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Probate

Wednesday, October 17, 2018

(Grand)Parenting 2.0

According to the National Census Bureau, grandparent-headed homes are among the fastest growing household types in the United States. Grandparent-headed homes are defined as living arrangements where the primary financial and caregiving responsibilities are held by one or more grandparents rather than a parent. Though the reasons that lead to this type of arrangement vary, many speculate that a difficult job market and bleak economy has led to an increase in the past few years.


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Friday, June 15, 2018

Common Types of Will Contests

The most basic estate planning tool is a will which establishes how an individual's property will be distributed and names beneficiaries to receive those assets. Unfortunately, there are circumstances when disputes arise among surviving family members that can lead to a will contest. This is a court proceeding in which the validity of the will is challenged.

In order to have standing to bring a will contest, a party must have a legitimate interest in the estate. Although the law in this regard varies from state to state, the proceeding can be brought by heirs, beneficiaries, and others who stand to inherit. While these disputes are often the result of changes to the distribution plan from a prior will, some common types of will contests are as follows.



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Monday, July 10, 2017

The Difference Between Equal and Equitable Inheritances

When it comes to estate planning, many individuals believe that dividing assets equally among adult children is the best choice. However, there are situations in which leaving each child the same amount might not be practical. For this reason, it is important to know the difference between an equal inheritance and an equitable inheritance, in which each child receives a fair share based on his or her circumstances.

What is an equal inheritance?

In this situation, each child gets the same amount of the remaining estate after both parents have died.

This option works well when the needs of each child are the same, or the parents provided similar support to each child in the past. Moreover, each child must be mentally or emotionally capable and financially responsible.

It is important to note that cases in which an estate includes real property and other tangible assets, it may be necessary to determine the differences in value of these assets in order to leave each child an appropriate amount. Lastly, leaving an equal inheritance may be the best way to avoid the emotional and financial costs of disputes.

What is an equitable inheritance?

In some cases, leaving each child and equal inheritance may not be the right thing to do. For example, it may be wise to reward a child who has taken on the role of caregiver for an aging parent or to compensate him or her for lost time and wages. There are also circumstances in which children may have been given different amounts of money while the parents were alive either for a wedding, educational expenses or a down payment on a home.

Lastly, for those who have a disabled child who receives public benefits, it may be necessary to provide for living expenses and medical needs in a special needs trust. In all of these situations, an equitable distribution of the estate assets is the best option.

The Bottom Line

In the end, determinations about the distribution of an estate to surviving children should be made in a way that will preserve family harmony. For this reason, it is important to discuss your decisions with your children and engage the services of an experienced estate planning attorney.




Monday, June 19, 2017

Why New Parents Need an Estate Plan

Becoming a new parent is a life changing experience, and caring for a child is an awesome responsibility as well as a joy. This is also the time to think about your child's future by asking an important question: who will care for your child if you become disabled or die? The best way to put your mind at ease is by having an estate plan.

The most basic estate planning tool is a will, which enables a person to determine how his or her assets will be distributed after death. Without this important estate planning tool, the state's intestacy laws will govern how these assets will be distributed. In addition, decisions about who will care for any minor children will be made by the court. For this reason, it is crucial for new parents to have a will as this is the only way to name guardians for minor children.

In this regard, selecting guardians involves a number of important considerations. Obviously, it is important to name individuals who are emotionally and financially capable of raising a child. At the same time, a will can also establish a trust that provides funds to be used to provide for the child's needs. Ultimately, guardians should share the same moral and spiritual values, and childrearing philosophy of the parents.

In addition to naming guardians in a will, it is also critical to plan for the possibility of incapacity by creating powers of attorney and advance medical directives. A durable power of attorney allows a new parent to name a spouse, or other trusted relative or friend, to handle personal and financial affairs. Further, a power of attorney for healthcare, or healthcare proxy, designates a trusted person to make medical decisions in accordance with the parent's preferences.

Finally, new parents should also obtain adequate life insurance to protect the family. The proceeds from an insurance policy can replace lost income, pay household and living expenses, as well as any debts that may have been owed by the deceased parent. It is also important to ensure that beneficiary designations on any retirement accounts are up to date so that these assets can be transferred expediently.

