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TAXES—The Tax Magazine®: The Mathematics of Harvesting Losses and Gains

Out of the Ashes: CPA Robert Keebler is Leading Keebler & Associates LLP to the Cutting Edge of Tax and Estate Planning

Steve Oshins & the Hybrid Domestic Asset Protection Trust

Estate Planning Attorneys

Wednesday, May 16, 2012

TAXES—The Tax Magazine®: The Mathematics of Harvesting Losses and Gains

The Ultimate Estate Planner, Inc. is pleased to share with you a copy the article, "The Mathematics of Harvesting Losses and Gains" by Robert S. Keebler, CPA, MST, AEP (Distinguished) found in the Family Tax Planning Forum that appeared in TAXES - The Tax Magazine®'s April 2012 edition. This article presents a model for deciding when it makes sense to harvest losses and explore its planning implications and quantify the power of gain harvesting in 2012. Click here to read the full article.

This article is reprinted and redistributed with the publisher's permission from TAXES - The Tax Magazine®, a journal published by CCH, a Wolters Kluwer business. Copying or distribution of this article without the publisher's permission is prohibited. To subscribe to TAXES - The Tax Magazine® or other CCH Journals please call 800-449-8114 or visit cchgroup.com.

Download Free Charts & Resources from Robert S. Keebler, CPA, MST, AEP (Distinguished)

View Upcoming Teleconferences with Robert S. Keebler, CPA, MST, AEP (Distinguished)

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View Upcoming Live 2-Day Educational Events by Keebler & Associates, LLP

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

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Tuesday, May 15, 2012

Out of the Ashes: CPA Robert Keebler is Leading Keebler & Associates LLP to the Cutting Edge of Tax and Estate Planning

Reposted from Financial Advisor Magazine | By Eric L. Reiner | May 2012

The financial crisis has been blamed for a lot of things. Setting in motion the events that launched a topflight planning boutique isn’t usually one of them.

The Ponzi schemes exposed by the crisis affected clients at the firm CPA Robert S. Keebler was with at the time. As he delved into the tax issues surrounding clients’ losses, Keebler, a nationally known speaker and writer based in Green Bay, Wis., came to a realization. Few, if any, noted experts existed in the obscure world of theft-loss deductions. So he set out to become one.

“I just knew someone had to step up and figure it out,” Keebler says. He invested time in learning the ins and outs of this little-used itemized deduction, then produced seminars and articles on the subject for practitioners.

Keebler is perhaps best known for his work in retirement plans and advanced estate planning, as well as for making private letter ruling requests from the Internal Revenue Service. Certainly he handles plenty of other matters as well, but foraying into the deep recesses of theft losses turned out to be a confidence builder and springboard. “Once we did that, we weren’t afraid to do other things,” he says.

Given such conviction, plus a little career coaching and encouragement from industry icons Sid Kess and Steve Leimberg, he made the inevitable move. In late 2010, Keebler left Top 20 accounting firm Baker Tilly Virchow Krause, where he had been a partner for years, to found Keebler & Associates with key members of his long-standing team. Guess what?

“The phone continues to ring,” says Keebler, 51. Frankly, the 18-month-old firm is doing fine, thank you very much.

In addition to serving the firm’s clients’ needs, “we do a lot of work for financial advisors, CPAs and law firms,” says Keebler, who remains down-to-earth and approachable despite his professional stature. “Most of our referral work comes from people who have heard me speak.” But then that’s always been Keebler’s rainmaking methodology.

How To Find Work In Green Bay And Beyond
“When I came up to Green Bay from Milwaukee in 1990, the only way to bring in work was to go out and teach local professionals like the Green Bay Estate Planning Council. You hoped if you spoke to enough people and showed them you had expertise that they would send you work,” he says. And they did.

As a speaker, “Bob is exceptionally good at breaking down high-level planning so that everybody in the room can understand and apply the ideas in their practice,” says Las Vegas attorney Steve Oshins, a prominent asset protection and estate planning expert with whom Keebler recently conducted a full-day seminar for a national accounting firm.

Keebler claims he was “driven to teach” once he discovered he was good at it, and that propelled him to the next level. Workshops for large insurance and financial-services companies, along with seminars for financial advisors, accountants and attorneys, take Keebler coast to coast these days. He also expands his reach with technology—through podcasts, webinars and teleconferences accessible through www.keeblerandassociates.com. The result is a clientele more national than local.

Skill Set
Like his teaching, Keebler’s writing for CCH, Leimberg Information Services and the American Institute of Certified Public Accountants emphasizes clarity and usefulness.

“Bob is able to get ahead of the curve in how to use estate planning tools and techniques and explain what they look like when they are modeled. He is a visionary,” says one of his editors and mentors, estate planning legend Steve Leimberg, namesake and CEO of the tax news and analysis service.

Keebler also holds awards such as the “Distinguished Accredited Estate Planner” designation (there are only 66 such individuals), which bears further testament to his technical prowess. But that alone does not a firm build. The truth is, Keebler is a pretty sharp cookie when it comes to marketing, too.

Staying on the cutting edge is vital to his teaching and writing brand. “So we move very quickly,” Keebler says. For instance, when the IRS recently announced an extension of the deadline for certain estates to elect the spousal portability of the estate-tax exemption, within hours Keebler & Associates blasted an e-mail to practitioners spotlighting the affected clients and steps advisors should take.

“We try to be the first people on the block with the news and how it’s going to apply,” says one of Keebler’s three partners, Stephen J. Bigge.

Inside The Engine Room
Each morning at the firm, another partner, estate-planning attorney Michelle Ward, begins her day with a visit to the Web sites of the IRS and a variety of subscription services. Her purpose is singular: to sift through the myriad news alerts and find the nuggets. “I’ll check to see whether anything relevant to our clients has come out and, if so, I’ll post it to our Twitter account and Facebook, and then pass it on to Bob,” says Ward, who has worked with Keebler since he hired her into the tax profession in 2000.

When Keebler deems a topic worthy of dissemination, he then turns to one of his partners. “We’ll figure out how the pronouncement applies to our client base and do a brief write-up on the rule,” explains Bigge, who Keebler hired right out of school from their shared alma mater, Lakeland College in Sheboygan, Wis., in 2001.

Backed By A Power Trio Of Experts
Keebler is the front man, enabled by his three partners’ strong, complementary backgrounds. Ward, an attorney with a master’s in law (LLM), tends to handle the research for private letter ruling requests while Bigge, a CPA, crunches the numbers for Roth conversions, sales to intentionally defective grantor trusts and other strategies clients are mulling.

The other principal, Peter J. Melcher, holds an LLM in tax plus an MBA from the University of Chicago. “Pete does the heavy tax research for white papers and opinion letters,” Bigge says. An executive assistant, Emily Rosenberg, rounds out the five-person operation.

Many accounting firms thrive on audits and tax-return preparation—dubbed “annuity work” by the CPA profession because of these services’ recurring nature—but that’s not the case at Keebler & Associates. There is no audit practice, and preparing returns accounts for only about 10% of total revenues. “Most of our revenues come from either Bob’s speeches or new tax-planning work from existing clients or referrals,” reports Bigge, who doubles as the firm’s chief financial officer.

An Eye On The Future
Despite the shop’s solid performance since inception, Bigge contemplates the future like a good CFO should. “The challenge is continuing to bring in work,” he says. “A lot of times we get called in as a specialist, and once we have resolved the client’s issue or helped him put a plan in place, he moves on and we have to look for our next planning client.”

A potential damper on the firm’s unique private letter ruling business is a recent hike in the fee the IRS charges for some ruling requests. That will make the requests feasible for fewer taxpayers, according to Ward.

In the firm’s estate planning business, a big question mark is what will happen to the federal estate tax exemption. Under current law, it will revert to $1 million per person at the end of the year. That would expand opportunities for estate planners. But if the exemption were maintained at its current $5 million, it would continue to constrain the market. In that case, says Bigge, “we’ll focus more on tax-sensitive retirement planning. That’s really at the intersection of finance and tax, where no one else wants to play.”

Developing drawdown strategies for retirees is one area Keebler has been putting time into lately. “If the client has Roth money, pretax money in an individual retirement account and after-tax money in a personal account, what does he spend first and how does he take it out in the most tax-efficient way? That’s where the action is,” Keebler says, adding, “Everyone is going to need a financial planner because this is so complex.”

Planners, for their part, will need to know more about taxes. “With the compression in tax season—because 1099s are going out later and later—having a 1040 prepared at a CPA firm is becoming more expensive” as accountants attempt to make a full year’s living in a shorter period, Keebler says. “The result is non-CPAs are preparing more income tax returns, and because of the seasonal nature of their businesses, often they are not equipped to do tax planning. So financial planners will have an opportunity to take a larger role in income-tax planning with more middle- and upper-middle-class families,” Keebler predicts.

Plans to grow Keebler & Associates stop at the point where the partners are managing the firm instead of bringing in lucrative speaking fees or national billing rates. From that perspective, an experienced practitioner, rather than a neophyte needing training, could be a more viable addition to the firm.

But no matter where the boutique winds up, it will have taken Keebler a long way from those local speaking gigs 20-plus years ago, even if ascending to the national stage and circulating with some of the biggest names in planning-dom were not his original goals.

“I was never shooting for the stars,” Keebler says. “It just kind of happened.”

Sources: fa-mag.com

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Friday, May 11, 2012

Steve Oshins & the Hybrid Domestic Asset Protection Trust

Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI). For information about how to subscribe to LISI, click here.

“After approximately 15 years since the first DAPT legislation passed, not a single DAPT has been tested all the way through the court system. Most likely this is because such a large supermajority believes that if tested the DAPT will work to protect its assets from a creditor of the settlor. However, despite the very high likelihood of protection, if there is a way to increase the odds of success even more, then such a strategy should be utilized whenever possible.

The Hybrid Domestic Asset Protection Trust (“Hybrid DAPT”) is such a strategy, and it is very simple. The Hybrid DAPT is like a regular DAPT except that the settlor isn’t an initial discretionary beneficiary of the trust, but can be added later.”

We close this week Steve Oshins’ commentary on a strategy he refers to as the “Hybrid Domestic Asset Protection Trust.” According to Steve, the Hybrid DAPT puts the client in a significantly stronger position than with a traditional Domestic Asset Protection Trust. As he explains below, this strategy can be used with both an incomplete gift version and a completed gift version of the Domestic Asset Protection Trust.

Steven J. Oshins, Esq., AEP (Distinguished) is a member of the Law Offices of Oshins & Associates, LLC in Las Vegas, Nevada. Steve is a nationally known attorney who is listed in The Best Lawyers in America® and has been named one of the Top 100 Attorneys in Worth magazine. He was inducted into the NAEPC Estate Planning Hall of Fame® in 2011. He has written some of Nevada's most important estate planning and creditor protection laws, including the law making the charging order the exclusive remedy of a judgment creditor of a Nevada LLC and LP (in 2001, 2003 and 2011), the law changing the Nevada rule against perpetuities to 365 years (in 2005) and the law making Nevada the first and only state to allow a Restricted LLC and a Restricted LP creating larger valuation discounts than any other state allows (in 2009). He is also the author of the Annual Domestic Asset Protection Rankings which you can download from our Free Resources page. Steve can be reached at 702-341-6000, x2 or at soshins@oshins.com. His law firm's web site is http://www.oshins.com.

Before we get to Steve’s commentary, members should take note of the fact that a new 60 Second Planner by Bob Keebler was just posted to the LISI homepage. In his commentary, Bob reviews the May 4th opinion by the Ninth Circuit in Estate of Morgans, where the issue presented was whether Section 2035(b)’s gross-up rule applies in the case of a surviving spouse's deemed gift of a QTIP remainder. You don't need any special equipment to listen- just click on this link.

Now, here is Steve Oshins’ commentary:

EXECUTIVE SUMMARY:

Asset protection has become one of the hottest areas of law and has become the ideal complement to estate planning. Consequently, the Domestic Asset Protection Trust (“DAPT”) has become one of the most popular asset protection tools in the planner’s toolbox. As more states have enacted DAPT legislation, practitioners have started doing more DAPTs for their clients.

FACTS: After approximately 15 years since the first DAPT legislation passed, not a single DAPT has been tested all the way through the court system. Most likely this is because such a large supermajority believes that if tested the DAPT will work to protect its assets from a creditor of the settlor. However, despite the very high likelihood of protection, if there is a way to increase the odds of success even more, then such a strategy should be utilized whenever possible.

The Hybrid Domestic Asset Protection Trust

The Hybrid Domestic Asset Protection Trust (“Hybrid DAPT”) is a strategy that should increase the probability that the trust assets will be protected. And it is very simple. The Hybrid DAPT is just like a regular DAPT except that the settlor isn’t an initial discretionary beneficiary of the trust, but can be added later. Thus, the trust is initially set up for the benefit of the settlor’s spouse and descendants, for example, but not for the settlor. By not including the settlor as a beneficiary of the trust, the Hybrid DAPT is by definition a third-party trust and therefore almost certainly avoids the potential risk of uncertainty of a regular DAPT.

Especially where the settlor is married and has a strong, trusting relationship with his or her spouse, is there any good reason that the settler must have his or her name in the trust agreement as a beneficiary? It is very simple to indirectly access the trust assets through the spouse. And the trust agreement should define the “spouse” using a “floating spouse provision” that defines the spouse as the person the settlor is married to and living with from time to time. This gives the settlor the ability to access the trust assets through a subsequent spouse in the event of a divorce or the death of the settlor’s spouse.

If the settlor has no spouse, then it becomes more difficult to access the assets. However, since a good asset protection planner will be sure to leave sufficient wealth outside of the client’s asset protection trust, in most cases the settlor won’t have to work through this issue anytime soon.

If the Settlor Is Added as a Beneficiary

In case the settlor needs to be a discretionary beneficiary of the Hybrid DAPT sometime in the future (i.e., if the settlor has no spouse or child that will “share” a distribution with the settlor and the settlor now needs a distribution), the trust agreement provides that the trust protector or independent trustee can add additional beneficiaries, including the settlor. However, if the settlor is added, then the Hybrid DAPT becomes a regular DAPT and thus risks that the law is still unsettled on DAPTs (even though most people believe that they work).

What happens if the settlor suspects that a creditor attack may be forthcoming? Or what if the settlor is considering filing bankruptcy? In either case, very far in advance of the problem occurring, the settlor would ask the trust protector or independent trustee to remove him or her as a discretionary beneficiary.

§548(e) of the 2005 Bankruptcy Act

It is extremely unlikely that a DAPT settlor will file for bankruptcy, especially if the settlor has an “old and cold” DAPT that is past the applicable state’s statute of limitations period. In fact, of the hundreds of DAPTs created by the author, not one of those clients has gone through bankruptcy.

However, in maintaining the philosophy of this commentarythat it is important to build into the structure every safeguard available, it is interesting to note that the Hybrid DAPT most likely does not fit the definition required by §548(e) of the 2005 Bankruptcy Act that would otherwise potentially claw back the assets of a traditional DAPT. The requirements of §548(e) are as follows:

(1) In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if—

(A) such transfer was made to a self-settled trust or similar device;

(B) such transfer was by the debtor;

(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.

Unless the settlor is added as a discretionary beneficiary of the Hybrid DAPT, Subsection (C) doesn’t apply. Also, arguably Subsection (A) doesn’t apply either since the Hybrid DAPT isn’t a “self-settled trust or similar device” at the time the provisions are applied.

The Completed Gift Hybrid DAPT

Most DAPTs are designed as Incomplete Gift DAPTs where the sole objective is asset protection. However, many DAPTs are designed as Completed Gift DAPTs where the settlor is a discretionary beneficiary of a trust designed with the following attributes:

(i) It’s a completed gift for gift tax purposes,

(ii) The settlor is a discretionary beneficiary,

(iii) The trust assets are protected from the settlor’s beneficiaries, and

(iv) The trust assets are outside of the settlor’s estate for estate tax purposes at the settlor’s death.

The Completed Gift DAPT strategy was approved by the Service in PLR 200944002 where a resident of a DAPT jurisdiction established the DAPT using the laws of that DAPT jurisdiction.

However, with respect to a resident of a non-DAPT jurisdiction, although most practitioners are comfortable that this strategy works, whether the trust assets are open to creditors of the settlor is still uncertain, since it is unclear which state law will apply for creditor purposes. The DAPT will be includible in the settlor’s estate at death if the trust assets are open to the settlor’s creditors. If this were the case, this would occur under IRC §2036(a)(1) since the settlor would be treated as retaining the ability to run up creditor debts which can be paid out of the trust at the settlor’s death.

IRC § 2036(a)(1) provides that the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in the case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, under which the decedent has retained for life or for any period not ascertainable without reference to the decedent's death or for any period that does not in fact end before death the possession or enjoyment of, or the right to the income from, the property.

The Completed Gift DAPT reduces this risk significantly since the settlor isn’t a discretionary beneficiary of the trust and, thus, it isn’t a self-settled trust. In an ideal scenario, the settlor will never need to be added as a discretionary beneficiary by the trust protector or independent trustee. However, if the settlor does need to be added at a later date, since the Completed Gift Hybrid DAPT also gives the trust protector or independent trustee the power to remove beneficiaries, as long as the settlor is removed as a discretionary beneficiary more than three years prior to death, there is no estate tax inclusion since IRC §2035 (the three-year contemplation of death rule) won’t apply.

Down and Dirty

To this date, there is still no case law saying that a DAPT does or does not work to shield the assets from the creditors of a settlor who is a resident of a non-DAPT jurisdiction. Although all the cases have settled, or the creditors have decided not to sue, the estate or asset protection planner must still consider how to plan if the law does go the wrong way. Unfortunately, although there will ultimately be case law, whether good or bad, unless the case law goes through the appeal process and is ultimately decided by the highest court, we still won’t have any certainty. So it is prudent to plan for this uncertainty.

If the settlor has set up a Hybrid DAPT, whether as an Incomplete Gift Hybrid DAPT or as a Completed Gift Hybrid DAPT, if the settlor wants to be sure to preserve a portion of the Hybrid DAPT’s assets if the settlor is being added in as a discretionary beneficiary, the trustee can split the Hybrid DAPT into two separate trusts and the trust protector or independent trustee can add the settlor as a discretionary beneficiary of only one of the two trusts so as not to taint the other trust.

For example, if there are $10 million of assets in the Hybrid DAPT, the trustee might divide the trust into two trusts – the “Clean Hybrid DAPT” which doesn’t include the settlor as a discretionary beneficiary and has $8 million of assets, and the “Dirty Hybrid DAPT” which includes the settlor as a discretionary beneficiary and has $2 million of assets. Thus, the risk has been transferred away from the Clean Hybrid DAPT to the Dirty Hybrid DAPT (which, again, should be protected, but is potentially being sacrificed in the interests of not tainting the assets in the Clean Hybrid DAPT). This is nothing more than a risk management decision.

COMMENT:

It is imperative that the asset protection planner create a plan with the highest probability of success. In most cases, it is possible to significantly increase the protection by simply using a Hybrid DAPT rather than a traditional DAPT. This commentary describes this structure, and also creates a further structure where the Hybrid DAPT can be divided into a Clean Hybrid DAPT and a Dirty Hybrid DAPT, so that even if the Dirty Hybrid DAPT is unsuccessful, it doesn’t taint the Clean Hybrid DAPT.

HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!

Steve Oshins

TECHNICAL EDITOR: DUNCAN OSBORNE

CITE AS: LISI Asset Protection Planning Newsletter #200 (May 10, 2012) at http://www.leimbergservices.com Copyright 2012 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.

CITES: PLR 200944002; Oshins & Keebler on Mortensen: “No, the Sky Isn’t Falling for DAPTs!”, Asset Protection Newsletter #186 (Oct. 31, 2011); Battley v. Mortensen, Adv. D.Alaska, No. A09-90036-DMD, May 26, 2011 (Original Memorandum) and July 18, 2011 (Memorandum Denying Motion For Reconsideration).

Sources: Leimberg Information Services & Steven J. Oshins, Esq.

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Monday, May 07, 2012

Estate Planning for the Blended Family: The Intersection of the Head and the Heart

By L. Paul Hood, Jr., Esq. & Emily Bouchard

A prospective new client contacts you about working with him and his partner. Within minutes you learn that they are unmarried with each having children from prior relationships as well as one of their own together. Do you experience a thrill of excitement at having such a complex and fascinating potential couple to work with, or does this scenario strike fear in your heart? If you’re like most of the estate planners we work with, fear would be your first response. Are you aware that your prospective client is most likely afraid as well, but for different reasons?

In Estate Planning for the Blended Family (Self-Counsel Press 2012), we identify and discuss 11 fears that clients can have when it comes to the estate planning process. These fears include everything from confronting fear of death, to fear of the estate planning process itself. On the other side of the equation, the biggest concern for the estate planner (or should be if it’s not already) is the likelihood of conflict of interests within the blended family system.

The reality is that estate planners need to be able to manage their own emotions, as well as those of their clients, around these fears and potential conflicts. It’s not enough to understand the intricacies of estate planning vehicles to avoid taxes and transfer assets efficiently – it’s also necessary to make sure you are addressing the core concerns (and yes, fears) that are part of the process. These fears prevent people from doing estate planning, or cause them to procrastinate. Fears lead to avoidance strategies that cause costly and unnecessary delays in estate planning. More often than not, people tend to avoid the conversations that could move the process along smoothly due to a lack of awareness about how to have the conversations effectively.

Estate planning for the blended family client can present some of the most challenging work that an estate planner ever does. One of the reasons why this is so is that most professionals in the field of estate planning aren’t sufficiently trained or experienced in the “human side” of the process, which is the “heart” of estate planning. Most attorneys, accountants, and financial advisors are trained in the “head” side of estate planning. The key to successfully navigating the often treacherous waters of estate planning for the blended family is properly balancing the head and heart.

On Tuesday, May 8th, the first in a series of three teleconferences on Blended Family Estate Planning will commence. This 90-minute presentation will dive into the key issues of the initial consultation and successful engagement of couples with a blended family. Participants learn how to address emotionally charged issues and fears that keep the planning process from moving forward, as well has how to move when a client shuts you down or shuts you out. Specifics related to property ownership and distribution will be addressed along with who should be considered for key fiduciary roles. The training provides a comprehensive introduction to estate planning for the blended family, and in so doing, marries the “head” and the “heart” of estate planning.

In the second session to be held on Tuesday, May 15th, attention is focused on the lifetime planning options that are available or advisable to blended family couples.

And last, but certainly not least, in the final session to be held on Tuesday, May 22nd, the various issues that are attendant to testamentary estate planning for blended family clients are addressed, as well as some post-death administration issues.

To sign up for this timely and important series and to receive a complimentary copy of our book, which includes a CD with forms, visit www.ultimateestateplanner.com.

If you have any questions, please feel free to contact Emily or Paul at estateplanning@blended-families.com. You can also contact The Ultimate Estate Planner, Inc. at 1-866-754-6477.

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Thursday, May 03, 2012

Strengthening Your Brand with CPAs

Reposted from RegisteredRep.com | By Matt Oechsli

Houston—“I’ve never had much success with CPAs,” groaned Peter, an advisor in a workshop I was conducting. “Even the CPAs I’ve referred clients to—nothing ever comes back my way. Do you think it’s realistic to develop a true referral alliance with a CPA?”

My short answer was “Yes.” But I recognize that many financial advisors feel Peter’s pain. They refer clients to a handful of CPAs in their community, fully expecting the law of reciprocity to engage, and nothing happens. Few if any referrals come back. Essentially, Peter is asking, “What’s going on?”

As I told this group, when it comes to CPAs, there’s good news and bad news. The bad news is that most CPAs don’t trust the financial services industry and therefore don’t trust financial advisors. The good news is that many elite financial advisors have earned the trust of CPAs in their communities and have developed excellent working relationships with them. Yes, it can be done, and now is the perfect time of year to begin.

With tax season finally behind them, most CPAs are taking a deep sigh of relief and giving themselves some time to relax. What elite advisors are doing is using this period of CPA decompression as a time to organize social outings with the select group they work with. The following are a handful of events that have been used effectively:

Social dinners: CPA and spouse with advisor and spouse. These are dinners with two couples, with CPAs where a healthy referral alliance is already established, and specific CPAs who are being romanced into a healthy referral alliance relationship.
Group wine tasting with spouses: CPAs of top 25 clients invited.
Drinks at a martini bar with spouse: CPAs of top 25 clients invited.
Saturday afternoon cookout: CPAs and families of top 25 clients invited
Golf outing: CPAs with a healthy referral alliance, and targeted CPAs (two foursomes; drinks with spouses to follow).

Sure, in some of these post-tax season events you’ll have competitive CPAs in attendance. That’s okay as you’re establishing a blanket of good will. The secret is to follow up and begin building a relationship with every CPA, one-on-one, following the event.

I know what many of you are probably thinking: “How can I call a CPA for a social event when I don’t even have a relationship with him?” And the answer is—easily. This is no different than inviting a prospect you’ve recently met to some fun event you’re hosting, but in the case of CPAs at this time of year, it’s even easier.

First of all, you might find it helpful to think in terms of four CPA buckets:

Bucket 1—These are the CPAs with whom you already have a healthy referral alliance relationship. With this group, you’ll want to make a personal telephone call and invite the CPA and spouse to dinner. The idea here is that they’ve worked hard over the past four months, you appreciate their hard work, and you want to make certain they have a relaxing evening with you and your spouse. It’s important to emphasize: no business, all social.

Bucket 2—CPAs of your top 25 or so affluent clients. For these CPAs, you should plan an event; whether it’s a wine tasting, martini evening or a cookout doesn’t really matter. The key is to make it fun. Here, either you or your assistant (if he or she has a good relationship) calls and personally invites each CPA and spouse to the event. Again, you’re recognizing the hard work they’ve been engaged in over the past four months, you express appreciation for the work they’ve done with your clients, and this is your way of saying thanks. Remember, your objective is to follow up and begin building relationships one-on-one.

Bucket 3—Oh, those thankless CPAs who you’ve given referrals to but haven’t experienced the reciprocity. These rascals in Bucket 3 need a wake-up call over a social lunch. Call and invite them to a lunch with a slightly different twist; now that tax season is over, you simply want to catch up. Yet during that lunch you want to express your appreciation for how well they are handling the clients you’ve referred to them (mention each by name), and after a brief discussion you bring down the hammer by directly asking, “I’m very curious. I’ve sent X referrals to you over the past Y years and I haven’t received even one from you. Why?” You’ll want to soften this to your own personality, but here is where you shut up and watch the CPA squirm. Either you’ll get an apology or an explanation why you’ll never get referrals. This will have one of two outcomes—either you’ll never get referrals and you’ll never give another referral, or you’ll start getting referrals. In which case, this CPA moves to Bucket 1 and it’s time for a social dinner.

Bucket 4—These are those CPAs you’re targeting but have yet to develop any type of relationship. This group requires a bit more homework. You will want to ask CPAs in Buckets 1and 2 if they know these individuals. If so, you’d like to invite them, as their guest, to your upcoming Top 25 CPA event. If not, you should conduct a social media search as you are looking for a connection. If you find a connection with anyone you know, you call the person you know, explain that you want to meet this particular CPA, describe the event, and invite them both, using your connection to invite the CPA you’re targeting.

I recognize that Bucket 4 CPAs are more challenging, but you’ve got nothing to lose. Tis-the-season to socialize with CPAs. Yet, you’ll need a game plan; not all CPAs are equal and not all will allow you to develop a healthy referral alliance relationship.

Yet all you need are three or four good CPA relationships to become a master rainmaker. It will take time, patience, and persistence—but over the next eight months you can significantly strengthen your branding with CPAs.

Source: RegisteredRep.com
Photo Credit: prssasdsu.org

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Monday, April 30, 2012

LISI.com - Practice Pointers on the Core Concern of Blended Family Estate Planning: Joint or Separate Representation

Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI). For information about how to subscribe to LISI, click here.

“Statistics show that approximately 60% of second marriages end in divorce, and almost 75% of third marriages do as well. These figures loom large in the minds of couples with the “yours, mine and/or ours” scenarios in their step and blended families.

There are pluses and minuses to couples sharing everything regarding their estate planning together, and when it comes to couples with blended families, the minuses can outweigh the pluses substantially. While there is great value in working together in approaching estate planning, it is important to be aware of the cautions against representing both partners in estate planning, especially when it is the second or third marriage or partnership for one of the members of the couple.

When couples who have children from prior relationships contact you about possibly representing them, the first question that should go through your mind is: “Should I represent this couple together or should I only represent one of the partners in the couple?”

The pros and cons of joint representation of blended family couples is the subject of L. Paul Hood, Jr. and Emily Bouchard’s commentary. Paul and Emily have written a book on the subject titled Estate Planning for the Blended Family, (Self-Counsel Press 2012) that will be released at the end of April. Their book will be available on all of the major online bookstore, and order information can be obtained through the following link: http://blended-families.com/estateplanning/

LISI members should also look for their three-part series on blended family estate planning that they are presenting on May 8, 15 and 22 for Phil Kavesh’s The Ultimate Estate Planner, Inc. The information on how to register for their upcoming teleconference series can be obtained either by clicking the following link: Estate Planning for the Blended Family 3-Part Teleconference Series.

L. Paul Hood, Jr. received his J.D. from Louisiana State University Law Center in 1986 and Master of Laws in Taxation from Georgetown University Law Center in 1988. Paul is a frequent speaker, is widely quoted and his articles have appeared in a number of publications, including BNA Tax Management Memorandum, CCH Journal of Practical Estate Planning, Estate Planning, Valuation Strategies, Digest of Federal Tax Articles, Loyola Law Review, Louisiana Bar Journal, Tax Ideas and Charitable Gift Planning News. Presently, He has spoken at programs sponsored by a number of law schools, including Duke, Georgetown, NYU, Tulane, Loyola (N.O.) and LSU, as well as many other professional organizations, including AICPA and NACVA. From 1996-2004, Paul served on the Louisiana Board of Tax Appeals, a three member board that has jurisdiction over all Louisiana state tax matters. Paul Hood can be reached directly at paul@paulhoodservices.com

Emily Bouchard is a family, wealth, and money coach, and the managing partner of Wealth Legacy Group (WLG), specializing in the emotional impact of wealth in people’s lives. She has been working with inheritors in high net worth families since 2004 with a specialty in step and blended family issues. She is also the director of www.Blended-Families.com and has appeared on the Today Show and NPR, and has been featured in publications such as New York Times and Newsweek. Along with coaching individuals, couples, and families, she consults with advisors in responding effectively to their client’s emotional needs related to estate planning. Her book, co-authored with Paul Hood, from Self Counsel Press on Estate Planning for the Blended Family is due out later this month. Emily can be reached at 360.991.9558 or by e-mail to emily@wealthlegacygroup.net.

Here is their commentary:

EXECUTIVE SUMMARY:

Statistics show that approximately 60% of second marriages end in divorce, and almost 75% of third marriages do as well. These figures loom large in the minds of couples with the “yours, mine and/or ours” scenarios in their step and blended families.

COMMENT:

Advantages of One Strategy versus the Other

Obviously, most professionals want what is in the client’s best interest. And there are advantages to both separate and joint representation.

Some advantages of joint representation for couples on blended families include:

It is a way to build greater trust and more open communication between the two of them, and possibly with all of the children in their lives.
It is more cost-effective, since they only have to pay one set of estate planners.
It can be more efficient for them, as they can work together and divvy up tasks as they prepare to meet with you.

Some pro’s of having separate representation for clients with blended families include:

Each may have more freedom to speak up about their specific concerns and desires without having to necessarily compromise with their partner.
The best interests of the individual you represent are the only interests guiding you, and this is an important consideration since there can often be competing agendas, and potential conflicts of interest, often between a step parent and their step children.
How suited the couple is for joint representation can be discovered in an introductory session with you, which we see also is advantageous for you, even if it is complimentary. No one wants a problem client, as they are more likely to sue you and less likely to pay you. Even in these uncertain economic times, sometimes the best decision that an estate planner can make is to not take on certain people as clients. Taking the time to determine the best route to go up front makes a lot of sense, even if you give a bit of your time away for free.

