Should I put my Florida homestead in my living trust?

Hello Mumbo Jumbo-ites!

So I'm fighting off the Florida summer heat and the doldrums to continue to deliver great estate planning content to you offered like no other law firm.  

One question that has often come into my practice, and has actually been the subject of some debate within the legal community, is whether a Florida Homestead should be titled into a revocable living trust?  

This question arises due in large part to the unique homestead protection offered under the Florida Constitution.  First, when we talk about homestead protection in this context we are not talking about the tax exemption status offered by the county of residence.  Rather homestead protection in this context refers to the protection against creditor attachment or protection against liens and/or judgements filed against the homestead by a creditor of the homeowner. 

Florida is unique in offering 100% homestead protection provided the real property meets the requirements of 1/2 acre within a municipality or not more than 160 acres outside of a municipality. 

Where things got a bit dicey for awhile related to an inconsistency between the 4th Circuit which held that homestead protections were secure within a living trust and a Federal bankruptcy case which seemed to suggest the opposite. Consequently many practitioners were opting not to title homestead property  into living trusts for many years. The inconsistency in the court decisions has since been remedied such that now it is clear that full homestead protection is afforded to homestead real property that is held within a revocable living trust.  

As a side note...you need to be sure to understand the difference between a revocable and irrevocable trust because the homestead protection is not available for irrevocable trusts.  

Another nugget...recent Florida legislation also allows a homestead to be afforded full protection if held in a Florida Land Trust...the topic of a future article. 

The take away is that if your homestead is not in your revocable living trust you should have it looked at by your favorite Florida estate planning attorney, hint, hint...

Until next time friends.

SJG

What? Did you say Gun Trust?

Hello Mumbo Jumbo-ites!  

Back again for your monthly infusion of legal wisdom, delivered like no other law firm...

Guns and gun ownership are a hot topic right now so without getting controversial, let's focus on what we all agree upon.  

We all agree that firearms must be handled wisely.  But you may not know that the idea of handling your firearms wisely concerns your estate planning as well as gun safety training, gun storage, etc. 

This brings us to the topic of the NFA Gun Trust.   Essentially, NFA refers to the National Firearms Act which was passed by in 1934 and gave the Congress an authority to tax firearms but had an underlying purpose unrelated to revenue collection which was to curtail, if not prohibit, transactions in certain types of NFA firearms. A $200.00 tax on the making and transfer of certain firearms was considered quite severe and adequate to carry out Congress' purpose to discourage or eliminate transactions in these firearms, also known as Title 2 Firearms or Class 3 Firearms.  The NFA has undergone a couple of amendments since 1934 but the basic provisions (including the $200.00 tax) have never changed.

So what is the purpose of an NFA Gun Trust?  Simply put, NFA Gun Trusts are an alternative to registering the guns in the individual's name and offer a few advantages. The idea is that the trust is the registered owner for NFA purposes (and anyone else in it).  Anyone listed in the trust as trustee may legally possess the guns as trust property. A grantor sets up the trust and may name anyone over age 18 as trustee. The grantor may also list as many beneficiaries as he or she likes and there is no age requirement under Federal law to be a beneficiary. 

The advantages of a Gun Trust are that they are set up to be very flexible as to who owns the guns.  Most Gun Trusts are established as a revocable living trust and thus the trustees, the beneficiaries and the gun ownership may be changed as long as the grantor has capacity.  

The key is that the NFA Gun Trust may be a Living Trust that is the registered owner of the guns and this preserves maximum flexibility and assures the easy passage of the guns to the beneficiaries.  Another key is that the Gun Trust ensures family privacy as does any other revocable living trust. 

Anyhoo, just another shot across the bow:)

Until next time friends...

Anybody psyched about Tax Freedom Day?

Hello Mumbo Jumbo-ites!

So to unpack the concept of this special day on our calendar, and you may note my cynicism, this is the day that the nation as a whole has earned enough money to pay its total tax bill for the year.

So this year Tax Freedom Day is April 18 which is five days later than last year. This may or may not seem significant to you. Let me unpack it some more...

Americans will pay $2.76 trillion in federal taxes and $1.45 trillion in state taxes, for a total tax bill of $4.22 trillion, or 29.4 percent of income. April 18 is 29.4 percent, or 108 days, into the year. Now depending on the state tax rate, the individual date for your state may vary.

Tax Freedom Day is five days later than last year mainly to the fiscal cliff deal that raised federal taxes on individual income and payroll. Additionally, the Affordable Care Act’s investment tax and excise tax went into effect.

Anyhoo, suffice to say that the Americans who pay taxes, emphasis noted, will work on average almost four months just to pay Federal Taxes. I know this is a bit of a downer but I'm all about informing my friends and valued clients and after all...tax day is upon us.

Of course monitoring taxes carefully is important for many reasons including your estate planning, business planning and other asset protection concerns.

Stay alert friends...until next time.

SJG

Getting Crazy With Business Entities and Taxes

Hello Mumbo Jumbo-ites!

