Wednesday, September 19, 2012

AICPA urges Congress to quickly fix tax cliff

AICPA urges Congress to quickly fix tax cliff (JEH: I've shared several links regarding the imminent changes to the federal transfer (estate/gift/GST) tax system unless additional legislation extends the 2010 tax provisions. Advisors and commentators are offering plenty of suggestions on considering whether to use the $5.12 million exemption before it reverts to essentially a $1 million exemption as of January 1, 2013. These numbers are still significant, but these rules can relatively easily ensnare folks who have no idea about them. For example, the entire value of life insurance could push a decedent's taxable estate well above $1 million after considering the value of his or her principal residence and other assets. Try sharing with that family that they owe 55% of every dollar above $1 million to the federal government! Small business owners represent another unsuspecting group because they often view their businesses as worth far less than others, including the government, would appraise the value. Political leaders rarely approach any problem in a proactive manner. Hopefully they will use a different tack here. Otherwise, plenty of people who have already been adversely affected by downturns in the real estate market, the stock market, and the status of their pension/retirement accounts (if anything remains there) might face yet another slashing of the assets that they worked diligently to obtain and cultivate.)

Sunday, May 13, 2012

Applying for a trust's EIN

We routinely receive practical questions.  I thought that I'd take an opportunity (composed several weeks ago) to explain one:  How do I obtain an employer (or taxpayer) identification number (EIN or TIN) for a trust?  This is obviously only an overview.  For an excellent, detailed article on this subject, I'd recommend "Grantor Trusts and Income Tax Reporting Requirements: A Primer" (March/April 2002 issue of Probate & Property (ABA RPTE Law Section)), written by Jonathan G. Blattmachr, Esq. and Bridget J. Crawford, Esq.

Grantor trusts, which generally include revocable trusts as well as some irrevocable trusts, may use an individual's Social Security number (SSN).  However, many institutions, including banks, life insurance companies, and financial services companies, either don't understand this or have a policy to the contrary.  They seem especially convinced that any irrevocable trust must obtain its own EIN.  That's simply not true.  Even so, they won't do what you're asking unless you furnish one.

The most efficient way to obtain an EIN is via the Internal Revenue Service's well-designed online system.  Unfortunately, third-party designees (TPDs), such as accountants and lawyers, can't and really shouldn't obtain EINs on behalf of their clients because legally an IRS Form SS-4 (“Application for [EIN]”) must be completed and submitted to the IRS prior to the online application.  That makes the online system a redundant one.

However, grantors (a.k.a., settlors or trustmakers) and trustees may use the online system.  For example, for an irrevocable life insurance trust, you'd select "Trust" and then "Irrevocable Trust."  Next, you'd input the individual grantor's name (labeled the "Responsible Party" here) and SSN, the trustee's name and address, the trust's name, and the funding month.  You'd generally select "No" when asked if the trust will pay employees within the next year.  Then you’d download the Adobe Acrobat file, which is named something like “CP575Notice_1234567890123.pdf.”

I would offer a couple of practical tips.  First, you sometimes need to abbreviate the name of the trust because the full legal name might not fit.  For example, the full legal name of my trust might be the “Jason E. Havens 2012 Irrevocable Trust.”  However, I might abbreviate the name to the “Jason E. Havens 2012 Irrev Tr.”  Second, you can't use most punctuation, including commas and periods.  Nevertheless, the IRS really doesn't care about that anyway for this purpose.

Besides the article above, the IRS’ “Instructions for Form SS-4” are the official guidance on these issues.  I hope that this helps.

Tuesday, May 1, 2012

Tennessee General Assembly » Legislation

Tennessee General Assembly » Legislation » HB 3760 by *McCormick ( *SB 3762 by *Norris) (JEH: The Tennessee legislature repealed Tennessee's inheritance tax, which will phase out over the next few years. Governor Bill Haslam is expected to sign the bill into law when it arrives on his desk. My friend Bryan Howard, Esq. offers more commentary on his blog here. Bryan also reported that the legislature repealed the Tennessee gift tax (here). The following bill appears to be the one that passed, although it originally indicated repeal of the Tennessee gift tax as of 2013: SB2777. The Tennessee House amendment, which is available via the link immediately above, includes an effective date of January 1, 2012. These developments make Tennessee more desirable, particularly to retirees who now only need to deal with issues such as Tennessee's "Hall" income tax on dividends and bond interest.)