Without healthy communication between the couple, joint representation could be disastrous. Paul witnessed this first hand with a couple, he in his early sixties, and she in her early fifties. Outwardly, they looked like a routine couple coming in for estate planning, and Paul agreed to represent the couple together, despite lingering concerns about how much was left unsaid at their introductory session, particularly about the abilities of each of their children, who should serve as their successor trustees, and how much to leave to all the children in their lives. However, shortly after the meeting, things quickly disintegrated between the partners, so much so that the couple ultimately divorced, in part over the significant differences in their estate planning goals and plans.

To make sure that he complied with the legal rules of ethics, Paul withdrew from representing both of them, and so they had to start over with two new attorneys. There were so many differences between the partners that they would have been better served by each having a separate set of estate planners from the start. The husband wanted their oldest son to serve as executor, while the wife was adamant that her younger daughter was the most capable. He felt strongly that her “baby” wasn’t ready or capable enough to handle her step-brothers and she wouldn’t command the boys’ respect or cooperation; his wife was just as adamant that his “baby” was neither incompetent nor unable to handle the enormity of the responsibilities. This couldn’t have been the reason for the divorce, but it was apparently just the straw that broke the camel’s back on a life-long tortured marriage, and it all came tumbling down.

Emily got to witness the other side of the equation, where joint representation created an opening for results beyond what anyone could have imagined. The advisory team at a well-known bank referred a client couple to Emily after then went two years without signing their estate planning documents. Their stand-off was a result of a blended family situation, where the husband had two children from a prior marriage and his second wife had two children with him. He wanted the estate equalized at the time of his death and to be assured that all four of his children received the same amounts.

She saw things very differently, since his children were not the same as theirs together, being able to benefit (or not as the case may be) from their bio-mother’s estate. As a result, she wanted her two children to receive the bulk of her estate, including that which she would be the beneficiary of if she were to outlive her husband (which was very likely since she was significantly younger than him). After four months of family dynamics coaching, they learned some communication strategies that allowed them to address over 30 years of long standing hurts and resentments. As a result of some in-depth, facilitated conversations, they not only came up with an innovative approach to their estate planning that honored both of their concerns, they also expressed feeling closer as a couple. They then worked effectively with their team at the bank and found an estate planning attorney who specialized in blended family issues who was able to easily incorporate their wishes into their documents.

Signposts for Joint or Separate Representation
In order to make the decision of joint or separate representation a bit more straightforward, there are some signposts that strongly indicate the need for considering separate representation:

If one partner is childless but the other has children. These people are not in similar circumstances if only one of them has descendants. Most people want to leave their estates to their children; it’s only natural. However, childless people don’t have such a tie. The risk here is where the stated goal of the parent partner is to leave everything to his or her children may be changed if the parent partner is the first to die.
There is a significant disparity in wealth or income in the couple. While not always definitive, an income or wealth disparity between the partners can signal an economic imbalance in the couple that could adversely affect the estate planning of the partner who has less.
One of them is economically dependent on the other. This signpost alone is usually not necessarily of the need to have separate representation. However, it together with the presence of other signposts discussed in this recording can be a strong signal of the need for separate representation.
One of them does all of the talking or appears to exert strong influence over the other. As an estate planner, you should take note of this sort of situation and take steps to delve into what appears to be a problem in communication between the two of them. The one who is being strongly influenced (or oppressed) will certainly know but may lack the self-will or the perceived freedom to point it out.
Length of the relationship. Generally speaking, the shorter the relationship, the stronger the suggestion of separate representation.
The number of past relationships one, or both of them, have had. Generally speaking, the greater the number of past relationships, the stronger the suggestion of separate representation.
The two of them were separately represented in a pre-nuptial agreement or property agreement. If it was important enough to have been separately represented in an earlier agreement, it is probably still important enough to maintain separate representation with respect to estate planning.
There is a significant age disparity between the couple. Generally speaking, the greater the age disparity between the couple, the greater is the need to consider separate representation.
If one of them has a significant secret from the other partner like another child, other assets or another lover. Secrets can have an insidious impact on relationships and can really put your estate planners in a difficult spot when the secret comes to light. Obviously, clients who are inclined to hold on to secrets aren’t going to be forthcoming, so you’ll have to ascertain this indirectly by reading between the lines and finding points of aggravation where you have violated the boundaries that the secret holding client has set around that secret information.

Ways to Address These Concerns with Potential Couple Clients
These are not easy points to consider and, the more uncomfortable they make the couple as you bring them forward, the stronger the indication that you all should slow things down. Give them sound legal reasons for why you think they need to seriously consider separate representation, if that’s what their particular circumstances call for at the time of your initial meeting. You can assure them that there are ways that they can stay in communication and connection around their planning even as they are represented separately.

Once they are clear about why you are recommending separate estate planners, you can then breakdown the different details to be determined together, such as medical/durable powers of attorney, and show them that they can still share with each other their thinking, and explore the pros and cons of their pending decisions. You can also note that when conflicts of interest arise, couples who can find places to align with each other, instead of needing 100% agreement, are able to feel more connected as they make their individual decisions.

With regards to alignment, in Emily’s earlier story about the couple with “yours and ours”, the husband was able to let go of needing 100% equality. They were able to come up with a strategy that honored the wife’s contribution to their marriage in a monetary fashion. They both agreed that her earning potential was about one sixth of his, and they calculated a percentage that seemed to fairly represent both of their views. This percentage was then taken into consideration in the difference that their two children together would receive over and above what his two would get. They were in alignment around the new approach and were able to get there by both letting go of their attachment to having their original views seen as right. In his estate, should he outlive his wife, all four children received the same amounts. She was able to be in alignment with that decision, even though it wasn’t her first choice.

Conclusion
If you determine that separate representation is the best option for a couple, communicate how you see it professionally and with a sense of truly taking care of both of their needs and concerns. Frame your assessment in ways that show them why this in their best interest and that it is not personal but is based on sound advice.

HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!

CONTRIBUTORS: L. Paul Hood, Jr., J.D., & Emily Bouchard

CITE AS: LISI Estate Planning Newsletter #1954, (April 26, 2012) at http://www.leimbergservices.com/

Sources: Leimberg Information Services, Inc. & Robert S. Keebler, CPA, MST, AEP

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Friday, April 27, 2012

Autism Awareness Month: Special Planning for the Future with Autistic Children

April is Autism Awareness Month and The Ultimate Estate Planner, Inc. has teamed up our fellow colleague, Thomas D. Begley, Jr. and the Begley Law Group, P.C., based out of New Jersey, to help spread awareness for this very special cause.

A recent report released by the Centers for Disease Control shows a drastic increase in autism diagnoses. One in every 88 children in the United States is diagnosed with a form of autism spectrum disorder, an increase of 78% since 2002. Boys with autism continue to outnumber girls at a rate of 5 to 1.

Since this is such a prevalent disorder that touches so much of the population, it is necessary to ensure that safeguards are in place for your loved one affected by autism.

GUARDIANSHIPS

If, upon reaching age 18, an autistic individual has sufficient capacity, he or she can, and ought to, execute documents, including a will, living will, and powers of attorney. These documents will name a loved one to act as an agent, if necessary, regarding emergency medical decisions as well as routine financial and personal decisions.

For an individual with insufficient capacity, a guardianship will be necessary. Once a child turns 18, the parents no longer retain the legal right to make the decisions that they have been making up to that point. In many cases, the guardianship process can be simple for parents of children on the autism spectrum, but it is still essential in order to ensure that safeguards are in place for the child.

It is also important for parents of children with autism to make sure that their own wills name choices for a successor guardian for their child.

SPECIAL NEEDS TRUSTS

Most parents worry about the well-being of their children once both spouses have passed away. A parent's or grandparent's concern about their loved ones is especially well-founded for special needs children. Leaving an inheritance outright to a child with special needs will jeopardize his or her eligibility for governmental benefits. For example, in order to receive Medicaid benefits, an individual cannot have more than $2,000 of countable assets in his or her name.

In order to rectify this issue, parents and loved ones often establish a third party special needs trust, which is a mechanism through which funds can be made available in order to enhance quality of life while still allowing the child to remain on government benefits. A special needs trust supplements public benefits, such as Medicaid and SSI, without jeopardizing eligibility. The trustee has absolute discretion to expend funds from the trust to purchase things for your child that are not otherwise covered by Medicaid.

It is extremely important to inform relatives about the existence of this special needs trust. Grandparents and other relatives can make lifetime gifts or leave inheritances directly to the child's trust in order to make sure that benefits are preserved.

Even if you are not personally affected by autism, please join us at The Ultimate Estate Planner, Inc. and the Begley Law Group, P.C., along with millions of other advocates, to continue to spread awareness about autism spectrum disorders and the importance of looking at the special planning needed for these individuals.

Source & Photo Credit: Begley Law Group, P.C., Susan M. Green, Esq.

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Thursday, April 26, 2012

IRS’ 5 Tax Tips for Newlyweds, Divorcees

If you or a client has just gotten married or divorced, the last thing you want is for something to further complicate tax returns–or throw a snag into the processing of a refund.

Name changes can do just that, whether it’s a matter of taking a new name or resuming an old one. Connubial bliss can suffer if the refund doesn’t arrive in time to pay some of those hefty wedding bills–and freedom might not seem so free if finances are impaired when a long-anticipated refund check fails to show up.

Thanks to the folks at AdvisorOne.com, here are five suggestions from the IRS that can help you stay out of trouble, whether you’re once again flying solo or have just tied the knot.

1. Calling a Spouse a Spouse
So you’ve taken the plunge and jumped the broom. The IRS’ computers won’t know, or care, unless you let the Social Security Administration know too–after all, a computer will look at your Social Security number and the name on your joint return and scream “Reject!”–even if you kept your old name and hyphenated it with that of your new spouse.

2. Back to the Future
Divorced? Same problem. If you went back to your old name, don’t forget to let SSA know so that the IRS computers don’t have a nervous breakdown trying to figure out where they know you from.

3. A Rose by Any Other Name
When you’re ready to notify Social Security, you will need to provide them with proof that you are (now) who you say you are. Make sure you have a recently issued document that identifies you as you wish to be known.

4. Gotta Do the Paperwork
Provide the Social Security Administration with that recently issued document, as well as a completed Form SS-5, Application for a Social Security Card, either by mail or in person at your local SSA office. The form is available online at http://www.socialsecurity.gov/, by phone–call 800-772-1213 to request it—or at those handy local offices. Your new card will arrive with your old number and your new name.

5. But What About the Kids?
Suppose you (or your spouse) adopted the kids, and their names changed too. Social Security needs to know about them as well, even if they don’t have SSNs yet. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number–or ATIN–by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).

Source & Photo Credit: AdvisorOne.com

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Wednesday, April 25, 2012

New Book Helps You Plan for and Protect Your Assets

Orange County, California (March 29, 2012) – There are few things in life more certain than death and taxes and perhaps, in today’s society, Law suits. However, the fact is few people actually plan for them.

In the New Book The Ladder of Success: An Asset Protection Planning Primer, Attorney Jeffrey R. Matsen (“Top 100 Attorneys in U.S.” Worth Magazine) has provided a straightforward and elementary description of what Asset Protection really is and demonstrates how it can be effectively implemented by taking various steps, like rungs on a ladder, to truly climb the ladder of success.

“The one constant over the many years of my practice and among the hundreds of different clients I have served is the imbalance of, on the one hand, their profound concern regarding Asset Protection, and on the other, their lack of understanding as to how to implement it,” says Attorney Matsen. “I have dedicated my career to assisting these clients in planning the fortification of their resources to ensure their financial security in the face of taxes, liability and creditor attacks.”

The Ladder of Success: An Asset Protection Planning Primer explains:

Why Plan? The Need for Asset Protection
The Limitations
The Operating Business Entity
Basic Estate Planning
Bankruptcy Considerations, Exemptions and Marital Planning
Liability Protective Entities for Investment Assets
Domestic Asset Protection Trusts and Modular Planning Utilizing LLCs
The Offshore Asset Protection Trust and the Modular Planning that Accompanies It
Advanced Estate Planning Techniques
Special Issues and Strategies for Physicians and Dentists
Climbing the Ladder and Putting It All Together

Chock full of authoritative information about estate planning and asset protection, The Ladder of Success: An Asset Protection Planning Primer is one book every conscientious person should own. “Nobody understands the nuances and practicalities of this area better than Jeff Matsen. His unique ability of making issues clear for clients and their advisors is a gift. This book is required reading for any layperson or professional who wants to learn more about asset protection and more importantly, take action,” says Bill Deitch, Leading Estate Planning Attorney, Chicago.

“Jeff Matsen is an expert to the experts in the asset protection field. Those seeking asset protection often share common characteristics—such as wealth, business ownership, real estate ownership, considerable income and estate tax exposures, as well professional practice ownership—and I recommend they read Jeff’s book to protect their families,” states Joseph J. Strazzeri, Fellow, Southern California Institute; Co-founder, Laureate Center for Wealth Advisors.

Tim Voorhees, JD, MBA President, Family Office Services; Principal, Matsen Voorhees, Orange County, CA. explains “Because of Jeff’s broad, multi-disciplinary experience, he knows how to integrate protection from lawsuits with protection from taxes. Jeff’s ability to combine creditor protection with tax planning helps clients accumulate more wealth and maximize upside potential.”

“Jeff Matsen is one of the best estate planning and asset protection attorneys in the country. His knowledge, wisdom and direct experience have truly made him one of the elite group of top experts in his field. If you are concerned about protecting your assets and want to leave a legacy for future generations, I highly recommend you read this book,” says Stephen Fairley, CEO of The Rainmaker Institute, LLC, The Nation’s Largest Law Firm Marketing Company.

Marc Selden, Nationally Recognized Estate Planning Attorney, New York City, states “Jeff is widely recognized in the legal community as an asset protection guru. In this book, Jeff does a wonderful job of explaining the principles and strategies of complex asset protection planning in a very clear and easy-to-understand way.”

The Ladder of Success: An Asset Protection Planning Primer, $19.95, Paperback 179 pages, ISBN 978-0-9852041-1-2, is published by Wealth Strategies Counsel, and is available online. >>ORDER NOW

ABOUT JEFFREY R. MATSEN
JEFFREY R. MATSEN, JD, received his law degree with honors from the UCLA School of Law and served as a Military Judge with the rank of Captain in the US Marine Corps. Matsen has been a Professor of Law in Business, Estate Planning and Advanced Taxation. He is a highly sought-after and respected speaker and educator and has published numerous legal articles. Matsen is the founder of “Wealth Strategies Counsel,” the Estate Planning and Business Transactions Department of Matsen Voorhees and Bohm, Matsen, Kegel & Aguilera, LLP, in Orange County, California. His practice areas include: Business and Estate Planning, Asset Protection, Probate and Trust administration and litigation, Real Estate and Offshore structures. Matsen has been designated one of the Nation’s “Top 100 Attorneys” by Worth Magazine, A “Super Lawyer” by Los Angeles Magazine and he is listed in The Best Lawyers in America. The Nationally Renowned Attorney Rating Service, AVVO, has rated Matsen a perfect “10/10 Superb.” Besides continuing to achieve the highest “AV rating,” he has been designated a “Preeminent Lawyer” by the prestigious attorney rating directory, Martindale Hubble.

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Monday, April 23, 2012

A Vexing Retirement Planning Problem? Predicting Health Care Costs

What worries your clients most about their prospects for achieving a secure retirement? The cost of health care.

Americans are less confident that they'll have enough money to pay for medical and long-term care expenses in retirement than they are about their ability to cover basic expenses, according to the Employee Benefit Research Institute's recently released Retirement Confidence Survey.

Affluent households seem especially worried. Seventy-nine percent of investors with $250,000 or more in investable assets responding to the most recent Merrill Lynch Affluent Insights Survey cite health care costs are their top financial concern – ahead of the nation's budget deficit, unemployment or possible tax hikes. And 34 percent say they are more worried about the financial strain associated with a chronic health situation than how it might compromise their quality of life.

It's the third year in a row that health care cost worries have topped Merrill Lynch's survey. Growing awareness among older Americans that longevity is rising is a key factor, since it raises the specter of ballooning lifetime cost, says David Tyrie, head of Personal Wealth and Retirement for Bank of America Merrill Lynch. “The longevity challenge is complex, and we need to think about it more holistically and find a comprehensive solution,” he says.

Health care cost inflation for retirees actually has moderated somewhat in recent years. Fidelity Investments reports that projected lifetime health care costs fell for those retiring in 2011 – the first time inflation abetted since the company began tracking it 10 years ago. Fidelity estimates that a 65-year-old couple retiring last year will need $230,000 to pay for lifetime medical expenses, not including nursing-home care. That represents an eight percent decline from 2010, when the estimate was $250,000 (Fidelity's 2012 report is due to be released later this month).

A key factor moderating prices is the Obama Administration's health reform law, according to Fidelity and other experts. The Affordable Care Act (ACA) contains several key changes to Medicare, including a gradual closing of seniors' out-of-pocket spending on prescription drugs in the notorious doughnut hole. The prescription drug program also has experienced lower-than-forecast enrollment and a major patient shift to generic drugs. The ACA also cuts reimbursement rates to hospitals, skilled nursing facilities, home health services and Medicare Advantage managed care plans.

While overall Medicare spending is soaring due to the country's aging demographics, the rate of average annual per capita spending is projected to be 3.5 percent for the coming decade – in line with projected GDP growth of 3.8 percent, according to the Congressional Budget Office. From 1985 to 2009, annual per capita spending growth averaged 6.7 percent. However, long term care costs have continued their inexorable rise. The annual rate for a private nursing home room last year was $77,745 in 2011, according to the Genworth 2011 Cost of Care Survey, up $17,520since 2005 – a compound annual growth rate of 4.35 percent over that period.

At the same time, the market for long term care insurance (LTCI) continues to struggle. The federal government threw in the towel last October on efforts to create a federally-sponsored option for long-term care coverage, called The Community Living Assistance Services and Supports Act (CLASS), due to worries that the program wouldn't be financially sustainable without adding significantly to the federal deficit.

The news in the private LTCI market hasn't been much better. Prices for LTCI policies this year are ranging from six to 17 percent higher than a year ago, according to the American Association for Long-Term Care Insurance (AALTCI) Many existing policy holders have been hit with double-digit rate hikes, as well.

Much of the premium hikes stem from the ultra-low interest rate environment, according to Jesse Slome,executive director of AALTCI. “Many people don't understand the importance of investment return in the insurance business. “About half of the assets carriers use to pay future claims comes from investment returns, and the other half comes from premiums” he says. “Every half point drop in interest rates translates into a 15 percent rate increase by insurers.”

Meanwhile, insurance carriers have been withdrawing from the market – 10 of the top-20 underwriters of individual LTCI policies five years ago have since announced that they will stop writing new policies, according to LIMRA, the insurance industry research and consulting group. And sales have been lackluster. In 2011, the number of people buying policies fell two percent to 230,000, according to LIMRA.

Helping Clients Cope

Mapping a strategy for managing health care costs in retirement is a critical component of any good financial plan. Yet the Merrill Lynch survey finds that, while respondents may be wringing their hands about the problem, they're not doing much to prepare. Seventy-eight percent of Americans under age 50 haven't planned for retirement health expense—but 62 percent of those over 50 haven't figured it out either.

Here are some key strategies to consider as you work with clients:

Create a savings goal for health care. Consider urging clients to set up a separate account to be tapped only for health expenses in retirement. Some may have access to a Health Savings Account at work, which permits investment of pre-tax dollars, tax-free growth and withdrawals for workers who want to save to offset health expenses. But HSAs are limited to workers enrolled in high-deductible insurance plans ($1,200 for an individual, $2,400 for families). Contributions are limited to $3,050 for individuals, and $6,150 for families.

Roth IRAs also can be useful vehicles for setting aside dollars tagged for health care, since they don't have Required Minimum Distributions for those over age 70 ½ and withdrawals generally are tax free.

Work longer. Staying on the job even a few years longer than planned is one of the best overall ways to counter health expenses, because it means more years of employer-sponsored health insurance and delayed Medicare enrollment.

Do a prescription drug benefit check-up annually. Seniors should re-shop prescription drug plans annually to ensure that they are getting the best price and appropriate coverage. Insurance companies often change their offerings year-to-year in ways that can increase premiums by thousands of dollars, or make it difficult to get certain drugs. And, your clients' health needs may change, too.

Manage Medicare carefully. Clients should be sure to sign up for Medicare within the correct enrollment windows to avoid major penalties for Part B – 10 percent for every year of delay for life.And high income seniors should pay careful attention to manage tax brackets to avoid premium surcharges levied for Part B and Part D.

Consider long-term care insurance. Despite the LTCI market's recent problems, there really aren't many viable alternatives for protecting clients against the risk of catastrophic cost. Medicare covers only a small amount of LTC costs; Medicaid, which funds the greatest share of the country's nursing home costs, requires beneficiaries to spend themselves into poverty and the quality of care available is spotty at best.

Some may be able to self-insure – a strategy that requires $500,000 to $750,000 in retirement assets in order to be confident of having sufficient resources to self-fund an LTC need, according to Dawn Helwig, a principal with Milliman, an actuarial consulting firm that works with the LTC insurance industry.

Helwig recommends that LTCI buyers consider trimming their costs by staying away from the most expensive policy types. “Especially with the way inflation has been running, people don't really need to be buying policies with five percent compound inflation features right now. The regulations usually require insurance agents to offer that, but most also offer lower inflation protection at lower rates, and that can make a big difference.”

And if rates jump on an existing policy, policyholders may be able to keep rates flat by reducing their benefit levels.

“There really isn't another game in town, unless you're willing or able to divest all your assets and qualify for Medicaid” says Helwig.

Mark Miller is a journalist and author who writes about trends in retirement and aging. Mark edits and publishes RetirementRevised.com, featured as one of the best retirement planning sites on the web in the May 2010 issue of Money Magazine. He is a columnist for Reuters and also contributes to Morningstar and the AARP Magazine. Mark is the author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living (John Wiley & Sons, 2010).

Source: RegisteredRep.com | By Mark Miller
Photo Credit: worldofdtcmarketing.com

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Friday, April 20, 2012

Steve Oshins’ 3rd Annual DAPT Ranking Chart & Other Free Updated Charts Available to Download

Steve Oshins’ 3^rd Annual Domestic Asset Protection Trust Ranking Chart
Thanks to the generosity of nationally renowned estate planning and asset protection attorney, Steven J. Oshins, Esq., AEP (Distinguished) for providing his 3rd Annual Domestic Asset Protection Trust Ranking Chart. For the first time since the chart was originally created, this chart now assigns numerical rankings to each DAPT state. The approximate weights assigned to each variable are listed. However, please note that in the interests of impartiality, since Nevada is the only state (of the top eight states per the rankings) that doesn’t allow divorcing spouses to access its DAPTs, Steve added a lot of subjective bonus points to the non-Nevada jurisdictions in order for the “Total Score” to not be too skewed.

Traditional IRA Distribution Flowchart
Thanks to the generosity of nationally renowned CPA and IRA Expert, Robert S. Keebler, we are providing to you his updated Traditional IRA Distribution Flowchart.

Updated Understanding the 3.8% Health Care Surtax Chart
In late March, the Supreme Court began hearing arguments on the constitutionality of the Affordable Care Act, the health care reform law that was signed on March 23, 2010. Accordingly, Robert S. Keebler updated his Understanding the 3.8% Health Care Surtax chart to reflect the new Medicare surtax. This law imposes a 3.8% tax on unearned income, such as interest, dividends, rents, royalties and certain capital gains, for higher income taxpayers (and trusts and estates).

*NOTE: Your contact information is required to receive these free resources. By supplying The Ultimate Estate Planner, Inc. your e-mail address, you are authorizing us to e-mail you announcements in the future about various products and programs we have available. You will also be added to the author's e-mail list and notified of tax news and information about programs. The Ultimate Estate Planner, Inc. does not rent or sell its list to other third parties. You can unsubscribe from these communications at any time.

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Thursday, April 19, 2012

Practical Planner - Checklist: Capacity (Volume 7, Issue 2)

Martin “Marty” Shenkman, Esq., CPA, MBA is an estate planning attorney and Certified Public Accountant who authors a number of publications each month, including his monthly e-mail newsletter, "Practical Planner". Below is the second installment from Marty's March/April 2012 newsletter. To be added to Marty's monthly e-mail distribution list, e-mail newsletter@shenkmanlaw.com.

Summary: By 2030 it is estimated that 1/5th of all Americans will be age 65 or older. Age brings challenges, that are often compounded by more health challenges. These make confirming that you have adequate ability, called “testamentary capacity,” to sign a will more important. But even if you’re sufficiently competent, were you unduly influenced to leave your son/caretaker double what his siblings get? Consider:

√ Many chronic illnesses, in addition to physical or other symptoms, are coexistent with depression. Depression can be part of the symptoms of the illness itself, or as the result of the impact of the illness on the client’s quality of life, or a consequence of medication used to treat the illness, or a combination of all three factors. Depression may affect your objectives, capacity, and risk for being unduly influenced. With depression sleep may be impaired, you may see the world through dark colored classes, you may have little energy and no ability to concentrate, etc. Depression may make you more susceptible to undue influence. If concentration is significantly impacted, your cognitive function may also be affected.

√ Consider who is making the assessment of your competency (capacity). Many primary care physicians don’t have the expertise to make these diagnosis, yet often lawyers rely on reports from primary care physicians to support their ultimate legal determination as to capacity. For patients with known depression, less than 25% were documented as being depressed in their primary physicians’ charts. Less than 10% were taking medication for depression. The statistics concerning the diagnosis of cognitive impairment are similarly weak. For a proper diagnosis, a number of different disciplines might be tapped. The basic analysis should include a bio-psycho-social framework. It is important to look at the entire person and not just a part. Evaluating medical records might be a good start, but when a full picture, including the patient’s social environment, is obtained, everything is put in context.

√ The testing process itself may yield a false positive. If someone age 85 is put through a 6 hour neuropsychological test, at the end of the test his performance could be affected as a result of the fatigue caused by the testing process itself!

√ How at risk are you to undue influence? What can be done to ascertain or corroborate you true wishes? Even if there is a strong risk of undue influence, if you’ve been consistent for decades (e.g., your will has always left your son a double portion), your wishes may be clear. The real challenge is in assessing the reality of undue influence if you’re living with moderate dementia. While changes in your historical pattern of disposition of assets might suggest an issue, is it?

√ A court might find that you had sufficient capacity to make a will, but then disqualify the will because of undue influence. In re Estate of H. Earl Hoover, no. 73519, Illinois, 6/17/93. Since capacity is a continuum, even if capacity is diminished, it may prove easier to challenge the will by demonstrating undue influence.

√ In early stages of even Alzheimer’s disease no one should assume that sufficient capacity does, or does not, exist. If the diagnosis was made by a primary care physician, what reliance is reasonable to place on the conclusion? What precautions should your lawyer take? The fact that you were prescribed a drug, such as Aricept, does not necessarily prove your cognitive status.

√ Competency is also situational. You may lack competence at one point in time, but you may be competent at another point in time. For example, you might feel so anxious in your attorney’s office that you cannot adequately respond to the queries your attorney believes essential to the demonstration of adequate capacity. Perhaps your lawyer should have a therapy dog present and serve lots of great snacks to put you at ease! Documenting the situational impact on competency presents another type of challenge.

Thanks to Sanford I. F, MD, Clinical Professor of Psychiatry at the University of Chicago Medical School and William Andrews, Esq. of Santa Rosa, California. PP

To download the complete newsletter and prior newsletters, click here.

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ABOUT THE AUTHOR: Martin “Marty” Shenkman, Esq., CPA, MBA is an estate planning attorney and Certified Public Accountant from Paramus, New Jersey. He received his Bachelor of Science degree from Wharton School, University of Pennsylvania 1977 with a concentration in accounting and economics. He received a Masters degree in Business Administration from the University of Michigan 1981, with a concentration in tax and finance.

Mr. Shenkman is a widely quoted expert on tax matters and is a regular source for numerous financial and business publications, including The Wall Street Journal, Fortune, Money, The New York Times, and others. He has appeared as a tax expert on numerous television and cable television shows including The Today Show, CNN, NBC Evening News, CNBC, MSNBC, CNN-FN and others. He is a frequent guest on radio talk shows throughout the country and has a regular weekly radio show on Money Matters Financial Network.

Mr. Shenkman is a prolific author, having published thirty-four books and more than seven hundred articles. Mr. Shenkman has served as contributing editor to a host of publications, including: New Jersey Lawyer, The Journal of Real Estate Finance, Real Estate Insight, Commercial Leasing Law & Strategy, The Journal of Accountancy, Real Estate Accounting and Taxation, Shopping Centers Today, and others.

Mr Shenkman is active in numerous charitable organizations, sitting on many boards and planned giving committees and lectures regularly for these and other organizations.

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Wednesday, April 18, 2012

Keebler & Ward on Taproot v. Commissioner: Roth IRA Not Eligible Shareholder of S Corporation

Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI). For information about how to subscribe to LISI, click here.

Traditional IRAs are not eligible S corporation shareholders under Rev. Rul 92-73 on the theory that the beneficiary of a traditional IRA is not taxed currently on the IRA's share of the S corporation's income. But what about Roth IRAs?

In Employee Benefits and Retirement Planning Newsletter #506 Bob Keebler provided LISI members with his analysis of the initial Tax Court decision in Taproot, that at the time supplied the answer to the fascinating question set out above. Now, Bob returns with Michelle Ward, and together they comment on the 9th Circuit’s affirmation of the Tax Court’s decision.

EXECUTIVE SUMMARY
In Taproot, the Ninth Circuit Court of Appeals upheld the U.S. Tax Court’s finding that a Roth IRA is not an eligible S-corporation shareholder.

FACTS
Paul Di Mundo incorporated Taproot Administrative Services, Inc. in the state of Nevada in 2002. Taproot elected S corporation status effective as of the date of incorporation and filed its 2003 tax return on a U.S. Income Tax Return for an S Corporation.

In early 2003, Taproot issued all outstanding shares of its stock to a custodial Roth IRA account held at the First Trust Co. for the benefit of Di Mundo. The custodial Roth IRA account remained Taproot’s sole shareholder during the 2003 tax year.

In 2007, the Commissioner of the Internal Revenue Service issued a notice of deficiency to Taproot for the 2003 tax year. Among other findings, the Commissioner determined that a Roth IRA did not qualify as an eligible shareholder of an S corporation. Consequently, Taproot was deemed taxable as a C corporation for the 2003 tax year.

DISCUSSION
Taproot argued that the individual beneficiary of a custodial account also qualifying as a Roth IRA should be considered the shareholder for purposes of the S corporation statute.

Treas. Reg. Sec. 1.1361-1(e)(1) provides that “[t]he person for whom stock of a corporation is held by a nominee, guardian, custodian, or an agent is considered to be the shareholder of the corporation for purposes of [the S corporation statute].” Taproot contended that as the sole beneficiary of the DiMundo Roth IRA, DiMundo should be considered the shareholder and, thus a qualifying individual for the purposes of the statute.

IRC Sec. 1361(c)(2)(A)(i) also extends shareholder eligibility to any grantor trust “all of which is treated...as owned by an individual who is a citizen or resident of the United States.” Taproot therefore also argued that a Roth IRA should be classified as a grantor trust.

In Rev. Rul. 92-73, the IRS ruled that an IRA is not a permitted shareholder of an S corporation under section 1361. The IRS reached similar conclusions regarding an IRA’s eligibility as an S corporation shareholder in a least 42 PLRs (see, e.g., PLRs 200915020, 200931039 and 200940013). While the Court acknowledged that such rulings were not binding precedent, it also noted that they can be used as evidence of an administrative practice of the IRS.

The Tax Court, along with noting the functional differences between IRAs and grantor trusts, found Rev. Rul. 92-73 to “sensibly distinguish[ ] IRAs from grantor trusts.” In making that determination, the Tax Court relied in part on the rationale of Revenue Ruling 92-73, stating that:

[T]raditional IRAs are not eligible S corporation shareholders because the beneficiary of a traditional IRA is not taxed currently on the IRA’s share of the S corporation’s income whereas the beneficiaries of the permissible S corporation shareholder trusts listed in section 1361(c)(2)(A) are taxed currently on the trust’s share of such income.

