Don’t forget to tune in today to WNAV Radio on 1430 AM or 99.9 FM @ 3:50pm to listen to Your Estate Matters with Attorney Paula M. Mattson-Sarli.  The topic is How do you know if you’re working with qualified professionals?

SinclairProsser Law, LLC is a member of the American Academy of Estate Planning Attorneys.

Insurance Can Play an Important Role in Estate Planning – Attorney Colleen Sinclair Prosser

SinclairProsser Law, LLC is a member of the American Academy of Estate Planning Attorneys.

Another year

And we’re still here

As we always plan to be

As your resource

To direct your course

In preserving prosperity

Should you want to establish

A Will or a Trust

Without hesitation

The answer is us!

In Trust Administration

We minimize taxes

To those who are aging

Our guidance relaxes

We’re experts at pre-nups;

And post-nups, it’s true

Business succession planning

We can position for you.

As your estate planning expert

We give peace of mind

Our team stands to serve you

Through the passage of time

SinclairProsser Law, LLC is a member of the American Academy of Estate Planning Attorneys.

When you put your estate planning in place you took some valuable steps to protect your family from guardianship, probate and/or estate taxes.  The current system of estate taxation in Maryland taxes estates in excess of $1,000,000 for a single person.  For a married couple with a living trust, $2,000,000 would be exempt.

Do you want to take additional steps to reduce or eliminate estate taxes?  Here are a couple of examples:

Gifting. You can transfer $13,000 per year to any person.  It is very simple and very easy.  If you would like to gift more than $13,000, then you will need to file a gift tax return and the amount in excess of the $13,000 will reduce your Federal estate tax exemption, currently $5,000,000.  However, since Maryland does not have a gift tax, your Maryland estate tax exemption will remain at $1,000,000.  There are also exemptions for gifts to pay educational and medical expenses.

Irrevocable Life Insurance Trusts (also commonly referred to as an ILIT “eye lit”).  You can transfer your life insurance policies to an irrevocable trust and exempt the proceeds from your estate.  You may also want to buy a life insurance policy and place it in the ILIT to create a source of cash to pay final expenses and estate taxes upon your death.  If you purchase the policy and you do not put it in an ILIT, then you are increasing your estate for greater taxation at your death.

Qualified Personal Residence Trust (also known as a QPRT “queue pert”).  This irrevocable trust allows you to place your home and/or a second home in a trust and exempt the value of your home from your estate.

Grantor Retained Annuity Trust (also known as a GRAT).  This is also an irrevocable trust that can be used to remove future appreciation of an asset from your taxable estate.  You would gift an asset or assets to the trust, receive a stream of income for a period of time, and at the end of the term of the trust the principal is distributed to the beneficiaries of the trust, most likely your children or grandchildren.  The success of the GRAT depends on the performance of the asset(s) gifted to the GRAT.

Family Limited Liability Company. This tax reduction strategy allows you to gift small portions of an asset to family members without having to break apart the asset.  Real estate or businesses are good examples of the type of asset best suited for a Family Limited Liability Company.

As with all tax reducing strategies, there are many technical issues that you will want to be aware of before implementing one of these plans.  It is important that you meet with a qualified estate planning attorney to discuss which options are best for you and your family.

SinclairProsser Law, LLC is a member of the American Academy of Estate Planning Attorneys.

Hollywood legend Elizabeth Taylor will be remembered for many things: her stunning violet eyes, her multiple marriages, her film accomplishments, and the success of her perfume and jewelry businesses. But Ms. Taylor may be remembered most of all for her philanthropy, especially relating to the fight to find a cure for AIDS and to end discrimination against those afflicted.

Much of the Oscar-winning actress’ wealth, which could top $1 billion, is expected to be distributed to charities, including the three charitable foundations she helped create – the National AIDS Research Foundation, the American Foundation for AIDS Research, better known as “AMFAR,” and the Elizabeth Taylor AIDS Foundation. Many commentators expect the bulk of the proceeds from the auction of her jewelry collection, expected to top $150 million, to go directly to these three charitable organizations. Most commentators speculate that the residual of her trust assets will be distributed among her four children and many grandchildren, with whom she had good relations.

The exact terms of Taylor’s estate plan are unknown because she used a trust as her primary estate planning document, rather than a Will. Because a Will requires a probate administration, its terms become public record. Many people prefer to use trusts as their primary estate planning document because of the privacy it offers by avoiding the probate process.