In the end, having a child is a time of joy, but also one that requires careful planning. The best way to protect your family is by consulting with an experienced estate planning attorney who can help you navigate the process.

 


Monday, May 22, 2017

Year End Gifts

If you’re like most people, you want to make sure you and your loved ones pay the least amount of tax possible. Many use year-end gift giving as a way to transfer wealth to younger generations and also reduce the overall potential estate tax that will be due upon their death. Below are some steps you can take to make gifts to your heirs without triggering any gift tax liability. Some of these techniques may also reduce your own income tax liability.

A combination of estate and gift tax exemptions can be used to significantly reduce the overall tax liability of your estate. Upon your death, federal estate tax may be owed. A portion of your estate is exempt from the tax. That exemption amount is set by Congress and can change from year to year. 

Many taxpayers make annual gifts to loved ones during their lifetimes, to reduce the overall value of the estate so that it does not exceed the exemption amount in effect at the time of death. It is important to consider that gifts made during your lifetime are subject to a gift tax (equal to the estate tax). However, certain gifts or transfers are not subject to the gift tax, enabling you to make tax-free gifts that benefit your loved ones and reduce the overall taxable value of your estate upon your death.

The annual gift tax exclusion allows each individual to make annual gifts of up to $14,000 to each recipient. There is no limit to the number of recipients who may each receive up to $14,000 totally tax-free. Married couples may gift up to $28,000 to each recipient without triggering any tax liability. This annual exclusion expires on December 31 of each year, and larger gifts may be made by splitting it up into two payments. By making a payment in December and one the following January, you can take advantage of the gift tax exclusion for both years. Keeping annual gifts below $14,000 per recipient ensures that no gift tax return must be filed, and that there is no reduction in the estate tax exemption amount available upon your death.

Annual gifts may also be made in the form of contributions to a §529 College Savings Plan. These, too, are subject to the $14,000 annual gift tax exclusion. Additionally, such contributions may afford the giver with a state tax deduction.

Payment of a beneficiary’s medical expenses is also excluded from the gift tax. There is no limit to the amount of medical expense payments that may be excluded from tax. To qualify, the payment must be made directly to the health care provider and must be the type of expenses that would qualify for an income tax deduction.

If you have a large estate that may be subject to taxes upon your death, making annual gifts during your lifetime can be a simple way to reduce the size of your estate while avoiding negative tax consequences.


Monday, April 24, 2017

Planning for Your Final Sendoff

Although most people don’t like to think about it, death is inevitable. It’s imperative that you have an estate plan in place that outlines your end of life wishes and how you would like your assets distributed upon your passing. As part of your planning, it’s important that you consider and make arrangements for your funeral. By planning this event before your passing, you can spare your family difficult decisions and ensure that your send off is exactly as you’d like it.

Here are a few things to consider:

Location
Funerals are not limited to churches or temples. If you’re not religious or if you want something different, you might ask that your relatives instead hold a memorial service in your honor at the park or even at the family vacation home.

Burial
Perhaps you hate the idea of being buried at the local cemetery and would prefer to be cremated. There are many options and having your relatives all agree upon one can be challenging. Be sure to make these wishes known as part of your funeral planning.  

Details    
You wouldn’t want someone picking the song for the first dance at your wedding so why would you want someone else deciding all of the details of an event to celebrate your life? As part of your funeral planning, list songs you might want played or poems which should be recited. If your favorite vacation was to Hawaii, you might want to brighten up the event with tropical flowers from Maui.

Obituary
It can be difficult to write about your life but for many writing their own obituary can help them reflect on the important things while giving them a chance to highlight their proudest moments. If you aren’t a writer or find this task daunting, consider writing a few bullet points for your loved ones so the information they share is accurate and provide a list of publications where it should be featured. Sure, your children may know that you belong to the church book group but they may have no idea that that same group has a newsletter which should share this information with fellow members.

Virtual Passwords
Traditionally when a person died, his or her children had the task of going through the old phone book and calling contacts to inform them of the news. Today, many of us connect with friends and relatives online. To help your heirs effectively communicate information about your passing, be sure to store your online passwords in a place where your relatives can find them and access the appropriate accounts accordingly.