On appeal, Taproot maintained that the Di Mundo Roth IRA functioned merely as the form of Di Mundo’s individual investment account and that the plain language of Treas. Reg. Sec. 1.1361-1(e)(1) explicitly authorizes those IRAs and Roth IRAs created as custodial accounts to be shareholders of S corporations.

Taproot first claimed that both forms of IRAs and Roth IRAs—trusts and custodial accounts—lack the essential characteristics of a separate taxpayer and should therefore be treated as indistinguishable from the individual owners. The Court, however, found that Taproot did not provide persuasive reasoning or convincing authority for this conclusion and found the reasoning in Rev. Rul. 92-73 to support the opposite result. The Court found that the distinguishing feature is the deferred income tax treatment, which differentiates IRAs from beneficiaries listed in IRC Sec. 1361(c)(2)(A) who are taxed currently on the trust’s share of income.

The Tax Court also discussed the legislative intent behind the S corporation statute, finding the only available evidence suggested that Congress did not intend to allow IRAs to own S corporation stock. Although at the time Congress initially drafted the S corporations statute, both traditional and Roth IRAs had yet to be created, the Tax Court reasoned that “had Congress intended to render IRAs eligible S corporation shareholders, it could have done so explicitly,” as it did with the 2004 amendment allowing banks with IRA shareholders to elect S status in specific circumstances.

This was especially true in light of Congress’s 1999 directive to “the Comptroller General of the United States to conduct a study of possible revisions to the rules governing S corporations including “permitting shares of such corporations to be held in individual retirement accounts.” For these reasons, the Tax Court concluded that traditional and Roth IRAs were not eligible shareholders. On appeal, the Court found the legislative history of the S corporation statute favored limited eligibility and that if at any point Congress had intended IRA eligibility, it could have amended the statute. The Court pointed out that if IRAs and Roth IRAs qualified as eligible shareholders in 2003, then the subsequent 2004 amendment would have been completely unnecessary.

CONCLUSION
It is interesting to note that the Tax Court was also mindful that under Taproot’s theory of statutory construction, DiMundo would avoid virtually all taxation on his S corporation profits. This would enable S corporations to achieve an overwhelming benefit over C corporation competitors which are subject to two levels of taxation —one at the corporate level and another at the shareholder level.

In a lengthy dissent, however, Judge Halpern notes that “this underestimates the strengths of the Code's other defenses against such shenanigans.” He noted that there are numerous limitations on what can go in and out of an IRA—income-contribution limits, deadlines for contributions, penalties on prohibited transactions, and penalties on excess contributions. Judge Halpern further noted that while custodial retirement accounts are generally exempt from tax on undistributed IRA income, they are still subject to the taxes imposed on Unrelated Business Income Tax. In general, the Unrelated Business Income Tax subjects the business earnings of tax-exempt organizations to taxation.

The majority of the Tax Court, however, expressed its skepticism that the Unrelated Business Income Tax could adequately mitigate this tax advantage. Although Taproot contended that the Unrelated Business Income Tax negates the Tax Court’s policy concerns, the Appeals Court agreed with the IRS that I.R.C. Sec. 512 generally excludes passive investment income, such as interest income, from application of the UBIT and thus, in this case, the interest income at issue would not be subject to the UBIT.

HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!

TECHNICAL EDITOR: Barry Picker

CITE AS: LISI Employee Benefits and Retirement Planning Newsletter #603 (April 17, 2012) at http://www.leimbergservices.com/ Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.

CITES: Taproot Administrative Services v. Commissioner, Case No. 10-70892; Revenue Ruling 66-266, 1966-2 C.B. 356; Revenue Ruling 92-73, 1992-2 C.B. 224

Sources: Leimberg Information Services, Inc. & Robert S. Keebler, CPA, MST, AEP

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Tuesday, April 17, 2012

Practical Planner: 2012— ACT NOW! (Volume 7, Issue 2)

Summary: Unless you’re hiding under a rock, you’ve been bombarded with email newsletters, mailings and more from your CPA, investment adviser, the 100s of people who want to be your investment adviser and more, cajoling you to make gifts before the end of 2012. Well this article is one more of ‘em. And you should pay heed. While the main drift of this message is clear: “make gifts before the law changes in 2013.” There are a number of important nuances to the message that the media blitz has not addressed: Lot’s of people, not just the ultra-high net worth folks, should be doing this. So if you’ve tuned out these messages because you’re not a zillionaire, tune back in! So, “I'll bet you think this song is about you. Don't you? Don't you?” Well Carly, it is! No one should just make a gift, the gifts should be in trust (your lawyer won’t make any money on the deal if it’s just a simple gift!). These trusts raise a host of issues, many of which have special implication to 2012 planning. So, we’re going to try to convey these key points in a really succinct amount of space, but hopefully enough can be conveyed to motivate you to act now, and act prudently.

Point 1: Uncertainty shouldn’t be an excuse for inaction. If the weatherman says 20% chance of a horrible storm, you’d carry an umbrella. Uncertainty may also mean opportunity. If you don’t act now 2013 is scheduled to bring a $1 million exemption and 55% rate. President Obama has continued to propose estate and gift tax changes that will undermine much of the planning arsenal, making his proposed 45% rate and $3.5 million exemption far more costly than most imagine. Consider that the left end of the tax continuum. True, the future is uncertain. Perhaps the Republicans will sweep the election and repeal the estate tax. Consider that the right end of the tax continuum. If you don’t act now and the left end materializes you (not only your heirs) may lose out big time. If the right happens worst case you’ve wasted the cost of the planning, but have you? The trust planning that will serve your estate planning needs will also provide asset protection benefits, including divorce protection for heirs, and better control and management of your assets. So the planning in the best tax case scenario won’t be for naught, you’ll just have one less benefit. And by the way, even if the estate tax is repealed (and ya shouldn’t hold your breath hoping for that one) the gift tax may remain intact with a $1 million exemption even under Republican control. Most folks forget that the gift tax is an integral backstop for the income tax, not only for the estate tax. Look at what happened in 2010 with the gift tax.

Point 2: Planning is not only for Richie Rich. If you have a non-married partner a $1 million gift exemption in 2013 may make it costly to shuffle ownership of assets between you and your partner. Everyone, not just surgeons, should be concerned about asset protection. Nothing anyone in Washington does will change the litigious nature of our society. About a score of states have decoupled from the federal estate tax system so that lower amounts of wealth may trigger state death tax. A simple gift today might be all it takes in many situations to reduce or eliminate state estate tax. Use the current favorable tax environment to shift assets into protective structures before the party ends. A $1 million gift exemption will render much of this planning costly, impractical, or impossible. Remember at midnight 12/31/12 the carriage turns back into a pumpkin and the ride is over.

Point 3: Start with a Financial Plan. While your estate planner might think he or she holds the keys to the planning kingdom, this kinda planning should have at its foundation a well thought out financial plan. Does this suggest your wealth manager should be driving the bus? Nah, but they should be a co-pilot. How much can you afford to give away and be really assured that you won’t be asking the kids for a loan? Which assets can or should you give away? Do you need additional life insurance for coverage in light of components of the plan? Do you need access to the money you give away and if so how much? This analysis is meant to insure that you’re left with more than adequate assets to maintain your lifestyle after the transfers. This can deflect an IRS challenge that you had also an implied understanding with the trustees (or managers of an LLC) to get money back because you left yourself with insufficient resources. It can make it harder for a creditor to prove later that your transfers constituted a fraudulent conveyance.

Point 4: Make Gifts in Trust. Whatever amount you determine to give away, give it to one or more trusts, not outright to an heir. Trusts provide asset protection, divorce protection, preserve generation skipping transfer tax benefits (in English they can keep the assets out of the transfer tax system forever). Trusts can be structured as “grantor trusts” so you can sell assets to them without triggering capital gains tax and you can pay the tax on trust income and gains thereby growing the value of the assets inside the trust faster while shrinking the assets left in your name, thus reducing assets reachable by creditors or subject to estate tax. Both of these bennies are on President Obama’s hit list, so get ‘em while you can. Perhaps the biggest vig of gifting to a trust is you can retain the ability to benefit from the assets in trust. Say you set up a trust for your spouse/partner and all future descendants. So long as your spouse/partner is a beneficiary you can indirectly benefit. Alternatively, you can set up a Domestic Asset Protection Trust (DAPT) and be a beneficiary of your own trust. Even if you’re mega rich, but much of your wealth is concentrated in a business, be very cautious about cutting off your access to trust assets. Don’t forget the harsh economic lessons of 2008-10+.

Point 5: Sell Assets to Trusts. While gifts can take advantage of the current law, sales of assets to trusts can also provide a huge benefit now, that may also disappear when the ball drops in Times Square. If you sell 45% of your interest in a family business valued with a 40% non-marketability and lack of control discount, that’s huge leverage. Discounts may head the way of the Dodo bird. Since few trusts will have sufficient cash to pay for the purchase these sales are structured as note sales. Interest rates remain at historic lows. So transfers well beyond the $5.12 million are “can do.” For many folks the better approach is a technique described in prior newsletters called a Beneficiary Defective Irrevocable Trust (BDIT) that will depend on this sale technique. Sell ‘em while you can!

Point 6: Design the Trusts Right. The trust or trusts you’ll use should not be off the rack. This is the time to step up to the custom tailored suit. Navigating Scylla and Charybdis is child’s play by comparison. Some of the issues to consider include:
- Should you be a beneficiary or not? If yes, there are precautions to take and only certain states in which the trust can be established.
- Is there any reason the trust should not be a grantor trust? Unlikely, but ask. If it is a grantor trust what happens if there is a big capital gain? Example – you transfer your family business to the trust and 5 years from now sell out to a public company for big bucks. You have to pay the gain but the bucks are in the trust. Some practitioners use a tax reimbursement clause but caution is in order. These clauses have to be handled correctly and the trust must be in a state with appropriate laws. Also, worrisome is that if the trustee just so happens to reimburse you, the IRS might argue that you had an implied agreement with the trustee to reimburse you for the capital gains tax on a big sale. There may be better approaches.
- If you and your spouse/partner both set up trusts, the trusts need to be sufficiently different to avoid the IRS arguing what is called the “reciprocal trust doctrine” -- that they are so identical that they should be “uncrossed” so that the trusts are taxable in each of your estates. That would entirely negate the planning. Differentiate the trusts using different powers, different distribution standards, set them up in different states, sign them on different dates, use different assets, print them on different color paper (just kidding on that one), etc.
- If you own all the assets to be given can you set up a trust and gift $10.24 million and have your spouse treat the gift as if it is ½ his thereby using up his exemption? While spouses can gift split, if your spouse is a beneficiary of the trust which is the recipient of the gift, that is a no-no.
- What if you gift $5.12 million to your spouse, and he then gifts it to his trust to avoid the gift splitting issue? Nice try but maybe no cigar. The IRS could attack using the “step transaction doctrine.” If the IRS wins they might treat your gift to your spouse, and his gift to the trust, as an indirect gift by you to his trust. Thus, you’d be treated as making two $5.12 million gifts and owe about $1.8 million in gift tax. Ouch!
- There has never been a time in history when so many taxpayers may feel so compelled to make so many large transfers in such a short time period. Big brother will be watching so more caution and planning then ever before should be exercised.
- You want to fund a FLP or LLC with appreciating assets, make gifts and secure discounts. If the assets are not inside the entity long enough the IRS will argue that the gifts were of the underlying assets – no discount.

Point 7: Operate the Plan and Trusts Right. Administer the plan and trust properly, and monitor it by meeting not less than annually with all your advisers to make sure all formalities are adhered to. Be sure the CPA is in the loop to monitor the gift and income tax returns so they all properly reflect the reality of the transfers. Revise asset allocations to coordinate asset location decisions.

Bottom Line: Just Do It! Time is fleeting. Everyone should review planning options for themselves and their family/loved ones to ascertain what might be beneficial and how to expedite the process so planning is completed in advance of year end, preferably before the election.

To download the complete newsletter and prior newsletters, click here.

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Monday, April 16, 2012

WSJ.com - Inherited IRAs: A Sweet Deal

Reposted from WSJ.com | By Kelly Greene

Inherited individual retirement accounts made news earlier this year when the Senate Finance Committee proposed to make heirs empty them within five years of the benefactor's death.

The measure, which was abandoned shortly thereafter, would have upended a system that is highly advantageous to families. Under current rules, heirs get to stretch withdrawals from an inherited IRA across their own life expectancies, meaning the assets could potentially increase in value, tax-deferred, for decades.

Yet many unwitting families cash out the account, losing the possibility of a life-expectancy payout, says Natalie Choate, an estate-planning lawyer at Nutter McClennan & Fish LLP in Boston.

That is a problem, she says, because there is no way to get the money back into the IRA after it has been cashed out.

Sometimes, even when the heir is aware of the opportunity to keep the inherited IRA in tax-deferred investments, financial and legal advisers botch the paperwork so badly that the IRA is disqualified.

Here are some of the snags that can result:

Trust tangles: M.D. Anderson, a tax preparer in Chandler, Ariz., has worked on so many inherited IRA snafus that he set up a website to chronicle the morass, titled InheritedIRAHell.com.

One of the most common problems involves how they intersect with trusts. Many people who set up plain-vanilla living trusts, often marketed as a way to avoid probate, name the trust as the IRA beneficiary.

But a trust isn't a person, and has no life expectancy, so it can't take advantage of the opportunity to stretch withdrawals across decades.

There is a potential fix: Demonstrating that a trust qualifies as a "conduit," or "see-through" trust, meaning its purpose is to get the IRA distributions to a trust's beneficiaries. Doing so, however, could require winning a so-called private-letter ruling from the Internal Revenue Service, which can cost $4,000 for filing and double that for the accountant or lawyer preparing it, Mr. Anderson says.

His advice: Keep the IRA out of the trust unless your kids' situation is so egregious that there isn't any alternative, like having kids who are in jail.

Titling problems: When you inherit an IRA, you should retitle the account so it reads like this: "William Smith, Deceased (date of death) IRA F/B/O (for benefit of) James Smith, Beneficiary." But Mr. Anderson is working with a client who received forms from the custodian of the account that didn't spell out that he had inherited the account. The second set of forms the client received still needed some edits to avoid possibly disqualifying the account, Mr. Anderson says.

So, when you retitle the account, make sure the paperwork is in the proper format.

Paying the tax twice: If the benefactor's estate were large enough to be subject to federal estate tax, and a federal estate tax were paid, then the IRA beneficiary can get a tax deduction for the estate tax paid on the IRA's value. That is the case even if someone else paid the tax, Nutter McClennan's Ms. Choate says.

Estates worth up to $5.12 million are exempt from estate tax this year, but the exemption reverts to $1 million in 2013 unless Congress acts.

For example: a mother leaves a $1 million IRA to her son and the rest of the estate to her daughter. The daughter ends up paying the federal estate tax on the entire estate, including the IRA, the taxes on which were $350,000. The son cashes out the $1 million IRA. He now has $1 million in gross income and a $350,000 deduction for the estate tax.

"This is the most overlooked deduction in America," Ms. Choate says. The reason: Heirs often don't realize they are entitled to the "income in respect of a decedent" deduction, as it is known. Estate administrators typically don't feel it is their job to tell beneficiaries about their future tax situations. Meanwhile, the beneficiary's tax preparer might have no idea that estate tax has been paid on the IRA.

Failing to pass it on: Many wealthier adult children forget they can disclaim an inherited IRA and pass it along to their children—possibly creating tax-deferred growth for decades, says Bobbi Bierhals, an estate-planning lawyer with McDermott Will & Emery in Chicago.

There are two things to keep in mind, Ms. Bierhals says. First, the IRA owner has to fill out the beneficiary designation form in a way that will allow it. The best way is to leave the account "to my then-living descendants, per stirpes," which means the account goes equally to your children, or, if they have died, to their children.

Also, you must act quickly. Disclaimers must be completed within nine months of the benefactor's death, she says.

Photo Credit: James Steinberg via WSJ.com
Source: WSJ.com

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Thursday, April 12, 2012

5 Important Steps to Update Estate Plans

The tumult of the current tax season is winding down, but advisors can provide a valuable additional service to their wealthy clients by encouraging them to closely review their estate plans to ensure these are up to date.

Estate plans are valid at the time they are signed, but sometimes years or decades pass before they come into play and circumstances change: assets grow or retract, designated trustees die, family members have falling-outs.

Keeping estate plans current is essential to protecting clients’ families and their assets, Blooma Stark, an attorney with Aronberg Goldgehn Davis & Garmisa, said in a telephone interview with AdvisorOne.

Stark noted that accountants are often the advisor clients see most often—at least once a year—and so are well positioned to recommend an estate plan review. In contrast, clients may see their attorneys only at wide intervals. She said she had just spoken with a client who had prepared an estate plan 20 years ago, and only recently realized she needed to update the plan.

Stark listed five estate plan areas to which advisors can direct clients’ attention for review. Doing this now “can save a lot of time and aggravation down the road,” she said.

Review Documents. It’s essential that a client’s estate plan documents align with his or her current situation. Often a review will show one or more of these need to be updated, Stark said. Especially important are the will, power of attorney, living will and trust.
Determine Familial Situation. Clients should assess whether their relationships with people they’ve named as guardians, executors, trustees or agents under a power of attorney are in good standing. If not, they will need to appoint others to fill those roles.
Assess Sub-Trusts. Children grow up, and often their adult circumstances are different from those envisaged at the time the client formulated the estate plan. They may now have children of their own, requiring the arrangements of trusts to be changed. For example, Stark said, clients may decide that their children are sufficiently wealthy not to need to be direct beneficiaries and so execute a generation-skipping trust to ensure their grandchildren will be well provided for.
Update Schedule of Assets. A critical issue clients often overlook or are unaware of is that an asset such as a second home does not automatically become part of their trust; the asset must be transferred to the trust during their lifetime. Failure to do this will likely result in probate costs that can escalate.
Evaluate Changes in Estate Tax Law. Depending on the net worth of the client’s estate, changes in the law may make it advisable to change estate plan documents. This year is a prime example, when so much is up in the air about the so-called Bush tax cuts. In 2013, for example, the estate tax exemption of $5 million could drop to $1 million, or some figure in between; nobody knows. Stark, like so many others who advise wealthy clients, said she has given up trying to crystal-ball what will happen next year. She is advising her high-net-worth clients to make gifts this year to take advantage of the current exemption.

Source: AdvisorOne.com

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Wednesday, April 11, 2012

Trust & Estates: CrummeyService.com - Automating Administration of Crummey Trusts

Reposted from Trustandestates.com | By Donald H. Kelley

Kelley Rating (one asterisk = lowest, to five asterisks = highest):

Ease of navigation, design of interface and learning curve *****
Instructional documentation and help system ***
Carries out the goal of the product as advertised *****
Overall usefulness ****

CrummeyService.com is a web-based solution to the administrative problems of Crummey trusts. It automatically sends gift and premium payment reminders, creates Crummey notices informing beneficiaries of their withdrawal rights. It sends the notices to beneficiaries; records acknowledgement of the notices and sends copies to trustees, grantors, fiduciaries and advisors to the trust. It relieves the attorney and trustee of tedious hard copy storage and administration. The publisher’s website includes a presentation on the nature of this service and screenshots of sample notices and reports.

CrummeyService.com accumulates, manages, tracks and monitors key trust information for grantors of trust owned life insurance. It records transactions, creates notices and alerts for funding shortfalls at defined intervals from the premium due date, supplies unpaid premium alerts and sends hard copy and electronic letters as required. The publisher asserts that all information and transactions are tracked and monitored in a secure environment. Trustees are notified when to pay the policy premium with payment date, method, amount and all other relevant payment details stored in the system. CrummeyService.com will manage the entire irrevocable life insurance trust lifecycle. It supports compliance with Internal Revenue Service and Uniform Prudent Investor Act regulations and guidelines and produces year-end and on-demand reports for tax filing and estate settlement. Administration of a trust may be authorized by CrummeyService.com, the trustee or an advisor. Notice text, data visibility and administrative rights can be controlled at the regional, office or attorney/advisors level.

This service may also be branded with your logo or, as a default, your contact information can appear on all communications to trust parties during the trust lifetime. The publisher offers extensive support for a corporate implementation.

The CrummeyService.com website furnishes Articles on Crummey trusts and their administration and maintains a Blog on Crummey trusts for the benefit of registered users.

Trust data is retained forever. Access to data is determined by authorization level based on the party’s role in the administration of the trust, with only authorized parties able to access trust data. Trustees have full data access, but beneficiaries will be given only limited access to data. Data access is available from any web browser 24/7.

What’s It All About?
After gathering the information needed to set up a trust (insurance policies, trust documents, the contact information for all parties to the trust, etc.), you enter the data required to set up the trust initially. Unless this information changes, this will be the only time you will need to enter it.

Upon entry to the secured area of CrummeyService.com, at the Welcome screen you are presented with the Main Dashboard that features a navigation menu on a left hand pane, a larger right hand pane and at the top, navigational buttons, a list of accounts and a Help menu. The right hand pane offers quick access to Add a New Trust, Complete Trust Entry, Record a Gift, Record a Policy Payment and My information. You can enter your personal information and settings at the My Information screen, which is then used throughout the system.

You may select Add a Trust on the right hand pane or choose from the activities listed on the navigational pane. A description of activities is available for each selection on the right hand pane. At the screen for Add A New Trust (or the screen for maintaining trust data), there is a tab for every party to the trust: grantor, trustee, guardian, beneficiary, policies, insured, advisor, and fiduciary. This information needs to be entered only once and is then used throughout the system. Access may be granted as desired. Fiduciaries may manage and edit information, if given permission. As all the necessary information for each tab is completely entered, a dot on the tab for the screen you are working on changes from red to green.

Saved data for each party includes tabs for personal and contact details, home address, business information and phone numbers.

A screen addresses Summary, Gift to Trust, Policy Payment and Gift Acknowledgment, displaying a list of previous gifts.

After the trust data for a new trust is entered and the dots on the tabs at New Trust are all green, the trust may be activated by clicking on the button “Activate this trust.” The trust is then ready to begin use of the website’s services. A welcome notice to the interested parties will be generated when the trust is activated.

Each year you will enter the gift(s) to the trust and information as to the payment of the life insurance premium.

Click on Financial on the left hand menu to open the Financial tab, which allows you to view and edit Gift to Trust, Policy Payment and Gift Acknowledgement for the policy you select, as well as displaying a summary of the trust activities for all policies.

You can then select Notice from the left hand menu to display a list of all trust activities (gift, policy payment, funding acknowledgement, etc.), as well as the welcome letter and the Crummey letter. Double click on the letter description to view the letter, select recipients, details for the delivery of the notice and the contents of the letter. The withdrawal notice defaults to 30 days, but may be changed. The Crummey notice language may be set to the default or you may tailor it as you see fit. The notices are customizable.

The Trust Attachments page allows you to upload the trust document file, or other documents associated with the trust, for storage and review.

You can create a Trust Report or Gift Report in a variety of formats, as desired. Selecting History allows you to view all activities of a given trust.

The Maintain Users tab allows you to enter the basic contact information for all users of a given trust and set the group and access settings for each user.

CrummeyService.com reminds the grantor (or employer, as applicable) when a gift to the trust is needed to ensure there are sufficient funds for the premium payment, and will automatically send the grantor, trustee and fiduciary a new gift reminder notice the following number of days prior to the premium due date: 60,30, 15, 0 (on the due date), and -15 (fifteen days into the grace period). A policy review reminder can be automatically generated on a user-defined schedule for each policy held by a trust and delivered to any of the trust parties. As with all notices, the text can be tailored, or default language can be used.

What About Help and Support?
At the Main Dashboard, and other screens, the Help menu offers a Hints screen that details the methods of data entry for all screens and a glossary. Each page includes context related help with instructions as to its operation. The site includes a facility to send the publisher your comments, corrections or suggestions.

How Do You Contact the Publisher?
CrummeyService.com is published by CrummeyService.com, LLC. The Standard version is priced at $399 per year, with a one-time setup fee of $200. Branding is separately priced. Volume price discounts for advisors, re-sellers and enterprise customers are offered. Initial contact is by email at: www.crummeyservice.com/contact.php. A free demo is available.

Bottom Line
CrummeyService.com allows you to eliminate the burdensome paperwork and administrative bother of servicing Crummey trusts and provides a convenient electronic means of efficiently addressing this area of your practice.

Trusts & Estates magazine is pleased to present the monthly Technology Review by Donald H. Kelley—a respected connoisseur of the software and Internet resources wealth management advisors use to further their practices. Kelley is a lawyer living in Highlands Ranch, Colo. and is of counsel to the law firm of Kelley, Scritsmier & Byrne, P.C. of North Platte, Neb. He is the co-author of the Intuitive Estate Planner Software, (Thomson – West 2004). He has served on the governing boards of the American Bar Association Real Property Probate and Trust Section and the American College of Tax Counsel. He is a past regent and past chair of the Committee on Technology in the Practice of the American College of Trust and Estate Counsel. Trusts & Estates has asked Kelley to provide his unvarnished opinions on the tech resources available in the practice today.

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Tuesday, April 10, 2012

Attract, Engage & Work with Families with Taxable Estates and Their Advisors

For decades many of us, as wealth strategies planners, have wondered not only how but if we should attract, engage and work with affluent families and those with complex taxable estates. Their advisors are more protective. The solutions are more complicated and create larger liability. Though the fees may be greater, are they enough to cover the time and effort – especially if we only do it occasionally?

The Laureate Center for Wealth Advisors has the training and education needed to attract, engage, and implement work in the taxable estate arena. You owe it to yourself and your clients to learn more about The Laureate Program, especially if you desire to:

Quarterback a team of advisors or be called in as a team member;
Find your quiet confidence as a leader and resource to clients and their advisors;
Identify, explain, and implement complex tax, wealth, legal, and other technical strategies in an understandable client language;
Price for your intellectual property and the value you create;
Improve closing techniques while practice with energy, freedom, and passion;
Have an effective, process-oriented, and profitable business, not a job

This program should seriously be considered by wealth strategies practitioners and advisors interested in the Families with Taxable Estates market and having the quiet confidence to quote six digit fees.

Below is a summary of The Three Pillars of the Laureate Curriculum: Counseling, Practice Management, and Case Studies. These pillars seem to separate the successful cases from the wildly successful and have helped to truly address the clients’ concerns, increase advisor compensation, and provide an established process through review, design, and implementation.

Counseling – Interpersonal Labs

The training and counseling labs provided through the Laureate Program helps each member decide and recognize which type of client you would like to work with. We believe that expanding from a “client engagement” to “client partnering” deepens the relationship and leads to more productive plans and results.

Client Partnering achieves the client’s specific goals through the process of Review, Design, and Implementation through authority on and clarity of:

Problem and what’s behind it;
Possible Solutions often resulting in former goals as less or not important; and
Implementation and commitment to solution, timeline, and responsibilities for new goals.

In Client Partnering we facilitate a safe environment to explore the client’s and advisor’s true drivers. The common characteristics of facilitating a safe environment are:

Rapport – a continued feeling of connection
Relevance – current personal perspective related to the subject
Expanding engagement
Encouraging “new and clearer thought about the situation and what’s behind it”
Understanding and committing to “We Can Help”
Proactive commitment to process
Expectations – setting, continuously reaffirming, achieving, and “whole plus one”

Practice Management - Processes & Protocols

Processes that worked before may not support a practice serving wealthy clients. Practitioners need to review and fine tune their processes and systems to support themselves and their team’s implementation, considering changes in technology. It is even more critical to continue to include the other collaborative advisors in communications, being sensitive and respectful to each professional and his or her role.

In short, continue to enhance your protocols on how you and your team interact with clients and advisors. Remember to work on, not in, your practice.

Case Studies – Review, Design, and Implementation

It is important to stay abreast of changes caused by new laws, economic conditions, financial products, and the impact of the media. Even though counseling and practice management are stronger players in attracting and engaging families with taxable estates, financial, tax and legal competency is required to design and implement successful client strategies. Through the technical and strategic training provided by The Laureate Program, we not only teach the “ins” and “outs” of stand-alone strategies but the more integrated strategies that should, or should not, be used together in the more hands on world of wealth strategies planning.

The art of working with affluent families is in the combining and layering of strategies that we have learned in order to accomplish our client’s deeper goals – identified through counseling. Laureate Program Members, through the Three Pillars of study and its members’ various professional experiences, continue to learn and practice to not only the variations of combining and layering complex strategies through case studies, but also ways to present these strategies to clients in an understandable fashion.

Enjoy Practicing Law – Join The Laureate Program today!

The Laureate Program facilitates discussions and provides process on how to counsel at a deeper level, manage our practices with more process, and to practice case studies that challenge ourselves, make more money, and appreciate what we do. Collaboration is king! Join The Laureate Program to learn more about how working with affluent families can be profitable and pleasurable with the right team of advisors at the table.

The Laureate Center for Wealth Advisors provides cutting edge training from industry leaders in advanced wealth, business, estate, and income tax planning. This year’s three 3-day session starts May 10-12, 2012. Visit www.laureatecenter.com or call (858) 200-1919 for more information.

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Monday, April 09, 2012

Robert Keebler: Planning for Concentrated Stock Positions, Plus Half Off Bob's Teleconference

Reposted with Permission from Robert S. Keebler, CPA, MST, AEP

Planning for Concentrated Stock Positions: Variable Forward Sales, Charitable Remainder Trusts and Exchange Funds

The detrimental effects of concentrated stock portfolios are well documented. Not only do they subject the investor to a high level of risk, but their volatility tends to drag down returns.

Fortunately, a number of strategies have been developed to address the problem. This is the last in a three-part series of columns explaining those strategies. In the first column I explained how asset volatility drags down returns, quantified the benefits of diversification and provided a model for analyzing when simply selling off a concentrated position and reinvesting in a diversified portfolio produces a better economic result than holding the stock. In the second column, I pointed out that there are hedging strategies like protective put options and cashless collars that seek to give taxpayers the best of all possible worlds. In this month’s column, we will explore variable forward sales, charitable remainder trusts and exchange funds as alternative hedging strategies.

Variable Forward Sale
In a variable forward sale (VFS), an investor agrees to tender stock to a counter party at a specified future date in exchange for receiving a specified amount of cash up front (usually as a percentage of the underlying stock's current value). A typical VFS term is generally two to five years and the stated percentage 75 percent to 90 percent. The taxpayer could immediately use the sale proceeds to invest in a diversified portfolio even though no tax will be payable until the sale closes, either by physical delivery of some or all of the stock or by cash settlement.

Economics
A VFS is not simply a tax-deferred stock sale because it also provides downside protection and caps upside potential. Thus, it could be thought of as a cashless collar plus a loan against the stock to be sold. In other words, the investor is purchasing a put option to protect the downside, selling a call option limiting potential gain and receiving a current cash advance on the stock subject to the collar. The embedded collar would be subject to the constructive sale rules of Code Sec. 1259 just like any other collar, so the spread between the put strike price and the call strike price should be at least 15 percent.

Advantages
A properly executed VFS accomplishes four important objectives:

Provides immediate liquidity for reinvestment
Provides downside protection below the put option strike price
Enables the investor to retain growth potential up to the amount of the call option strike price
Defers gain recognition until the VFS is closed

Variable Forward Sale vs. Outright Sale
Research suggests that an outright sale generally outperforms a VFS. This is not to say, however, that there are not situations in which a VFS can perform better than simply selling the stock. Perhaps the most common situation is one in which the taxpayer is concerned about the risk of a concentrated stock position but is nevertheless bullish about the stock’s prospects in the short term. A VFS would… READ MORE

GET 50% OFF OUR TELECONFERENCE WITH BOB KEEBLER ON THIS RELATED SUBJECT:
Back in December of last year, Bob did a teleconference entitled, "Tax Planning for Concentrated, Low-Basis Stock Positions". We are offering our blog readers a special 50% discount on the extensive handout materials and the audio recording of this program. To apply your 50% discount, simply enter in the coupon code "CONCENTRATED" when purchasing. This offer is only good through next Monday, April 16th. For more information and to purchase...

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Thursday, April 05, 2012

How Do You Convince Clients to Actually Do GRATs (and Other Estate Tax Planning)?

