Things to Consider When Using a Family Limited Partnership

Writen by Jeff Faust

This FLP Alert is directed at clients and their advisors who have already established Family Limited Partnerships (“FLP’s”) and those clients who are considering a partnership as part of their estate plan.

With all the attacks the IRS has made on FLP’s over the past few years, culminating at the Strangi III decision in July 2005, many have inquired as to the continued viability of FLP’s, particularly with respect to estate tax valuation discounts. The Strangi cases (I, II and III) were extreme cases involving a fact pattern that weighed heavily against the taxpayer and should be used to clarify how to structure an FLP in order to minimize tax consequences.

Background – In the Strangi case, Mr. Strangi’s son-in-law, acting as his agent under a durable power of attorney, created an FLP two months before his death in 1994. Approximately 98% of Mr. Strangi’s net worth was transferred to the FLP and he became the 99% limited partner; however, he also retained a small percentage of the 1% general partnership interest.

On Mr. Strangi’s estate tax return, the executor reported the value of Mr. Strangi’s partnership interest at a discount from the value of the underlying partnership assets using the “estate tax valuation discount.” In claiming this discount the executor asserted that the FLP agreement created restrictions that would cause a third party to value the limited partnership interest lower than the value of the underlying assets held by the partnership. On audit, the IRS disagreed and informed the executor that it was seeking an additional $2.5 million in estate taxes. Litigation has continued since then, with the most recent decision in favor of the IRS, referred to a Strangi III. It is unknown at this time whether the Estate will appeal this decision to the U.S. Supreme Court.

Free Living Will and Free Living Will Forms Online

Writen by J.J. Nielson

Looking for a free living will? If you are preparing your finances and other personal matters for your retirement and want to make sure that your family members are taken care of in the event of your death, you will need one. There are several useful sites online where you can download a free living will form to use for your needs. You can chose generic forms based on your state, as each state has different laws regarding living wills.

Many of the free living will sites online will recommend that you use their free will forms as something to cover general purposes, but not to act as a substitute for seeking the advise of an actual estate attorney or lawyer. If you have a lot of complicated estate needs, you might consider hiring an estate planner or lawyer to write up your will.

Another thing to consider as you write your free living will is to make sure that you assign a power of attorney and executor of your will. If you have an accident and are incapable of making health decisions (advance directives), you will need a health care advisor to carry out your requests in the event that you are in a coma or on life support machines. Something is better than nothing, so if you are unable to afford an attorney at this time, at least get started with your temporary free forms so that you have something legal in place for your future.

Did you know that if you cannot afford a lawyer to draw up certain estate papers, that you can find a free living will form online that you can print right at home? If you have a basic need for a living trust and you want to print a free living will form to have on hand in case of your illness or death, it is a good idea when you are preparing for your retirement. Using an online free living trust form should not replace seeking professional advice from a lawyer, but if you can’t afford a lawyer, it is the next best thing.

Once you print your free living will form and fill in your crucial information, you might be wise to have it signed and stamped by a notary public in your area. This notary signature will act as proof of your document’s existence and that the signatures on it are valid. You can also find a lot of other free estate planning forms online that you can use when planning your retirement.

In addition to a free living will form, look for durable power of attorney, advance directives (health care advisories) and any other special forms regarding the executor of your estate. Gather all of your important documents like car pink slips, mortgage loan documents, and anything else that can be useful in the event of your death or incapacity, and make sure that a family member or child, or a lawyer, knows of their location and existence. Planning ahead now will save your children from a headache later.

For more information on retirement planning and senior care visit us at:

http://www.best-senior-care-online.com

J.J. Nielson is a successful internet publisher and author.

Do You Really Need A Will?

Writen by Ronald Hudkins

Many people wonder if they really need a will. They may think that they don’t have enough assets to bother with a will. Some people erroneously believe that a will causes your heirs to have to go through probate, leading to unnecessary expenses. However, a will is a good idea for just about everyone. Read on for some of the reasons to have a will.

A will is a document in which a person declares what he wants done with his property at the time of his death. A will has no effect until the person who wrote it, known as the testator, dies. The testator can also revoke a will at any time prior to his death.

