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Showing 23 posts tagged estate planning.
A Hollywood Lesson for Everyday People: Trusts
Phillip Seymour Hoffman, an accomplished actor, died suddenly in February at age 46 of a suspected drug overdose. Seymour had a long-term companion, Marianne O'Donnell, with whom he had three young children. Under the terms of his Will, a significant chunk of his $35 million-plus estate was left to O'Donnell. The media and estate planners have examined the Will, which has led to several estate planning issues garnering public attention. His Will was written before the birth of his last two children and never updated; thus, his estate plan is completely silent about his wishes for them. The actor's death also highlights the effect that marriage can have on an estate plan. Because Hoffman and O'Donnell were not married, nearly $14 million must be paid in estate taxes - an outcome that could have been avoided had the couple tied the knot (at the federal level, any property passing to a spouse at death is free of estate taxes, therefore delaying any federal estate tax until the surviving spouse's death). More >
'Til Death Do Them Part: Creditor Rights
Settling the affairs of a deceased love one is never easy. When the decedent has outstanding debts to credit card companies, mortgage lenders, or other institutions, the process is further complicated. Generally, no one else is legally obligated to repay the debt of a person who has died, but there are exceptions to this rule. For instance, a co-signor on a loan may be liable for the debt under certain circumstances. More >
Trusts Can "Materially Participate" in Businesses
Estate planning attorneys and financial planners now have much-needed guidance about "material participation" and "personal services" as they relate to trusts. The Tax Court recently ruled that a trust materially participated in its rental real estate business and therefore could deduct the losses it incurred in conducting those activities as losses from non-passive activities. The court rejected the IRS's argument that "personal services" performed in real estate activities must be performed by an individual, not a trust. This ruling is especially important considering the introduction of the "Medicare Tax" which imposes a 3.8% surtax on net investment income (the definition of net investment income includes income derived from a trade or business that is a passive activity to the investor). More >
A New State & Your Estate
People are not stationary - moving to a new state for work, family, or other reasons is a part of life for a great deal of individuals. What happens to an estate plan, though, when a person no longer lives in the state where their plan was created? Is the plan still valid in their new state? Although estate planning documents that were validly executed in one state should generally be valid in another, these instruments may need some modification. It is highly recommended that all executed documents be, at the very least, reviewed by an attorney when relocation occurs. More >
My Spouse is Gone, But is the Debt?
After a divorce, the last thing one wants to consider is the debt that their former spouse may have left behind. In Kentucky, debt accumulated during the marriage is treated differently than property acquired during the marriage. Kentucky is a marital property state, meaning that property acquired during the marriage is subject to equitable distribution. On the other hand, according to the Kentucky Supreme Court, there is no statutory presumption that debts incurred during the marriage are marital or non-marital in nature. More >
The Role of Appraisals in the Inventory Process
Settling a loved one's estate after their passing can be an overwhelming process. In Kentucky, the first step involves filing a petition to do one of three things: (1) probate the will; (2) appoint an administrator/administratrix (if no Will exists); or, (3) appoint an executor/executrix (if a Will does exist). Within the same form, the petitioner must also include fair market value estimates of the decedent's real and personal property. More >
The Gift of Education
Many grandparents want to enrich the lives of their grandkids, but are not sure the best way to accomplish this with their estate plan. I encourage clients to consider helping their grandchildren with the future costs of education. The proper planning can help grandkids avoid hefty loans and be tax-efficient for the donor. More >
What is an Irrevocable Life Insurance Trust?
Life insurance is an important estate planning tool; however, life insurance proceeds can be quickly diminished by taxation. This is due to the fact that a policy's face value is often included in a decedent's taxable estate. For instance, if you own a life insurance policy with a face value of $2 million dollars and you have other assets valued at $4 million dollars, then at the time of your death your estate would be valued at $6 million dollars. Your heirs would be exposed to estate tax liability on the amount exceeding $5.25 million dollars, the current estate tax exemption, (which is always subject to change). Notwithstanding these facts, proper planning can protect life insurance proceeds; one way to minimize the threat is to create an irrevocable life insurance trust ("ILIT"). More >
Key Considerations in Your Family Business's Succession Planning
According to Forbes magazine, family businesses are responsible for 50 percent of the U.S. gross domestic product. Moreover, they account for 80 percent of all new job opportunities and make up 60 percent of all American jobs. Some 35 percent of Fortune 500 companies are still family firms. More >
The Sooner, the Better: Not Always True with Trusts
It is a story that estate planning lawyers are all too familiar with: a well-intentioned parent or relative establishes a trust for a child, the child reaches age eighteen - the age of distribution specified by the trust, and bam! The trust funds are gone in a flash; an inheritance spent on cars, clothes, or fancy vacations - not at all what the grantor of the trust had in mind for the beneficiary. More >