Taylor’s AIDS work saw her address the General Assembly at the United Nations. She was a huge supporter of Ryan White, the 18-year-old who died of the disease in 1990 after attracting a frenzy of media attention when he was expelled from his middle school because of the disease, which he contracted from a blood treatment for his hemophilia. At a time when AIDS was poorly understood by the world, Ryan helped reduce stigma and raise awareness. Over the last twenty years, Ms. Taylor worked tirelessly to fundraise and reduce the stigma that surrounds AIDS, and was honored by a plethora of organizations that recognized her commitment to the cause. She was presented with the Jean Hersholt Humanitarian Award by the Academy of Motion Picture Arts and Sciences (“AMPAS”), the Marion Anderson Award, the Vanguard Award by the Gay and Lesbian Alliance Against Defamation (“GLAAD”), and she was honored by the Women’s Image Network. Other honors she received include the French Legion of Honor, the Presidential Citizens Medal, and being made Dame Commander of the Order of the British Empire.

The portion of Taylor’s estate paid to charity will NOT be subject to estate tax. Any portion of her estate over the amount that can pass free of estate tax, currently $5 million, may be distributed to her children and grandchildren and will be subject to estate tax and possibly GST tax. Given the size of her estate, the estate tax could be in the millions of dollars.

For persons who are charitably inclined like Elizabeth Taylor, there are various planning strategies available that both reduce estate and GST taxes and provide funds to worthwhile causes. Outright gifts to charity, both during life and at death, reduce the estate by the amount gifted to the charity. Depending on the law at the time of the death of the donor, the amount of estate taxes saved may be as much as 55% of the amount given to the charities. If the individual wants to retain some control regarding how the funds are to be used, he or she can make a gift to a donor advised fund at an established charitable organization. Even greater control can be retained over the use of the funds through the establishment of a charitable foundation by the donor, either during life (as Elizabeth Taylor did) or upon the donor’s death.

Two additional planning options, a charitable gift annuity and a charitable remainder trust, allow the donor to gift money or property to a charity while retaining a stream of payments for a term of years (not to exceed twenty years) or the life or lives of one or more individuals. The value of the charitable gift (and thus the amount of the charitable deduction for income and estate tax purposes) using these planning options is the present value of the remainder gift to the charity. The payment stream retained by the donor remains a part of the donor’s estate, unless expended during the donor’s lifetime.

Another planning strategy, a charitable lead trust, is basically the opposite of a charitable remainder trust. Payments are made to the charity for a period of years, with the remainder at the end of that period passing to designated beneficiaries, usually the children of the donor. The value of the charitable gift using this planning option is the present value of the payment stream made to the charity.

In certain circumstances, it may be appropriate to combine the use of these various charitable planning strategies with the purchase of a life insurance policy through an irrevocable life insurance trust. This wealth replacement strategy allows the amount of the death benefit from the life insurance to be paid income and estate tax-free to the designated beneficiaries, usually children and grandchildren of the donor, as a substitute for the funds that were given to the charity.

SinclairProsser Law, LLC is a member of the American Academy of Estate Planning Attorneys.

By: Stephen C. Hartnett, J.D., LL.M., Associate Director of Education, American Academy of Estate Planning Attorneys

After much wrangling and politics, on December 17^th, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, otherwise known as “TRA 2010.” The law did many things:

• Temporarily extended the Bush-era income tax cuts,
• Temporarily extended the program extending unemployment insurance benefits,
• Temporarily cut employee’s FICA tax by 2%, and
• Temporarily provided estate tax relief.

From an estate planning perspective, the new law set the amount that could pass without an estate tax at $5 million per person for 2010-2012. However, the new law is temporary and will expire after 2012. In 2013, the amount that can be passed free from tax will go back down to $1 million per person. Thus, unless the law is changed again between now and then, someone dying in 2013 would only be able to pass $1 million without an estate tax.

As before, you can use a portion of that exclusion to make lifetime gifts, but then it would not be available at death. In 2010, you can use up to $1 million of your exclusion during your lifetime. In 2011 and 2012, you can use your whole $5 million exclusion during life. Of course, then you would not have any available at death.

Congress also introduced a new “portability” provision. This is where one spouse can add their deceased spouse’s remaining estate tax exclusion to their own exclusion to shelter more from taxes. This portability provision, also known as the “Deceased Spousal Unused Exclusion Amount,” can be used to shelter the assets of the surviving spouse. While intriguing on the surface, under current law this portability tax benefit only happens if both spouses die in 2011 or 2012. If either spouse hangs on until 2013 or beyond, there is no portability option available.

In addition, the new law reduces the top estate and gift tax rate to 35% in 2010-2012. However, a top rate of 55% returns in 2013 and thereafter.

So, what’s the gist of the new law? Prior to TRA 2010 we were facing a return to the $1 million estate tax exclusion on January 1, 2011. Now, we are still facing a return to the $1 million estate tax exclusion; it’s just put off for two years now—to January 1, 2013. The bottom line is that TRA 2010 is temporary. In two years, it will disappear as though it had never existed.

SinclairProsser Law, LLC is a member of the American Academy of Estate Planning Attorneys.