 35% tax rate above that.
One of the more interesting items in the proposed bill includes a "portability" provision. Historically, in order for both spouses to maximize their total available exemption amount, assets had to be titled in a certain manner and different drafting provisions were necessary. ("Use it or lose it" was the message.) The portability provision would provide that if a spouse didn't use their exemption, their spouse could use it. Thus, it could be possible for a surviving spouse to actually have a $10 million exemption available at death and pass $10 million tax free to their beneficiaries.

This portability will be interesting as to how it gets applied. It will change the way attorneys plan for their clients. Assuming this bill passes, of course.

Sunday, September 19, 2010

Farm Estate Planning and Trust Protector

I recently attended the Farm Estate and Business Planning Seminar in Ames, Iowa, which is put on by the Iowa State University's Center for Agricultural Law and Taxation with Roger McEowen as the Director. Each year I'm impressed with the materials and speakers presented.

One of the speakers this year, Wayne Reames, discussed utilizing trust protectors. I have used trust protectors in the past for substantially-sized estates, but Mr. Reames further highlighted some of the benefits in even modest estates. A common problem is who is to serve as trustee. A trustee is responsible for investing and managing trust assets, which can be substantial, preparation and filing tax returns, preparing and providing accounting reports and dealing with distribution requests from beneficiaries. This can be a daunting task for many people.

Rather than having friends or family members serve as trustee, and potentially be in over their head, naming a bank as a trustee may be a better solution. Then, as a way to keep the family involved, name a trusted family member as a "trust protector" and give them the ability to remove and replace a trustee. They don't have to deal with requests for funds, tax returns, investment decisions, or accounting, but yet have plenty of authority to make sure the trust is managed properly with the ability to pull the "hook".

Again, just another planning tool for your estate plan.

Monday, September 06, 2010

Iowa Guardianship Proceedings in the News

Another guardianship proceeding in Iowa is getting some notoriety lately after another one recently was in the news. The Des Moines Register has been following a story involving a 16 year old mom's battle to get her 1 year old daughter back from the 16 year old's family members. Unfortunately, the story highlights some legitimate concerns over the guardianship process in general:

(1) Publicity - This is open record for the whole world to watch your life on stage. Like all court proceedings, they are open proceedings for the public or the media. The Des Moines Register brought in their legal counsel to prevent/"urge" Associate Probate Judge Klotz from closing the proceedings and requests to keep the reporter out of the courtroom.

(2) Delay - The time involved in getting the facts before the court and for the court to review the evidence can take months. The challenge is do you take the child away from the parent for safety concerns or do you return the child to the parent when there is allegedly some danger involved. Tough call.

Guardianship proceedings are continuing to grow in numbers and crowd the court docket. Guardianships can cover individuals from 1 day old infants to 109 year old individuals and everything in between.

Monday, July 26, 2010

Special Needs Trust in Iowa for Disabled Children

Parents, grandparents and others wanting to benefit family members with special needs should act carefully in providing for lifetime gifts or testamentary gifts.

The primary options when it comes to planning for gifts with special needs children in Iowa include:

  1. Gift to Disabled child. The problem with a gift is the impact it may have on eligibility for public assistance benefits. It may even disqualify the child from getting those benefits until the funds from the gift are completely exhausted, at which time the child will need to reapply for benefits.
  2. Disinherit the disabled child. To avoid the issue of disqualification from public assistance, a simple route is to disinherit the special needs child altogether. There is no legal requirement that one must provide for a child under their estate plan.
  3. Distribute to a Another Person for Disabled Child's Benefit. Another option is to distribute the funds to someone (a sibling for example) for that person to manage and distribute the funds for the benefit of the special needs child. However, this can be risky as it the assets are exposed to the creditors of that person, ex-spouses, bankruptcy, and possibly gift taxes.
  4. Special Needs Trust. Distribution of the funds to a properly drafted supplemental needs trust can avoid all of issues addressed while providing for a little extra benefit and resources for the special needs child. Extreme care is necessary in preparing such a trust.

No matter the plan, you should seek the advice of experienced counsel in making the arrangements for a special needs child.

Wednesday, July 14, 2010

Iowa Estate Plan Blog is Still Alive!

Despite a noticeable absence from this blog, Mr. "Life and Death Lawyer" is back at it. I have a posting on the Iowa Law Blog about a recent Iowa Court of Appeals case dealing with trustee removal and trustee fees.

Friday, April 16, 2010


Looking forward to beautiful weather tomorrow for a 5k run. A local 501(c)(3) charitable organization 5kfor5charities that I have had the pleasure of working with is sponsoring their inaugural 5k charity run at the Blank Park Zoo tomorrow, April 17th.

Thursday, April 15, 2010

Another Reminder on Updating Your Estate Plan in 2010 (and not on your own)

The North Carolina Estate Planning Blog has a good reminder post that summarizes the state of current affairs about (1) the importance of updating your estate plan, (2) the coming estate tax changes, and (3) the limitations of D-I-Y wills/trusts, as I have previously commented on.

Tuesday, March 02, 2010

Economy Affecting Estate Planning - Only 35% of Americans Have a Will

A new survey by the Harris Poll for recently reported that even fewer Americans have estate plans in place. According to the poll, only 35% of Americans have a will in place. This is down from 45% only 2 years earlier.

Apparently, individuals are focusing on their short-term needs as the economy continues to lag and job security continues to be an issue. While keeping food on the table is critical, putting your estate plan matters in place is also important. With young children, second marriages, children from prior marriages and beneficiaries with creditor problems, the lack of an estate plan can create significant emotional and financial hardship on a family.

When looking for an attorney to handle your estate planning when cost is an issue, look at attorneys that offer flexible payments or those that allow you to pay by credit card (not that increasing your credit card balance is good, but it does offer some ability to pay over time.) Hint: contact me.

Tuesday, February 09, 2010

Looking to Disinherit Your Spouse? Now an Iowa Court Tells You How

I have a post about an interesting ruling by an Iowa district court on disinheriting your spouse on the Iowa Law Blog.

Iowa Legislature Working on Posthumously Conceived Children

As a result of the struggle a family endured in seeking Social Security benefits for a child conceived through in vitro fertilization two years after her biological father died of leukemia, the current Iowa legislature is looking at a bill to provide some legal rights for children conceived after a parent dies. The current bill is taking into consideration some of the issues raised by the Iowa State Bar Association, such as obtaining necessary consent from the contributing parent as well as a limited time period. Jason Clayworth of the Des Moines Register had a recent article as he continues to follow the story.

Tuesday, January 12, 2010

"Trust Mill" Fines of $6.4 million in Ohio

The Ohio Supreme Court fined two California-based companies multi-million dollar fines for the unauthorized practice of law. The operation apparently involved telemarketers and salespeople persuading elderly residents of purchasing a living trust in order to avoid exaggerated fees and costs at their death. Apparently, over 3,000 Ohio residents were convinced to purchase the products, which were from non-attorneys, although "approved" by an Ohio attorney, despite not speaking with the client. The Ohio Supreme Court was not thrilled with the performance of legal services by non-attorneys and handed down the hefty fines.

Living Trusts (or revocable trusts or inter vivos trusts - all the same) can be an effective estate planning tool. The determination of whether it is an appropriate plan for you should be carefully considered after consultation with an attorney (not a salesman or telemarketer) who is familiar with estate planning. After the trust is established, it is also important that it be funded, otherwise many of the key benefits are lost.