The Ultimate Estate Planner, Inc. President and estate planning attorney, Philip J. Kavesh, J.D., LL.M. (Tax), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Tax and Probate Law, and nationally renowned estate planning and asset protection attorney, Steven J. Oshins, Esq., co-authored an article entitled, "How Do You Convince Clients to Actually Do GRATs (and Other Estate Tax Planning)?", featured in WealthCounsel's April 2012 Quarterly Newsletter released earlier today.

READ FULL ARTICLE

In the April 2012 WealthCounsel Quarterly Newsletter

Download the April 2012 WealthCounsel Quarterly Newsletter

A Comment on the Ethics of Fraudulent Conveyances
By: Professor Denis Kleinfeld, Esq.

Do Not Forget About an Old 401(k) in Estate Planning
By: Jeffrey Bedell, J.D.

How Naming a Family Financial Assistant Makes Handling the Clients Affairs Easier for Everyone Involved
By: Timothy B. Borchers, Esq.

Create Your Own Micro-Climate To Make It Rain
By: Mark Powers & Shawn McNalis, Atticus, Inc.

Adaptable Planning Advice for 2012 and Beyond
By: Charles Douglas, JD, CFP®, AEP

You Can Call Me Ray, or You Can Call Me J: Common Terms with Different Names
By: Mary Merrell Bailey, JD, CPA, MBA, MSTaxation, MSAccounting

Attract, Engage, and Work with Families with Taxable Estates and Their Advisors
By: Joseph J. Strazzeri, Esq. and Stephen J. Mancini, Esq.

There’s No Place Like Home: Follow the Yellow Brick Road to a Better Estate Plan
By: Stephanie N. Prestridge, J.D.

Chunk It! We Want to Tell You How to Chunk Your Life So You Can Achieve Peak Performance
By: Julieanne E. Steinbacher, Esq. and Adrianne J. Stahl, Esq.

Additional Content in This Issue!

Drafting Documents: Set Your Sights on Accessible Language
WebSource™ and ClientDocx™ - - Redefining the Way Members Generate Clients and Growth Their Practices
Five Reasons to Register Now for the 2012 Symposium

WealthCounsel Unveils “EstatePlanning.com”
EstatePlanning.com is the nation’s only web portal specifically designed to educate the public about the importance of estate planning while also facilitating communication with a local attorney.

Source: WealthCounsel.com

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Tuesday, April 03, 2012

Estate Planning for Clients with Beneficiaries Struggling with Substance Abuse

Reposted from The Trust Advisor | By Patricia Annino

When working with families on their estate plans, many parents have raised the issue of what to do when a child or grandchild struggles with substance abuse. With the recent death of Whitney Houston and her connection to substance abuse, it serves as a reminder of what this means during the estate planning process. These parents are heartbroken and need guidance on how to address this difficult situation in their estate planning documents.

Substance Abuse – whether it’s alcohol, prescription drugs, or illegal narcotics – affects many of the families we advise. As a result, we developed a list of questions for families to consider when designing their estate plan:

Has the beneficiary ever been diagnosed with a mental illness?
Is the beneficiary having a particularly hard time – is divorce on the horizon? Has he lost his business? Does he gamble?
What is his relationship with other family members?
Who does he trust?
Who is giving him money?
Is he eligible for government assistance?
Who is paying his health insurance?
Is he employed? For how long? What types of jobs?
Has he ever been treated for his addiction?
Is he a member of Alcoholics Anonymous or a similar organization?
Do these issues run in the family?
Has there been a family intervention?
Is he open to counseling? Has this topic been addressed?
Where is he living? Can he live alone?

Substance abuse often masks other underlying mental health issues, including undiagnosed or untreated schizophrenia, bipolar disorder, and depression. That these issues are often part of a larger family pattern makes having the discussion much more difficult, but much more essential.

Families in Conflict
An addicted child may have already taken a significant emotional, physical, and financial toll on the entire family. Parents who find it difficult to handle this child become increasingly disturbed when they consider who would step in if they are unable or unavailable. This helplessness often leads to anger, frustration, and conflict.

One parent may want to cut off the beneficiary while the other parent cannot consider doing so. One parent may want to kick the child out of the home, while the other parent believes that doing so would make matters worse. These conflicts add stress to their marriage and the family at large.

Grandparents may have different opinions than the parents. Siblings may already be resentful of their addicted sister or brother. In many families, the troubled child has already received significant emotional and financial assistance. His troubles have already taken center stage at the dinner table. His presence in the home and attitude toward the family may have already created constant disruption.

Estate Planning Tools and Options
As complex and emotional as these issues are, families must address them. And they will welcome having an impartial, yet compassionate advisor to provide guidance, suggestions, and choices.

One planning tool for parents to immediately consider is for that child to designate them as the agent under his health care proxy and his attorney in fact under the durable power of attorney. Without these documents, HIPAA will prohibit the parents from being involved with his treatment. Also, these documents give parents legal access to his health and financial records, which could be extremely important if it becomes necessary to apply for government benefits.

Inevitably, an estate planning discussion will include disinheritance. In my experience, this is a subject frequently discussed and rarely implemented. No matter how angry and frustrated they are, parents still want to provide some sort of safety net for their child.

This pressure to disinherit the troubled child may come from the sense that he has already taken more than his fair share of the family’s resources, possibly at the expense of the other, more responsible children. As the family’s advisor, however, you should ask the parents:

If you are not here, how will the child be cared for with no existing financial resources?
Who will be responsible?
Who will he call?
Will disinheriting him place a financial burden on your other children, or will they be able to walk away?

Establishing a Trust
Rather than disinheriting him, a common solution is to establish a trust that includes him as a permissible beneficiary – or is only for his benefit during his lifetime. The hard decision, however, is who will serve as trustee after both parents die. Parents are understandably reluctant to place that burden on their other children or on other relatives.

If there are significant assets, then choosing a corporate trustee is the simple choice. The other children or trusted friends or advisors can then have the right to remove or replace that trustee during the trust duration. If there are not sufficient assets to warrant a corporate trustee, then the parents must identify friends or trusted advisors – who should be paid for their services. The trustee should review the trust document to ensure that he has the right to resign from his office, and understand the mechanism for subsequent trustee appointments. The document should provide the trustee with the authority to expend funds for purposes such as counseling, detectives, drug testing, and private security.

Trust Terms and Provisions
After deciding on the line of succession and identifying who will operate the trust, parents need to focus on the various purposes for which the trustee may or may not distribute income and/or principal from the trust to the beneficiary.

If the beneficiary is likely to require government assistance, then the terms of the trust must contemplate that. The trust document may also give the trustee authority to withhold payments if deemed advisable. This is often preferable to asking that trustee to determine whether a beneficiary is drug-free. Those suffering from substance abuse can be clever, and making such a determination is tricky.

Rather than withholding payments, another approach is to provide the beneficiary with incentives for staying clean. The trustee could provide additional distributions if the child holds a full-time job or regularly attends counseling sessions. Making the distribution provisions restrictive and under the trustee’s sole control can help protect those assets from the troubled child’s creditors, or from any of the many “friends” and acquaintances who might take advantage of him if they believe there is money in his pocket.

Many parents have a sense of shame or denial, and may rightly choose not to make these troubles public, or put them in a trust document that others can access. I encourage parents to write an annual side letter to the trustee that describes their observations and offers details that they are reluctant to share while living. This letter could be placed in a sealed envelope, kept with the original estate planning documents, and updated/revised as circumstances change. It can be comforting to the trustee to understand more about the parents’ goals and objectives from their own voice.

Planning for the beneficiary with a substance abuse issue is complex and can have consequences that affect the entire family. Remind parents that life is a movie, not a snapshot. A plan created now should be good enough to handle today’s circumstances, yet flexible enough to contemplate the unknown. Encourage parents who are dealing with this difficult situation to revisit their plan every few years as circumstances change and evolve.

Source: trustadvisor.com
Photo Source: pcwhi.blogspot.com

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Monday, April 02, 2012

A Funny Thing Happened on the Way To… (Some of My Craziest Seminar Stories from Over the Years)

By President, Philip J. Kavesh, J.D., LL.M. (Tax), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law

You may already know that one of my favorite things in life is presenting educational seminars on estate planning, whether it be seminars to market my law practice to the consumer public or presentations before my fellow estate planning colleagues. What you may not know - - and I’ve been asked to share with you here - - are some of the unusual occurrences I’ve experienced in doing over 2,000 seminars for my law practice over the past 25 plus years. I’ve had so many funny, odd and not-so-funny events happen on the way to, during and after seminars that I really have to probe my memory to pick out the most unusual ones.

Of course, I’ve encountered all the “usual” goofs that any seminar speaker has experienced over time. I’ve traveled to the wrong hotel, or gotten there on the wrong day and time. Or, I’ve arrived to the right venue and found the seminar room locked and no one could find the key, or found the room open but all the chairs locked up in the storage closet with no one having the key. I’ve forgotten the slides or handouts or brought the wrong ones. I’ve suffered equipment failures, power outages and even overhead sprinklers going off! However, I’ll bypass all these mundane misfortunes and go right to the weirdest, most memorable occurrences.

Let me start with some of the “lighter” ones.

The Jokester & His “Match”

I recall that once, during a seminar, I was talking about how all your assets comprise your estate, even your antiques and junk - - and quipped “you know there’s a fine line between the antiques and junk!” Immediately, a gentleman turned to his wife and blurted out, “Yeah, I know - - she’s the antique and she says I’m the junk!” (to which his wife instantly reacted by hitting him in the face with her handbag!)

“Please Hold Your Questions Until the End…”
Another time, during a seminar, a lady began raising her hand above her head. I stopped and reminded her - - per the rules I set out when I began - - to please hold her question until the end and I would be happy to answer it then. But that didn’t stop her. Moments later, she raised her hand again. I again had to nicely remind her to wait! Then, after 20 minutes, just when things appeared to be okay, she once again raised her hand, began waiving it wildly back and forth and practically jumped out of her seat to get my attention. I finally caved in and said, “All right, I’ll answer your question now” to which she shrieked out, “Can I go to the bathroom?” and then proceeded to run out of the room! (Wow, I guess as a youngster she must have attended a really strict school!)

The Sleepy Attendee
I can recall receiving many strange questions during the question and answer session at the end of my seminar presentations. One of my favorites came from an elderly man, seated in the front row, who had seemed to doze off at times during my two hour, detailed discussion of Living Trusts. When this discussion was over, he raised his hand and I politely asked him for his question. He stopped, seemingly locked in deep thought and then slowly asked, “What’s this here Living Trust thing you’ve been talkin’ about?”

Please Have Some Seconds
Another time, at a dinner seminar, I got to the questions part, but no one raised their hand so I stood there and waited for a moment. Finally, I saw a hand go up and I said, out of relief, “Good, a question!” to which the person responded, “Can I get another dinner and dessert to take home?”

That reminds me of a near riot I once caused at the end of a seminar...

“The Riot”
I was expecting a large audience and we had put out a big spread of gourmet cheeses, fruit, rolls, desserts and candies. When I finished the seminar, I noticed the great amount of food left so I said, “Help yourselves to any of the food.” You should have seen the people bolt out of their seats and stampede to the back of the room - - then fight over the spoils, with ladies elbowing each other out of the way and shoving food in their handbags!

I’ve also had some “heavier”, more serious events occur.

We Will Never Forget
One emblazoned in my mind happened just as I was about to leave my home to go to a seminar. I had spent a great deal of time and energy preparing for this particular seminar and I was very pumped up to give it - - my first ever on the new invention I had just created, the “IRA Inheritance Trust®”. As I was halfway out the door, my wife screamed, “Your Mom is on the phone and she sounds like she’s having a heart attack!”. I ran to the phone and my Mom was shouting almost incoherently, “Turn on your TV - - right now!”. I did and just as the picture came on I saw an airplane fly into the side of a skyscraper building. The day was September 11th, 2001 and after I calmed down my Mom (who lived close to New York and was afraid for her life!) I called my office to cancel the seminar, a small misfortune compared to the horrible suffering of others on that day.

Another False Alarm?
I’ve also had to call off seminars midway through them due to other unexpected, near catastrophic events. Once I was speaking at a hotel where an irritating, loud fire signal repeatedly went off, followed by an announcement over the loudspeaker, “Sorry for the false alarm!” So when it happened for about the fifth time, I just calmly said to the audience, “Don’t worry. Stay seated. It’s probably just another one of their false alarms.” Everything did seem fine, until a few minutes later a man in the audience jumped out of his seat and motioned to the window where we could all see smoke and then flames lapping up the side of the building! Fortunately, we all got to safety. But you can imagine all the chaos as fire engines were pulling into the parking lot, attendees were scurrying in all directions and I was frantically chasing them to grab their response forms before they got into their cars! (I quickly learned the value of having an assistant accompany me at my seminars!)

Thanks to the Men in Blue
Another mid-seminar disaster was far more strange. As I was speaking, I faced the back of the room where the entry and exit doors were located across from each other. All of a sudden, one door swung wide open and a man with a hoodie pulled over much of his face ran across the back, heading for the other door - - followed by a policeman with his gun drawn! They continued their chase out of the exit door, and shortly thereafter police backup cleared the audience and me from the room. As we were standing in the parking lot watching the police place a tape barrier around the building, I realized, to my dismay, that all my seminar equipment, handouts and keys to my car were still in the room - - and I had to travel to another location in about 45 minutes to give another seminar! This time not only didn’t I get the attendees’ response forms, I had to call off the other seminar too because I wound up spending hours swapping jokes with the policemen in the parking lot before they finally let me back in the room. (You know, I never did find out whether the hooded man was apprehended!)

An Important Lesson Learned by Everybody That Day
But the one mid-seminar disaster I most often recall was scarier than either a roaring fire or armed police chase. While I was speaking, I noticed that a man in the audience suddenly slumped over and looked like he was about to fall out of his chair. The person seated next him shouted out, “Dial 911!” My assistant did so immediately and laid the apparently unconscious man flat on the floor. Seemingly within a minute, paramedics rushed in, placed him on a gurney and wheeled him out. No one knew if he was dead or not, or whether he could be revived. After all this disruption, I tried my best to return to my seminar presentation and seemed to have recaptured the audience’s attention, when all of a sudden the paramedics wheeled the man, now in a conscious and seated position, back into the room! As the rest of us looked at him in shock, he explained, “I’m okay. Just had a minor heart attack because I forgot my medicine - - but I wasn’t going to let them take me to the hospital because I really need to listen to what you have to say!” His entrance seemed right on cue because I was just about to flip to the slide where I explain that the reason people don’t have any estate plan, or one that has become old and out-of-date, is procrastination - - and that no one has a guarantee they’ll have a chance to take care of it tomorrow! Needless to say, everyone at that seminar wound up making a consultation appointment! (And, by the way, there may be a lesson in this story for you, too!)

Despite all the wild, crazy, funny (and at times not-so-funny) things that have happened on the way to and during my seminars, there does occur a wonderful event after almost every seminar nowadays that keeps me plugging along after all these years. Invariably, someone - - either a client of our firm, or a trustee who has served on behalf of an incapacitated or deceased client, or a client’s beneficiary - - walks up, extends his or her hand, and personally thanks me for how we have helped. That alone makes all the seminar “madness” I’ve endured worthwhile. It serves as a reminder why I got into this area of law and have devoted to it over half my lifetime.

Hopefully, if you’re an estate planning professional, I haven't completely scared you away from doing seminars with all of my stories. If anything, I hope you take away that despite the crazy events in life that are out of your control, you can still find a great deal of success in marketing your practice and your services via seminar marketing. For those that took the time to read through this blog entry, I personally extend to you a very special 50% discount on any one of our seminar marketing packages (for this month only). Simply enter in the coupon code "SEMINARBLOG" when checking out to apply your 50% discount. If that doesn't make doing seminars a little easier, I don't know what will! Click here to view our Seminar Marketing Packages.

Source: kaveshlaw.com

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Friday, March 30, 2012

WSJ.com - Death Tax Defying: Estate Tax Repeal Gains Momentum in the States

While Washington continues to debate what to do with the federal death tax—the top rate is now 35% and is scheduled to rise to 55% next year—states are starting to recognize that their high estate taxes are a good way to chase away wealth producers.

Last year Ohio abolished its estate tax, joining the 28 other states that do not impose such a tax at death. Indiana's legislature recently passed by big margins a bill to phase out its death tax by 2021, and Governor Mitch Daniels signed it this week. Heated debates are going on in Tennessee and Nebraska over the issue. Even in Oregon taxpayer groups are attempting to put an initiative on the November ballot to abolish the death tax, and polls show it could win.

The left has long been flummoxed by polls showing that roughly two of three Americans want this tax abolished. Why would Americans oppose a tax that politicians say is aimed at the top 1%?

The answer is that Americans instinctively understand that the tax is unfair. It punishes a lifetime of thrift and investment solely due to the accident of death. And it does so in a way that imposes another tax on income that in most cases has already been taxed once, or sometimes twice.

A majority still believes that anyone can get rich in America, and that someday that could happen to them or to their children. They reject the idea that the government could then help itself to half their hard-earned fortune. All of this is to say that Americans generally view the death tax debate not in soak-the-rich terms, as the left does, but as a moral issue: Thou shalt not steal.

But even on purely economic grounds, death taxes are spectacular failures as revenue raisers or a tool of income redistribution. This is because the people who are subject to these taxes often move across state borders to avoid paying. They do this so they can pass businesses and property to their children and grandchildren.

People generally don't build up assets to leave them to the IRS. Certainly Warren Buffett doesn't, though he favors a punitive death-tax rate. He can afford to be generous with everyone else's money because he's created a charitable foundation that will let him avoid the tax.

A November 2011 study of tax return data by economists Arthur Laffer and Wayne Winegarden shows how people avoid state death taxes. The study compared Florida and Tennessee high-income returns. Both states have no income tax, but Tennessee is one of only two states that imposes an estate and a gift tax. (Connecticut is the other.)

The authors point out that this year there is a $5 million exemption on the federal estate tax and gift tax (a once-in-a-lifetime wealth transfer for the living), but in Tennessee the exemption is a meager $13,000 for estates and gifts. With a gift and death-tax rate that reaches 9.5%, a Tennessean with a $5 million estate would pay $462,000 more estate tax than someone living in the 29 states with no such tax, such as Florida. Tennessee is a very expensive state to die in.

The Tennessee tax really does cause the rich to flee. The authors found that in 2010 Florida had nearly twice as many federal tax returns with taxable estates (per 100,000 population) as did Tennessee. The average estate is also larger in Florida—$7.4 million versus $4.4 million in Tennessee.

Here's the kicker: Because wealthy people avoiding the estate tax take their businesses and spending with them, the study concludes that "had Tennessee eliminated its gift and estate tax 10 years ago, Tennessee's economy would have been over 14% larger in 2010." They also find the estate tax cost Tennessee state and local governments over $7 billion in tax collections. Could there be a more self-defeating tax?

The main obstacle to reform in Nashville is GOP Governor Bill Haslam, who earlier this year acknowledged damage from the tax, saying "There's a whole lot of people who used to live in Tennessee who don't anymore because it's cheaper to die in Florida." But he now says the state needs the revenues, however imaginary they might be. This mistaken logic is also being used to block repeal in Nebraska.

With Ohio and Indiana zeroing out their estate taxes and others likely to follow suit, the remaining high-rate states will have an increasingly hard time holding onto their mobile high-income citizens as they get older. Mr. Obama wants a 45% federal estate tax rate next year, which in many states would mean a more than 50% combined rate. That is not fairness. It is self-defeating confiscation.

Source: WSJ.com

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Thursday, March 29, 2012

Paul Hood on Wandry v. Commissioner: A Significant Taxpayer Win in another Defined Value Case

Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI) and L. Paul Hood, Jr.. For information about how to subscribe to LISI, click here.

"Congratulations to counsel to the taxpayers for a slam dunk taxpayer victory! You should read this opinion. It is an important extension of defined value gifts and proves that one doesn’t need a charitable or marital “wrapper” for these things to work properly as I have argued in published articles for almost ten years. In my opinion, the bottom line is that properly designed and implemented defined value transfers are more legitimate now than ever before and should be accorded respect for tax purposes, and it is well past time for the IRS to accommodate them with formal guidance. Given the significant string of defeats in these cases, it is time for the IRS to start getting hit with attorney’s fees under IRC Sec. 7430 for continuing this fight.” The case of Wandry v. Commissioner represents another taxpayer win in a “defined value” case, and Paul Hood provides LISI members with his timely commentary on this hot-off-the-press decision that was released on Monday, March 26th.

Before we get to Paul’s commentary, members should take note of the fact that a new 60-Second Planner was recently posted to the LISI homepage. In his PodCast, Bob Keebler provides members with his thoughts on the Wandry decision. You don't need any special equipment to listen, simply just click on this link.

Now, here is Paul Hood’s commentary:

EXECUTIVE SUMMARY:

In this federal gift tax case, the Tax Court determined in a memorandum opinion that the taxpayers’ respective defined value gift clauses were enforceable under state law, were defined value gifts of LLC membership interests instead of gifts of percentage interests and were to be respected for federal gift tax purposes.

FACTS:

On January 1, 2004, Joanne and Dean executed separate assignments and memorandums of gifts (“gift documents”). Each gift document provided:

I hereby assign and transfer as gifts, effective as of January 1, 2004, a sufficient number of my Units as a Member of Norseman Capital, LLC, a Colorado limited liability company, so that the fair market value of such Units for federal gift tax purposes shall be as follows:

Name	Gift Amount
Kenneth D. Wandry	$261,000
Cynthia A. Wandry	$261,000
Jason K. Wandry	$261,000
Jared S. Wandry	$261,000
Grandchild A	$11,000
Grandchild B	$11,000
Grandchild C	$11,000
Grandchild D	$11,000
Grandchild E	$11,000
Total Gifts	$1,099,000

Although the number of Units gifted is fixed on the date of the gift, that number is based on the fair market value of the gifted Units, which cannot be known on the date of the gift but must be determined after such date based on all relevant information as of that date. Furthermore, the value determined is subject to challenge by the Internal Revenue Service (“IRS”). I intend to have a good-faith determination of such value made by an independent third-party professional experienced in such matters and appropriately qualified to make such a determination. Nevertheless, if, after the number of gifted Units is determined based on such valuation, the IRS challenges such valuation and a final determination of a different value is made by the IRS or a court of law, the number of gifted Units shall be adjusted accordingly so that the value of the number of Units gifted to each person equals the amount set forth above, in the same manner as a federal estate tax formula marital deduction amount would be adjusted for a valuation redetermination by the IRS and/or a court of law. [emphasis added]

Corresponding timely adjustments were made to the capital accounts of the members. The transfers were subsequently appraised by a qualified appraiser. The transfers were fully disclosed with all of the documentation on the federal gift tax returns of Joanne and Dean. There was a little discrepancy between the gifts as shown on the gift tax returns, which reflected gifts of interests worth a certain dollar amount, and the supporting schedules, which reflected gifts of percentage interests of 2.39% and .101%, respectively.

On audit of the federal gift tax return, the IRS argued for a higher unit value ($366,000 and $15,400, respectively) than that opined by the business appraiser. Additionally, the IRS argued that the defined value gift clauses granted percentage gifts (2.39% and .101%, respectively) rather than defined value gifts ($261,000 and $11,000) because of the schedules to the gift tax returns. The IRS also argued that the defined value gift clauses were unenforceable and violated public policy.

Joanne and Dean obviously disagreed, and each filed a Tax Court petition. Subsequently, the parties agreed that the values of the gifts were $315,800 and $13,346, respectively, which would require subsequent downward adjustments to the membership interests pursuant to the defined value gift clauses.

In the Tax Court, Judge Haines began with the gift description issue. While the IRS cited Knight v. Comr. in support of its position on this issue, namely, that the schedules to the gift tax returns reflected what Joanne and Dean actually gave, Judge Haines distinguished Knight, noting:

Petitioners have not similarly opened the door to respondent’s argument. At all times petitioners understood, believed, and claimed that they gave gifts equal to $261,000 and $11,000 to each of their children and grandchildren, respectively. In Knight, the taxpayers’ gift tax returns did not report dollar value gifts. In the cases at hand, although respondent relies on the gift descriptions as the basis for the alleged admissions, petitioners’ gift tax returns were consistent with the gift documents. Petitioners’ gift tax returns reported gifts with a total value equal to $1,099,000, and the schedules supporting petitioners’ gift tax returns reported net transfers with a value of $261,000 and $11,000 to petitioners’ children and grandchildren, respectively. Petitioners’ C.P.A. merely derived the gift descriptions from petitioners’ net dollar value transfers and the [business appraiser] report.[Emphasis added]

Judge Haines then addressed the IRS argument, citing a Colorado (applicable law state) case, Thomas v. Thomas, that the capital account adjustments, rather than the gift documents, control and the former described percentage gifts. Judge Haines disagreed with the IRS, noting:

Respondent’s reliance on Thomas is misplaced. Thomas is a case about whether and when a gift of corporate stock is complete, and it has no bearing on the nature of petitioners’ gifts. We do not find respondent’s argument to be persuasive. The facts and circumstances determine [the LLC’s] capital accounts, not the other way around. Book entries standing alone will not suffice to prove the existence of the facts recorded when other more persuasive evidence points to the contrary.

…

In fact, the Commissioner routinely challenges the accuracy of partnership capital accounts, resulting in reallocations that affect previous years. If the Commissioner is permitted to do so, it can be said that a capital account is always “tentative” until final adjudication or the passing of the appropriate period of limitations. Accordingly, [the LLC’s] capital accounts do not control the nature of petitioners’ gifts to the donees.

Even if we agreed with respondent’s capital accounts argument, respondent has failed to provide any credible evidence that the [LLC] capital accounts were adjusted to reflect the gift descriptions. The only evidence in the record of any adjustments to [the LLC’s] capital accounts in 2004 is the capital account ledger and the [LLC’s] members’ Schedules K-1, neither of which provides credible support to respondent’s argument. The capital account ledger is undated and handwritten. There is no indication that it represents [the LLC’s] official capital account records, and it does not reconcile with any of petitioners’ or respondent’s determinations. The capital account ledger is unofficial and unreliable. [emphasis added]

With respect to the argument of the IRS that Petter Est. was distinguishable, Judge Holmes also disagreed, noting:

Respondent argues that the cases at hand are distinguishable from Estate of Petter. Rather than transferring a fixed set of rights with an uncertain value, respondent argues that petitioners transferred an uncertain set of rights the value of which exceeded their Federal gift tax exclusions. Respondent further argues that the clauses at issue are void as savings clauses because they operate to “take property back” upon a condition subsequent.

Respondent does not interpret Estate of Petter properly.

Judge Haines then went on to analyze the subject case documents under the Petter Est. rationale and noted several key points. First, he noted that the only unknown in the mix, i.e., the value of the LLC’s assets as of January 1, 2004, was a constant. Second, both before and after the IRS audit, the donees were entitled to receive the same percentages of LLC interests because the gifts were “essentially expressed as a mathematical formula, as follows:

Value of gift to child = $261,000

FMV of LLC assets

Value of gift to grandchild = $11,000

FMV of LLC assets

After this analysis, Judge Haines concluded:

Absent the audit, the donees might never have received the proper [LLC] percentage interests they were entitled to, but that does not mean that parts of petitioners’ transfers were dependent upon an IRS audit. Rather, the audit merely ensured that petitioners’ children and grandchildren would receive the 1.98% and .083% [LLC] percentage interests they were always entitled to receive, respectively.

It is inconsequential that the adjustment clause reallocates membership units among petitioners and the donees rather than a charitable organization because the reallocations do not alter the transfers. On January 1, 2004, each donee was entitled to a predefined [LLC] percentage interest expressed through a formula. The gift documents do not allow for petitioners to “take property back”. Rather, the gift documents correct the allocation of LLC membership units among petitioners and the donees because the [business appraiser] report understated [the LLC’s] value. The clauses at issue are valid formula clauses. [emphasis added]

Finally, with respect to the Procter public policy argument, Judge Haines also turned it back, expressly noting that “[t]he lack of charitable component in the cases at hand does not result in a ‘severe and immediate’ public policy concern.”

COMMENT:

Congratulations to counsel to the taxpayers for a slam dunk taxpayer victory! You should read this opinion. It is an important extension of defined value gifts and proves that one doesn’t need a charitable or marital “wrapper” for these things to work properly as I have argued in published articles for almost ten years.

In my opinion, the bottom line is that properly designed and implemented defined value transfers are more legitimate now than ever before and should be accorded respect for tax purposes, and it is well past time for the IRS to accommodate them with formal guidance. Given the significant string of defeats in these cases (conjuring up memories of the armies of certain unnamed allies who never win wars), it is time for the IRS to start getting hit with attorney’s fees under IRC Sec. 7430 for continuing this fight.

HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!

CITE AS: LISI Estate Planning Newsletter #1941 (March 27, 2012 at http://www.leimbergservices.com Copyright © 2012 L. Paul Hood. Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.

CITES: Wandry v. Comr., 2012-88; Petter v. Comr., T.C. Memo 2009-290, aff’d 643 F. 3d 1012 (9th Cir. 2011); Christiansen v. Comr., 130 T.C. No. 1 (2008), aff’d 586 F. 3d 1061 (8th Cir. 2009); McCord v. Comr., 120 T.C. 358, 364 (2003), rev’d 461 F.3d 614 (5th Cir. 2006); Comr. v. Procter, 142 F. 2d 824 (4th Cir. 1944); King v. U.S., 545 F. 2d 700 (10th Cir. 1976); Knight v. Comr., 115 T.C. 506 (2000); Ward v. Comr., 87 T.C. 78 (1986); Harwood v. Comr., 82 T.C. 239 (1984); Rev. Rul. 86-41; and Hood, Defined Value Gifts and Sales Under the Microscope: What’s Possible and What’s Not-Revisited, BNA Tax Management Estate, Gift and Trust Journal, July 11, 2011.

Sources: Leimberg Information Services & L. Paul Hood, Jr., J.D.

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Wednesday, March 28, 2012

4 Estate and Tax Planning Steps to Take in an Uncertain Year

Regardless of whether Congress acts on taxes by year-end, estate planning attorney John Scroggin says taxpayers shouldn't dally

Reposted from AdvisorOne.com | By Michael S. Fischer, AdvisorOne

Planners will not know before year-end what changes on the tax front are in the works for 2013, according to John Scroggin, a business, tax and estate planning attorney and a popular speaker at advisor conferences based in Roswell, Ga. A last-minute deal in a post-election lame duck session of Congress, similar to the one in 2010, is highly unlikely.

That means planning this year will have to take place in a vacuum, Scroggin told AdvisorOne in a recent phone interview.

John Scroggin Scroggin (right) said affluent people, defined as those with upward of $3 million in assets, should discuss with their advisors whether estate planning is necessary in 2012, and consult with a qualified expert in estate and income taxes before implementing any major tax planning this year. “Waiting to year-end is stupid in this environment,” he said.

Given the parlous planning environment this year, he offered the following suggestions:

The estate and gift tax exemptions drop from $5 million per taxpayer in 2012 to $1 million in 2013. People with estates above $5 million to $10 million should consider making significant gifts in 2012 in order to reduce the future estate tax cost of bequests when the exemption is lower and the tax rate is higher. Although Congress may increase the exemptions in 2013, there is no assurance that will happen and if it does happen what the exemptions will be. Effectively, you will be forced to “plan for the worst and hope for the best,” he said.
The federal dividend rate of 15% will expire at year-end. Anyone holding significant cash in a C-Corporation should consider taking a dividend of the cash out before year-end. If needed, the funds could be loaned back to the C-Corporation.
The federal capital gain rate increases from 15% to 20% in 2013. If you are anticipating an imminent capital gain transaction, consider completing the transaction before year-end. If a transaction in 2012 has any deferred payments, consider assuming the entire tax burden in 2012, rather than opting to pay taxes as the funds are received.
A client whose longevity beyond 2012 is in question (because of terminal illness or old age, for example) should consider having a general power of attorney in place, with the power holder having broad authority to make gifts and/or advance bequests.