Thursday, April 12, 2012

Estate Planning: The Clock is Ticking -- Use it or Lose it Before 2013

"Estate Planning: The Clock is Ticking — Use it or Lose it Before 2013" by David Pratt, Lindsay A. Roshkind, and Scott L. Goldberger - Florida Bar Journal (February 2012 -- Volume 86, No. 2) ("Page 31 | On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296 (2010) (2010 act). The 2010 act ushered in some significant changes to the estate, gift, and generation-skipping transfer (GST) tax regimes, namely reducing the estate, gift, and GST tax rates to 35 percent, increasing the estate, gift, and GST tax exemptions to $5 million,[1] and reunifying the estate and gift tax exemptions.[2] However, these provisions of the 2010 act will remain in effect only through December 31, 2012, when the act is scheduled to sunset.[3] Unless Congress enacts new legislation prior to then, on January 1, 2013, the law will revert to the laws in effect in 2001, with top estate, gift, and GST tax rates of 55 percent, estate and gift tax exemptions of only $1 million, and a GST tax exemption of only $1 million (indexed for inflation).[4] Thus, in order for clients to avail themselves of the maximum benefits under the 2010 act, clients should consider engaging in one or more of the planning techniques discussed in this article as soon as possible. Each of these techniques can significantly reduce one’s taxable estate at death by taking advantage of the provisions of the 2010 act before they expire.")

Wednesday, April 11, 2012

Monday, April 9, 2012


Rubin on Tax: JUDICIAL MODIFICATION OF TRUST BARRED BY TRUST TERMS [FLORIDA] (JEH: Floridians can indeed "opt out" of the Florida Trust Code's judicial modification provisions. Query whether that also bars modification under common law, which was the underlying premise of earlier Florida cases that allowed changes to a trust's provisions.)

Saturday, March 24, 2012

The Rush to Avoid Gift Taxes

Family Value: The Rush to Avoid Gift Taxes - (JEH: This is an excellent, brief article on several key trust planning concepts related to the potential use of the current $5 million estate/gift/generation-skipping transfer (GST) tax exemption. I have posted other articles on this topic over the past year or so. Many practitioners and commentators have suggested self-settled spendthrift trusts (also known as "domestic asset protection trusts" (DAPTs)), which this article highlights, as part of this type of planning. These trusts are generally not advisable for effective protective planning, but can indeed be useful in the context of making a completed gift for federal transfer tax purposes in this current exemption scenario because they offer added flexibility (though, again, likely little if any actual protection for the grantor(s) (also known as the settlors or makers of the trust)). If you are considering this type of planning, you should commence sooner rather than later. If you wait until November or December 2012, you will probably be too late.)

Sunday, March 18, 2012

With more blended families, estate planning gets ugly

With more blended families, estate planning gets ugly - USA Today ("Feuds over estate planning more likely in a nation of blended families" -- center column of front page of March 14, 2012 issue)

Friday, March 2, 2012

"Last Chance" Estate Planning May End Soon - Tax - United States

"Last Chance" Estate Planning May End Soon - Tax - United States| Mondaq ("Much has been written about the perfect storm of estate planning: the coincidence of low values, low interest rates, valuation discounts and the $5 million ($10 million for a married couple) gift and estate tax exemption. Unfortunately, the $5 million gift and estate tax exemption ends (reverting to $1 million) after December 31, 2012. Values of certain assets are increasing. However, most importantly, valuation discounts may be severely restricted at any time by IRS regulations. Thus, the best opportunities may close well before December 31, 2012. Don't wait for this 'last chance' at once-in-a-generation estate planning.")

Thursday, February 23, 2012

Advisory Trust – The Delaware Advantage

"Seizing the Opportunity to Make Gifts that Work for Families" - Advisory Trust ("Authored by Wilmington Trust's Carol Kroch, Head of Wealth and Financial Planning and Managing Director, Charitable Trusts, this article discusses estate tax relief enacted at the end of 2010 that offers unprecedented opportunities for high-net-worth families to transfer wealth through the end of 2012. Carol focuses on some of the decision points that families need to think about as they transition wealth to the next generation, and also looks at some of the most helpful ways to transfer wealth in a tax-efficient way during this exceptional two-year window of opportunity.")

Monday, February 20, 2012

Whitney Houston's Funeral Shows Trouble Already Brewing Around Her Estate - Forbes

Whitney Houston's Funeral Shows Trouble Already Brewing Around Her Estate - Forbes (JEH: I hope for her daughter's sake that Ms. Houston had one or more trusts in place, whether via her will ("testamentary" trusts) or created during her lifetime ("inter vivos" trusts).)