Paying in Advance
Funerals can be very expensive and a huge burden for many families dealing with the loss of a loved one. Luckily, with the right planning, you can prepay for your funeral and save your family the expense. Generally an attorney or a funeral director can help you to determine how much money will be needed and help you to establish a trust where it will be stored until your passing.

While planning your funeral may seem to be a depressing thought at first, it is actually empowering—allowing you determine how you will say farewell to your loved ones and leaving you with peace of mind knowing that you’ve taken care of every last detail so your family can celebrate your life without the added stress of planning your funeral.  


Monday, March 27, 2017

What happens if you are bequeathed a car that no longer exists? The ABCs of Ademption

If you’re involved in settling a loved one’s estate, you may come across the curious word “ademption”. Ademption describes what happens when something designated in a will no longer exists. Say, for example, your uncle dies and leaves for you in his will an old-school Harley Davidson motorcycle. However, if your uncle crashed the motorcycle two years before the will was probated and there’s nothing to leave, then that gift would be considered adeemed and you would receive nothing. This is why certain wills include language that says, “if owned by me at my death.”

However, it is important to realize that certain items cannot be adeemed. For instance, money. If your uncle died and left $7,000 for you in his will, but left a zero dollar balance in his accounts, your gift of cash would not be adeemed. Instead, the estate would be responsible for satisfying that gift, say for example, through the sale of the house or other such property.

There are exceptions to ademption, however. If the property leaves the estate after the person who wrote the will has been declared incompetent, ademption is waived.  Other states make exceptions for cases where interest in a corporation that no longer exists because the shares were exchanged with that of an acquiring company.  Your state may tackle ademption differently based on its laws, so please consult a qualified real estate or probate lawyer if you want to learn more about ademption and its exceptions.
 


Monday, March 20, 2017

Utilizing Family Limited Partnerships as Part of Your Estate Plan

Designed to preserve family businesses for future generations, Family Limited Partnerships (FLPs) and Family Limited Liability Companies (FLLCs) can help shelter your assets and reduce overall estate and gift taxes.   FLPs are also utilized as an integral part of business succession planning.

A Family Limited Partnership is typically established by married couples who place assets in the FLP and serve as its general partners. They may then grant limited-partnership interests to their children, of up to 99% of the value of the FLP’s assets. When this occurs, two things happen: a) the value of the partnership interests transferred to the children is deemed to be lower than the respective pro-rata value because of minority and marketability discounts and b) the assets are removed from the general partners’ estates.  This allows a transfer of significant assets to the children at lower valuation which results in reduced estate taxes. The general partners continue to maintain control of the FLP and its assets, even though they may own as little as just 1% of the partnership’s valuation.

Limited partners may receive distributions from the FLP which can serve to transfer additional assets from the older generation to younger beneficiaries at more favorable income tax rates.

How Minority and Marketability Interest Discounts Work

Since limited partners do not have the ability to direct or control the day-to-day operations of the partnership, a minority discount can be applied to reduce the value of the limited partnership interests that are transferred.  Furthermore, because the partnership is a closely-held entity and not publicly-traded, a discount can be applied based upon the lack of marketability of the limited partnership interests.  This allows the older generation to leverage the FLP as a vehicle to transfer more wealth to its beneficiaries, while retaining control of the underlying assets.  

With these significant tax benefits, it’s no surprise that man

y FLPs have attracted scrutiny from the IRS. Many family partnerships have run into issues with tax authorities due to mistakes or outright abuse. Care must be taken to ensure your FLP is properly established and operated.  Specifically, the IRS may look at the following issues when assessing the viability of the FLP:

  • Whether the establishment of the FLP was created solely for tax mitigation objectives. You stand a better chance of avoiding – or surviving – a challenge from the IRS if you can show a legitimate non-tax-related reason the FLP was created. 
     
  • Whether the partnership functions like a business.  Keep your personal assets out of the FLP. You can reasonably expect to transfer closely held stock or interests in commercial real estate into a Family Limited Partnership. However, personal property such as cars or residences may not fare well against an IRS challenge. Similarly, the FLP’s assets should not be used to pay for any personal expenses. The FLP must be a legitimate business entity operated to fulfill business purposes.
     