If you die without a will, the state will distribute your property to your heirs according to the state’s intestacy statutes. The statutes might call for a distribution that is similar to what you want. Then again, maybe they won’t.

State intestacy laws will provide how the sum total of your property is to be divided among your heirs. It can’t provide for who will get certain specific items of your property. This can lead to many problems. Your heirs may not agree on who will get certain items of your personal property. For example, say you have inherited your grandmother’s wedding ring and intend to pass it on to your daughter. If you die without a will saying that is what you want, your son may feel very strongly that his wife should have it. So even if you don’t have a lot of assets, you may be concerned about making sure that certain items of your property go to the people that you want it to. You can do this with a will.

Another misconception about having a will is the idea that having a will causes your heirs to have to go through probate, and that it will be difficult and expensive. If you die without a will, the court is still going to have to oversee the distribution of your assets to your heirs. There is absolutely no reason to think that this process is made easier or less expensive by your not having a will. In fact, it will probably be more expensive. For one thing, whoever administers your estate will probably have to post a surety bond if you don’t have a will. If you do have a will, not only can you choose the person who will administer your estate, you can provide that he or she will not have to post a surety bond.

Do you have minor children? If so, you really need a will. If you don’t have one, the probate court will have to set up a conservatorship to manage your children’s share of your property. A judge will decide who manages the money. When each child turns 18, he or she will get his share, whether they can handle it or not. If you have a will, you can decide who will manage your children’s inheritance on their behalf and you can choose the age at which you want it to be distributed to them.

Even if your estate is small, there are good reasons to have a will. You should see an attorney who practices in the area of estate planning or wills and trusts. This attorney can also help you decide if you need more advanced estate planning techniques and help you implement an estate plan that is best suited to your needs.

About Ronald E. Hudkins; Ronald Hudkins is a retired military enlisted member that was assigned as a staff researcher. He was responsible to compile, write or conduct; reports, studies, statistics, reviews, plans, inspections, lessons and numerous other tasks deemed essential to operational efforts. His actions allowed superior, peer and subordinate commands, their designated leaders and staffs make vital and logical decisions. The ability to identify, analyze and propose solutions is a trait still exercised. For additional asset protection and estate planning needs he suggests his web site: http://www.AssetProtectNow.com.

Powers Of Attorney Vs. Successor Trustees – Does One Have More Power Than The Other

Writen by Michael Pancheri

Question: I am listed as the Successor trustee, my bother is listed as the Durable Power of Attorney for property management of my father’s estate. Does one have more power than the other. Does the POA have the power to sell my dad’s property or do I the successor? Thanks ahead of time – really confused. N.H.

Answer: Dear N.H. – Generally speaking, you can have as much power under a power of attorney as you can as a successor trustee. As a practical matter, however, the laws of most states are better defined with respect to trustee powers and financial institutions are more accustomed to dealing with trustees. So, that sort of gives the edge to trustees. If you’re concerned about a specific type of power, you’d have to check the laws of your particular state.

Your question, though, is whether your brother has the power to sell your dad’s property under his power of attorney or whether you have the power as successor trustee. It’s not clear to me whether your dad is still living or not. Assuming that he is, then he’s probably the sole trustee of his trust and you’re just waiting in the wings until he steps aside. If that’s the case, then you don’t have any power to manage his property. If there is any property in your dad’s trust, your dad would be the only person who could manage it since he is the sole trustee.

If your dad is still living, then your brother would have the power to manage his property right now, even though your dad is able to do it on his own. In most cases, however, the intent is that the power of attorney would be used only in the event the principal (i.e., your dad) is unable to attend to his own affairs.

The real issue here is who owns the property? If your dad owns the property, then your brother has the power to manage it under his power of attorney. If your dad’s living trust owns the property, then the trustee has the power to manage it under the terms of the trust instrument. That would be your dad, if he is the trustee, or you, if you are the trustee.

If your dad is no longer living, then your brother’s power of attorney would be null and void, and any property owned solely by your dad would become probate property. That property would then be managed by the executor under your dad’s will or by a court-appointed administrator. The property in your dad’s living trust would continue to be managed by you as the successor trustee.