_______________________________

Yesterday, we held a teleconference with estate planning attorney and CPA, Martin M. Shenkman on the topic of, "Recent Developments in Estate Planning: Special Traps and Tips to Avoid Them". According to attendees, this was an excellent program to cover a variety of tax planning ideas for this year. You can still purchase the handout materials and the audio recording to this program.

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Friday, March 23, 2012

Steve Oshins on Weddell v. H20, Inc: Nevada Supreme Court Affirms Creditor Protection Benefits of Nevada LLCs

Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI). For information about how to subscribe to LISI, click here.

“Prohibiting the creditor from exercising the debtor’s management rights reflects the principle that LLC members should be able to choose those members with whom they associate. Thus, the historical rationale for charging order protection was to protect the other members of an LLC where one member has a personal creditor problem.

However, as asset protection planning has evolved and the competition among the states to have the most protective asset protection laws has intensified, the asset protection planners now have the ability to use charging order protected entities to protect their clients’ assets from potential creditors. This tool is so easy, yet it is extremely underused by estate planners who at a minimum should be integrating this form of asset protection planning into their repertoire.”

We close this week with Steve Oshins’ observations on the “hot off the press” case of Weddell vs. H2O, Inc., an opinion issued by the Supreme Court of Nevada on March 1, 2012. As Steve points out in his commentary, this case illustrates the creditor protection benefits of using a Nevada LLC.

Steven J. Oshins, Esq., AEP (Distinguished) is a member of the Law Offices of Oshins & Associates, LLC in Las Vegas, Nevada. Steve is a nationally known attorney who is listed in The Best Lawyers in America® and has been named one of the Top 100 Attorneys in Worth magazine. He was inducted into the NAEPC Estate Planning Hall of Fame® in 2011. He has written some of Nevada's most important estate planning and creditor protection laws, including the law making the charging order the exclusive remedy of a judgment creditor of a Nevada LLC and LP (in 2001, 2003 and 2011), the law changing the Nevada rule against perpetuities to 365 years (in 2005) and the law making Nevada the first and only state to allow a Restricted LLC and a Restricted LP creating larger valuation discounts than any other state allows (in 2009). He is also the author of the Annual Domestic Asset Protection Rankings Chart, which can be downloaded on our website under our Free Resources. Steve can be reached at 702-341-6000, x2 or at soshins@oshins.com. His law firm's web site is http://www.oshins.com.

Here is Steve’s commentary:

FACTS:

Between 2000 and 2007, Michael B. Stewart and Rolland P. Weddell entered into a business relationship concerning a number of different projects, ranging from garlic farming to geothermal energy. Several disputes arose between the two parties, ultimately leading to the collapse of their business relationship. Upon the relationship's demise, Weddell filed a complaint asserting numerous claims against Stewart. Stewart also filed a complaint and asserted numerous counterclaims. After a four-day bench trial, the district court found in Stewart's favor on all counts. Weddell appealed the decision.

Stewart and Weddell both owned percentages of Granite Investment Group, LLC (“Granite”) and High Rock Holding, LLC (“High Rock”). In October 2008, in an unrelated matter, the district court granted an application by a creditor to charge Weddell's membership interest in Granite and High Rock, among other Weddell entities, for over $6 million. Pursuant to NRS 86.401.2, the charging order issued by the court entitled the creditor to any and all disbursements and distributions, including interest, and all other rights of an assignee of the membership interest.

Creditor’s Rights under Charging Order

The primary issue in the case was whether the judgment creditor receives any rights to participate in the management of a Nevada LLC upon receiving a charging order over the debtor’s membership interest. The district court had ruled that the charging order against Weddell's membership interests in Granite not only gave the judgment creditor Weddell’s economic rights over the membership interest, but also his managerial rights.

The collection rights and remedies against a member's interest in a Nevada limited liability company are governed by NRS 86.401. This provision recognizes the charging order as a remedy by which a judgment creditor of a member can seek satisfaction by petitioning a court to charge the member's interest with the amount of the judgment. A charging order directs the LLC to make distributions to the creditor that it would have made to the member. As a result, a charging order affects only the debtor's membership interest and does not permit a creditor to reach the LLC assets.

Consequently, the judgment creditor does not step into the shoes of the member. The judgment creditor only receives the rights of an assignee of the member's interest. A judgment creditor, or assignee, is only entitled to the judgment debtor's share of the profit and distributions, takes no interest in the LLC's assets, and is not entitled to participate in the management or administration of the business.

After the entry of a charging order, the debtor member no longer has the right to future LLC distributions to the extent of the charging order, but retains all other rights that the debtor had before the execution of the charging order, including managerial interests. The Supreme Court of Nevada reversed the district court's judgment relating to the scope of the charging order against Weddell's membership interests. The Supreme Court ruled that the charging order only divested Weddell of his economic opportunity to obtain profits and distributions from Granite, not his managerial rights.

COMMENT:

It is no surprise that the Supreme Court of Nevada reversed the district court on the issue of the extent of the rights the holder of a charging order has with respect to the LLC. This decision is in line with decisions in other charging order cases.

This case was decided under the Nevada charging order laws that were modified in the 2003 legislative session and did not include the substantial enhancements made in the 2011 legislative session. See Steve Leimberg's Asset Protection Planning Email Newsletter - Archive Message #180. The 2003 version of Nevada’s charging order laws specifically made the charging order the exclusive remedy of a judgment creditor. However, there were no provisions disallowing the judge from issuing an equitable remedy to find a way around the exclusive remedy language.

For example, the judge could have used one of a number of potential equitable remedies, including the constructive trust theory, the resulting trust theory, the alter ego theory or the reverse veil-piercing theory as a way around the statutory provisions. Maybe none of these potential theories were raised by the attorney for the holder of the charging order or maybe the judge determined that it wasn’t appropriate to go beyond the charging order remedy.

The 2011 legislative changes to Nevada’s charging order laws specifically disallow the issuance of any equitable remedies. Therefore, in future litigation, members of Nevada LLCs will be even more protected than the degree of protection provided by pre-2011 laws.

Planning Opportunities

Prohibiting the creditor from exercising the debtor’s management rights reflects the principle that LLC members should be able to choose those members with whom they associate. Thus, the historical rationale for charging order protection was to protect the other members of an LLC where one member has a personal creditor problem.

As asset protection planning has evolved and the competition among the states to have the most protective asset protection laws has intensified, the asset protection planners now have the ability to use charging order protected entities to protect their clients’ assets from potential creditors. This tool is so easy, yet it is extremely underused by estate planners who at a minimum should be integrating this form of asset protection planning into their repertoire.

By itself, a charging order protected entity almost always causes a creditor to settle a dispute for less than the amount that the creditor would be able to reach if the charging order protected entity did not exist. This is why there are relatively few published charging order cases in comparison to the endless number of litigation cases filed each year. So, at a bare minimum, an LLC (or LP) should be used for almost every client who has sufficient at-risk assets to substantiate the cost of forming and maintaining an LLC (or LP).

Taking this a step further, when the charging order protected entity is combined with an asset protection trust, the odds are even more stacked against a potential creditor from the creditor’s perspective. Thus, there are even fewer published cases involving asset protection trusts. The more roadblocks the planner can include, the more frustrated a potential creditor will get and the better the negotiation will tilt in favour of our debtor clients.

HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!

TECHNICAL EDITOR: DUNCAN OSBORNE

CITE AS: LISI Asset Protection Planning Newsletter #196 (March 22, 2012) at http://www.leimbergservices.com Copyright 2012 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.

CITES: Weddell v. H2O, Inc., 128 Nev.Adv.Op. #9 (Nev., Mar. 1, 2012); NRS 86.401

Sources: Leimberg Information Services & Steven J. Oshins, Esq.

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Wednesday, March 21, 2012

Polls: Current Financial Concerns Trump Planning for Retirement

Reposted from RegisteredRep.com | By Jerry Gleeson

inancial advisors and RIAs may have more handholding to do with clients. The glum outlook for American retirement appeared little improved with the release this week of two separate reports that showed continued worker skepticism about their prospects.

In its annual survey on the state of retirement, the Employee Benefit Research Institute said the percentage of workers who feel confident about having enough money for a secure retirement is at just 14 percent, statistically unchanged from a year ago.

It remains at the lowest level since EBRI began its annual survey 22 years ago. It also showed that just 21 percent of workers were getting advice from an FA, down from 33 percent two years ago.

Meanwhile, the Certified Financial Planner Board of Standards reported poll results that found 49 percent of respondents were worried about their retirement savings, and 44 percent don’t feel any better about their financial security than they did a year ago.

It wasn’t all gloom. EBRI found that 81 percent of eligible workers are contributing to workplace retirement plans, a figure that has remained relatively stable over the past three years. And the CFP poll found solid optimism among respondents about their financial shape in the months to come—51 percent were “more positive” about their financial situation a year from now, while just 9 percent were “more negative.”

Stronger optimism could support the economic recovery, CFP Chief Executive Kevin Keller said. Concern about their current financial conditions appeared uppermost in the minds of the respondents in the two polls.

“Retirement is not Americans’ major concern. Right now job security and financial security are,” Jack VanDerhei, EBRI’s research director, said during a conference call with reporters this week. “Many workers report they have virtually no savings and investments.”

Indeed, 58 percent of workers with less than $35,000 in income report having less than $1,000 in savings. The percentage of workers who feel they are on track with their retirement savings is just 31 percent, down from 44 percent in 2005.

“Workers are falling further behind, and they know it,” said Mathew Greenwald, co-author of the report.

Scott Mings, associate vice president of Hensley & Mings, a Raymond James & Associates practice in Greenwood, Ind., said he was surprised at the dropoff in Americans using FAs. He said he doesn’t get a lot of pushback on the fees he charges, although questions about fees tend to come up more often during tougher economies.

And more people are investing on their own, he added, spurred on by marketing campaigns by large on-line brokerages that encourage a do-it-yourself approach.

“The market’s going to have to show people some positive returns. Quite frankly, there hasn’t been a lot of added value from advisors on 401(k)s; maybe that’s a reason for a little bit of the dropoff,” Mings said. “If you’re getting advice but your accounts aren’t growing, then what’s the value of the advice?”

EBRI’s finding that 81 percent of eligible workers are contributing to workplace retirement plans bodes well for both investors and advisors; 64 percent of those who contribute to such plans say they are “very” or “somewhat” confident that they will have enough to retire comfortably on, while just 48 percent of those who don’t contribute to such plans feel that way.

The workplace is a good place for advisors to grab a larger share of the market, Greenwald said, as plan sponsors seek ways to help their employees manage money in 401(k) and other plans.

“I think that’s a natural,” he said. “I think there’s various ways a lot of people are going to step up to the plate and try to get more involved in managing money in retirement…It’s just a question of how it’s going to get done. I think we’ll see a lot of experimentation and a lot of success in that area.”

EBRI surveyed more than 1,200 workers and retirees by telephone in January. The CFP telephone survey polled 1,000 Americans across broad income ranges on March 1-4.

Pessimism about economic prospects abounded in the EBRI report. Just 16 percent of workers and 11 percent of retirees were “very confident” that their investments would grow in value; 8 percent of workers and 10 percent of retirees said they were “very confident” that the economy would grow an average of at least 3 percent a year over the next 10 years.

To offset reduced retirement savings, many workers are resigned to postponing retirement and working longer. EBRI noted that workers who expect to retire at age 70 or older has risen from 12 percent in 2002 to 26 percent this year.

But it may not be an option for many, EBRI warns. While 70 percent of workers expect to work for pay in their retirement years, just 27 percent of retirees report actually doing so. Greenwald said many workers underestimate their prospects for this period.

“In many occupations it’s difficult to get the job done as people get into their 60s,” he said. “So the plan to work longer is positive in some respects but risky in other respects.”

Source: RegisteredRep.com

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Wednesday, March 21, 2012

The Drama of Whitney Houston’s Estate Continues to Unfold

Greatest Love of All
Reposted from Trust & Estates | By Michael K. Kirsch

Ever since Whitney Houston’s death on Feb. 11 at age 48, rumors have been circulating about her estate. Would her ex-husband, Bobby Brown, seek to gain control of the money? Did Whitney protect her daughter, Bobbi Kristina, with a trust, or will everything be paid to her at once, since she is 18?

Life Insurance Lawsuit
We know that shortly before her death, Whitney won a court case brought by her stepmother over a $1 million life insurance policy that John Houston, Whitney’s father, had left to Whitney. Barbara Houston, her stepmother, said the policy was supposed to pay off the money that Whitney’s father and stepmother borrowed from Whitney to buy their New Jersey condo. Whitney held a private mortgage on the condo.

Barbara sued after Whitney refused to credit the life insurance money against the mortgage. In December, eight years after John died, an appeals court judge ruled in Whitney’s favor because Barbara didn’t have any documents to prove the insurance policy was meant to cover only the mortgage loan. As the judge noted, its impossible to legally determine what the deceased would have wanted, beyond what’s spelled out in the documents. Had John’s attorneys set up a trust to accept the life insurance proceeds and use them to pay off the loan, his wishes would have been clear, and none of the ensuing legal in-fighting would have been necessary.

Assets in Estate
How much was Whitney worth? Some have speculated that Whitney’s estate will be worth between $10 and $20 million. Others claim she was broke. Back in 2001, she signed the biggest record deal in history, for six albums and $100 million in guaranteed royalties. She died owing Arista three records, so a big chunk of that $100 million could be lost. Regardless of its current value, Whitney’s estate is expected to benefit from the boost in sales since her death. Her estate reportedly has made $700,000 in royalty payments since her death. In August 2012, a movie she did with Jordan Sparks called “Sparkle” will be released. She also owned a home in New Jersey, once worth $6 million, but recently listed for under $2 million.

The Will
As it turns out, Whitney had a will, which was executed on Feb. 3, 1993. The 19-page will names her only child, Bobbi Kristina, as the primary beneficiary. According to the terms of the will, the assets will be placed in a trust with one-tenth of the principal paid to her at age 21, one-sixth at age 25 and the remaining balance at age 30. A codicil to the will dated April 14, 2000, appointed Whitney’s mother, Cissy Houston, as executor and her brother and sister-in-law, Michael and Donna Houston, as trustees. Reportedly, Bobbi Kristina has been struggling with substance abuse issues for years, much like her mother did.

Distributions made outright to a client’s heirs have no protection from the variety of risks to which personally held assets are exposed. Once distributed, the heirs can use those assets as they choose and the assets can be subject to their creditor’s claims. However, bequests that are kept in trust for the benefit of the heirs enjoy protection from creditors, predators (including ex-spouses), irresponsible spending and future estate taxes.

Whitney’s death serves as a reminder to estate planning professionals to make sure their client’s estate plan includes more than a simple will and that they update documents every few years. For the majority of clients with even a modest amount of assets, a will isn’t enough. A properly funded trust, with detailed distribution provisions specifically tailored for your client’s beneficiaries and based on your client’s wishes, is the best way to protect your client’s loved ones.

Celebrities are, for the most part, very difficult clients to deal with when it comes to estate planning. They’re used to having things done for them, and they would rather not deal with all of the issues involved. Many celebrities start the planning process, but never actually finalize it. A number of music/sports stars have died without completing a will. That list includes Sonny Bono, John Denver, Jimi Hendrix and Steve McNair.

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Source: trustandestates.com
Photo Credit: cmgworldwide.com

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Friday, March 16, 2012

Leimberg Information Services: 60-Second Planner on Fifth Circuit Affirms Chilton on Inherited IRAs

Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI). For information about how to subscribe to LISI, click here.

Nationally renowned CPA, Robert S. Keebler, recently produced an audio recording for Leimberg Information Services on the court ruling in the Chilton case pertaining to Inherited IRAs. CLICK HERE TO LISTEN TO THE LEIMBERG 60-SECOND PLANNER RECORDING

Special thanks to Robert S. Keebler and Stephan Leimberg for sharing this valuable information!

Additionally, Robert Keebler is gearing up for his upcoming Learn it Live 2-day IRA seminar in Green Bay, Wisconsin on May 14-15, 2012 and just announced a June seminar to take place in Minneapolis. The Minneapolis seminar will be held June 20-21, 2012. This 2-day seminar for lawyers, CPAs and financial advisors is titled: "What the Lawyer, CPA and Financial Advisor Need to Know about Sophisticated Planning and Drafting for IRA & Qualified Plan Distributions Including How to Plan with a $5,120,000 Exemption." The seminar provides extensive coverage regarding planning with retirement accounts including: Estate planning for IRAs with a $5,120,000 exemption, the Pension Protection Act, the IRA Regulations, pre-retirement issues, required beginning date issues, the inherited IRA, the minimum distribution rules, spousal rollovers, QTIPing an IRA, charitable bequest planning, beneficiary designation planning, retirement plans payable to trusts, Roth IRA issues, distribution of employer securities, insurance strategies and new, innovative planning strategies. For more information and to register...

Sources: Leimberg Information Services, Inc. & Robert S. Keebler, CPA, MST, AEP

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Wednesday, March 14, 2012

4 Tips for a Better Assistant (and More Efficient and Productive Advisor!)

Kristina Schneider here. I am currently the Executive Director for The Ultimate Estate Planner, Inc. However, I used to be President and Estate Planning Attorney, Philip Kavesh’s, full-time Executive Assistant with respect to his law firm, Kavesh, Minor & Otis, Inc. So, I’m very aware of and experienced in the types of duties involved in being an assistant to a busy professional. I take pride in being able to say that I’ve been with Phil for almost 8 years now, which is longer than just about any other assistant that he’s had over the past 30+ years of practice. That being said, I am providing to you 4 simple tips to having a better working relationship between assistants and advisors. These principles and tips can be applied to any assistant for any type of professional, whether you’re an assistant to an attorney, financial advisor, life insurance agent or any other professional outside of the estate planning community.

Assistant Tip #1: Block Off Regular Times with Your Assistant (and Other Key Staff!)

One of the ways that we have tackled all of the multiple deadlines and tasks that we have on our plate every day is by making sure that Phil has a regularly scheduled time to meet with his assistants (literally scheduled appointments on his calendar). In addition to his assistants, he also does this for other key staff members in his firm, such as his associate attorneys, Director of Marketing, bookkeeper, office manager, etc. - - basically, anyone that may require his time for advice, answers, direction or otherwise.

In fact, Phil has blocked off an entire day each week to do this.

The reason this is so effective is that it provides him 4 other virtually interruption-free days to work. Daily staff meetings can take up a lot of time, especially those “impromptu” meetings that are not on the calendar. On Mondays, all of the staff members that have meetings with Phil are expected to come to the meeting well-prepared with a list or agenda of the matters for which they require Phil’s time and attention. This has allowed us, as staff, to learn how to prioritize our work and to put off any non-urgent, non-important items for our scheduled weekly meeting time with him.

Not only does having a scheduled meeting time allow for Phil to be more efficient, but it allows us, the staff, to be more efficient as well.

Trust me, coming from the perspective of an assistant to a busy professional, we need to meet with you. There are issues and matters that come up that simply require your attention. Having a set meeting time each week (and for some busier professionals, it may require an interim meeting with certain staff) allows your assistant and staff members to be reassured that they will have an opportunity to meet with you and get the time that their job requires of you in order for them to effectively perform their job duties. This structure also results in your staff learning to handle more minor matters by themselves, thereby empowering them to become better decision-makers and more productive. Additionally, Phil defers any non-urgent and non-important items to the weekly meeting as well, which has decreased the number of times he interrupts his own staff. It’s a win-win for everybody!

I know that some of you may be thinking that this tip seems like an obvious one, but I have spoken to several assistants and even some attorneys and advisors and know that many do not have regularly scheduled meetings together. By “regularly scheduled” I mean you never violate this blocked time by taking other appointments or doing other work! So, if you don’t do so already, sit down with your assistant and key staff members and schedule a specific time to meet with them on a regular basis (either once a week or even twice, if necessary). Once you do so, I guarantee you that you will begin to find you and your staff members working much more efficiently and effectively together - - allowing you to do more of the things you love to do!

Assistant Tip #2: Remember to Use CPR—It Just Might Save Your Life!

One of the most overlooked (or possibly unknown) techniques that most busy, successful executives and their administrative staff use is what I like to call “CPR”. No, I’m not talking about the medical emergency procedure that can save someone’s life in a life-threatening situation. What I’m talking about is a simple, yet effective, technique that can and should be used each and every single day—Clean, Plan and Relax.

Sounds pretty simple and obvious, right? Let’s go into more detail about what this technique entails.

Clean – Some people may say, “Oh, my work area may look messy and disorganized, but I know where everything is and it hasn’t impacted me or my business at all!” This may be true and I understand that we all have different habits when it comes to the organization of our desks and offices (and our lives!), but it is important to realize what kind of impact having a cluttered office or desk can indirectly have on you.

First and foremost, if you’re a busy executive, it may make your clients (as well as your employees) a bit uneasy. You can be on the ball with everything you do, but your office and desk will say a lot about you (even if you don’t think it does or you don’t want it to). It can take away from your credibility as a professional who is capable of handling important matters such as one’s legal and financial matters. For assistants, it may make your boss and coworkers a bit uneasy about entrusting you to handle certain tasks.

And, for both assistants and executives, it also affects you indirectly by how it can impact you subconsciously while you’re at the office.

Picture it…you’re an assistant to a busy professional. You wake up a few minutes late and are rushed to get ready for work, caught in traffic while on your way to the office (maybe we feel this more—we’re in LA!), and you rush up to your office, open the door and what do you see? Papers strewn all over the desk, folders, files and mail all over the place. Pens, paperclips, and an empty water bottle (lord knows how long that’s been there!). A notepad with your quick scribbles all over it with things you need to do, some done, some not, some crossed off, some not. Now, you turn on your computer, you’ve got clutter on your desktop, in your e-mail inbox, all your electronic files scattered everywhere. What kind of impact do you think that will have on you? Are you calm, cool and collected? Or, do you feel more frazzled?

And now, picture this. Same scenario—with the rushing to get ready and the traffic to get to the office—but now, picture walking into an office with a clean desk. A desk with a small stack of folders and paperwork, with a notepad on top marked “To Do List” with today’s date. Pens, paperclips and supplies in cups and organizers where they belong and a computer with folders, files and an e-mail inbox that is arranged so that it is easy to find what you need, when you need it. How does that change how you feel about your day? How does that impact what you do when you first get in? Are you spending time sorting through the piles or getting right to the first thing on your “To Do” list? And, thus, how does this scenario change how productive you will be?

We’ve said it before, we’ll say it again. An organized, efficient, “A+” assistant best supports an efficient and successful professional.

Plan – Remember that “To Do List” we referenced in the above scenario? That to do list and its creation and implementation is what is what I call “Plan”.

After you’ve had an opportunity to clear your desk and organize yourself, the next step is to Plan. This involves reviewing your notes, sifting through the paperwork and going over your calendar to determine a game plan for the next day. In the process of putting together the items that you need to do for the next day, it would make sense to prioritize each task. Essentially, you are creating a road map for when you walk in the door, you know what things come first, second and third. And, if you’re an assistant to any busy executive, I know there’s always that unpredictable “Other Tasks as Assigned” item (handed to you in haste!) that comes up each and every day. At least with a game plan in your pocket, you can take on those unplanned tasks and still make sure that you do not let any of the important tasks you had to complete slip through the cracks - - or at least let your boss know what may fall through if you switch gears, and let him or her “make the call”!

Along with creating a to do list at the end of each day, it is highly recommended that at the end of the workweek you even look further ahead and plan a general list of things that have to get done the following week. This is a great reference point for when you’re creating your daily to do lists.

Relax – Last, but certainly not least, we are at the final component of this wonderful technique and probably the most enjoyable (that’s for sure!). And, that is…Relax!

Once you have been able to train yourself and develop this technique as habit, you will find that you are able to leave the office feeling relaxed, renewed and ready for the next day. What a wonderful feeling that is - - to leave looking at a tidy and organized work area!

This CPR does not take very long to pick up or implement each day, although for some of you, the initial “clean up” and office and desk organization may take a little more time. But, it’s like what mothers always tell their children about cleaning up their room, “After you’ve done it once, it’s just about maintaining!” Same concept here. Once you have taken the initial step to organize and de-clutter your desk and your office, then it’s just about maintaining from there. Maintaining is so much easier, too!

Trust me, as someone who by late afternoon often doesn’t know where her to do list begins or where it ends, taking the final 10 minutes or so of the day to clear off the paperwork on my desk, organize anything I may need into folders and neat piles, and putting together my to do list for the next day—it’s the best 10 minutes you will ever spend throughout your day and you will begin to see its effects immediately. You will feel better about your day when you leave the office. You will feel better about coming in to work. You will be a better assistant and all of those around you will begin to benefit from your organization, efficiency and, probably most importantly, your confidence!

So, that’s it! Seems simple, but it is often underestimated and overlooked. Next time you are struggling to keep your “head above water”, just remember to use CPR!

Assistant Tip #3: 5 Ways to Get Yourself Electronically Organized and Be More Efficient Throughout Your Day

Staying organized with your paperwork, your desk or office space and your To Do List is still probably only half of what’s involved to completely stay organized throughout your day.

How should your boss - - like most busy professionals - - spend much of his or her day? Hopefully, as an advisor, in front of a client. Phil has always said that if the advisor is not in front of a client, they’re not making any money. But, what about you, as an assistant? Where do you spend most of your day? I would venture to say that most assistants spend probably a good 75-80% (or more) of their day in front of a computer.

So, that brings us to an important question. How “electronically organized” are you?

While the running joke amongst my friends, family and co-workers is that I have some OCD tendencies about my level of organization, I must give credit to this attention to detail and organization (both in “real life” and electronically) as the reason I am able to juggle as much as I do. I took a course on how to manage priorities and deadlines, "Managing Multiple Priorities, Projects & Deadlines" by Fred Pryor Seminars. It was very informative and, in this course, I learned that one of the biggest time-wasters for people in the workplace is losing and looking for things. How much time have you spent this week looking for something? How about today? Hopefully, not too much. But, if you have ever spent more than a couple of minutes looking for something, the disruption to your work and efficiency is huge by the end of the day. That’s why it may be high time for you to spend some time organizing yourself.

I’d like to present to you some helpful ways to organize yourself electronically. This could be helpful to busy executives, too! (That means you, boss!)

Clear Your Inbox. When I come in the office each day, I open up Microsoft Outlook to find nothing there until I hit that “SEND/RECEIVE” button. It’s my way of making sure that anything that comes into my inbox is new and unread. I am aware that unread messages are bolded, but in Tip #1, I talked about what a cluttered desk can do to one’s psyche. Imagine what hundreds, if not thousands, of e-mails in your inbox (your e-desk, if you will) does to one’s psyche. (I’m sure your IT guy would love you too, because you won’t get that message that says you’ve reached your mailbox capacity, either!).

So, what do you do with all those e-mails? Delete them? It depends. I’m a believer that you may never know when you may need a particular e-mail at any given point. This is why Outlook has created such a wonderful thing called “Folders”! I create larger categories, as you will see below.

I assist Phil on issues that relate to his law firm, Kavesh, Minor & Otis (“KMO”), as well as with The Ultimate Estate Planner, Inc. (“UEP”). Additionally, I assist Phil in monitoring his e-mail (which includes his list serve subscriptions). I keep these folders all separated, as it helps me find things immediately when I need it. As you can tell from the image above, those folders then have sub-folders. Those sub-folders will be even more specific to allow me the easiest way to find an old e-mail. What’s great is that those e-mails are always there and won’t need to be pulled up from the Archives, if you have to go searching for them.

Set Up Rules for Your E-mail. As mentioned above, I have separate folders for the various e-mail that I monitor, which includes Phil’s subscriptions to multiple list serves. I am able to do this by setting up Rules inside Microsoft Outlook. I only do this for the purpose of separating out the type of e-mail (KMO e-mails versus UEP e-mails, my e-mails from Phil’s e-mails and Phil’s list serve e-mails). I do not recommend that you use the Rules feature for any and all kinds of e-mails. That will just result in more work later on and tens to hundreds of different folders you will have to monitor to check for new e-mail. This is just to segregate large stuff.

To setup Rules for your e-mail in Microsoft Outlook, go to Tools and select “Rules and Alerts”. A menu will pop up that will allow you to create, edit, delete and manage your Outlook e-mail Rules.

You will be able to then set the parameters of the rule, which can be based on where the e-mail was sent, who sent the e-mail, what the subject includes, and then what you want Outlook to do with the e-mail. For the purpose I am recommending, you will set the rule to “Move it to a specified folder” and then you will want to specify which folder you want the e-mail to be moved to. Voila! No more list serve e-mails cluttering your inbox and, if you’re like me and you monitor multiple e-mail addresses, there’s no confusion about whom the e-mail was intended for.

Clear Your Computer Desktop. One of my hugest pet peeves is having a ton of icons on the computer desktop. Again, going back to what clutter does to the psyche - - the cleaner and simpler you can keep things, the better. Have you ever saved something to your computer or your desktop and spent far too much time trying to find it? It’s very simple. Just like my advice in the past about keeping your office and desk organized, keep your computer desktop clean too. Some of you may be thinking, “But, it makes it so easy to have everything available at my fingertips. I don’t want to have to go looking all throughout my computer to find a program or folder.” Not a problem. It’s very simple, actually. Just start utilizing the “Quick Launch” toolbar at the bottom of your screen.

Simply right click on your toolbar at the bottom, go to “Toolbars” and select “Quick Launch”. You may already have it checked, which means you already have it. But, now is the time to put the applications and folders on the toolbar that you want to be able to access quickly.

Here's what I have.

(click to enlarge)

I keep the “Show Desktop” button on, which minimizes all windows when you need to easily access your desktop. I keep my Internet Explorer button handy for accessing internet, along with the various folders and drives that I may access frequently. Then, I have all of the other programs and applications available on the drop down (when you click the >> arrows).

Other than my Recycle Bin, the only other thing that I have on my desktop is a folder I call my “Current Works in Process” folder, which has shortcuts and documents that I want to quickly access and includes items I’m working on currently.

Folders, folders, folders. Aside from e-mail, there’s another place on your computer that you may also need an e-filing system of some kind and that’s either on your computer directory (My Documents) or, for some, may even be on a centralized server setup for your office. Just like keeping a tidy desk, a tidy computer desktop and a tidy Outlook inbox, keeping your electronic files tidy and organized is also equally as important.

I assist Phil with tasks related to his law firm, to The Ultimate Estate Planner, Inc., as well as some personal items. Therefore, I have three separate main folders: KMO (for his law firm), UEP (for Ultimate Estate Planner) and PJK (for Phil). This keeps these items separate. Depending on whether I have a letter, document, contract or some other electronic file I may have to file away, I determine whether it’s related to these. This makes locating files much easier. And, of course, like with the Outlook folders, each of these main folders has sub-folders that categorize them in even further detail (including by year for some).

Honestly, whatever works for you is best, but just keep in mind that the more you can categorize and be detailed in how you name files and file away electronic files, the easier it will be to find things. Think about it - - would you rather sort through 100 folders, which then each contain 10 sub-folders with 5 appropriately filed documents, or sort through one large folder with 5,000 files?

Naming Files. And, of course, the previous brings me to this final tip, which is the “science” of naming electronic files. I am teased at times for having extensively long file names, but my system has yet to fail me. I will use brief (2-3 word) descriptions, event names, revision dates and whatever else that may be useful to help identify what a document contains. This helps in organizing and determining if certain versions you have are older, as well as preventing you from having to open up each document to identify what they are. Combining very carefully thought out file naming with file folder organization is really a match made in heaven for any assistant, as well as any busy executive!

I know that these tips may seem like common sense, but after years of assistant experience and working with different people, I can honestly say that while it may seem “common”, it’s not commonly practiced.

Even implementing just one or two of these tips will make any assistant (and executive) more efficient and is a huge step towards becoming more “electronically organized”. Keep in mind, when an assistant becomes more efficient, it frees up her or his time to do the types of truly important tasks that can really benefit a busy executive. And, the same goes for executives and their level of productivity! So, what are you waiting for? Clean up that computer desktop, clear out that inbox, start utilizing folders and create easily identifiable e-file names. You will be glad you did!

Assistant Tip #4: The 4 "D's" of Being a Better Assistant (and More Efficient Executive, too!)