  • Whether the valuations are based on objective criteria.  Rather than have a partner or family member determine the valuations or discounts for any assets transferred into the FLP, you should have your FLP professionally appraised. A qualified appraiser has a much better chance of withstanding IRS scrutiny.

An FLP can be a powerful planning tool to enable business owners to transfer their stake to the younger generation, while allowing the senior generation to continue conducting operations and mentoring and grooming the young owners.  However, an FLP can be incredibly complex and should only be established with the help of a qualified team of estate planning attorneys, accountants and appraisers.  


Monday, March 6, 2017

Making Decisions About End of Life Medical Treatment

While advances in medicine allow people to live longer, questions are often raised about life-sustaining treatment terminally ill patients may or may not want to receive. Those who fail to formally declare these wishes in writing to family members and medical professionals run the risk of having the courts make these decisions.

For this reason, it is essential to put in place advance medical directives to ensure that an individual's preferences for end of life medical care are respected. There are two documents designed for these purposes, a Do Not Resuscitate Order (DNR) and a Physician Order for Life Sustaining Treatment (POLST).

What is a DNR?

A Do Not Resuscitate Oder alerts doctors, nurses and emergency personnel that cardiopulmonary resuscitation (CPR) should not be used to keep a person alive in case of a medical emergency. A DNR is frequently used along with other advance medical directives by those who are critically ill and prefer not to receive life sustaining treatment.

What is a Physician Order for Life Sustaining Treatment (POLST)?

A Physician Order for Life Sustaining Treatment is similar to a DNR,  however a POLST is prepared by a patient's doctor after discussing end of life treatment options. This is not a legal document prepared by an attorney, but rather a binding doctor's order that is kept with a patient's medical records. A POLST declares a patient's preference for receiving certain life sustaining treatments, as well as treatment options the patient does not want to receive or to be continued.

Examples of these treatments include, but are not limited to, artificial nutrition and hydration, intubation and antibiotic use. These decisions should be made when there is no medical crisis that can affect an individual's decision making, after various treatment options have been discussed with his or her doctor. In short, a POLST ensures that a patient will receive appropriate treatments, but not be subjected to life sustaining measures the patient does not want.

By having these advance medical directives in place, a person can have peace of mind knowing that he or she will receive end of life treatment according to his or her wishes, and loved ones will not be forced to go to court to obtain the right make these decisions.

 


Monday, February 27, 2017

People. The Essential Component of Your Estate Plan’s Success

Properly drafted estate planning documents are integral to the success of your legacy and end-of-life wishes.  Iron-clad estate planning documents, written by a knowledgeable attorney can make the difference between the success and failure of having your wishes carried out.  However, there’s more to estate planning than paperwork.  For your wishes to have the best chance of being honored, it is important to carefully choose the people who will carry them out.

Your estate plan can assign different responsibilities to different people.  The person who you most trust to raise your children, for example, may not be the person you’d designate to make health care decisions on your behalf, if you are incapacitated.  Before naming individuals to carry out your various estate and incapacity planning wishes, you should carefully consider the requirements of each role and the attributes which each individual has that will allow him or her to perform the duties effectively.

Executor.  You name the executor, (also known as a personal representative), in your will.  This person is responsible for carrying out all the terms of your will and guiding your will through probate, if necessary.  The executor usually works closely with a probate or estate administration attorney, especially in situations where will contests arise and your estate becomes involved in litigation.  You may appoint co-executors, or name a professional – such as a lawyer or accountant – as the co-executor.

Health care proxy
.  Your health care proxy is the person you name to make medical decisions for you in the event you are incapacitated and unable to do so yourself.  In addition to naming a health care proxy (sometimes called a health care power of attorney), most people also create a living will (or health care directive), in which they directly state their wishes for medical care and end-of-life care in the event of incapacity.  When choosing a health care proxy, select a person who you know understands your wishes regarding medical care, and who you trust to carry out those wishes, even if other family members disagree.  You should also consider individuals who have close geographic proximity to you as well as persons you believe can make difficult decisions under pressure.