That being said, I’m concerned that you and your brother have been placed in a very difficult position that will result in a major rift between you and your families. By your question, it’s already apparent that a disagreement is brewing.

Unfortunately, this almost always happens when siblings are placed in different roles, as with you and your brother. It creates a natural conflict that cannot readily be avoided as long as you remain in different and conflicting roles.

It is for this reason that I always recommend that all siblings be appointed to each of these positions – at least to the extent possible. Yes, it becomes cumbersome if three or more siblings are appointed as attorneys-in-fact, or as successor trustees, or as executors under the will. And, yes, you may be able to exclude some siblings without hurting any feelings, if, for example, some are too young, or too old, or live too far away, or have certain physical or mental disabilities that prevent them from serving. The important point, however, is that none of them should be offended and no conflicts should be allowed to exist. If that can’t be accomplished with the appointment of siblings, then an independent professional should be appointed to those positions. Its always better to have the siblings united against someone else rather than divided among themselves.

Charitable Remainder Trusts: Preserving Your Estate

Writen by Frank Amato

Most people would not dispute the value of financial and estate planning, but studies show that relatively few people actually adopt such a plan. Too bad, because in its present form financial and estate planning ensure that a person’s assets and property will be put to the greatest use during life, and to the beneficiary’s best use after death. Planning tools can be as simple as a will, or as complex as a trust. And many times, life insurance can play major role in a trust.

Although most people equate the need for an estate plan with the very rich, it doesn’t take much these days to exceed $600,000 in accumulated assets, the amount at which federal estate taxes kick in. An estate includes virtually anything of value:” real estate, stocks and bonds, savings, pensions, collectibles, jewelry and more. Proper estate and financial planning can help to lessen the eventual tax bite, which ranges as high as 55% of an estate, and preserve or even increase the value of an estate. Trusts can help accomplish those goals.

The definition of a trust is simple enough: an agreement in which a person, bank or trust company manages your assets for the benefit of your beneficiaries. Assets placed in a trust are no longer owned by the person who placed them there, but by the trust. Estate, gift and income taxes are naturally reduced on the individual’s shrunken estate.

The one notable exception is a revocable trust, one of the few that doesn’t offer estate tax advantages, but it does offer flexibility. As the name implies, the trust can be revoked or revised at any time. Assets in these trusts bypass the costly probate process, but are subject to full taxation since full ownership of the assets can be regained at any time.

An irrevocable trust doesn’t offer the same flexibility or control, but it does keep assets out of an estate until death — thus there’s less to levy taxes upon. Once an irrevocable trust is established, it can’t be changed without adverse estate tax implications.

Many planners will suggest that all or part of an irrevocable trust be funded with life insurance. Such an agreement can provide beneficiaries with the necessary liquidity to take care of estate taxes and administrative costs without having to sell off assets.

A Crummey Trust is one popular tool in this situation, allowing for the purchase of an insurance policy with gift-tax-free dollars.

Another type of irrevocable trust is the Charitable Remainder Trust, a vehicle in which assets, including life insurance, can be gifted to charity, allowing for tax deductions during the donor’s lifetime or upon dispersal of the estate.

A variety of other trusts can be used to pass assets to minors or dependents of any age, to spouses who are not U.S. citizens, and to ensure the orderly continuation of a business.

With the assistance of qualified financial advisors, a property structured trust can ensure that future plans can be carried out. Many times, life insurance makes those plans a financial reality.

Frank Amato is a Chartered Financial Consultant and the Managing Member of Arizona ESOP Group, LLC in Scottsdale, AZ. He is receptive to any comments and/or questions at (480)222-0199.

Visit message from Frank A. Amato at:
http://www.arizonaesopgroup.com/index.php?page=about

How Can An Estate Plan Help Me?

Writen by Aaron Grey

Do you know how your life will be divided after your death? Who will your estate go to Who will look after your children? With an estate plan you decide. You are in control of your family’s security in the event that something tragic should happen. Now perhaps you are a little foggy with some of the fundamental ideas associated with estate planning. Let’s start at the beginning.

