Estate and Tax Planning e-Bulletin
November, 2014
 As 2014 winds down and the New Year approaches, now is the time to fine tune your estate plan before the chaos of the holiday season is in full swing. It is important your estate planning continues to reflect your current goals and circumstances.


In this newsletter, we will review some critical issues that many people fail to consider. Wishing you and yours a wonderful holiday season.


                               John R. Crawford


                                                        Florida Bar Certified in Tax Law          

2015 Estate and Gift Tax Update
Beginning in 2015, the Federal estate and gift tax exclusion will increase from $5.34 million to $5.43 million.
Beware of New IRA Traps                   

The IRS has tightened its IRA rollover rules.  The "one-rollover-per-year" rule which allows you to withdraw IRS funds tax and penalty-free, provided you reinvest the funds in the same or another IRA within 60 days, will be restricted to one account per year, regardless of how many IRA's you have.  There remains no limit on trustee-to-trustee transfers between IRA's.  Click here to read the official rule.


In addition, in June the Supreme Court ruled unanimously that inherited IRAs are not protected from creditors in bankruptcy. This ruling does not affect your own IRAs but could apply if your non-spousal beneficiaries declare bankruptcy. The good news is that certain states can offer bankruptcy protection - and, for that matter, creditor protection in non-bankruptcy situations - to inherited IRAs under state law, including Florida.  If your beneficiaries reside in another state, however, you may want to explore an IRA trust to continue their IRA protection.

Estate Planning 101                   

Many people think estate planning is only for the wealthy. This is their first mistake! Thinking and, more importantly, planning to maintain the value of your assets for you and your beneficiaries you would be wise to consider these options when reviewing your estate.


  1. Hire an experienced estate planning attorney. Pay now or you may pay much more later. Many do not want to pay legal fees for something that they think they can do themselves with will-writing software that sells for less than $100. It is important to know the legal intricacies that only a lawyer with expertise in estate planning can provide. Make time to meet with your estate planning attorney on a regular basis to ensure your estate will pass to your beneficiaries the way you intended.


  1. Choosing the right trustee - Choosing an unbiased third party to manage the interests of preserving family peace and abiding the direction of the estate.  Family members or close friends may be put into an uncomfortable situation that can easily be avoided.


  1. Consider a revocable trust - Many people consider their last will and testament as the best way to distribute your assets, but this may result in your estate enduring a public probate process that can be costly and intrusive. A revocable trust can eliminate this process and ensures privacy. But remember, a trust only avoids probate if it holds your assets; It is important to rename your accounts in the name of the trust. 


  1. Estate planning doesn't take care of itself - Consider how much has changed in your life this year. Have your circumstances or goals changed? Do you have more assets that need to be addressed? Do you have additional beneficiaries? One of the biggest misconceptions of estate planning is setting it up and forgetting it.  Life changes and so might your current framework. 


Plan to review your documents every year or whenever your life, or the estate law, changes. Your attorney can provide you the guidance on any new rules that may be applicable to you and your estate.
Minimizing Capital Gains
The federal estate tax is no longer the cloud over the heads of most affluent people who wanted to avoid taxes on wealth they leave to heirs. The rules governing income and estate tax have now opened tax savings on capital gains by those who choose carefully which assets to hold until death. The top federal rate on long-term gains is at nearly 24%. As a result, many people are focusing on minimizing capital gain taxes and state levies.  The high exemption is prompting changes in gift strategies and trust planning.  You should plan which assets to hold until death to maximize, what is coined, "step up" , which cancels the long-term capital-gains tax on assets that a taxpayer holds until death.  Some advisers also suggest withdrawing from traditional IRAs or other retirement plans because the assets don't get a step-up in basis. The step up also affects tax-saving trusts; presently a surviving spouse can claim the unused portion of a partner's exemption. Many couples in states with death taxes (click here) will need tax-savings trusts also.  Finally, consider the gifts you make to other people as part of your estate planning; often this is counterproductive given that the original owners cost basis carries over to the recipient so the gift is really an expense.

Be(a)ware of Fraudulent Transfer Laws           

As you consider your estate planning options be aware of that most states (including Florida) have adopted the Uniform Fraudulent Transfer Act (UFTA) which allows creditors the ability to challenge your gifts, trusts and retitled property as fraudulent transfers. You should consider how a court might view a transfer before you make or gifts or place assets. Discuss any potential transfer with an experienced asset protection attorney before taking action to transfer your wealth, whether the transfer is intended to save estate taxes or to actually protect assets from lawsuits or creditors.

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