Once again, your monthly infusion of legal wisdom, delivered like no other law firm...

So as you know, the deadline for filing corporate tax returns is March 15th.  This all begs the ever mystical question of taxation with entitization (I made that up) or how to manage business entites for tax planning purposes?!?

There are a number of key considerations to be addressed (the stuff they don't talk about on the cheapo web document sites).  Remember the old adage:   You don't know what you don't know.   Some key questions are as follows:

What kinds of assets (or income) are associated with the business entity?

What is the business purpose for the entity?

Are there unique risk management considerations related to the business purpose or assets?

What kind of maintainence do you want to have concerning the business entity?  In other words, how many annual reports or tax returns will you need to be keeping on top of on an annual basis?

How many members or shareholders will there be and what will those relationships involve?

Will there be a desire to add new partners or members or to sell partnerships or memberships?

The foregoing are just a few of the introductory questions that MUST be asked?

The foregoing questions will inevitably lead you to the question of whether you should be taxed as an S Corp (small business election under the Tax Code), a partnership or a sole proprietorship?

There are advantages to the S Corp status which may result in substantial tax benefits but there are limitations as to when this election should be used.  The key is the type of business income, the relationship between the partners and the amount of revenue generated by the business.  Whether there is an intent to raise additional investment capital is another key concern?

The take away here is that proper use of business entities may result in substantial tax advantages but a prudent review must be conducted prior to designing an appropriate strategy to meet your specific objectives and situation. 

More on business entities next time...

Until then friends...

Why Florida Medical Directives Are Unique Among the 50 States?

Hello Mumbo Jumbo-ites!

Back again for your monthly infusion of legal wisdom...

Today the topic concerns your medical directives...

First things first, when we talk about your medical directives we are talking about a couple of different documents.  If you aren't aware of this simple fact, I recommend reviewing your documents and possibly consulting your favorite estate planning attorney, hint hint...

Anyhoo, your medical directive is comprised of a Living Will, which is essentially a "do not resuscitate" and this document was brought to the forefront of most of our lives for awhile during the Terry Schiavo case. 

The Living Will has been an area of concern for the Florida legislature since the Schiavo case for obvious reasons.  The fact is that Ms. Schiavo did not have a Living Will, but even if she had, the controversy would have raged on because the current FL legislation did not allow life support to be removed for someone in a persistent vegetative state, which was Ms. Schiavo's prognosis at that time. 

The Florida legislature has sinced amended the statutes so that life support may be removed where any 1 of 3 prognosis exists which are:  1.  Persistent vegetative state  2. Terminal conditions or 3.  Irreversible end stage condition.   You must review your living will to see if these prognosis are mentioned and to assure that you have initialled at least 1 of them...

Enough said on that.  Additionally, medical directives include what we call a Designation of Healthcare Surrogate which is basically an appointment of someone to make medical decisions for you in the event you cannot...you should have both of these documents as part of your Medical Directive and probably a general release of medical records for those closest to you.

The kicker and the big difference in the Sunshine State, which is Florida for you newbies, is that Florida is the only state in the USA that leglislatively requires medical directives to be updated every 24 months.  So if your documents were signed more than 24 months ago, it may be time to have them reviewed and newly executed to ensure the presumption of reliability.

I hope this information is helpful.

Until next time...

SJG

Why it is important to have your old Power of Attorney reviewed for compliance with new FL law?

Hello Again Mumbo Jumbo ites!

As we recently turned our clocks to 2013, it is timely to mention the Florida Legislature's decision of just one year ago to rewrite the statutes governing Powers of Attorney in the State of Florida. 

As a bit of background, a Power of Attorney allows another person to make business decisions on your behalf and there are many different types.  In the estate planning world, the preferred type is a Durable Power of Attorney.  The "durable" nature of this Power of Attorney provides that it does not terminate upon one's disability where other Powers of Attorney would in fact terminate upon disability.  Thus, a Durable Power of Attorney, provides you with some protection in the event you are disabled and cannot manage your own business decisions. 

The revisions to the Power of Attorney Statutes had two major impacts which are as follows.

1.  Virtually eliminated the option to provide a "springing" Power of Attorney.  A springing power of attorney allows the power to become effective only upon disability such that it "springs" from the disability and this type of power of attorney is no longer permitted by Florida Statutes.

2.  Required that all the specific powers my be independently authorized by the initials of the party granting the power of attorney, such that the one authorizing the power is aware of the specific powers that he or she is giving away.

While the change in legislation does not invalidate an old Power of Attorney document it does, in my humble opinion, raise a question of whether the old document should be deemed reliable by the powers that be who are most notably banking institutes.  I should point out that most lending institutions have highly paid, well motivated and highly paranoid legal departments.

Anyhoo, the take away friends is that it is expeditious to have your powers of attorney looked at and probably updated to assure that you're covered if something were to happen.

Next time...will review a similar issue re; medical directives in Florida!

Until then...

Why it may make sense for you to update your Powers of Attorney ASAP!

Hello Again Mumbo Jumbo ites!