According to Merriam-Webster’s Dictionary of Law estate planning is:
The arranging for the disposition and management of one’s estate at death through the use of wills, trusts, insurance policies, and other device

Your estate is everything you own, your assets and liabilities. This includes things such as your house, account in your name, your insurance policies, and vehicles. The problem with dying without an effective estate plan is that even if your property is distributed to the proper people, a process known as “probate court” may cost your heirs up to 10% of your assets net value. Also you must take any children that you are the legal guardian of into consideration. If you do not have an estate plan it may be probate court that decides who looks after them after them after you are gone.

You don’t want to let this happen to you and your family. You need an estate plan. Now, in order to start estate planning you are going to need to look into the following options: living wills, revocable living trusts.

A living will is a document in which you can spell out where all of your assets will be going. You may also modify this document at anytime. You are the one in control. This is a great way to avoid probate court.

A living trust allows you to name a person who will handle all of your legal affairs after you pass away. Your trust may either be revocable or irrevocable. Revocable means that, just like a living will, you can modify it at any time. However, in an irrevocable living trust you do not have the ability to change it.

Having an estate plan can help your family avoid many hardships after your passing. Don’t let your whole life fall into the wrong hands. Take control. Make an estate plan today.

Is Your Special Needs Child Included in Your Estate Plan?

Writen by Thomas McNally

You have undoubtedly made provisions for how your beneficiaries or guardians will handle your finances in the event of your death or disability. You’ve appointed a guardian for your young children and you’ve outlined instructions for how to handle your child’s education, finances and other expenses. Sure, you have a plan in place to provide for your child – but have you thought about special provisions for your Special Needs Child?

Special Needs Children require special care when planning your estate. Because your child may not be able to care for himself, the first and foremost consideration for him in your estate plan is deciding who will be your child’s guardian. In the event of your death or disability, your appointed guardian will be the protector of your Special Needs Child’s interests. Make sure you choose wisely.

If you have not appointed a guardian, then your child will have a guardian appointed by the court. You can rest assured that the guardian will be legally bound to adhere to the instructions that you’ve left behind.

When it comes to finances, you will also need to establish a plan that will take care of your child for the rest of his life. Depending on how you set up your estate plan, your Special Needs Child could have access to all finances that you’ve left behind for him or her. But, it’s not always strategic to leave all of your assets behind to a Special Needs Child.

If your Special Needs Child meets low-income requirements, he will have access to government and privately sponsored aid, such as in-home care, institutional care, medicines and support. Thus, leaving behind a large sum of money might actually work against your Special Needs Child.

Your Special Needs Child will most likely require special care for the remainder of his or her life. If he or she relies solely on the assets you leave behind instead of government-sponsored aid, then he will be out of luck when those assets are spent. Ultimately, the goal with a Special Needs Child is to keep him in a position to have access to government and private aid.

So what do you do with the estate you’d like to leave behind for your child? If you leave it for him, he can’t have access to the resources he needs. If you don’t leave it, how to do you know he’ll always be financially secure?

Luckily, the government has approved a Special Needs Trust to allay this concern. A Special Needs Trust is a simple, straightforward way to leave assets for your Special Needs Child without jeopardizing his or her access to government benefits.

You will appoint a guardian that will control the funds in the Trust. In the event that your child needs care that is not directly covered by a government or privately sponsored program, the guardian can use the Trust funds to cover any expenses.

Setting up a Special Needs Trust is a sound move for any parent of a child with special needs. The Trust assures that your child will be protected and financially independent, yet also have access to a lifetime of government and privately sponsored aid.

Thomas McNally is the staff writer at the National Directory of Estate Planning, Probate & Elder Law Attorneys. McNally stresses the importance of finding a qualified estate planning attorney to ensure that your estate passes to whom you want, when you want, and is carried out in the manner you’ve chosen.

Estate Planning Basics

Writen by Mansi Aggarwal

Greek philosopher Heraclitus had remarked that ‘you cannot step into the same river twice’ i.e. time will never be the same ‘Change’ is the only constant factor and ‘Death’ is the only certain thing in life. So what is true for today will not be true forever. A contended joyful life today does not entail happiness for all the successive years. Time can flip today or tomorrow. No one is sure that when the journey of life will meet its end and our eyes will never open again to see the sunshine. So, keeping the precariousness of life in mind, one should be prepared for the good as well as bad times.