Whether you’re a busy executive or the assistant to a busy executive, you know the feeling of having far too many things to do in a day than hours available, right? There are a lot of different tips and ways that you can handle such a workload. One such technique of determining how to handle a heavy workload is something that Phil actually taught to me. It’s the 3 “D’s”: Do It, Delegate It, or Destroy It!

Start by looking at your To Do List - - which I hope all of you have, because if you’re not, that’s a whole other story for developing habits for efficiency and organization (see Assistant Tip #1). It’s important to list your tasks in a To Do List, so you can then determine where each task falls under the 3 “D’s” below.

DO it. The first of the 3 “D’s” is DO it. There are some tasks that you, and only you, can do. These tasks are the ones you determine need to stay on the To Do List and, from there, you can prioritize which ones need to be done in what order.

DELEGATE it. The second “D” is DELEGATE it. This is one that most people struggle with, especially those Type A personalities and perfectionists. It really involves a lot of trust in others and was definitely an area that I personally struggled with. I felt like I couldn’t delegate a certain task somewhere else because it might not get done right or I know how Phil would like to have that done and the time and extra work involved to train and supervise someone else to do it would not be worth it, so I should just do it. That mentality really started to affect my level of efficiency, because now I was unable to complete certain things because of a lack of time or other priority projects repeatedly bumping them.

Ultimately, I had to determine that nobody would ever be able to learn how to do certain tasks and allow me an opportunity to delegate unless I started to give up some of the control and started trusting others to take on those tasks that could be delegated away. As a result, we were able to free up my time to do the things that I do need to do and, frankly, that I enjoy doing (like blog writing and interacting with attorneys and advisors on a daily basis!).

Start by delegating some relatively simple tasks that you ordinarily take on, if there are others in your office that could be doing them instead. For example, there can be some downtime for your receptionist between answering phone calls and assisting clients, which is great for doing certain tasks like sending out letters or putting together manuals.

Delegating some more complex tasks may take a leap of faith, but you may be pleasantly surprised to find what others can take on when empowered to do so. In fact, don’t tell Phil I told you this, but it took him some time to realize that I was capable of writing. He started to build up a level of trust in me in the area of writing and has since allowed me the opportunity to assist him in doing initial drafts of correspondence, proposals and contracts and has now entrusted me to post blog entries (for UEP and his law firm), modify both company’s websites, create monthly newsletters for the law firm, and even draft some of the marketing pieces! (Thank you, Phil!)

Whether the task is simple or requires some training and supervision, once you learn to build up that trust and feel comfortable to delegate tasks to others, you will find that a lot more can get done. What’s that lovely saying? You can do more in teams than as an individual? Something like that.

You probably won’t be able to jump in the pool right away, but you will need to dip that first foot (and, if you’re like me, maybe it’ll just be that first toe!) into the water!

DESTROY it. Last, but certainly not least, my favorite of the 3 “D’s” is DESTROY it. This is one of those where if you can use it and simply “destroy” a task, it’s great. However, unfortunately, not all tasks that are on our plate are capable of being “destroyed”. But, destroying tasks is necessary when you have far too much on your plate and you must weigh the benefits versus the cost to take on such a task (and, remember, your time is money too!). It’s okay to decide not to do things! If you can’t “destroy” a task, then at the very least, you may determine it necessary to DELAY it until other tasks that are more important are completed. And, that may also allow you an opportunity to delegate as well!

So, the next time you feel overloaded with things to do, go through your To Do List and determine what tasks you can DESTROY (or, at the very least, delay), DELEGATE to someone else, and the ones that you will have to DO. Better yet, make this determination immediately when items come to you and get placed on your To Do List! I’m sure once you master this, you will free yourself up so that you’re starting to do the tasks that you need to do, and hopefully the ones that you enjoy, too!

Well, that’s it for the tips to being a more efficient assistant. I hope that you found these tips helpful and since it’s usually the busy professionals reading our blogs and e-mails, you might want to be sure to pass along this blog entry to your assistant! If you’re interested in having me personally come in and consult with your assistant and even train him or her on some of the concepts mentioned in this blog entry, please feel free to contact me directly and I can give you more information about what services we have available.

ABOUT THE AUTHOR. Kristina Schneider has been with The Ultimate Estate Planner, Inc. since July 2004, providing administrative support to Mr. Kavesh, along with sales and customer service support for clients and prospective clients. Kristina was originally brought on to coordinate and facilitate all of the "Missing Link" Boot Camps and served as Phil's Executive Assistant at the Law Firm of Kavesh, Minor & Otis for over 7 years. Kristina currently assists both companies with marketing, including e-mail newsletters, blogs, and the company websites. Through Kristina’s direct hands-on experience in Phil's law firm, Kristina has been able to assist numerous professionals - - and equally as important, their staff - - in the successful implementation of Phil's products and systems. Kristina graduated with a Bachelor's of Science Degree in Business Administration from Pepperdine University in 2004. She currently resides in Los Angeles and, in her spare time, enjoys playing club basketball, reading and writing, including assisting various companies with their blogs. She is a big hockey fan (thanks to Phil) and enjoys cheering on the Los Angeles Kings.

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Tuesday, March 13, 2012

The 3-Step Process for Closing New Prospects

Closing more client meetings is a big deal for all types of estate planning professionals, whether you're an attorney, financial advisor or life insurance agent. There's an old saying that a financial advisor used to say which went, "If you're not meeting with clients, you're not making any money." But, if you've ever been in the business of meeting with clients, you would know that meeting with clients doesn't guarantee you their business. There's a lot of competition out there and you need to find something to set yourself apart. Next Wednesday, March 21st, Philip Kavesh will be holding a special teleconference entitled, "Successful Initial Client Interview & Appointment Closing Tips". This teleconference is perfect for attorneys, as Phil goes over his process for closing over 85% of his client meetings.

Last week, we found this article posted on Registered Rep, which goes over a 3-Step Process for closing new client prospects. In particular, this is from the financial advisor angle, but the approach is the same for most estate planning professionals. While it varies slightly from Phil's approach, as he utilizes educational seminars and a 2-step meeting process, so the rapport-building happens prior to the prospect setting foot in the office, the concepts are still valuable. Enjoy!

How to Help Your Clients' Adult Children

Reposted from RegisteredRep.com | By Kevin McKinley

Giving the young adults in your clients' families a little time and attention can be beneficial for everyone involved. Most advisors are most interested in working with individuals who have the most money to manage. This usually means those who are about to retire or have just done so. But many of these clients have one thing on their minds that may be even more important and worrisome to them than their money: their fully-grown (if not yet fully-matured) children. Helping the next generation get off on the right financial foot could be the most valuable service you provide.

Win, Win, and Win

It won't be difficult to persuade the parents to let you talk to their kids. Solid money advice might be easier to take from an outsider like you than a mom or dad, and may make it less likely the kids remain (or become) a financial burden to the parents.

The younger folks get to take advantage of your expertise, despite having neither the income nor the assets necessary to otherwise qualify for an audience with you.

Finally, developing a positive relationship with the younger members of your clients' families could ensure that your oversight of their assets continues long after the older clients pass away.

Some Ground Rules

Inserting yourself between generations of even the most harmonious families can make matters worse if not handled with delicacy, diplomacy, and discretion.

You should start with the parents, perhaps by giving them a few extra business cards and suggesting that they forward your contact information to their adult children or grandchildren.

Make it clear to the current clients that none of their financial information will be discussed with the younger family members. But also pledge that anything you cover with the younger generation will be kept confidential from all others.

You can let these privacy shields loosen a bit during “family money meetings,” which you should not only suggest but also organize and facilitate if asked.

Once you get a chance to talk to the young adults, you should reiterate that what they tell you will remain private (although certain circumstances might compel you to suggest the kids talk to their folks).

Where Are They (and Their Money) Going?

After the formalities are out of the way, it's time to get down to business. Ask the twenty-something where she wants to be in the next few years, and how she plans to fund those near-term plans.

Encourage her to track her current monthly expenses, and calculate how those might be affected by any life changes, such as returning to school or moving to a new city.

Ask if she has enough savings set aside to cover a few months (or years) without a steady income, and suggest she establish a rainy day fund before spending any extra money on trivial pursuits.

Bad Credit = Financial Headwind

Whether the young adult is still going to school or has just entered the workforce, it's likely he will be attempting to borrow money at some point in the near future.

You can increase his chances of landing the best lending terms by encouraging him to check his raw credit data for free at www.annualcreditreport.com, and getting his FICO score for a small fee at www.myfico.com.

Even if he doesn't see any need to borrow any money in the near term, you can point out that his credit rating can affect his ability to rent an apartment, his insurance costs, and even his employment prospects.

Repayment at the Right Pace

On the other hand, financially-savvy young adults are often too quick to want to get out of debt, especially when it comes to paying off student loans.

Eliminating education debt is a great idea, unless it leaves the borrower with no cash to cover other emergencies, or living expenses between jobs.

So instead of rapidly paying down college loans that have lower rates and longer repayment schedules, advise the kid to focus first on funding the aforementioned emergency savings account.

After six to twelve months' worth of living expenses are built up, then any extra income can be redirected toward accelerating the debt repayment.

Wading Through HR Forms

Gainfully-employed young adults don't have to worry as much about money as their unemployed cohorts, but they have another concern with which you can help: making the most of their employers' benefit package.

Start with the kid's 401(k) plan, demonstrating the tax savings (and potential employer matching contributions) that are available on the worker's deferrals.

If that doesn't motivate her to start saving right away, show her that setting aside just $10 per day from age 22 on at 7 percent hypothetical annual return will make her a millionaire at age 65.

You can tell her the truth about her reaching that age much more quickly than she can imagine, but a long rant about how little her million will actually buy at that time will tend to diminish her enthusiasm for investing.

Family Counseling

Even clients' children who have long been independent can benefit from your words of wisdom.

You could offer newly-engaged couples the chance to have a money meeting with you, and help them establish mutually-desired long-term financial goals and short-term spending and saving amounts.

Most new moms and dads lack the proper estate planning documents to protect themselves and their families, so sending the young parents to a qualified attorney would be an act appreciated by your older clients, as well.

Along those lines, you should encourage the younger generation to not only purchase life insurance, but with a benefit amount that's large enough to prevent a tragedy from turning the kids and grandkids into a financial responsibility of the older generation.

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Photo Credit: registeredrep.com

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Thursday, March 08, 2012

Tax Expert Marty Shenkman: Two Tax Mistakes to Avoid With Clients in 2012

Despite the uncertainty of where estate, income and capital gains rates will be this year, you still need to plan.

Reposted from AdvisorOne.com | By Marlene Y. Satter, AdvisorOne

Martin Shenkman of Shenkman Law in Paramus, N.J. doesn’t hesitate to tell it like it is about tax planning in 2012: “This is not a normal year,” he says. However, that’s no excuse for what he sees as two huge mistakes that advisors and their clients often make as they quiver with uncertainty over what Congress may or may not do this year regarding taxes.

Those two mistakes? Acting like an ostrich and looking for a magic bullet to fix everything.

Mistake No. 1: Doing Nothing in 2012

Many investors, he says, are so freaked out by the fact that it’s not a normal year that they’re mimicking ostriches and burying their head in the sand, afraid to do anything at all. “The ostrich approach is not very effective unless you’re an ostrich,” he warns. Those who mimic the big bird are waiting to see what, if anything, gets decided out of a myriad of possibilities with the tax code as the Bush-era tax cuts approach their sunset at year's end.

However, Shenkman (left) warns that “wait and see will become wait and pay” if they continue to do nothing. He suggests protecting assets, particularly through gifting and trusts, as well as consider transferring some dividend-paying equities into an IRA where taxes will not become an issue.

The $5 million gift tax exemption could become a thing of the past if laws change--President Barack Obama, he says, is talking about reducing it to $3 million, and he reminds us that “for a long time we had a $1 million gift exemption. There’s no guarantee that won’t come back” if the government needs to raise funds–and while many people don’t think they’re anywhere near that in assets, they could be in for an unpleasant surprise.

He points out that even many clients who are not ultra-wealthy could find themselves in a bind if there are changes reducing that $5 million–particularly unmarried partners, who will find it more difficult to transfer assets back and forth. “Evaluate [ownership of] assets now,” he advocates, and make any changes “while it’s still easy to do.”

Another category of clients who should consider trusts and estate planning, in light of possible tax code changes, is anyone who could be subject to a lawsuit or malpractice claim. That, he adds, “includes everybody.” Not only doctors but also members of boards of directors, owners of businesses or real estate that could be beset with hazardous waste claims–such clients of yours, he warns, need to look at asset protection.

“With a $5 million exemption,” explains Shenkman, “you shift assets to a trust and you’re done. If [the amount is reduced to] $1 million, you have to use much more costly and complicated and risky techniques to shoehorn wealth into a trust like that.”

He adds that more than 20 states have “decoupled from the federal estate tax system” so the need to place assets into a trust to shelter them can be even more important, because individuals can be beneficiaries of the trust should they need money, get the assets out of the estate, and save a significant amount of estate tax in the process.

Individuals can also use the current $5 million exemption to equalize giving–say, for a couple with two grown, married children. Shenkman provides an example: If one child has five children and the other has only one, and the parents have been gifting the annual limit, the family with one child has received considerably less money than the family with five children. The $5 million exemption will allow the parents to even that out–to “equalize those prior gifts.”

Mistake No. 2: Taking the Wrong Steps in 2012

Some clients might go to the other extreme and seek a magic bullet, making simplistic decisions on what are complex matters. Some are deciding to sell assets now to avoid an increase in capital gains tax, without thinking things through. “Why realize a capital gain today, when you could harvest losses to eliminate that gain?” he asks. “It’s not clear that capital gains will increase.” He also suggests that advisors and their clients look at the whole picture: “If you have a rental property, why would you sell something to realize a capital gain?”

Instead, he suggests, take a multidimensional approach rather than “letting the tax tail wag the investment dog.” That way, even if one purpose of a tax planning strategy becomes moot because a tax increase or other eventuality does not come to pass, it will still serve other ends–such as an insurance policy purchased to pay estate taxes, but with other needs in mind as well. That way, even if the estate tax does go away, the purchase will still serve a purpose.

Even if capital gains rates and dividend rates rise, he warns, it doesn’t make sense to make decisions based only on taxes. “Don’t go for investment allocation that doesn’t make sense just because you’re anticipating a change in the tax law,” he warns.

Estate planning could change, too; Shenkman mentions the “green book” tax proposals in Obama’s budget. “He will hammer very hard on almost every technique that the wealthy use in estate planning,” warns Shenkman. “If people who can benefit from it don’t take advantage of it soon, it may be gone by the end of the year.”

In fact, Shenkman's office is not booking annual reviews for clients in November and December, anticipating that people will suddenly decide to shelter whatever assets they can at the last minute. “Everyone will call at the last minute,” he says, pointing out that “even if you can turn documents around quickly, you still have to open bank accounts and get trust companies to accept trusts; it doesn’t happen overnight. Assets still have to be transferred.”

Add to that the fact that your clients rushing at the last minute of 2012 may not have thought through all the implications of such a move, there is the chance that they may be “missing the point of what’s relevant to them, and at year end they may have to rush through and not do things the way they really want.”

A Sit-Down After Tax Season

Shenkman also suggests that clients consider booking time with advisors–all their advisors–after the rush of tax season is over, and asking advice rather than telling advisors what they want. Much of the time, he says, clients will tell advisors what they want and that’s what advisors will give them.

However, he recommends to clients that they “sit down with your accountant once a year, after April 15, and say, ‘Tell me what you think may be of interest and use to me.’ Somebody independent, not selling, who has the review of your financial life and you can’t spend an hour of money to hear what they have to say? Especially with all this uncertainty.”

Better yet, he adds, is to sit down with the whole planning team–CPA, estate planning attorney, and investment advisor–and discuss everything from insurance to tax returns, perhaps on a conference call. “We do web conferences,” he says; “they’re incredibly efficient. It’s fascinating what a meeting of minds does to come up with ideas for clients,” he adds. “No one advisor has a lock on all the right ideas.”

One last thing: even if tax rates go up, it will not be a catastrophe, since even the new proposed rates being bandied about by President Obama are not egregious by historic standards. “People don’t need to panic over them; they just need to plan.”

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Marty Shenkman is a speaker for several teleconferences for The Ultimate Estate Planner, Inc., including 2 programs coming up this month. The first is on Wednesday, March 14th at 9am Pacific Time on the topic of, "Gift Tax Returns: Traps & Tips for Practitioners Heading Into Filing Season". The second is on Tuesday, March 27th at 9am Pacific Time and is on the topic, "Recent Developments in Estate Planning: Special Traps and Tips to Avoid Them".

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Thursday, March 08, 2012

MainStreet.com: The Top 15 Richest Counties in America

Much to the pleasure of our Maryland-native Event Coordinator, Megan DeLaGarza, and the many other estate planning professionals based out of the Northeast, we are pleased to repost this article we found on MainStreet.com with the Top 15 Richest Counties in America. Are any of you planning in these counties? If not, you should be! Happy Estate (and Financial) Planning!

The Richest Counties in America
by Kali Geldis

Where the 1% Live
While many Americans struggle to find jobs, balance their budget and get by with less, some folks are still living high on the hog.

Looking at the most recent Census Bureau data from 2010, we chose the 15 counties in the U.S. with the highest median household income. With three counties exceeding the $100,000 mark, life seems pretty good in these areas, even as the U.S. median household income declined 2.3% from 2009 to 2010. Still, the following 15 richest counties still have a median income that is about double the national average of $49,445.

Read on to see if your county made the list.

15th Richest: Charles County, Md.
Median Household Income: $87,007
The first of five Maryland counties to make our list, Charles saw a population burst of 21.6% in the first decade of the 21st century. With Maryland taking up a full third of our list, it’s important to note that this state’s residents took the sixth spot in our ranking of the most generous states in the U.S.

14th Richest: St. Mary's County, Md.
Median Household Income: $88,444
The median household income in St. Mary’s sky-rocketed from about $72,000 in 2009 to more than $88,000 in 2010, the biggest percentage increase (roughly 22%) on our richest counties list. This beautiful county lies on the Chesapeake Bay across from Virginia, and is home to the Lexington Park neighborhood as well as a state park and a regional airport.

13th Richest: Calvert County, Md.
Median Household Income: $88,862
Calvert lies just across the Patuxent River from St. Mary’s County, which holds the 14th spot on our list. The median household income in this county didn’t see the same boom that St. Mary’s saw year over year, though. Its income remained essentially flat, decreasing less than 1% from 2009. Veterans make up roughly 10% of the population, according to the most recent census data.

12th Richest: Montgomery County, Md.
Median Household Income: $89,155
With almost 1 million residents, Montgomery is one of the largest counties on our list. It’s no surprise that this county is so large, since it’s situated just north of Washington, D.C. and only an hour from Baltimore. More than half of the county’s population has a bachelor’s degree or higher and the home values in this area are astounding. The median value of owner-occupied homes was $482,900 from 2006-2010.

11th Richest: Nassau County, N.Y.
Median Household Income: $91,104
Just a hop, skip and a subway ride from Manhattan, Nassau County contains a large chunk of Long Island and Long Beach. The only New York county to make the list, this area has an extremely low poverty rate, with only 5% of residents living below the poverty line. But what really sets Nassau apart is its diversity, with 20.7% of foreign-born residents and 27.3% of its residents speaking a language other than English at home.

10th Richest: Morris County, N.J.
Median Household Income: $91,469
Morris just barely snuck into the top 10 richest counties after its median household income fell by roughly $3,000 from 2009. The county’s residents are less than an hour from Manhattan, and the area includes several lakes and state parks. Golfing is big in Morris county, with about 20 places to tee off.

9th Richest: Prince William County, Va.
Median Household Income: $92,655
Not to be outdone, Virginia matches Maryland with the most counties on our list. Prince William has seen its median household income increase from 2009, even as the national average declined. Prince William is situated outside of Washington, D.C., just like several other on the list. What makes it stand out from the rest though is the 43.2% population boom it has seen in the past decade. The area is home to many historical sites, including the Manassas National Battlefield Park, where two Civil War battles took place.

8th Richest: Somerset County, N.J.
Median Household Income: $94,270
With one of the most prestigious colleges in the country just outside the county line (Princeton University), it’s no surprise that the education levels of Somerset County’s residents are very high. Almost 93% of residents have a high school diploma and roughly 50% have a bachelor’s degree or higher.

7th Richest: Stafford County, Va.
Median Household Income: $94,317
With just 128,961 residents, Stafford County is one of the smallest population areas on our list, but what it lacks in size it makes up for in jobs. The county’s unemployment rate is just less than 5%, much better than the current national average of 8.3%. The wealth of jobs must put residents in the giving mood, since the state of Virginia also came in at the third spot on our list of the most generous states in the U.S.

6th Richest: Douglas County, Colo.
Median Household Income: $94,909
The only Colorado county and the only county west of the Mississippi to make our list, there’s something special about Douglas. The large youth population (30.5% of residents are under the age of 18) suggests that the county is a good place for families. Lying just outside of Denver, residents only need to travel up I-25 to get to the Mile High City. The rural beauty must attract residents, as there are only 339.7 people per square mile and the population has seen a 62.4% increase from 2000-2010.

5th Richest: Arlington County, Va.
Median Household Income: $94,986
Living in Arlington isn’t cheap, so you’d better be making at least the median household income to live in this county that sits just outside of Washington, D.C. Arlington may not be the richest, but it does set a record for real estate values. The median value of owner-occupied homes in Arlington county is $571,700 – almost $70,000 more than any other county on our list. This county also stands out as the most educated on our list – 70.1% of residents hold a bachelor’s degree or higher.

4th Richest: Hunterdon County, N.J.
Median Household Income: $97,874
The richest county in New Jersey, Hunterdon just missed the six-figure mark in median household income. Located just west of Somerset County, which took the 8th-richest county spot, Hunterdon’s income has actually crossed the $100,000 mark before. While some might assume that Hunterdon’s residents make high salaries by commuting to New York City, where salaries are higher than the national average, the truth is that almost 94% of residents stay in-state for work. In fact, more residents commute to Pennsylvania for work than New York.

3rd Richest: Howard County, Md.
Median Household Income: $101,771
With an astounding 58.3% of residents holding a bachelor’s degree or higher, Howard County shows that higher education can pay. One of only three counties that have a six-figure median household income in the U.S., Howard is located between Baltimore and Washington, D.C., attracting the extremely affluent. The median value of owner-occupied homes in the county is $456,200.

2nd Richest: Fairfax County, Va.
Median Household Income: $103,010
Fairfax County is one of the largest counties in terms of population to make our list (1,081,726 residents in 2010), but it is also notable for its real estate. Fairfax is one of only two counties on our list to break the half-million mark in home values. Coming in at $507,800 for the median value of owner-occupied homes, the county truly has some spectacular real estate. Government buffs will be excited to learn that Langley (headquarters of the CIA) is within the county line, so government employees must be making a decent amount of money these days. Also, the unemployment rate in the county has been astoundingly low historically, hitting 1.4% in 1999.

The Richest County in America: Loudoun County, Va.
Median Household Income: $119,540
With a median household income that is a full $16,000 higher than our second-place finisher, Loudoun county has trounced the competition on its way to becoming the richest county in America. Another county surrounding our nation’s capital, Loudoun borders both West Virginia and Maryland and is the home to Washington Dulles International Airport. The Appalachian Trail runs along its western border and the area was largely an agricultural community until the airport was built in the 1960s. The population has continued to increase since then, with the area nearly doubling in population size from 2000 to 2010. The poverty rate is also at an incredibly low 3.2%.

Photo Credit: forbes.com

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Monday, March 05, 2012

The Paperless Law Firm - Using Technology for Lowering Overhead and Greater Efficiency

Reposted from SnapSnapCommunity.com | By Ed Poll

As electronic tools and databases transform the practice of law, pundits contend that the documents and records common to all law firms face extinction, as scanned files or cloud databases replace hard copy law texts, briefs and client documents. British technology consultant Richard Susskind even claimed in his book, The End of Lawyers?, that the ongoing development of new paperless technologies will so commoditize legal services as to make traditional lawyers irrelevant. But rather than “the end of lawyers,” paperless technology is really the start of a new law firm business dynamic. Consider these three examples of what is to come.

Discovery

Doing more work by less expensive labor has been the law firm’s past profitability strategy. In the future clients will demand leverage through a staffing/technology mix, so that databases – not paralegals or associates – provide the cost efficiency. Firms must learn to staff accordingly, or have far more lawyers than they can support. Some work will be forever commoditized. This is already happening to litigation, as e-discovery software can analyze documents at a fraction of the time and cost for lawyers to do the task. File search programs find documents with relevant terms at high speed, and even extract relevant concepts and deduce patterns that lawyers examining paper copies may have missed. Inescapably, many lawyers who used to conduct document review will no longer be billable. Profitability for the firm will come from the ability to swiftly analyze the millions of equivalent paper pages that electronic documents represent.

Knowledge

Knowledge management (KM) databases combine the work product of all lawyers into a single unified database that can be accessed by each lawyer to the benefit of all clients. Clients no longer want their lawyer to reinvent the wheel: once the research is done or the form is created, clients do not want to pay for others in the firm or for their own lawyer to re-create it (and charge for doing so) in another matter. But the focus on shared knowledge indicates where the secret weapon lies: the efficiencies from computer technology. Online database management has the potential to turn a lawyer’s or law firm’s knowledge into a high volume commodity. With a lower price through fixed fees, client demand could increase volume and profits likewise could rise.

Analysis

The popularity of ebooks and tablet readers adds a philosophical dimension to the paper issue. I have long felt that, because we learn by touching things as children, we retain positive adult feelings toward the tangible touch of papers and books. Moreover, paper documents offer free association made possible by glancing through printed pages. Facts and concepts leap off the page quickly and can be processed in ways different from a search engine. Now, an ebook or tablet reader offers these same advantages. You can hold it, leaf through it and use it anywhere at any time. Accepting the positive implications that this change brings to the analytical process is now a necessity for any lawyer, including one as devoted to paper as I am.

Ed Poll (@LawBiz) is a ScanSnap Squad contributor and an award-winning legal management consultant with over four decades of professional experience. Ed has also had previous experience publishing on the ScanSnap Community.

Photo Credit: blog.ironmountain.com

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Friday, March 02, 2012

Senate Highway Bill S.2132 Brings Back Mandated 5-Year Rule for Payout of Inherited IRAs

A special thanks to Robert Keebler of Keebler & Associates, LLP for bringing to our attention the Senate Highway Bill S.2132, which brings back the mandated 5-year rule for Inherited IRAs (with some exceptions). This obviously has a lot of estate planning professionals on edge to see what's going to happen with respect to retirement benefit planning for clients this year and beyond. The entire Bill can be found on the Library of Congress' website. To view S.2132, click here.

Robert Keebler has a phone call into Senator Baucus' office to confirm and will be posting more updates in the future as we eagerly await news on this Bill.

Photo Credit: rubins401k.com

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Friday, March 02, 2012

22 Days of Tax Planning Advice: What I Do in My Practice, Pt. 1

Reposted from AdvisorOne.com | By Mike Patton

This is the first in a series of blog postings from advisor Mike Patton on how he works with clients during tax season and throughout the year to maximize his value to clients when it comes to tax planning.

As we approach tax return filing time, there are opportunities for advisors to add value, even if you’re not your client’s tax preparer. In this post, the first in a series of blogs, I'd like to share what I am doing during this season for my clients.

Fact-Checking 1099s
Clients should have received their 1099s by now. Although most will contain all of the necessary data, believe it or not, there are a few firms that do not include the cost basis for securities sold. In fact, the custodian that I use 'had' a relationship with one such clearing firm. This firm, which shall remain unnamed, showed the gross proceeds, but not the basis. To remedy this, I export the 'gains and losses' for the calendar year into an Excel spreadsheet. Then I would send this to the client’s tax preparer. Because it was in Excel, it can easily be sorted by capital gain treatment, position, etc.

Asking for Clients' Returns
I sent out an email to all financial planning clients recently requesting a copy of their 2010 tax return and their 2011 return when completed. In an effort to become more involved in this area, and to assist in identifying errors and ways to save, clients were very appreciative. After all, to maximize cash flow, you must either increase income or reduce expenses, or both. And the more free cash flow, the greater the potential for wealth accumulation.

As an example of how having returns benefits clients, one of the returns I reviewed recently was from an elderly couple who had been using the same preparer for decades. The problem was that this particular preparer had made numerous errors on their return. Although I do not prepare returns, and have no plans to do so, I can help identify issues which need addressing. In this case, I referred the client to a CPA who filed an amended return for the year in question. The result? The client saw the benefit I brought to the table. And after all, that's what it's all about!

Making Tax-Smart Use of My CMS
I just completed a revision of my contact management system. The update included adding fields which will increase my ability to effectively communicate with clients. For example, I added the fields, "taxable" and "tax deferred." Then I created a query so I can filter clients with taxable or tax deferred accounts. To those with taxable accounts, I can send communications geared to tax issues and for tax deferred accounts, I can suggest that they make a contribution to their IRA for 2011. Of course, I would include the parameters whereby they can make a contribution such as having earned income.

There are many sometimes overlooked steps we can take as advisors to become more involved and add value for our clients when it comes to issues revolving around taxes. These are only a few. Perhaps you'd like to share some of your ideas?

Photo Credit: namm.org

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Thursday, March 01, 2012

2012 Tax Season Survival Guide: 22 Days of Tax Planning Advice

Reposted from AdvisorOne | By Dan Skiles

Tax season is officially here. For some advisors, preparing clients’ tax returns is a standard part of their services. Others may provide guidance and assistance, but someone else completes the actual tax return. No matter your style, there are several best practices and operational procedures that you should consider to help make tax season a little easier for your firm.

A good place to start tax season is with your custodian’s calendar. Take a look at your custodian’s schedule for sending out 1099 reports. For example, your custodian might use a different timetable for sending out 1099 reports for accounts that include mutual funds that have received income or distributions than for accounts that only include stocks or bonds. This is especially important if your clients have accounts that include a mix of mutual funds and other securities. They would receive the 1099 for their account that includes only equities, but may become concerned when they don’t receive the 1099 for their mutual fund account at the same time.

Reconciling the information included on your clients’ 1099 statements versus the same data on your own performance reports can be a challenging project. In theory, the information should match as long as you are properly reconciling the accounts in your reporting system. In addition, since most 1099 reports are in a PDF format, you can also consider copying and pasting the account data in a table format. Once loaded into a spreadsheet, you have new opportunities to more efficiently merge and compare information. Your custodian may also allow you to download 1099 reports for a number of accounts in a single file, which will make it easier to access and maintain the information.

Perhaps one of the more frustrating aspects of tax season is when a client receives a revised 1099 report. This can happen for a number of reasons and can lead to extra work for you and your client—especially if the client has already filed his or her taxes based upon the initial 1099 report. Advisors can minimize this risk by making sure that clients understand that this can happen if securities issuers have to revise their data. Sometimes waiting an extra week or two before filing their taxes is not a bad idea, essentially making sure a revised 1099 is not already on its way. Advisors should also be on the lookout for these revised 1099 reports by leveraging the tools available through their custodians. Many custodians provide alert features, search criteria and other tools to help you stay informed of any 1099 report revisions. This can really assist you with providing excellent service to your clients by being proactive with this information, perhaps even notifying your clients of the 1099 revision before they receive it in the mail.

Another fairly significant effort during tax season is making sure that other professionals (CPA, tax advisor, attorney, etc.) who serve your clients’ needs receive all the necessary documents as well. The most common way to fulfill this task is to send the documents via email. However, if you have a Web portal solution, for example, file sharing with Dropbox, then you should consider creating an account for each of these professionals as well. If you utilize a Web portal solution, you have the ability to securely upload documents and ultimately have more control over the process. If a document is misplaced, the file is still in the professional’s account and they can re-download the file.

Tax season can be a very busy time of the year. It involves a hard deadline as well as significant effort in collecting critical information. When it goes smoothly, it is mainly time-consuming work, but the level of frustration rises when mistakes or surprises occur. Minimize these issues by implementing the appropriate best practices and operational procedures for your firm.

