Changes in certain tax and investment rules will dramatically effect estate planning in the near future. These changes may warrant a phone call to your estate planning advisors for a quick check up.
New FDIC Rules for Living Trust Accounts
Living or family trust bank accounts are now insured up to $250,000 per owner for each named beneficiary. For example, if a father has a bank account owned by his living trust, and his two children are equal beneficiaries, then the deposit account held by the trust at an insured bank could be insured up to $750,000. There are exceptions and you can find the information at: fdic.gov.
Estate Tax Update
Current Exemption Amounts created by Tax Relief Act of 2001The federal estate tax rate and applicable exclusion amounts will be
as follows until repeal for the year 2010:
Calendar Estate Applicable Highest Estate
Year Exclusion Amount and Gift Tax
2005: $1.5 million 47%
2006 : $2 million 46%
2007: $2 million 45%
2008: $2 million 45%
2009: $3.5 million 45%
2010: Unlimited (no tax this year!!) Top Individual rate (gift tax only)
2011: $1 million 45%
After 2011, the Disclaimer A-B Trust (IRC Sec. 2046 & 2518) can be a very useful estate planning tool for families with intermediate sized estates. The Disclaimer A-B allows a delay in the decision to possibly split the estate into separate A and B trusts, while preserving the ability to obtain a double estate tax exemption, which may or may not be required depending on applicable tax laws and asset values in the future.
Since the surviving spouse can decide whether to disclaim within 9 months after the death of the first spouse, the chance exists that an inconvenient estate split and unnecessary loss of control would be experienced. As laws constantly change, it is important to have a flexible estate plan with periodic reviews, especially if there have been any changes in your family or financial situation.
The Special Needs Trust: Planning for a Disabled Dependent
If you have a member of your family who is physically, mentally or developmentally disabled — whether from birth, illness, injury or drug abuse – he/she may be entitled to valuable government benefits (SSI and/or Medicaid) now or in the future. Therein lies the issue where most of these benefits are available only to those with very limited means. You may, therefore, be faced with a difficult choice. If you leave a substantial inheritance to this person, he/she will be disqualified from receiving government benefits which would be crucial for his/her care.
Alternately, you may not want to disinherit him in order to preserve these benefits. Fortunately, a special needs trust will keep you from having to make this very difficult decision. A special needs trust must be very specific in stating that its purpose is to supplement government benefits, to provide only benefits or luxuries above and beyond the benefits the beneficiary (disabled person) receives from any local, state, federal or private agencies.
It is critical that the trust not duplicate any government-provided services and that the beneficiary not have any resemblance of ownership of the trust assets. In that situation, the government could attempt to seize the trust assets for repayment of services already provided or determine that the beneficiary does not qualify for future benefits
To accomplish this, you will need to give the trustee complete control over the distribution of the assets and any income they generate; the beneficiary cannot be able to demand any principal or interest from the trust. Pay careful consideration to your choice for trustee. Of course, you (and your spouse) will continue to provide for this person while you are alive and able. But someone will need to assume this responsibility after your death or incapacity. The most obvious choice is another family member who also cares deeply about this person. But be aware of a possible conflict of interest, especially if he/she will inherit the trust assets after your disabled dependent has died; he/she may care more about preserving trust assets than providing for your beneficiary. Consider using (or adding) a corporate trustees such as a bank or trust company that specializes in managing trusts. They can be impartial, and they will be around for as long as your beneficiary lives. Finally, be sure to work closely with an attorney who specializes with these trusts.
Warning to LLCs and Corporations
Owners are increasingly receiving by mail official-looking documents regarding their
corporations or LLCs, from private companies such as Corporate Compliance Centre, Annual Minutes Compliance Board, Board of Business Compliance, Annual Minutes Division, Corporate Headquarters and other similar organizations. These letters appear to require the filing of annual minutes or a shareholders and directors report with a government agency, along with an annual filing fee of anywhere from $95 to $150 along with a filing deadline.
These official-looking letters are fraudulent and are designed to mislead corporation and LLC owners into sending money. You do not have to comply with these requests. If you check the fine print, most of the solicitations indicate that it is not an official document and that there is no affiliation with the State. Should you receive one of these suspicious solicitations, consult with your attorney prior to sending any money.
For those who have already mistakenly paid money due to a fraudulent solicitation, complaints can be filed with the California Attorney General’s office by mail, telephone, fax, Internet, or email, as follows: Attorney General’s OfficeCalifornia Department of Justice, Attn: Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244-2550, 1-800-952-5225 (Toll-free in CA) or (916) 322-3360, http://ag.ca.gov/consumers; piu@doj.ca.gov
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Craig Higdon, “The Insider”
www.ExcelsionMortgage.com, www.InvestmentPropertyInsider.com, www.CommercialLoanCoach.com
Craig Higdon has over 16 years experience in financing commercial loans, small business loans, construction loans, and land loans. He owns Excelsion Mortgage, a commercial mortgage direct lender offering a wide range of commercial lending resources to investors and commercial real estate service providers.
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