Power of attorney
.  A financial power of attorney (or simply power of attorney) is different from a health care power of attorney in that it gives another person the authority to act on your behalf in financial matters including banking, investments and taxes.  You can limit the areas in which the person may act, or you may grant unlimited authority.  A power of attorney may also be limited for a specific time, or it may be a durable power of attorney, in which case it will continue even after the onset of incapacity (until your death).  A power of attorney can take effect immediately or “spring” into effect in the event of incapacity.

Guardians.  If you have minor children or other dependents (disabled adult children or other disabled adults for whom you are the named guardian), then your estate plan should name a person or persons to take over the parental role in the event of your death.  The guardian may also have control over any assets that you leave directly to your minor children or other dependents.  If you create a trust for the benefit of your minor children, then the trust’s trustee(s) will have control over those assets and their distribution.  Important considerations include age of the guardian, compatibility with his or her personality and moral values as well as the extent and quality of the existing relationship with your children.

Trustee.  If you place any assets in trust as part of your estate plan, then you must designate one or more trustees, who will act as the legal owners of the trust.  If you do not wish to appoint someone you know personally, you may appoint a corporate trustee – often a bank – to play this role.  Corporate trustees are often an excellent choice, since they are financial professionals and neutral, objective third parties.  Its important you select individuals who are not only trustworthy but also organized, diligent and detail oriented.

 


Monday, February 13, 2017

Common Estate Planning Myths

Estate planning is a powerful tool that among other things, enables you to direct exactly how your assets will be handled upon your death or disability. A well-crafted estate plan will ensure you and your family avoid the hassles of guardianship, conservatorship, probate or unpleasant estate tax surprises. Unfortunately, many individuals have fallen victim to several persistent myths and misconceptions about estate planning and what happens if you die or become incapacitated.

Some of these misconceptions about living trusts and wills cause people to postpone their estate planning – often until it is too late. Which myths have you heard? Which ones have you believed?

Myth: I’m not rich so I don’t need estate planning.
Fact: Estate planning is not just for the wealthy, and provides many benefits regardless of your income or assets. For example, a good estate plan includes provisions for caring for a minor or disabled child, caring for a surviving spouse, caring for pets, transferring ownership of property or business interests according to your wishes, tax savings, and probate avoidance.

Myth: I’m too young to create an estate plan.
Fact: Accidents happen. None of us knows exactly when we will die or become incapacitated. Even if you have no assets and no family to support, you should have a power of attorney and health care directive in place, in case you ever become disabled or incapacitated.

Myth: Owning property in joint tenancy is an easier, more affordable way to avoid probate than placing it in a revocable living trust.
Fact: It is true that property held in joint tenancy will pass to the other owner(s) outside of the probate process. However, it is a usually a very bad idea. Placing property in joint tenancy constitutes a gift to the joint tenant, and may result in a sizable gift tax being owed. Furthermore, once the deed is executed, the property is legally owned by all joint tenants and may be subject to the claims of any joint tenant’s creditors. Transferring a property into joint tenancy is irrevocable, unless all parties consent to a future transfer; whereas property owned in a living trust remains under your control and the transfer is fully revocable until your death.

Myth: Keeping property out of probate saves money on federal estate taxes.
Fact: Probate, and probate avoidance, are governed by state law and address how property passes upon your death; they have nothing to do with federal estate taxes, which are set forth in the Internal Revenue Code. Estate planning can reduce estate taxes, but that has nothing to do with a discussion regarding probate avoidance.

Myth: I don’t need a living trust if I have a will.
Fact: A properly drafted trust contains provisions addressing what happens to your property if you become incapacitated. On the other hand, a will only becomes effective upon your death and specifies who will inherit the property. If you own real property, or have more than $100,000 in assets, both a will and a living trust are generally recommended.

Myth: With a living trust, a surviving spouse need not take any action after the other spouse’s death.
Fact: Failure to adhere to the proper legal formalities following a death could result in significant administrative and tax implications. While a properly drafted and funded living trust will avoid probate, there are still many tasks that have to be performed such as filing documents, sending notices and transferring assets.  
 


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