Tuesday, February 14, 2012

Obama's 2013 budget also sets stage for 2012 campaign

Obama's 2013 budget also sets stage for 2012 campaign - ("The budget contains these details: •Estate taxes would return to their 2009 levels, with a $3.5 million exclusion and a 45% top rate.")

Cell Phone Companies ‘Throttling’ Largest Data Users « CBS Pittsburgh

Cell Phone Companies ‘Throttling’ Largest Data Users « CBS Pittsburgh (JEH: Sprint is far from perfect, but certainly the best in terms of data plans.)

Tuesday, February 7, 2012

Consumer alert regarding Florida annual minutes

We continue to receive inquiries from clients regarding the "requirement" to file annual minutes in Florida. These erroneous email messages and correspondence are false. Following is a Florida Department of State official statement regarding this type of message (available via this link):

"CONSUMER ALERT: Please be aware that COMPLIANCE SERVICES (not to be confused with the Florida corporation, Compliance Services, Inc.) is mailing notices to business entities requesting that "Annual Minutes" and a fee of $125.00 be sent to them for filing. These notices are NOT from the Dept. of State, Division of Corporations. "Annual Minutes" are NOT required to be filed with any agency. They are to be kept by the business entity itself. Do NOT confuse these notices with the messages sent by the Division of Corporations reminding each business entity to file its 2012 Annual Report."

Please remember that Florida only requires annual reports for most business entities, which may be easily filed via the Florida Department of State's Division of Corporations website, Unless you have updated information, you may literally confirm the information and pay your annual fee -- all online in a matter of minutes. Corporate resolutions, minutes of meetings, and other internal documents, including governing documents (bylaws, operating agreements, and partnership agreements), are generally never disclosed or provided to anyone other than the owners of the entity or perhaps a lender in the course of financing.

Please be careful out there. An annual report provided directly to the Florida Department of State is typically the only required filing. If ever in doubt, either contact the Florida Department of State directly or feel free to contact us.

Saturday, February 4, 2012

Validity of wills in Florida and how to prove them

Florida is relatively clear regarding its will requirements. In some cases, however, you must take additional steps to prove a will. Following are excerpts from a helpful article written by William T. ("Bill") Edy, Esq., which was published in the August 24, 2008 issue of "The News-Press" (the newspaper of the Fort Myers area, where I started practicing law). It's no longer available via The News-Press, but has been reproduced elsewhere. Much of the article was derived (in many cases paraphrased) from the Florida Statutes (primarily the Florida Probate Code, which is available here) and/or the Florida Probate Rules (available here).

"Last week, I mentioned that any document purporting to be a last will, or document attempting to make dispositions of a person's property after his or her death, must be filed with the clerk of court within 10 days after receiving notice that the will-maker, called the 'testator' [or 'testatrix'], is dead. Even if they believe the will is invalid or fraudulent, [section 732.901 of the] Florida Statute[s] requires that the custodian of the will deposit the will with the court for the proper county, where the probate judge will decide if it is valid and should be admitted to probate. Even if there are no assets in the probate estate, and even if no one intends to file a petition for administration, the custodian must still file the will with the court. Upon the filing of a petition for probate, the judge will decide if it is a valid will.

[Section 732.502 of the] Florida Statute[s] sets forth the requirements for a will to be valid. Any document which attempts to devise the property of a deceased person after his or her death must be executed or signed by the testator in the presence of two witnesses. No particular form of words is necessary to the validity of the will if it is executed with these formalities required by law. The proper execution of the will must be proven to the satisfaction of the probate judge. Probate comes from the Latin word meaning 'to prove.'

There are three ways to prove the proper execution of the will. The first method is by the inclusion of an affidavit attached to the will, which is signed by the two witnesses stating that they signed their signatures above the affidavit in the presence of the testator, who also signed above the affidavit. This affidavit must be notarized by a notary public who takes this sworn statement from the witnesses and from the testator. The notary must state that the notary either knows the persons taking this oath personally or has seen acceptable identification. The suggested words for the affidavit are set forth in Florida Statute[s section] 732.503 entitled [']Self-proof of will.[']

Attorneys who prepare wills generally attach this self-proving affidavit to the will because it makes it much easier to commence the probate process. FS 733.201[(1)] states that self-proved wills may be admitted to probate without further proof.