An essential feature of this preparation is the planning of one’s estate. Estate planning is foremost judicious step in securing your family’s future and also to fulfill your desires after you depart from the world. Generally people think that they do not need to allocate their estate now, this should be done in old age. But the fact is that it is never too early to plan your estate. Doing so will be a great assistance to your successors. They will not have to tax their brains in dividing and managing your share. This will save their time and effort. You will also snatch your estate from being the victim of many expected quarrels that may arise amongst your heirs. The best part is that it is your wish that will be obeyed even in your absence.

Apart from these merits, another wonderful thing to pre-planning estate is the saving of tax. In order to do this you require gathering complete information about the types of will, the adequate time and manner of allocation of estate. Your attorney can be the best person to seek advice from. Once you make your intentions clear to him, he can direct you the correct way to follow to achieve your goals.

There are several ways in which estate planning can be done. For instance you can make wills (living wills are even helpful within your lifetime), plan your funeral arrangements, life insurance and other directives. ICMA RC is a good source to seek help and guidance. It directs you the step-by-step procedure to prepare your will and the manner in which you should bifurcate your assets. ICMA RC also makes one aware that if he or she does not write the will during his or her life period then after death the court will have the authority to allocate the property to the members. For those who have their own business ICMA RC especially suggests is to leave behind a paper trail behind. Documentation is the biggest evidence for your plans and desires for the future.

Whereas future life (old age and its consequences) is concerned Americans today largely rely on the Long Term Care Insurance. This has proved to be beneficial to numerous Americans in today’s date. However, one should be ultra careful and educated about the merits and demerits of policy before laying hands on it.

Often people question the pre planning of funeral arrangement. They think it is comical and worthless to do so. But they forget that by pre planning their funeral they are making things least complicated for their loved would be survivors. It is generally seen that when somebody dies his family members are gripped with the tension of funeral arrangements. They do not get any time to express their feelings and feel the loss that they have met. However, if the one who has died has pre planned his funeral; everything goes smoothly without any hustle bustle and in accordance to the will of the deceased.

So when are you planning your estate nowRemember it’s now or never!

Mansi aggarwal writes about estate planning. Learn more at http://www.stepstoestateplanning.com

Private Trust Companies

Writen by Jon Dow

A Private Trust Company is, essentially, a company formed for the specific purpose of acting as trustee of a single trust, or a group of related trusts. It is not uncommon for settlors to wish to retain a degree of control over assets they settle into trust and this is sometimes achieved by reserving specific powers under the terms of the trust. Such a course has risks, however, and in some cases Courts have ruled that the trusts are a sham. This can have unwanted fiscal consequences and may expose the assets to claims by creditors. Another means of retaining influence might be to appoint members of the settlor’s family or his financial advisors as trustee. This is not always possible as the trust may be treated, in consequence, as tax resident where these persons live.

With a Private Trust Company, the settlor, members of his family or his advisors can be appointed to the Board of Directors and in this capacity they are in a position to influence the manner in which the trust is administered. The composition of the Board can be changed from time to time to bring in members of succeeding generations and in this way involve them in the management of the family affairs. The company itself will generally be administered by a fiduciary in the chosen offshore location and which will be represented on the Board.

A professional trust company will often not be in a position to offer the settlor the degree of flexibility and the speed of response he is looking for and its employees cannot be expected to be as familiar with the business of companies owned by the trust as will be family members. Decisions may have to be referred internally and independent advice taken before they can be put into effect. If a change of trustee is desired it can be a lengthy and expensive process. With the Private Trust Company however, problems such as these can be largely avoided. People familiar with the business make the decisions and a change of direction for the management of the trust can be achieved by changing the Board of the Private Trust Company.

Although it all sounds simple there are some other considerations, which must be taken into account. All the major offshore locations now have a licensing regime for professional trustees and the Private Trust Company may have to apply for a license. This means that, not only will its owners and officers have to qualify, and proposed changes be approved in advance, but also that the ongoing compliance formalities could be onerous. The directors will also have to remember at all times that when they are taking decisions in relation to the trust; it is the interests of the beneficiaries as a whole, which must be considered. They should not be unduly influenced by their personal circumstances, something that is not always easy. The Private Trust Company is nevertheless the right solution in the appropriate circumstances.