Photo Credit: AdvisorOne.com

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Wednesday, February 29, 2012

February 29th: Fun Facts About Leap Day

Today is February 29th, 2012. LEAP DAY! We thought that it'd be fun to share some fun facts about Leap Day with all of you, thanks to this entry on Yahoo! Work + Money. Enjoy!

2012 is a leap year, meaning that February, the shortest month, has an extra day, bringing the year to 366 days. This notable event comes only every four years. Which means you have an extra 24 hours. So what will you do with yourself? How about heading to Disneyland for 24 hours straight, catching a movie, or spending the day skiing?

Lookups on the Web are taking a leap, including "leap day activities," along with the quadrennial questions: "what is leap year," "why is there a leap year" and "history of leap year." Here, your guide to the day.

When is it? An extra day is added to the month of February every four years. This year, Leap Day is on Wednesday, February 29.

Why we need Leap Day: Usually, our year is 365 days long. Except that it's not: A full cycle of seasons is actually 365 days, 5 hours, 49 minutes, and 16 seconds long, or about 365.25 days. Over time, the extra quarter of a day adds up, and without Leap Day, the calendar would be one day out of sync with the seasons. After 30 years, it would be about a week off, and after 100 years, it would be nearly a month off.

Bing Quock, the assistant director of Morrison Planetarium at the California Academy of Sciences, explains, "Leap Day is added as a correction to the calendar so that it stays in sync with the seasons ... that way, the seasons start on the same day from year to year to year."

The history of Leap Year: Leap Year has been around for 2,000 years, since Julius Caesar created the 365-day calendar, although Caesar's astronomer, Sosigenes, get s credit for adding an extra day in February every four years.

How to celebrate: Fans of Disney parks will be lining up to take advantage of "One More Disney Day" at Disneyland in California and at Magic Kingdom in Florida, which will be open for 24 hours, from February 29 at 6 a.m. until 6 a.m. March 1. Michele Himmelberg, a spokesperson for Disney, said it's the first time in recent memory that theme parks on both coasts will be open to mark the quadrennial event. She confirmed the rides will run all night. Hey, come in your PJs.

Leap Year babies probably have the biggest reason to rejoice -- since they see their birthdate only once every four years. Yahoo! searches are in a festive mood with lookups on "leap year birthdays," "leap year birthday cards," and "leap year party ideas." Good news for ski bums born on February 29: Show your Leap Year birthday date and get a free stay at Mammoth ski resorts.

If you prefer to mark the extra day on your couch, there's always "Leap Day," the movie. The 2010 romantic comedy stars Amy Adams and is based on an Irish tradition that a man must say yes to a woman who proposes to him on Leap Day. Some NBC shows have already run their Leap Day-themed episodes, which included "30 Rock's" alternative-universe idea that Leap Day is celebrated like an actual holiday and even has a mascot, "Leap Day William" (Jim Carrey), who stars in a "Groundhog Day"-type movie with Andie MacDowell. Its message: Take a leap.

____________________________________________

Source: Yahoo! Work + Money Blog by Claudine Zap
Photo Credit: ABCnews.com

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Tuesday, February 28, 2012

An Untapped Source for Financial Advisor Referrals

Reposted from ClientWise.com | By Ray Sclafani

For top-performing financial advisors, introductions from centers of influence and other professionals are a key to client acquisition success. And client acquisition and net new assets are key identifiers to a wealth advisor’s growing business. In fact, our research suggests that the most effective financial advisors find more than 70% of their new assets come from two sources: referrals from clients, and introductions from other professionals. In the ClientWise customized coaching for financial advisors, we find this to be true as well.

However, in our view these prime sources for financial advisor referrals, especially from other professionals, are misunderstood, misused, and…untapped.

Having trained and coached top performing financial advisors in this area for more than nine years, here is what I’ve observed.

Most financial advisors have experienced mixed results when it comes to working with other centers of influence and other professionals. Many have become discouraged and given up entirely.We have observed that most financial advisors have made ineffective attempts to partner with these other professionals, have focused on working only with CPAs and attorneys and typically start and stop the approach, rather than maintain consistency in building a true partnership for the benefit of others. Since many of these referral outreaches have been weak and poorly-conceived, other professionals have become somewhat hardened towards working with financial advisors and see the approach as just another “solicitation.”

Before jumping into this topic much further, here are a few observations that help set the stage:

In order for today’s financial advisor to be truly successful in building a network of other professionals with whom to partner, she or he must…and I mean must understand that the primary reason to partner with another professionals is not to simply build a referral pipeline. Instead, the primary reason is to build a network so that today’s financial advisor can deliver the promises of wealth management. There is no way today’s financial advisor is going to be all things related to wealth management for every client. (i.e. banker, financial planner, primary insurance provider, asset manager, business valuation specialist, business broker, corporate real estate developer, etc.)
In today’s competitive landscape, financial advisors need to have a group of other professionals who recognize the value that they create for the benefit of clients.
The financial advisor should recognize the value that the other professionals create for the benefit of their clients and be able to articulate that value.
The very best wealth advisory businesses make a habit of partnering with both clients and other professionals in order to serve the client in the most complete wealth management way possible.
Most clients enjoy and value the idea of their network of trusted advisors partnering and communicating with each other for their own benefit.
First and foremost, this type of network is grounded in client service. To receive introductions from other professions and to be a provider of introductions to another, the financial advisor must care deeply about their own clients, as well as the professional advisor network that they create.

For those financial advisors who partner with other professionals to create a wide-ranging wealth management network for the mutual benefit of their clients, introductions between professionals become a powerful byproduct of the network… rather than the main objective.

That’s all for now. This entire topic, of building professional advisor networks, cannot be addressed in one blog post. We plan on coming back to this subject again in the near future.

As they say…watch this space!

________________________________________

The Ultimate Estate Planner, Inc. and President, Philip J. Kavesh, push the model of referral relationships, particularly between financial advisors and estate planning attorneys. With over 20 years of experience in successfully developing multi-million dollar producer referral relationships, Mr. Kavesh has put together a number of tools and training on successfully developing the referral relationship, so that it's ethical, legal and a win-win-win for the advisor, attorney and, more importantly, the client! For more information about the Client Meeting Forms and Practice-Building Products to help you successfully develop attorney/financial advisor referral relationships, click here.

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Monday, February 27, 2012

Adopt Your Girlfriend as Your Daughter Asset Protection Plan Shocks Planning Community

Reposted from The Trust Advisor | By Scott Martin

Estate planners call “Adopt Your Girlfriend as Your Daughter” strategy to shield John Goodman’s assets from creditors bizarre. His lawyers say they have lost confidence in Bessemer Trust’s ability to manage Goodman’s children’s money after the girlfriend-daughter was added as a trust beneficiary. Others say that relationship now legally amounts to incest.

Depending on who you talk to, Palm Beach air conditioner tycoon John Goodman was either brilliantly expanding the frontier of traditional estate planning or hastening the end of western civilization when he adopted his 42-year-old girlfriend as his daughter and heir.

A dig into the details shows that while the move was way outside the box, it represents a remarkable response to a difficult and arguably unique situation.

Goodman is already facing 2010 drunk driving manslaughter charges that could put him away for the next three decades, so in that respect he’s past trying to protect his public image.

But with the court talking about starting the trial in the immediate future, his lawyers shifted to locking down his more tangible interests, including support for his girlfriend and control of a family trust reportedly worth $300 million.

After all, if the trial goes badly, his time as a free man will be extremely limited.

“It should be obvious to everyone that at the present time Mr. Goodman’s continued availability to ensure that the trust’s assets grow and continue to provide benefits for his children is uncertain,” explains Daniel Bachi of West Palm Beach law firm Sellars, Marion & Bachi.

Cutting through the hype

When the media heard that the lawyers had decided to have Goodman adopt romantic companion Heather Hutchins — barely six years younger than he is — it unleashed a frenzy of misconceptions about how trusts actually work.

For one thing, Goodman is not trying to hide his money from the parents of the young man whose car he hit two years ago.

The assets in the trust were transferred in 1991, so the notion that Goodman was trying defraud a civil suit 20 years down the road is vanishingly remote.

In any event, while the trust is currently run under Delaware law, it’s not an “asset protection” trust in any way, shape or form. Goodman is not a beneficiary or the trustee, so he has neither ownership nor control.

He’s signed affidavits to that effect.

The bottom line here is that naming Hutchins as his third “child” doesn’t add a layer of protection from lawsuits — it’s not Goodman’s money any more and hasn’t been for a long time.

And Hutchins isn’t immediately going to get $100 million or even $70 million to play with. She’s now a beneficiary entitled to draw on the income, but not the trustee.

That income stream allows Goodman to provide for her and her two young children from a previous marriage, without antagonizing rich relatives who might balk at carving out a big piece of the family fortune for the girlfriend.

Under a separate agreement, Hutchins agreed that only $10 million of the trust’s principal would ever pass on to her children. Subsequent amendments whittled her interest down even further, to $5 million.

So adopting Hutchins takes care of her if Goodman goes to jail. But there’s an even bigger game afoot here waiting to play out.

Fighting the trustee, not the plaintiffs

Goodman’s lawyers frame the decision to adopt Hutchins as a way to give her official status in the eyes of Bessemer Trust, which has been running the trust since 2009.

As far as they’re concerned, Bessemer failed to live up to its promises to accept Goodman’s direction on how the “special” holdings in the trust — including his house and the $14 million polo club that turned him into a pillar of Florida society — should be managed.

“Bessemer agreed to keep the management team that had grown and protected these holdings in place for many years,” lawyer Bachi explains.

“Instead, Bessemer took steps to change management of these holdings, which have significant financial and intangible value to the children.”

Goodman named himself and two business associates as obvious choices with “experience with the management of such special assets.”

However, ex-wife Carroll objected to the appointment, leaving Bessemer with the headache that many trust companies that accept “alternative” assets like private equity and real estate know so well.

While the trustee tries to maintain an iron curtain between the grantor and the operations of the trust itself, the fact remains that the grantor is often uniquely qualified to manage the assets to their best potential.

As it is, Goodman’s ongoing relationship with the polo club is now being used in arguments that he’s been secretly running the trust to his own enrichment all along, no matter what the trust documents say.

If that were the case, those assets may be exposed to legal action no matter how many children he adopts.

That’s where adopting his girlfriend as a legal child-beneficiary may give him a chance to keep his polo club and run it too — even if he ends up in jail.

Hutchins apparently knows how Goodman wants the club to operate. As beneficiary, Bessemer has to take her interests and informed opinions seriously.

And in return for her input, she gets at least $500,000 a year from the trust.

“The contract provides funds to take care of Ms. Hutchins and her family and to compensate her for the large undertaking of overseeing such a complex and closely held family business,” Bachi explains.

As for the incest argument, it only legally applies to blood relatives.

Besides, if Goodman goes to jail, it will only matter on occasional conjugal visits anyway.

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Friday, February 24, 2012

Leimberg Information Services: 60-Second Planner on President Obama's Estate & Income Tax Proposal

Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI). For information about how to subscribe to LISI, click here.

As mentioned previously by Robert S. Keebler in a previous blog entry, President Obama's Fiscal Year 2013 budget was released on February 13th. Follow this link to get a full copy of the 2013 Budget. The Treasury's Green Book containing general explanations of the Administration's revenue proposals can be found here.

We now wanted to share with you two Leimberg Information Services, Inc. 60-Second Planner podcasts in response to this budget. One podcast deals with the estate and gift tax proposals of the budget and the other addresses the income tax proposals. These recordings are reproduced courtesy of LISI (Leimberg Information Services, Inc.) and can be found on their website, along with plenty of other resources for you and your practice.

Special thanks to Robert S. Keebler and Stephan Leimberg for this valuable information!

Sources: Leimberg Information Services, Inc. & Robert S. Keebler, CPA, MST, AEP
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Thursday, February 23, 2012

How to Thrive in the Under $5 Million Estate Market

By Philip J. Kavesh, J.D., LL.M. (Tax), CFP^®, ChFC, California State Bar Certified Specialist in Estate Planning, Tax and Probate Law

I and many practitioners have over the years built successful practices on what I call the “middle market”, that is, estates valued anywhere from $500,000 to $5 million.

This level of estate planning practice faces a number of challenges today unlike any we have had in the past. Our services have become commoditized into mass produced documents, with increasing low-priced competition from the internet, do-it-yourself packages, non-attorney paralegals and bargain-priced attorneys. Plus, with the new $5.12 million Federal Estate Tax exemption amount for 2012, there is now reduced need for advanced--level estate tax planning and post-death administration.

Should You Even Stay in the Under $5 Million Market?

Given all these challenges, I have heard many practitioners say that it is time to quit the under $5 million market. I couldn’t disagree more.

First, the greatest potential market share is comprised of less than $5 million estates. I have read various statistics which estimate that estates over $5 million represent less than 2% of the overall estate planning market.

Second, the middle market consists mainly of those described as the “Millionaire Next Door” (profiled in the famous New York Times’ bestseller of the same name by Thomas J. Stanley). These are the “Moms and Pops of America”, the great unserviced, silent majority, who don’t typically have a long-term, fixed attorney relationship. Maybe they have worked with an attorney here or there for a specific matter or maybe for a “one-shot” estate plan, but they have basically been “orphaned” by the legal profession. These are the easiest people to reach, close and get to refer their other friends to you.

Third, if you have a high net worth practice, by also offering planning to the middle market you can generate the cash flow you need to live on while you are “hunting white elephants”.

Fourth, you can develop a volume practice in this middle market that will allow you to retire someday! If you have only a few, high net worth, “high touch” clients that require you to always be meeting with them, it will be much harder to transition them and it will be a far greater risk if you try; if you lose a few large clients, that’s a big hit on your total revenue. If you have more of a volume practice, you can gradually turn over your clients to your junior associates and phase down (that’s what I’ve done).

Assuming that I have now convinced you to stay in this middle market, how do you overcome each of the challenges that I’ve pointed out and not only survive, but thrive?

Fight Back Against Commoditization and Low-Priced Competition

Some practitioners have just ignored these issues and have decided to do something completely different (or the opposite), focusing only on the “high touch” approach, over-servicing a few clients at higher fees. The problem is, in this middle market, will there be enough of these types of clients willing to continue to pay significantly higher fees? Will you be able to generate enough consistent cash flow? And, if so, how much constant work will you have to put in for each client, that will effectively reduce your net profit?

Consider the possibility of having two practice models side-by-side, like low and high end models in a Mercedes Benz showroom. Maybe you can retain your high touch model for larger estates and a different model for estates under $5 million.

My approach to the under $5 million market is different than the high touch model. I accept that we have become a “commodity” and show prospective clients why mine is better. Where in any industry there is a Coca-Cola, there’s always room for a Pepsi. You can actually leverage off the marketing done by the other competitors in your market. Check out what they offer versus what you offer and show people how to comparison shop as part of your “consumer education” marketing approach.

For example, you can emphasize the importance of counseling as a part of what they get when they work with you, an estate planning attorney. Emphasize that attorneys have, in the past, been called “counselors at law” and how important it is to see a skilled professional to assist with important choices, such as the following. Who should be the Trustee? Should there be Co-Trustees? Independent Trustees? Distribution Trustees? Who should be guardians? Who should be the health decision makers? How and when should each beneficiary receive his or her inheritance in the best manner? And, of course, there is the counseling necessary to resolve special issues with blended families (children of prior marriages), LBGT couples, business succession planning, specific bequests and equalization formulas. Emphasize how there are many decisions to be made, even before “filling in the form” or preparing their document - - and that “one-size-fits-all” planning may be the worst thing that people may do!

You also want to emphasize why your “hard package” (yes, your commodity!) is better and more complete. This is also, of course, how you will justify the value of your higher fees. This is not a technical article, but there are many unique features to your Basic Living Trust plan that probably do set you apart from plans of your competitors - - everything from “flexible” A-B trust provisions, HIPAA and Medicaid features, and custom-fit beneficiary trusts (lifetime, spendthrift, special needs and beneficiary defective asset protection trusts - - with special flexibility features like powers of appointment and trust protector powers). You can also emphasize the additional features of your overall trust plan, what I call the “support mechanisms” that make sure that the plan will actually work properly when the time comes - - things like title transfers, or adjunct materials like an Owner’s Manual and Health Document Emergency Card (such as Docubank). You can also add on, for people with larger IRAs, a Stand-Alone IRA Inheritance Trust. Finish by simply posing the question, “Do those other low-priced plans do all this?”

You also can emphasize service after the sale, which they don’t get from the low-priced competition. Some practitioners utilize a maintenance program at an additional fee, but I favor a free service package approach with the under $5 million market. I’m not going to get into here the reasons why. In either case, you can provide such things as periodic updates or seminars as laws and planning techniques change, a newsletter, periodic review meetings and a free Trustee meeting when the time comes that the Trustor is disabled or passes. Be sure to “show and tell” prospective clients all the things that set you apart.

Combating the Reduced Need for Advanced Level Estate Tax Planning and Post-Death Administration

Even in the middle market, there are still a few simple, advanced level building blocks that can be placed onto the Living Trust foundation. The key is to emphasize not so much the estate tax benefits of these planning devices, but more so their asset protection benefits, income tax benefits and succession management benefits (keeping assets in the family). When describing these simple advanced techniques to middle market clients, just like with your basic product, you want to emphasize how your advanced product is also superior. Examples of these products are: Dynastic Flexible Irrevocable Gifting Trusts (“dynastic” may mean even utilizing another state situs and by “flexible” I mean power of appointment and trust protector features that permit change of Trustee, beneficiaries and how and when they get their inheritance); LLCs and Self-Settled Trusts, particularly if clients own a business or rental real estate (again, possibly in another state utilizing better asset protection laws); Life Insurance / ILIT, emphasizing estate building and its use later as a “family bank” to acquire more property and wealth or, for use in equalization of bequests, and designing them too as “flexible”); CRTs for sales of appreciated assets without capital gains tax; and, QPRTs as a way to hedge peoples’ bets about estate tax in times of uncertainty, particularly in the middle market where they may not want to make substantial gifts of investment assets they may need later to live on.

Your post-death administration may go down for estate tax purposes, but if you have done better lifetime planning, which includes continuing trusts for beneficiaries (even if they are beneficiary-controlled trusts), you clearly have more opportunity for next-generation planning, such as when testamentary limited powers of appointment need to be exercised. And, even if clients come in for administration meetings where there is little more to do than a distribution deed, there is always an opportunity to make referrals to other professionals (who hopefully will refer back to you), such as a CPA or financial advisor, or to work with the client’s existing advisors and establish new business relationships.

Obviously, I could go on further in much more detail; however, given the limited space of this article, I trust that this will give you a good starting approach to being successful in the middle market. Perhaps, in a future article, we can address another issue or “challenge” so many practitioners in this market face - - how do you attract and bring in these clients?

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Wednesday, February 22, 2012

Senate Bill Threatens Life of Stretch IRAs

Highway bill provision would end tax-deferred stretches of IRAs for beneficiaries other than a spouse, minor children or the disabled

Reposted from AdvisorOne | By Melanie Waddell

Industry trade groups are up in arms over a provision in a Senate highway bill that would reduce the value of inherited IRAs, commonly referred to as stretch IRAs, and are determined to have it removed.

The bill, S. 1813, the Highway Investment, Job Creation, and Economic Growth Act, includes a provision that would no longer permit tax deferred stretches of IRAs for beneficiaries other than a spouse, minor children or the disabled. Others, such as adult children, would only be permitted a five-year window to defer.

The provision would require beneficiaries to pay taxes on inherited IRAs over five years instead of spreading them over their lifetime. If passed, the provision would apply to deaths after Dec. 31, 2012.

The proposal is designed to reduce the value of a tax-planning technique that allows inside buildup of tax-deferred funds inside inherited retirement accounts.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, added the provision on Feb. 7 during markup of the bill by his committee, but after pushback he promised to have the provision removed.

During the markup of the bill, Baucus said that “IRAs are intended for retirement,” adding that IRAs are being “used by some taxpayers to give tax-free benefits” to future generations. The taxes from the stretch IRAs provision was to be used to help pay for the highway bill, and would raise $4.6 billion over 10 years.

As it stands now, the provision was adopted by Baucus’ committee and remains intact in the highway bill, which awaits action by the full Senate. Once taken up by the Senate, industry officials believe that the IRA provision will be replaced with one that raises the funds by changing the way assets are valued in defined benefit plans.

Judy Miller, chief of actuarial issues at the American Society of Pension Professionals and Actuaries, says that the new provision would likely "reduce the current required contribution to defined benefit plans; when you do that there are fewer deductions taken so it raises money."

But given that the IRA provision has yet to be taken out, the Financial Services Institute is mobilizing its members to have it removed.

Chris Paulitz, spokesperson for FSI, says that FSI “won’t rest" until it's removed. "We’re keeping the pressure on from our members to try and ensure it eventually is indeed stripped out.”

FSI said in a Feb. 15 letter to its members that “while we expect the provision to be removed from the highway bill, it is important that we send the Senate the message that taxes on inherited IRAs should not be used to pay for other governmental spending.”

IRA guru Ed Slott told AdvisorOne on Tuesday that Congress “sees gold in IRAs,” and that the provision on stretch IRAs being inserted into the highway bill “is an indication of where Congress intends to find money to pay for the future.”

Slott said that advisors must “look at the money that their clients may intend to leave over [to heirs] and leverage that now, whether through life insurance or a charitable trust or changing beneficiaries” because Congress believes that IRA money “was never meant to be used as an estate planning vehicle to pass on to beneficiaries.”

Robert Miller, president of the National Association of Insurance and Financial Advisors, told AdvisorOne that NAIFA "is concerned that changing the tax rules on inherited IRAs and other retirement products would place an added burden on middle-income Americans at a time when numerous studies show that Americans are financially under-prepared for retirement."

At the very least, he said, "legislation changing the rules should receive more study rather than being rushed through as part of a highway bill. NAIFA is pleased that the Senate leadership has proposed to remove changes to inherited IRAs from the current bill.”

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Wednesday, February 22, 2012

IRS Extends Deadline to Make Portability Election

By Robert S. Keebler, CPA, MST, AEP

On February 17th, the IRS released an important Notice allowing an extension to make a portability election for certain qualifying estates. An executor of a qualifying estate that wants to obtain the extension granted by this notice must file the application for a six month extension no later than 15 months after the decedent's date of death. With the extension granted by this notice, the Form 706 of a qualifying estate will be due 15 months after the decedent's date of death. The first of these extensions (and underlying Form 706) will be due April 2nd. Estates qualifying for this election must meet the following requirements:

The decedent must have a date of death after 12/31/10 and before 7/1/11
The decedent must be survived by a spouse
The gross estate does not exceed $5 million
The estate is not a qualifying estate if the estate effectively requested an automatic six-month extension of time to file Form 706 by timely filing Form 4768 on or before the due date for filing Form 706.

The executor of a qualifying estate may file Form 4768 at the same time as the executor files Form 706, as long as both are filed on or before the date that is 15 months after decedent's date of death. To obtain the extension, the executor must meet the following requirements:

The executor files Form 4768 with the Service office designated in the form's instructions;
The executor files Form 4768 no later than 15 months from the decedent's date of death; and
The executor enters at the top of Form 4768 the notation "Notice 2012-21, Extension for Good Cause Shown" or otherwise sufficiently notifies the Service on or with Form 4768 that Form 4768 is being filed pursuant to this notice.

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Tuesday, February 21, 2012

Whitney Houston Leaves Behind a Legacy of Music and Estate Riddled With Confusion

Reposted from The Trust Advisor | By Scott Martin

Mere weeks after winning nine-year probate case against her own stepmother, glamour queen’s shock death and controversial financial shape raise the odds of much bigger courtroom battles ahead.

Whitney Houston’s management had barely squelched rumors that the 48-year-old diva and recovering cocaine addict had run out of cash before they had to confirm reports that she was dead.

The latest news is that she fell asleep in the bathtub and drowned after mixing prescription painkillers with alcohol.

Now, it’s the disposition of Houston’s remaining wealth that is becoming the object of public scrutiny — and giving advisors plenty to mull where their own clients are concerned.

If Houston’s lawyers were smart, they ironed out her estate plan a decade ago, the gurus tell me.

Back in 2001, she had just signed the biggest record deal in history — six albums, $100 million in guaranteed royalties — and the signs of her drug use were getting harder to hide.

That combination of massive incoming wealth and rising litigation and mortality risks should have been all the incentive her advisors needed to set up long-term trusts and iron out her will.

Unfortunately, that was also the moment at which her career and personal life started to unravel, so they might have missed their opportunity — and as details come out, we might see the grim results.

A very complicated decade

Part of the problem is that Houston’s last decade was extremely complicated, so the lawyers had less time than we might think to keep her affairs orderly.

When she signed that $100 million contract, she was already carrying her long-time husband, Bobby Brown, and a young daughter.

Her father, who had managed her career up to that point, was slowly dying of heart disease and seems to have been perpetually hurting for cash.

In 2002, he sued her for a round $100 million, claiming he was owed that much for helping her beat marijuana possession charges and negotiate her big record deal.

That suit dragged on well after his death before being dismissed in 2004, robbing Houston’s lawyers of vital time to move that money into an asset protection trust.

As long as the lawsuit was pending, those record company millions were simply too hot to hide — any judge would have considered such a move a blatant attempt to defraud an existing creditor.

Two years of relative quiet followed, but Houston spent a lot of that time in and out of rehab, so any claims she was in “sound mind and body” to sign any estate documents may not hold up without challenge.

Her divorce from Bobby Brown dragged on through most of 2007. Her lawyers were on the ball here: she had a prenuptial agreement cutting him out of her money and any legitimate claim to spousal support.

After that, she drifted out of the limelight. And now she’s gone.

Fighting her father’s example

Given the haphazard way the Houston musical dynasty used sophisticated planning techniques to manage its millions, we might expect to see Whitney’s estate reflect a mix of good and bad advice.

On the positive side, Bobby has no claim on her money, and now that daughter Bobbi Kristina is legally an adult — and out of the hospital herself — he can’t try to get custody and the money that goes with that.

And Houston’s father earmarked a $1 million life insurance policy to cover the mortgage on his house, so someone over the years was on the ball there.

Unfortunately, if Whitney and her father used the same lawyers, we can expect fireworks ahead.

John Houston appears to have died without clearly stating whether the life insurance money was meant to go to Whitney — who loaned him the money for the house in the first place — or to pay off his debt to his daughter.

He left behind letters talking about how Whitney made an oral agreement to apply the $1 million toward the loan, but her lawyers successfully noted that nothing like that was spelled out in his actual will.

In November — a full eight years after John Houston died — the case finally wrapped up in Whitney’s favor.

Had the lawyers set up a trust to accept the life insurance proceeds and use them to pay off the loan, his wishes would have been clear and none of the ensuing legal in-fighting would have been necessary.

As the judge noted, it’s impossible to legally determine what the deceased would have wanted, beyond what’s spelled out in the documents.

How much was Whitney worth?

The big question is how much of Whitney’s money the lawyers managed to save.

She died owing Arista three records, so a big chunk of that $100 million from the 2001 contract could be forfeited right away.

Her 10-acre New Jersey property was once appraised as worth $6 million but more recently listed for well under $2 million — barely what she owes in taxes and mortgage payments.

While rumor has it she was calling friends to borrow $100 a few weeks ago, her people insist that she wasn’t hurting for cash.

She’d just wrapped her first movie in 15 years, and as her staff says, she didn’t work for free.

“People get paid to make movies,” they point out.

And estate planners get paid to make sure the movie money lasts. Let’s hope Whitney’s lawyers earned their fees.

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Thursday, February 16, 2012

Forbes.com: Obama Declares War On Rich Folks And Wealth Advisors

By Deborah Jacobs
Reposted from Forbes.com

If Pres. Obama has his way, starting next year, it will be substantially more difficult for the ultra rich to pass along wealth to children and grandchildren without giving Uncle Sam his due.

The President’s proposed budget for 2013, issued yesterday, would permanently restore the estate tax rates to those that were in effect in 2009 and severely curtail some popular high-end tools for shifting assets to future generations. The Green Book, as it is called, downloads here as a pdf.

Under current law, we can each transfer up to $5.12 million tax-free during life or at death without incurring a tax of up to 35%. That figure is called the basic exclusion amount. In addition, widows and widowers can add any unused exclusion of the spouse who died most recently to their own. This enables them together to transfer up to $10.24 million tax-free.

Unless Congress acts before then, at the end of this year the current $5.12 million per-person exclusion from the federal estate and gift tax will automatically dip to $1 million and the tax on transfers above that amount will go up to 55%.

The same threat loomed at the end of 2010, and the President capitulated to Republican lawmakers, putting in place the current very favorable system for two years. What will actually happen at the end of this year is anybody’s guess. But the budget gives us a clear idea of what the President would like to do. And it’s not a pretty picture for rich folks or the wealth management industry.

Under the President’s plan, the exemption from the estate and generation-skipping transfer tax would drop to $3.5 million from $5.12 million per person. Perhaps more importantly, the tax-free amount for lifetime gifts would decline to $1 million. And the top tax rate would rise to 45% from 35% for transfers during life or death that exceed the limits.

There’s been talk–and some feeble attempts–for at least five years to restrict what are called leveraging techniques: sophisticated estate planning strategies that pack more into the lifetime exemption amount and minimize the gift tax owed. If the latest budget is any indication, the President means business this time. His budget mentions not only tools that have been a target in the past, but also a hugely popular one that didn’t seem to be previously at risk.

Here’s what’s at play:

NEW TARGETS

Grantor trusts. This is not a single variety of trust, but a set of characteristics that can be incorporated into various types of popular trusts. The term refers to the fact that the person who creates the trust, known as the grantor, retains certain rights or powers. As a result, the trust is not treated as a separate entity for income tax purposes and the grantor, rather than the trust or its beneficiaries, must pay tax on trust earnings.

A 2004 Revenue Ruling made it clear that paying the tax is not considered a gift to the trust beneficiaries. Yet this tax, on income that the grantor probably never receives, shrinks his estate. At the same time, assets can appreciate inside the trust without being depleted by ordinary income taxes or capital gains taxes.

Until now, another attractive feature of these irrevocable trusts is that assets placed in the trust are removed from the senior family member’s estate. From an estate and gift tax perspective, the transfer is treated as a completed gift. The value of the assets is frozen at the time of the transfer, so that future appreciation is not subject to estate or gift tax. These hugely popular trusts have been used for a broad range of people, from young entrepreneurs with mushrooming assets to elderly couples with securities portfolios.

The President’s proposal would eliminate this additional feature of these trusts. This is an enormous change that would wreak havoc with an important tax-saving tool. As the budget states: “The lack of coordination between the income and transfer tax rules applicable to a grantor trust creates opportunities to structure transactions between the deemed owner and the trust that can result in the transfer of significant wealth by the deemed owner without transfer tax consequences.”

Going forward, Obama would like these trusts to be taxable as part of the grantor’s estate. And distributions from the trust to beneficiaries during the grantor’s life would be subject to gift tax.

Dynasty trusts. Some states allow trusts to continue in perpetuity (or for a very long time) and pass wealth through multiple generations without incurring estate, gift or generation-skipping transfer taxes. These trusts are allowed to continue in perpetuity only in states that have abolished the rule against perpetuities. These include Alaska, Delaware, South Dakota and Wisconsin. Residents of other states can choose one of these states as the situs, or location, of a trust; in most cases, some connection to the state is needed and certain conditions apply.

The President’s proposal would do away with dynasty trusts, limiting the generation-skipping transfer tax exemption to 90 years.

OLD TARGETS

The low-risk grantor retained annuity trust or GRAT. This device allows someone to put assets into an irrevocable trust and retain the right to receive distributions back over the trust term. The annuity is equal to the value of what’s been contributed plus interest at a rate set each month by the Treasury called the Section 7520 rate (named after the section of the Internal Revenue Code that applies). For February, this rate is 1.4%.

If the value of the trust assets increases by more than the hurdle rate, the GRAT will be economically successful. In that case, the excess appreciation will go to family members (the remainder beneficiaries) or to trusts for their benefit when the GRAT term ends. If the appreciation never occurs, the trust can satisfy its payout obligations by returning more of the assets to the grantor—the person who created the trust.