If the will is not a self-proofing will, the second way to prove the will is by the oath of one of the witnesses. [(See FLA. STAT. s. 733.201(2).)] One of the witnesses will be required to sign an oath in front of the judge or deputy clerk of court or commissioner appointed by the court. A commissioner is a notary public that the judge appoints to take the witnesses’ oath based upon the request made by the filing of a written motion. A commissioner is generally used when the witnesses are not located in the same county.

The third way to prove the will is by the oath before the judge, clerk of court, or commissioner signed by the personal representative nominated by the will, whether or not the personal representative is named a beneficiary of the estate. If the personal representative nominated in the will is not available, then the oath may be signed by any person who is not interested in, or a beneficiary of, the estate. The oath must state that the will is believed to be the last will of the decedent. [(See FLA. STAT. s. 733.201(3).)]

Individuals moving to Florida often ask the Florida attorney if their will signed in their former state is valid. [Section 732.502(2) of the] Florida Statute[s] states that any will, other than a holographic or [a] nuncupative will, executed by a nonresident of Florida is valid if the will would be valid in the state where the will was signed. If the will does not meet the Florida requirements it may become expensive to prove to the judge that the will would be valid in the other state unless it was already admitted to probate in that other state. A holographic will is a will written in the handwriting of the testator. A nuncupative will is an oral will.


[Section 736.0403(2)(b) of the] Florida Statute[s] also provides that the testamentary aspects of a revocable trust, that is, those aspects which attempt to transfer interests to others after the death of the trust maker, must be executed with the same formalities of the will and may be proved in the same manner as a will. Recently, a client who executed a trust some time ago sent me a courtesy copy of an amendment to his trust to place in his file. I had to call him and inform him that the amendment was not valid because it was not properly executed, even though he had signed the document he prepared himself. Because not all states have this requirement, it is dangerous to use a form from a self-help book or off the Internet.


If you have signed a will, you should have the original in a safe place and review it to ensure that it is a valid will. You should review it or ask an attorney to review it every few years, especially if you have married or have adopted a child after signing the will, which is called 'pretermitted.'


Assuming the will is valid, the attorney handling the probate process will have to decide whether the estate must utilize formal administration [(see FLA. STAT. ch. 733)], or whether the estate qualifies for one of the simpler administrations for small estates [(see FLA. STAT. ch. 735)], which will be the subject of next week’s article."

Tuesday, January 24, 2012

Finding and/or choosing a lawyer or other professional

Earlier this morning I sent information to a potential/prospective client regarding how to find and/or choose a lawyer. There are some articles on this subject, but not an abundance of information. Consequently, I'd like to share my general thoughts.

As an initial matter, I always encourage potential clients to conduct due diligence on any professional whom they're considering, whether it's a builder, a CPA, a doctor, an engineer, a financial professional, or a lawyer. A professional's or their company's website is a good starting point. Specific to lawyers, however, two primary ratings systems exist: Martindale-Hubbell and Avvo.

For example, here are Destin's local lawyers listing "Estate Planning" as a self-described practice area, with the peer review rating being the one that Martindale-Hubbell has conducted for more than 130 years (and the client review rating being the one that they added in 2007 due to Avvo's newer ratings system): It's important to note that a lawyer is not necessarily rated in the area of law that they list as a practice area, which you need to discern. Here is the same type of search via Avvo, which began rating lawyers in 2007:

Other sites provide informational lawyer profiles as well. Justia is one of my favorites and is affiliated with Cornell's Legal Information Institute. JDSupra is another good profile site. I also like LinkedIn, which offers extensive profile information on individuals and companies who create profiles via their site. I wrote on ABA article published in our RPTE Law Section's eReport that discussed these profile sites from a lawyer's perspective: "Should Lawyers Be Anti-Social Networking? Suggestions on Sites to Use (or Perhaps Snub)."

Ratings and profile listings are useful, but board certification is arguably more important. Just like doctors, everyone should be keenly aware of board certification (if available in a given state), which is generally the highest level of professional certification for doctors, lawyers, and a few other professions. The Florida Bar's board certification examinations are rigorous based on the view of every lawyer whom I know (including my own view). Notably, it's illegal for Florida lawyers to say that they "specialize" or are "experts" in any area of law unless they're board-certified by The Florida Bar (see the following one-pager).

I hope that these general thoughts help. They should generally apply to selecting nearly any type of professional, although the ratings, profile sites, and certifications might differ a bit. Referrals from friends or family help, but it's still prudent to obtain sufficient information to make your own assessment based on all of the facts that you can gather.