Tax Law and Litigation News

As April 15, 2013 has now passed, you may be wiping your brow and pushing the thoughts of taxes far from your mind (we encourage you to do so) however, we would like to take a moment to inform you about the following tips prior to closing the last filing cabinet drawer, file folder, or the shoe box where you carefully store your receipts, the following 2013 tax changes you may find useful:

On January 2, 2013, President Obama signed The American Taxpayer Relief Act of 2012, known in short as "ATRA".  There are many pros and cons to ATRA that effect each of us:

The first pro would be that for many American's this means no estate tax. This is due mostly in part to the fact that, when signed into law, ATRA made the $5 Million Estate, Gift, and Generation Skipping Transfer (also known as "GST") tax permanent. Originally this tax exemption was set to expire on January 1st and revert back to the $1 million estate exemption. (After indexing for inflation the exemption amount is $5,250,000.00 for 2013.) However, we find that the majority of our clients, and their loved ones, may still face an estate tax issue at the time of their passing.  

The first con would be that this new act raised the top tax rate from 35% to 40% beginning in 2013, so for your tax calculations and preparation of you tax returns for this year keep in mind this new rate.  We guarantee this new rate increase will change the way most American's plan for this coming year.  (However, even given this con, we must point out its better than the 55% tax rate of past tax years.)

The second pro, I would like to point out, is that this relief act made the portability tax benefit a permanent feature in estate and gift tax law. Since married couples can effectively exempt over $10 Million in assets from estate taxation, we strongly encourage are married clients to speak with us regarding this method of planning today.  What if I am single you ask? Not a problem, while portability is still not available for GST tax purposes, (we would call this con number 2) there are other planning methods that do not require marriage which can be taken into consideration.  

We are still surprised to find a few of our clients are inadvertently self-imposing estate tax issues on their loved ones.  This is due to the fact that they either have not domiciled in a State which does not charge a "state estate tax" or they have not properly domiciled in an estate-tax free state.  The majority of individuals residing in Florida that travel back and forth to a second home up-north are mislead to believe that they are properly domiciled. We often hear from family members, after a loved one has passed, who has been contacted by another state asking when an estate tax return will be filed. Don't let this happen to you or your family; if you have questions about proper domicile in the state of Florida please contact our office today.  

As many of you know the state of Ohio has recently decided to change their laws regarding estate tax, should you wish to discuss these changes with an Ohio licensed attorney feel free to contact our office and we will connect you to our of counsel attorney Ty Mahaffy.

Some individuals will view the ATRA and decide that estate planning is no longer necessary or a requirement for their family.  They may feel that estate planning is for those who have an estate of $5 Million or more. They may feel that they need not worry about federal tax planning.  However, this line of thinking is flawed. Estate planning is not just a tax planning tool; it is also an avenue by which gives our loved ones our final thoughts and wishes.  Not only should we give this peace of mind to our loved ones, but to ourselves as well.  Estate planning is planning for the future, to preserve our legacy, to plan for our children, our grandchildren, and yes, even our great-grandchildren (and for some of us our pets). Trust planning most often is looked at as the packaging for which we give our hard earned work to our families and those we care most about.  Trust planning allows for us to protect our children from creditors, thieves, failed marriages, and even the would-be-bad mistakes a young person can and sometimes do make. Placing the proper trusted individual over your child's inheritance is necessary. This person needs to be chosen with care and consideration, factors that should be considered at the time of choosing this individual are:

  1. What is this person's understanding of my desires for my child or loved one?
  2. How will this person treat my desires and my loved one once I have passed away?
  3. Will this person give my loved ones requests for health, education, maintenance and support the time, energy and thought that I would if I were here?
  4. Does this person have a good grasp or understanding of estate planning matters?
  5. Will this person take the time to direct my loved one or child in business matters or financial matters or suggestions as may be needed?
  6. What will happen if my child is sued for any reason? Will the person I have chosen to assist them be able to advise or protect them?

Some of the other non-tax planning items to consider when approaching estate planning are as follows:

  1. When I pass away will my loved ones know what my final instructions or wishes were?
  2. Will my desires be carried out in the method in which I have designated?
  3. When I am disabled, will the person I desire be able to care for me? Have I left the proper documentation in place to give my loved ones the authority to care for me as I would for myself?
  4. Have I left a Living-Will giving my loved ones the peace of mind to make end of life and medical decisions for me?
  5. Have I taken the time to designate my belongings to my loved ones?
  6. Who will have access to my funds once I become disabled or pass away?
  7. Who will talk to the Doctor's on my behalf if I am unable?
  8. Will my children be properly cared for, who will raise them if they are still minors?
  9. What court costs will be associated with my passing if I leave no direction?

In non-tax planning considerations, it is wise to consider the following:

  1. Are you or have you ever been divorced? A common mistake made by divorced couples is that they believe that by signing the divorce papers there is no longer any legal obligation under law to the other person, while 9 out of 10 times they forget to change their estate planning documents, their IRA and 401K beneficiary designations and even their life insurance policy designation.

  2. Do you have children from a prior marriage? Does your spouse have children from a prior marriage?  

Other items to consider are: does your loved one have special needs? Do you have a child which will require care when you are no longer able to provide or are here to care for him or her? Special needs planning is an intricate part of estate planning and should not be over-looked or put off until tomorrow.  

There are many facets of estate planning, some are tax related planning and others are non-tax related, in our office they are all specifically related, tailored and customized to the individual needs of our clients.  We have had the pleasure of helping many of our clients reach their estate planning goals, and we have enjoyed the challenges they each bring.  If you feel that your estate planning goals have not yet been achieved or if this letter has raised any questions about outstanding items you, a loved one, a child or friend my have need of completing; please do not hesitate to contact our office.  

We will be happy to speak with you at any time regarding your estate planning whether it be for tax planning purposes or non-tax planning purposes.

Above are just a few suggestions of items that may need review, please do not hesitate to call our office to schedule your 2014 Estate Plan meeting to discuss these and other items in greater detail.

With office locations in Florida and Pennsylvania, Jeffrey M. Janeiro and his staff assist clients in Naples, Bonita Springs, Marco Island, Estero, and Cape Coral in Collier County, Lee County, Broward County, Miami-Dade County and Palm Beach County.

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The Law Office of Jeffrey M. Janeiro, P.L. assists clients with Medicaid Planning, Planning for VA Aid and Attendance Eligibility, Special Needs Planning, Estate Planning, and Probate, Estate & Trust Administration matters in Collier County, Lee County and other nearby Florida counties.