Popular demand has persuaded me to re-initiate Legal Mumbo Jumbo at the sorrowful expense of my previous, but considerably stuffier, newsletter.

So you will see some improvements in the coming weeks as this blog makes a dramatic come back with a facelift and some other fresh ideas.

We welcome your comments as we are always working to serve you more effectively.

So for this week's edition, just a foreshadowing of the weeks to come:

Why it may make sense for you to update your Powers of Attorney ASAP!

Why Florida Medical Directives are unique among the 50 states!

What on earth is happening "legally speaking" in Texas!

Latest Federal Estate and Gift Tax updates and how this impacts Florida!

Stay tuned for great things Friends!

S. Gibbs, Esq.

Thoughts About A-B Trusts?

Hello Mumbo Jumbo ites! Happy Cinco de Mayo.

I was recently in a conversation over chips and salsa with a financial advisor who asked me about A-B trusts in light of the new interim federal estate tax laws which establish the exemptions for estate and gift taxes at 5 million dollars.

As I shared with him, this is a very tricky question because we don't know what will happen next year as the Federal government has declined to inform the public as to what direction they will go? I attribute this lack of information to the ideological battle that is currently waging in Washington.

In any event, it appears that the A-B trust may become useful for those with moderate to large estates in the near future but we cannot be sure for now. In any event, an A-B trust can be implemented effectively within a joint trust so for those of you with 1-5 million dollar estates who have separate A-B trusts, you might consider speaking with your estate planning attorney about updating your plan.

Until next time.

SJG
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Get juiced about your estate planning, yeah!!!

Hello my MumboJumboites:

Hungry for knowledge today?  My guess would be yes!  I hope your day is going excellently and I thank you for signing in!

Did you know that people generally spend more time planning their annual vacation than planning their estate?  Thought provoking huh?  So my commentary today is going to drift a bit into the editorial side.

As a society, I believe we are drifting away from one that emphasizes disipline and character and toward one that emphasizes momentary enjoyment, star power, and/or immediate gratification. Heavy stuff I know but worth considering?  When talking to people about estate planning, I often begin to feel the energy draining out of the room and it is always frustrating because this should be a topic of tremendous interest and engagement.  Consider the fact that the average person spends thousands upon thousands of hours during his/her lifetime productively working in order to provide for those that he/she loves the most.  Further, consider the fact that a random life event could virtually wipe out that lifetime of hard effort and leave those loved ones in a serious predicament.  I've seen firsthand the results of good planning as well as poor planning and there is a tangible different in the stress level experienced by loved ones.

So to re-frame the issue, when approached with the topic of estate planning, one should rightfully engage the discussion with gusto, as the wealthy often do, because it involves protecting everything that one has worked so long and hard to achieve.  The most engaging of these topics involve trusts and estates, wills, powers of attorney, business succession planning, living wills a/k/a medical directives and designations of healthcare surrogate, irrevocable trusts, family limited liability companies, corporations, limited liability companies, avoiding probate . . . etc, etc.  Juiced up yet? 

So the message is:  before you plan your next vaca . . . get charged up about  your estate planning!

Thanks for taking in some mumbo jumbo today.

The Big 3 Estate Planning Docs and a Probate Tip !

Hello Legal Mumb Jumbo Ites!

Yes, admittedly some time has passed since my last post.  To offer a shameless excuse, the hectic pace of operating a new law office been a bit of an adjustment; but take heart as I am working to build greater discipline in this area, even as we are building more discipline in all of our systems here in order to ever improve our standard of client services.  My goal is to offer a monthly post at this to occur at the middle of the month, so the next one will be on or about October 15th - I am putting it on my calendar as a recurring meeting!

OK, so the big three estate planning documents are:

1.  Will     2.  Power of Attorney    3.  Living Will (also called Healthcare Directive) & Designation of Healthcare Surrogate

So I tell clients this all the time when they ask me about just doing a will.  Any attorney that would do the will without the other documents without informing you of the need of all three is more than likely not experienced in estate planning and is thus not serving your interests.  These 3 documents have very distinct functions which work together to begin to form a coherent estate plan.  The will is an instruction sheet for the probate court, plain and simple, in that it tells the court what you (the testator) want to happen to your estate.    Note, the will does not prevent probate - only a trust can do this - another topic.  The power of attorney gives your appointee the power to manage your business affairs while you are alive and it expires upon death.  Finally, the living will contains end of life instructions and should appoint someone (healthcare surrogate) to enforce those instructions.  I know, not the most exciting or enjoyable topic but an important one for families nonetheless.  I always say that the peace of mind you gain from setting up your plan may  just help you live longer?

Oh, I promised a probate tip! - make sure all of your retirement accounts (annuities, IRA's, 401K's) and life insurance policies either have an individual or (if applicable) your trust designated as beneficiary of your estate.  We've been doing some probates for clients where the estate was the named beneficiary.

Anyway friends, thanks for checking out some Legal Mumbo Jumbo and as always, I hope this was helpful.


Until next time.

Steven Gibbs, Esq.