Ref: CO270406

Chesterfield provide offshore trust consultancy, management and administrative services covering offshore company and trust formation and offshore partnerships and management for trading, investment holding, asset management and estate and tax planning. For more information on these services and buying a property in the UK visit http://www.chesterfield-offshore.com

Estate Planning – Rules and Trustees

Writen by Ronald Hudkins

If you are wisely attempting to put some assets into a trust (inter vivos) in your lifetime, then you have been paying attention to the important differences between wills and trusts. A trust created during your life will be far more secure with respect to its ability to withstand challenges to how your assets are to be distributed during estate planning than a will. Making a trust is a brave thing to do, because it telegraphs, to a certain extent, what you are going to do with your assets while you are still alive. This is what insulates it from attacks on your capacity, because it is unlikely, for example that, one of your relations is going to say you are insane or feeble and unduly influenced by another of your relatives to your face and this makes the trust a far surer bet than a will, in some cases.

However, the trust also may engender hard feels regarding the exclusion of a relative and those feelings will become known to a person creating a trust while they are still alive. This is the advantage of a will — if people don’t like it, you will never know. The will maker is long gone when those that don’t like what they have done contest the will and those that do like it try to defend it. Although, it should be noted that clever drafting should be able to alleviate the necessity of either a contest or a defense. That is why you need a clever estate planning attorney to create your will rather than just a form. The attorney that creates your will often defends its contents, or in other words, their understanding of your wishes. The trust is a different story, because your trust will be administered by someone (called the trustee) for the purpose of those that the trust benefits (the beneficiaries).

One of the paramount problems of forming a trust is deciding what powers the trustee has and what powers they do not have relative to the assets you have placed in trust. Remember that a trustee is already assumed to have a duty to benefit the trust and that many states have laws regarding what a trustee can and cannot do, if the settlor (the creator of the trust) does not specify otherwise. But, again, you don’t want to leave the financial destiny of your trust up to the state any more than you want the state to decide who gets your assets. Your wills and trusts attorney will be able to give you a list of the traditional powers of a trustee in your state and tell you what they mean.

Many of the powers concern what type of assets the trustee can invest in on behalf of the trust. For example, the trustee is sometimes prohibited from buying general securities for the trust because they are considered too risky. But, if you have chosen your trusted stock broker as your trustee and she has agreed, then this might be exactly the restriction you don’t want. Consult with your attorney about the kind of trust you would like to create and what the rules are in your state. Remember, that these rules are there to cover the bases in case you don’t make your own rules. Understanding the rules that are there, and why, will give you a sense of the kinds of rules that might be good and the ones that you would rather not have. In addition, you will be able to give the trustee more freedom than the state rules would allow, or less, depending on how conservatively you want your assets to be managed.

Be prepared to have a candid conversation with your attorney regarding what the rules are and what you would like to see happen. It is good to remember that your estate planning attorney has seen many trusts and understands how they work. Sometimes restrictions that seem good today might be the very restrictions that cripple your trust in a vastly different economic environment. In some cases, a trust may span several decades and the trustee may change along with the climate the trust was created in. When radical economic changes have occurred, a trust with greater flexibility will be beneficial. So you have a lot to think about as you enter the exciting world of forming a trust. Don’t let rules be off-putting, they are there as guides and when you understand them you will have a greater understanding of what you need. Ask your estate planner to give you information about the current rules and some general advice about how to choose a trustee.

About Ronald E. Hudkins; Ronald Hudkins is a retired U.S. Army Military Police member that was assigned as a staff researcher. He has coordinated with military and criminal investigators, set on court marshals and worked closely with the Staff Judge Advocate Generals Office (JAG). He has a keen sense of legal matters – their interpretation, initiatives and guidelines. For imperative financial planning needs he suggests his book “Asset Protection and Estate Planning for All Ages.” Additionally, he offers a Free Newsletter at his web site: http://www.AssetProtectNow.com