Estate Planning

Can the Name of Your Trust Put You at Risk?

One of my clients approached me the other day with a concern that I felt deserved a thoughtful answer. This client had recently come across an article written by an attorney who claimed that naming your Revocable Living Trust (a very common estate planning tool) with your own family name could put your family’s privacy in grave danger. The article’s author claimed that such a practice “completely destroys the entire privacy prong of trust benefits.” [emphasis mine]. This statement is misleading for at least two reasons:

NY Times: Don't Let the Tax Tail Wag the Estate Planning Dog

A recent New York Times article discussing the uncertainty of the Estate Tax environment provides some important reminders about opportunities that currently exist for saving on taxes.  Perhaps more importantly, however, the last few paragraphs of the article reminds us that sometimes, in an effort to "stick it to the IRS," we can sometimes get carried away and allow the tax tail to wag the estate planning dog.

Mid-year Update on Current Estate Tax MESS

As you may have heard, the federal estate tax rules changed radically in 2010 and could change radically again in 2011 unless Congress passes new legislation. This article is intended to advise you of what has happened and encourage you to reevaluate your estate plan as soon as possible.

2001 Tax Act. In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) which provided for significant phased-in increases in the federal estate, gift and generation skipping tax (GST) exemptions and lower tax rates. EGTRRA provisions included:

• In 2009, the estate and GST exemptions increased to $3.5 million per decedent, with a flat 45% estate and GST tax rate on any excess. The gift tax exemption was $1.0 million, with tax rates from 41% to 45%.

• In 2010, the federal estate and GST taxes were repealed for one year. The gift tax $1.0 million exemption remained, with a lower flat tax rate of 35%. Thus, you had to die or pay gift tax to get the benefit of the change. The step up in basis rules (which gave a “fresh-start” fair market basis for most assets of a decedent) was replaced with an adjusted carry-over basis. These new basis rules permit a step up in basis of up to $1.3 million, plus an additional $3.0 million for certain spousal transfers at death.

• On January 1, 2011, EGTRRA will be automatically repealed, resulting in an odd situation:

Planning for the Family Cabin

Many Utah families have fond memories of spending time together at a "family cabin." Whether it's up at Sundance, Bear Lake, Heber, Park City, or any other number of beautiful locations throughout the country, a family cabin often is a repository for a wealth of happy memories. Because of these frequently strong sentimental attachments to vacation homes, those who own them often want to ensure that the cabin stays within the family and will continue to be used over generations to keep family members close to one another. However, harmonious use of such properties can often go quickly awry without proper "cottage planning."

What is "cottage planning?" First and foremost, it is recognizing that a family cabin is a much different asset than a typical asset passed on through a traditional trust-based estate plan. Once you recognize that, then cottage planning can focus on designing and implementing a plan for the successful transition of a cherished family vacation property to future generations. If done properly, you can greatly increase the chances that the family cabin will stay within the family and be used for its intended purpose - to maintain and strengthen family relationships.

Unfortunately, many family cabin owners never think about the numerous pitfalls that lurk in the shadows when it comes to passing on the family cabin.

Gary Coleman: Utah’s Own Celebrity Estate Battle

Blog Post by:  Melissa C. Platt, Esq.

Utah has turned Hollywood as the latest celebrity estate battle is playing out right here in Utah County. Actor Gary Coleman, child star of the smash 1970’s television sitcom, “Diff’rent Strokes,” died in Provo late last month after suffering a brain hemorrhage. Best known for asking, “Whatchu talkin’ bout, Willis?”, Coleman moved to Utah and met his future wife, Shannon Price, during filming for the 2006 comedy, Church Ball. Coleman and Price married in 2007 and then divorced in 2008, although the couple remained close and continued to live together in Coleman’s Santaquin home until Coleman’s death.

In fact, it was Price who called 911 after Coleman fell in his home and hit his head. In the call, she repeatedly refers to Coleman as her “husband.” And it was Price who ordered that Coleman be taken off life support.

How Much for a Simple Will?

Blog Post by:  Melissa Christensen Platt, Esq.

This is by far the most frequently asked question we get, and I cringe every time I hear it (or variations of it) because I know the answer will be unsatisfactory to the person who has just asked the question and to me as well.

The biggest problem with this question is that it is impossible to answer directly. Why can’t a respectable estate planning attorney just quote you a fee right off the bat? Because estate planning is not “one size fits all” or even “one size fits most,” so estate planning fees can’t be one size fits all either. The question assumes that a will (or a trust) is right for everyone.

It’s kind of like walking onto a car dealer’s lot and asking, “How much for a car?” The answer will depend on whether you want an SUV, truck, van, or sedan, whether you want to buy used or new or lease, whether you want all the options or a stripped down model, and so on.

The Underworld Froze Over: Estate Tax Repeal is Here!

Honestly, I don't think anyone really saw this coming. Even the nerdiest of the Tax Law and Accounting nerds didn't think that Congress would actually allow the Estate Tax to be repealed. But Congress has. It's gone!

The Problem

First, the good news: If you (1) have a large estate (over $3.5 M), (2) you live in Utah (where we have no state inheritance taxes), and (3) you die in 2010 and before Congress changes the law, then all of your estate will pass to your heirs/beneficiaries free of Estate and Generation Skipping Transfer Taxes (GSTT), even without planning. Hooray!

Now the bad news: If your estate consists of a significant amount of property that has appreciated above what you originally paid for it

Are Bill Gates & Warren Buffett Walking Dead Men?

Many of my clients have heard me quip about how Bill Gates and Warren Buffett should be worried beginning New Year’s Day, 2010 because of the large target that Congress has placed squarely upon their backs. Now, to be honest, there is most likely no actual, physical threat to their lives because they have probably done appropriate estate planning. But this quip helps me to illustrate a point about Estate Taxes. On New Year’s Day 2010 – unless something happens within the next few weeks over in Washington D.C. – the Estate Tax or “Death Tax” will go away in a puff of smoke. In other words, as the laws currently stand, any one individual who dies in 2010 owning over $3.5 million worth of property will not have to pay Uncle Sam 1 red cent in estate taxes.

For the sake of illustration, let’s assume that Mr. Gates died “intestate” (i.e. without any wills or trusts in place) and that he wasn’t married.

Joint Ownership as an Alternative to Estate Planning (Part 2)

Blog Post by Melissa Platt, Esq.

It’s finally here—the long-awaited second installment in this two-part article on joint ownership! As a brief refresher, we’re talking here about the serious unintended consequences of using joint ownership (to be technical, joint tenancy with rights of survivorship or JTWROS) as a replacement for estate planning.

Example: Mom adds the name of trusted adult Son to her checking and savings accounts to allow Son access to these accounts to pay bills. Mom and Son have an understanding that when Mom dies, Son will distribute the money in the accounts to all the siblings equally. (Or Mom could also add Son’s name to the title of her home, CDs, money market accounts, brokerage accounts, etc.)

"Trust Mill" Fined $6.4 Million

The Ohio Supreme Court recently slapped a $6.4 million penalty upon two companies, American Family Prepaid Legal Corp. and Heritage Marketing and Insurance Services Inc., for the illegal practice of law (running a "Trust Mill") in that state.  These companies have also been banned from ever operating in Ohio again.

What is a "Trust Mill?"  Trust Mills are typically made up of individuals who sell insurance, annuities or other types of high-commission financial products.  

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