For the moment, it is possible to form what’s called a zeroed-out GRAT, in which the remainder is theoretically worth nothing so that there is no taxable gift. The President’s proposal would do away with zeroed-out GRATs. It would also require that a GRAT have a minimum term of 10 years, compared with the current two-year minimum.

This greatly accentuates what is called the “mortality risk” of a GRAT: If the grantor dies during the trust term, all or part of the trust assets will be included in her estate for estate tax purposes. Rich folks would no longer be able to use short-term GRATs to minimize that risk.

Since the proposal would apply only to GRATs put in place after it becomes law, folks who set up GRATs before then would be grandfathered.

Using family entities to achieve discounts. Some people use closely held enterprises, such as family limited partnerships, or FLPs, and limited liability companies, or LLCs, to discount assets before transferring them to family members or trusts for their benefit.

Here is how these family-controlled entities work: A senior family member puts assets, such as marketable securities, real estate or shares of an operating business, into the entity, which is most often an FLP but may be a LLC (some lawyers are more familiar with that structure). Then the individual sells or gives away shares in the entity that holds the assets – not the assets themselves. Since the interests can’t readily be sold outside the family, their value is discounted for both lack of marketability and lack of control (typically a total discount of 20% to 30%).

By reducing the value of partnership units or membership shares for gift tax purposes, discounts enable you to minimize the tax cost of transferring assets.

Valuation discounts have been have been the subject of multiple and protracted tax court battles, and the outcome of some cases are hard to reconcile. The budget proposal suggests that the Administration wants to scale back on the use of discounts, though the contours are not clearly spelled out. However, it clearly indicates that whatever restrictions emerge would apply retroactively to October 8, 1990 (the effective date of section 2704 of the Tax Code).

For more than a decade, fluctuating estate tax rates and political battles–not to mention a volatile economy–have made it extremely difficult for wealthy people to plan for tax efficient transfer of their assets. If even some of the President’s proposals become law, it could put an end to the uncertainty, but perhaps with very unfavorable results. That’s certainly true for wealthy people. It may also be true for the advisors who have reaped huge transaction fees designing complex estate planning strategies for the super rich.

Photo Credit: reason.com

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Monday, February 13, 2012

Bloomberg: Senate Proposes Tougher Requirements for Inherited IRAs

Sen. Baucus Eyes Inherited IRAs for $4.6B

By Richard Rubin
Reposted from Bloomberg.com

The changes that Baucus proposed earlier today would raise $4.6 billion for the Treasury over the next decade by requiring younger beneficiaries to pay taxes over five years instead of spreading them over their lifetimes, according to the Finance Committee. Baucus, a Montana Democrat, had wanted to use the money to help pay for a highway bill the panel is debating.

Under pressure from Republicans, Baucus said he would work with them to find replacement revenue. During the committee meeting, he didn’t provide details about alternatives.

Baucus’s proposal would curtail a tax-planning technique that allows the buildup of tax-deferred gains inside inherited retirement accounts. Currently, holders of inherited IRAs can take required taxable distributions over their anticipated lifespan.

“IRAs are intended for retirement,” said Baucus, who said the current law is being abused. “They’re being used by some taxpayers to give tax-free benefits” to future generations.

Financial advisers and tax lawyers said Baucus’s proposal would significantly alter retirement and estate planning.

Change ‘Playing Field’

“It would really change the whole playing field for retirement planning,” said Ed Slott, an IRA adviser in Rockville Centre, New York. “That would make things simpler, but it would really put a crimp in the whole legacy planning people do for IRAs.”

The proposal includes exceptions for an account owner’s spouse, beneficiaries within 10 years of age of the account owner, and disabled and chronically ill people, according to a summary by the nonpartisan Joint Committee on Taxation. Children would be exempt from the new five-year rule until they reach adulthood.

Owners of regular IRAs must begin taking taxable distributions at age 70 1/2, and they must be taken according to a life-expectancy calculation.

Baucus’ proposal would take effect for people who die starting in 2013.

Late Starter

Senator Jon Kyl, an Arizona Republican, said members of his party found out that the IRA provision would be included early this morning and said it showed that senators’ attempts to limit highway funding sources to items related to transportation and energy had fallen apart.

“I think we’ve lost the opportunity to have a truly bipartisan package,” he said during the committee meeting. He later praised Baucus for his willingness to find a replacement for the provision.

“Perhaps this provision and the subject can be taken up in tax reform,” Baucus said.

Depending on how the language is written, beneficiaries in some cases might be able to use rollovers into their IRAs to avoid the required distributions, said Mary Ann Mancini, who leads the private client group at Bryan Cave LLP in Washington.

Mancini said many of her clients don’t use IRAs as an estate-planning tool because beneficiaries often want to spend their inheritances.

“If you can keep it in the IRA with tax-free growth, the longer you can keep it in the IRA, people can come out with millions,” she said. “The problem is people don’t keep it in the IRA. Young people want the money.”

‘Too Much Invested’

Baucus’s proposal would return IRAs to their intended purpose as a retirement savings tool and not an estate-planning tool known as a stretch IRA, Slott said. The change, if enacted, would cause people to spend the money in their IRAs rather than leave it as an inheritance for their children, he said.

“It sounds good, but I think it’s a nonstarter,” Slott said. “There’s too much invested in the whole stretch IRA concept.”

John Olivieri, a partner in the private clients group at White & Case LLP in New York, said the change could increase the taxable income of heirs each year for five years and may push them into a higher income tax bracket, he said.

Another potential benefit to the federal government is that, because distributions would be taken out faster, there would be less time for the money to accumulate in the IRA tax- free, Olivieri said.

“Once the money is out of the account, it can no longer grow tax-free,” he said. “That’s where the government may be planning to get the most benefit from this.”

Photo Credit: marketwatch.com

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Monday, February 13, 2012

U.S. Treasury Announces President Obama's 2013 Budget and Proposed Estate Tax Law Changes

A special thank you to Robert Keebler of Keebler & Associates, LLP for the heads up that the U.S Treasury just released its FY2013 Greenbook, which provides an explanation of the Administration's revenue proposals for Fiscal Year 2013. The Administration's FY2013 budget proposes tax policy to boost growth, create jobs and improve opportunity for the middle class.

In particular, as estate planning professionals, we are all extremely interested to see what is going to happen with the current Federal Estate Tax Exemption Amount, which is set to revert back to $1 million in 2013. According to this bill, the estate tax exemption amount would revert back to the 2009 $3.5 million level. According to Robert Keebler, that despite this change, the income tax changes would keep us all busy for a decade.

Some estate planning professionals feel that this bill looks very similar to the 2012 Budget Proposal, which was released exactly a year ago on February 14, 2011 and was rejected by the Senate in a unanimous vote of 97 to 0.

To view the explanations of the proposed changes to the Estate & Gift Tax Exemption, click here.

To view the complete FY2013 Greenbook, click here.

Photo Source: AP

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Friday, February 10, 2012

The eBoot Camp's Valentine's Day Gifts to You

Phil Kavesh here to share with you a very special Valentine’s Day Gift that I am passing along from a dear friend of mine.

A little over a year ago, I had the fortunate opportunity to pick up a copy of The eBoot Camp’s President, Corey Perlman’s, book entitled, The eBoot Camp: Proven Internet Marketing Techniques to Grow Your Business. Some of my favorite marketing minds and authors had endorsed the book for small businesses and as a self-proclaimed internet dinosaur, it was not only an easy read, but I could tell that Corey knew what he was talking about.

Corey then informed me of a 2-day Seminar he was holding where he would spend time with me and other attendees on the concepts of internet and social media marketing for our businesses. More so, he was going to give us hands-on, personal consultations about our website and our current internet marketing plans. I was convinced that I needed to go, but the seminar was in Florida and my schedule wouldn’t allow it. He then offered me the option for a personal consultation while he spent a week with several other businesses in Los Angeles - - an offer I couldn’t refuse.

It was time and money well spent and we have already incorporated a lot of Corey’s ideas into not only my law practice, but with The Ultimate Estate Planner, Inc. as well.

Corey sent me an e-mail this morning with my Valentine’s Day gifts from him. Good thing Kristina and Megan monitor my e-mail, because I might have deleted it (joking of course, Corey!). It was filled with different offers that I asked Corey if we could pass along to all of you and he replied back with a resounding, “YES!”. So, here you go.

The eBoot Camp’s Valentine’s Day Gifts to You
by Corey Perlman

Gift #1: A Tip

Engagement is an important piece of the social media puzzle and occasions like Valentine's Day are great for connecting with your prospects and customers.

If you're going to send out a Valentine's Day email or post to your social media sites, here are a few tips:

Give sincere appreciation. Valentine's Day is about telling people how you feel. Take the opportunity to tell your customers, contacts, fans, co-workers, etc. that you appreciate them and are thankful for their business.
Use video or pictures. Two years ago, I posted Happy Valentine’s Day on my Facebook business page and got very little in the form of engagement. Last year, I also included a cute video of a lion and his trainer reuniting after being separated for a year. It got a lot more responses and engagement from others. Videos and pictures are worth 1,000 words!
Ask them to engage! Ask for a funny Valentine’s Day date story or ask them to 'like' your post if you helped remind them to go get something special for their significant other.

________________________________________________________

Gift #2: A Video

My friend Erik Qualman (Social Media Revolution) is at it again and shot a great social media video with a Valentine's Day theme. Enjoy and share it with your community as well: http://www.youtube.com/watch?v=6vY9Nd3Pft8

________________________________________________________

Gift #3: A Free Webinar

Time is limited, budgets are thin. But we all know social media is here to stay. I will share five tips YOU can implement right now to increase your reach and see a better return on your web marketing efforts. If you're in charge of your social media marketing, don't miss this session.

It will be February 23rd from 12pm-1:15pm EST.

Here's the link to register:

Social Media Webinar: 5 Ways to Maximize Your Efforts

________________________________________________________

Gift #4: A Deal

We're at about 50% capacity for our 2-day Workshop in Atlanta, so we're going to have a great group of entrepreneurs, business owners and marketers.

At the 2-day on March 22nd and 23rd, you will:

Receive recommendations to improve your Website.
Make sure you rank well on Google.
Start a Wordpress blog and learn how to update it.
Makeover your LinkedIn profile.
Learn to use Twitter efficiently and effectively - never miss a Tweet about you or your business.
Start using Google+ and I'll share why it's going to rival Facebook and Twitter.
Work on strategies for better email marketing and video marketing.
Leave feeling confident on exactly what you need to do on the web to be successful.

Deal #4 - You're getting $200 off the price.

Deal #2 - You get to bring a colleague for free.

Deal #3 - I'll give you a 1-year subscription to our Geek for 1-Hour a Week program.

That's about $2,000 worth of a DEAL!

Here's the link: www.ebootcamp.com/seminars

Corey really helped my practice out and got the ball rolling for me to enter the 21^st Century in marketing. If you aren’t ready to commit to his seminar, then at the very least, visit the eBootCamp’s website, sign up for his e-mails, read his Blog, and connect with him on Facebook, Twitter, and LinkedIn.

Photo Credit: eBootCamp.com

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Thursday, February 09, 2012

Financial Planning Magazine: Top Tax Strategies For 2012

Planners and clients may worry about losing tax cuts this year - but they can also take action.

By Ann Marsh
Reposted from Financial-Planning.com

There's a one-word theme for the 2012 tax year: uncertainty. Chief among the reasons are the sky-high exemptions on the estate tax, the lifetime gift tax and the generation-skipping tax. All are currently set at $5 million, but they are headed for expiration at year's end. Most planners expect that these taxes and others - including taxes on capital gains and dividends - will be going up next year, though no one knows for sure. And that's the rub.

"The big question is whether the Bush-era tax cuts will expire at the end of 2012," says Eleanor Blayney, consumer advocate for the CFP Board. "So there's a lot of uncertainty. A lot of us assume that, one way or another, taxes will go up. And if not directly, then we may lose deductions."

After speaking with and learning from planners around the country, Financial Planning has gathered a list of top tax strategies for 2012. Quite a few of these strategies are geared specifically to this year's low-tax-rate environment. Others are tried and true, and bear repeating in any tax year. For as any good planner knows, smart tax planning is not only about choosing the right strategy at the right time, it's also about avoiding bush league mistakes, like the one that befell one high-net-worth family about five years ago.

In this instance, according to the planner involved, several children of modest means became very wealthy upon inheriting assets from their late father. Each child in turn prepared his or her own estate plan. All but one brother signed a plan. "He just never got around to it," the planner says.

About a year after the father died, the son "went to a holiday party, had a massive heart attack at age 49 and died with no estate plan in place," the planner recalls. "His sisters were literally running through the house saying, 'Did he sign the plan? Did he sign the plan?' No, he did not. His estate paid 45 cents on the dollar above and beyond the federal exclusion. More tragically, the old will still named his ex-wife and her child, his former stepchild. It was grotesque. A ton of money went that didn't need to go." All because of one critical misstep.

Planners often don't know for sure which tax strategy could end up being most critical for each client. But, as this case shows, doing something as simple as getting clients to review their estate plans can be just as important as taking advantage of a $5 million estate and lifetime giving exemption.

1. Consider the $5 million estate and lifetime giving tax exemptions.

For the rest of the year, the beneficiaries of anyone who dies won't pay federal estate taxes on the first $5 million value of his or her estate. A gift tax and generation-skipping tax exemption, both at $5 million, were designed to synchronize with the estate-tax exemption. That means that, before they die, clients can give up to $5 million to any individual, including their grandchildren or charity without paying taxes on the money. For couples, the limit is $10 million, with a 35% tax on assets above that amount. The $13,000 annual gift-tax exemption also remains in place and does not count against the $5 million thresholds. By next year, these exemptions could drop substantially.

"It will really be ugly if it goes back to [2002] when it was at $1 million," says Armond Dinverno, president of Balasa Dinverno Foltz in Itasca, Ill.

Some planners say many of their clients have already taken advantage of these exemptions. But others think they pose hidden and dangerous risks. "There are a number of things we leave to our children," Dinverno says. "They include family values, faith and work ethic. I don't think that trading a tax savings for a work ethic or at the expense of creating a trust fund baby is a good choice."

Some of Dinverno's clients have decided it's just not worth the risk to give money too soon to a child or a grandchild, even if the high giving threshold disappears next year. A multimillion-dollar gift, given too soon to someone, can strip away that individual's drive to work, he says.

Dinverno's older clients are more willing to pull the trigger. In these instances, their own children are grown, with well-established careers, families and homes, making the perceived risk lower. "For them," he says, "it's a slam dunk."

2. Channel estate transfers through family limited partnerships.

Planner Andy Berg, co-founder of Homrich Berg in Atlanta, advises his clients to combine the gift-tax exemption with family limited partnerships. "The partnerships are a tool you can use to give away a great deal of wealth, but remain in control of the underlying assets," Berg says.

One of Berg's clients, for example, owned $7 million in commercial real estate. By putting it into a family limited partnership, the actual value of the property was discounted to $4.5 million for tax purposes because it is not liquid. The gift, which fell under the $5 million gift-tax threshold, came tax- free, he says. "It's somewhat of a loophole, if you will," Berg says.

In this strategy, the giver can remain a general partner owning just 1% of the property in the trust, but keeping all decision-making to himself or herself. The other 99% is owned by the recipient and limited partner. "But the limited partner would have little or no say in the management of the assets," Berg says.

When the grantor dies, the recipient pays a capital gains tax on the difference between the basis of $4.5 million and any appreciation. "Let's say it appreciated to $10 million," Berg says, "but who cares." The grantor, he says, "got $7 million out of their estate, tax-free, and the kids already own it."

3. Open a donor-advised fund

A donor-advised fund allows a person to contribute any amount he or she wants to charity, without having to name the charity right away. Once the money is in the fund, it has been gifted from the perspective of the IRS, but the client can take his or her time in deciding who will get it.

Planners say it gets the money out of the income tax column while buying time for clients. "Part of many people's identity is how closely tied they are to a charity," says planner Jeff Fishman, a former lawyer and the founder of JSF Financial in Los Angeles. "So even if they have a couple of bad years, they can keep up with their giving commitments."

4. Use highly appreciated stocks for charitable giving.

Lori Flexer, a chartered financial analyst with Ferguson Wellman Capital Management in Portland, Ore., says that, whenever possible, she urges her clients to give highly appreciated stocks, instead of cash, to their charitable causes. That allows them to both keep up with their giving and to avoid paying capital gains taxes on low-basis-cost investments.

5. Consider Roth IRA conversions.

When it comes to contemplating Roth conversions, "proceed with extreme caution with your CPA by your side," Flexer cautions.

But in the right cases, planners say, Roth conversions make sense. (See "Betting on Roth Conversions" on page 61.) Flexer offered the example of an executive who retired the previous year but is not yet 701/2 years old. For this tax year, he has no earned income and is not taking Social Security. His only income is capital gains. "He knows that 10 years from now he is going to be taking out six-figure distributions (from deferred-tax retirement accounts). So maybe he does a Roth conversion of $50,000 or $60,000 at the lowest state and federal tax rates. He pays those taxes now and that money will grow tax-deferred forever."

Another advantage: Roth accounts aren't burdened by mandatory distribution requirements.

6. Direct annual $13,000 gift tax exemptions to 529 plans.

Several planners say they urge clients to put annual tax-free gifts of $13,000 to each child or grandchild directly into 529 accounts. These accounts allow tax-free accumulation of investments in savings accounts earmarked to pay for higher education expenses.

7. Watch the Foreign Account Tax Compliance Act

Many American citizens who live abroad or keep assets overseas are not aware of the Foreign Account Tax Compliance Act, which passed Congress in March 2010. Planners should inform any clients who might be affected by it.

The act will require all foreign banks and institutions to report to the IRS all U.S. citizens with investment accounts of $50,000 or more. Institutions that fail to comply will have 30% of their earnings on their U.S.-based investments (from mutual funds to municipal bonds to real estate) withheld.

It remains to be seen how vigilantly the rest of the world complies with this expanded jurisdictional move by U.S. tax collectors, but citizens who haven't already reported the existence of these accounts may find that their foreign banks are doing it for them.

8. Invest in municipal bonds.

Some planners believe there is tremendous value to be found in the best municipal bonds, which remain one of the few tax-exempt investments and sources of cash flow. The interest on such bonds is exempt from both federal and state taxes as long as the bond is issued in a state where a client is a resident.

For high-net-worth individuals, the tax-adjusted returns for municipals can be superior to those on alternative fixed-income instruments like Treasuries. Some planners think that if you believe taxes are headed up, then munis become even more attractive.

9. Look at investment interest expenses for deductions.

Susan Colpitts, a planner with Signature in Norfolk, Va., analyzes her clients' returns to see if they can deduct interest expense that they paid on their investments. "For any investor, I would look to see if this is optimized," she says.

The determination of when this is possible is somewhat complex, Colpitts says, but planners can check IRS Form 4952 and use tax software to do the calculation. If a planner doesn't want to tangle with tax forms herself, she can recommend that they go to the client's CPA for help.

When it makes sense, investors can gain the right to deduct all of their investment interest expense by electing to have a portion of their qualified dividends or long-term capital gains taxed at their top tax rate, she says. For example, a couple in the 35% tax bracket with a taxable income of more than $379,000 could save $7,500 by taking this election, she calculates.

"We would recommend a taxpayer do this in the case that they have nondeductible investment interest expense year after year," she says. "If, on the other hand, it is an unusual circumstance for the taxpayer and they can likely take the full interest deduction in another year without making the election, we would suggest that they would not make it."

10. Invest in an independent film.

It's little known outside of Hollywood, but Section 181 of the IRS code allows people to take a tax write-off for investing in an independent film. "It's pretty popular among my clients," says Fishman, the L.A.-based planner.

A client can take the write-off as long as the total budget on the production is less than $15 million and as long as 75% of the film is produced in the United States. Now you know why there's no shortage of independent films debuting every year, even though fewer people are going to the movies.

11. Feel free to use 401(k) catch-up contributions for older clients.

Several planners say they are surprised to discover how few of their clients are aware that they can contribute more to their 401(k) plans once they turn 50 years old. The maximum annual amount that anyone younger than 50 can contribute to a 401(k) or IRA is $17,000 for 2012.

But for people older than 50, the IRS has provided a catch-up provision allowing them to contribute $5,500 more, bringing their total annual contribution to $22,500. Clients who walk away from a 401(k) match are walking away from a dollar-to-dollar return if their employer matches their contribution, and from potentially getting themselves into a lower tax bracket.

12. Revisit estate plans frequently.

No one likes contemplating his or her own demise. But because estate-tax laws are changing so frequently, planners need to advise their clients to do so - in some cases, annually.

"It does make people really uncomfortable," Flexer says, "but I try to encourage them by saying, 'You have some clear intentions for this wonderful wealth that you've spent your lifetime building. If you choose not to do this, the government is going to take a crazy amount of the money that you've worked so hard to earn.'"

When one of her clients came to her fuming over a $4,000 bill she got for revising her estate plan, Flexer reminded the client what the government could take if she hadn't done that work. That bill "was expensive compared to what?" the planner says she asked her client before adding, "I love you, but you get no sympathy from me."

13. Work to avoid the alternative minimum tax.

Originally, the alternative minimum tax was designed to ensure that people whose income came mainly from dividends and interest paid their fair share. Instead, planners say, the AMT rules subsequently were changed, making it highly complex and expanding its reach.

"There isn't a rule of thumb except that more and more people are subject to it, which wasn't the original intention," says Deb Wetherby, a planner and former CPA with Wetherby Asset Management in San Francisco. "Once they changed the way it worked, it captured more taxpayers."

Many planners say it's critical to watch the AMT like a hawk to try to keep clients from becoming subject to it. At that point, clients lose the benefit of many deductions.

For example, Fishman says, some of his clients in Los Angeles have bought multimillion-dollar homes, expecting to write off the mortgage interest. But those who became subject to AMT were shocked to discover they lost those deductions. "We call it a stealth tax," he says.

14. Team up with clients' CPAs.

A surprising number of planners neglect to review their clients' income tax statements, their colleagues say. Or they rarely confer with their clients' CPAs. The first order of good tax planning, many planners maintain, is for planners to make a habit of working closely with their clients' tax preparers.

"Planners ought to be asking for copies of income tax returns," says Colpitts, who is a former CPA herself. "CPAs are so busy that, unless you ask them for planning ideas, they don't offer them. Sit down with a CPA to talk about opportunities. Have the conversation between the time the CPA prepares the draft and files the return."

Ann Marsh is a senior editor and the West Coast bureau chief of Financial Planning. Ann Marsh is the West Coast Bureau Chief of Financial Planning Magazine. She spent five years writing the popular "Money Makeover" column for the Los Angeles Times, which featured financial planners helping individuals and families to turn their lives around. A former staff writer for Forbes, she worked on the Forbes 400, researching and writing about the lives and holdings of the wealthiest Americans. Her work has appeared in dozens of publications including O, The Oprah Magazine, Salon, Fast Company and Business 2.0. She has also coauthored several books, including Copy This!, the autobiography of Kinkos founder and philanthropist Paul Orfalea.

Photo Credit: wscounselblog.com

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Monday, January 23, 2012

Full Report of The 46th Annual Philip E. Heckerling Institute on Estate Planning

At The Ultimate Estate Planner, Inc., we are committed to providing our fellow estate planners access to the information, products, education and various resources that are available to help individuals be better practitioners and provide better service of both estate and financial planning, to their clients.

Therefore, we are extremely pleased and privileged to provide to you through the graciousness of the American Bar Association's Real Property, Trust & Estate Law (RPTE) Section the full and complete report from the 46th Annual Heckerling Institute of Estate Planning Conference, one of the nation's leading conferences for estate planners, including attorneys, trust officers, accountants, insurance advisors, and wealth management professionals.

The 2012 conference was just held on January 9-13 in Orlando, Florida and had over 2,600 people in attendance.

Click here to download the Complete Report (Reports 1-16A)

You may also download individual reports and/or reports from prior years by visiting the ABA RPTE Section's website.

The University of Miami School of Law has also announced that the 47th Annual Heckerling Institute will be held next year from January 9-13, 2013 in Orlando, Florida.

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Friday, January 13, 2012

Lawyers & Social Media - What You Need to Know

By Philip J. Kavesh, J.D., LL.M. (Taxation), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law

I just finished the last educational program needed to meet my continuing legal education requirements for my California State Bar license. I took an on-demand course that I thought was not only timely and relevant, given that I have recently done quite a bit of work with my law firm (and with The Ultimate Estate Planner, Inc.), with respect to this topic, but also a topic that many attorneys should be looking into as well.

The course I took was entitled "Online Networking Media and Lawyer Ethics: How Many Tweets Are Too Many?", offered by the California Continuing Education of the Bar ("CEB"). It was presented by attorneys Jonathan T. Rubens and Colette E. Vogele. I initially had a few hesitations about this program, because I thought that it was going to be all about posting tweets on Twitter, which we don't do that much of. But, the speakers put together an excellent program that included a lot of great information about the ethical responsibilities of attorneys pertaining to all kinds of online social media, including maintaining blogs for your law firm or other companies, Avvo, LinkedIn, Yelp! and Facebook.

I learned quite a bit about some different things that I need to consider and look into further with all of these various online networks so that I am meeting my ethical responsibilities as an attorney. What I got from this program is to be extra judicious and deliberate in your thought processes pertaining to anything you post online or electronically. As attorneys, we are held to a higher standard of responsibility for what we say and do and with the internet, the second you publish, post or tweet, you are creating permanent records to be judged upon.

If you are an attorney in California and are any online networking sites, I highly recommend this program. If you're not in California or an attorney, definitely try to find a comparable program on this topic!

That being said, I leave you with the following disclaimer. I am an attorney. I am not your attorney. You are not my client. But, please feel free to find me online and check out all of the interesting things I have to post. :)

Happy Friday everyone!

Photo Credit: alexlovellsblog.blogspot.com.jpg

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Monday, January 09, 2012

NEWS RELEASE: WealthCounsel® and Trusts & Estates® Announce Findings from the Fifth Annual Industry Trends Survey

NEWS RELEASE from WealthCounsel, LLC - Today, WealthCounsel, LLC and Trusts & Estates magazine released a report of the key findings from the Fifth Annual Industry Trends Survey. The survey is conducted annually and has earned a reputation as the primary resource for insight on the state of the industry and emerging trends. Of the 1,085 respondents, 87 percent were estate planning attorneys, while the remaining professionals were comprised of certified public accountants, certified financial planners, registered representatives and insurance professionals.

“This year’s survey has a broader focus, inviting participation from all professionals involved in estate planning and wealth management,” said Matthew T. McClintock, J.D., Chief Executive Officer of The WealthCounsel Companies. “It is clear from the growing number of participants that the survey has become a valuable business resource for professional advisors engaged in trust and estate planning.”

In addition to questions regarding the impact of the Tax Relief, Unemployment Insurance Reauthorization and the Job Creation Act of 2010, this year’s survey solicited feedback on the economy’s impact on business-owner clients, partisan gridlock in Washington, the unemployment crisis and the connection between financial illiteracy and the subprime mortgage crisis. Key findings include:

57 percent stated that clients are proceeding with planning for non-tax reasons
32 percent believe the 2010 Tax Act has all but eliminated “estate tax avoidance” as motivation to plan
80 percent believe the nation’s economy will continue to suffer due to partisan gridlock in Washington
71 percent believe business incentives are needed to return jobs to the U.S. that have been sent overseas
73 percent believe that the lack of financial literacy contributed to the purchase of adjustable rate mortgages involved in the subprime mortgage crisis

“Despite the challenges over the past year, it is encouraging to see that 89 percent of those surveyed expect to see their practices grow over the next five years,” said Rich Santos, Group Publisher, Trusts & Estates.

A report summarizing the findings appears in the January 2012 issue of Trusts & Estates magazine. Complimentary copies are also available this week at the WealthCounsel and Trusts & Estates exhibit booths located in the exhibit hall at the 46th Annual Heckerling Institute on Estate Planning in Orlando, FL.

Download the 5th Annual Industry Trends Survey

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TAXES—The Tax Magazine®: The Mathematics of Harvesting Losses and Gains

Out of the Ashes: CPA Robert Keebler is Leading Keebler & Associates LLP to the Cutting Edge of Tax and Estate Planning

Steve Oshins & the Hybrid Domestic Asset Protection Trust

Estate Planning for the Blended Family: The Intersection of the Head and the Heart

Strengthening Your Brand with CPAs

LISI.com - Practice Pointers on the Core Concern of Blended Family Estate Planning: Joint or Separate Representation

Autism Awareness Month: Special Planning for the Future with Autistic Children

IRS’ 5 Tax Tips for Newlyweds, Divorcees

New Book Helps You Plan for and Protect Your Assets

8 Habits of Highly Productive People

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2012

May

TAXES—The Tax Magazine®: The Mathematics of Harvesting Losses and Gains
Out of the Ashes: CPA Robert Keebler is Leading Keebler & Associates LLP to the Cutting Edge of Tax and Estate Planning
Steve Oshins & the Hybrid Domestic Asset Protection Trust
Estate Planning for the Blended Family: The Intersection of the Head and the Heart
Strengthening Your Brand with CPAs

April

LISI.com - Practice Pointers on the Core Concern of Blended Family Estate Planning: Joint or Separate Representation
Autism Awareness Month: Special Planning for the Future with Autistic Children
IRS’ 5 Tax Tips for Newlyweds, Divorcees
New Book Helps You Plan for and Protect Your Assets
8 Habits of Highly Productive People
A Vexing Retirement Planning Problem? Predicting Health Care Costs
Steve Oshins’ 3rd Annual DAPT Ranking Chart & Other Free Updated Charts Available to Download
Practical Planner - Checklist: Capacity (Volume 7, Issue 2)
Keebler & Ward on Taproot v. Commissioner: Roth IRA Not Eligible Shareholder of S Corporation
Baby Boom Good for Life Insurance
Practical Planner: 2012— ACT NOW! (Volume 7, Issue 2)
WSJ.com - Inherited IRAs: A Sweet Deal
5 Important Steps to Update Estate Plans
Trust & Estates: CrummeyService.com - Automating Administration of Crummey Trusts
Attract, Engage & Work with Families with Taxable Estates and Their Advisors
Robert Keebler: Planning for Concentrated Stock Positions, Plus Half Off Bob's Teleconference
TrustAdvisor.com: Does Hartford’s Annuities Exit Signal the End for Others?
How Do You Convince Clients to Actually Do GRATs (and Other Estate Tax Planning)?
Estate Planning for Clients with Beneficiaries Struggling with Substance Abuse
A Funny Thing Happened on the Way To… (Some of My Craziest Seminar Stories from Over the Years)

March

WSJ.com - Death Tax Defying: Estate Tax Repeal Gains Momentum in the States
Paul Hood on Wandry v. Commissioner: A Significant Taxpayer Win in another Defined Value Case
4 Estate and Tax Planning Steps to Take in an Uncertain Year
Steve Oshins on Weddell v. H20, Inc: Nevada Supreme Court Affirms Creditor Protection Benefits of Nevada LLCs
Polls: Current Financial Concerns Trump Planning for Retirement
The Drama of Whitney Houston’s Estate Continues to Unfold
Leimberg Information Services: 60-Second Planner on Fifth Circuit Affirms Chilton on Inherited IRAs
4 Tips for a Better Assistant (and More Efficient and Productive Advisor!)
The 3-Step Process for Closing New Prospects
How to Help Your Clients' Adult Children
Tax Expert Marty Shenkman: Two Tax Mistakes to Avoid With Clients in 2012
MainStreet.com: The Top 15 Richest Counties in America
The Paperless Law Firm - Using Technology for Lowering Overhead and Greater Efficiency
Senate Highway Bill S.2132 Brings Back Mandated 5-Year Rule for Payout of Inherited IRAs
22 Days of Tax Planning Advice: What I Do in My Practice, Pt. 1
2012 Tax Season Survival Guide: 22 Days of Tax Planning Advice

February

February 29th: Fun Facts About Leap Day
An Untapped Source for Financial Advisor Referrals
Adopt Your Girlfriend as Your Daughter Asset Protection Plan Shocks Planning Community
Leimberg Information Services: 60-Second Planner on President Obama's Estate & Income Tax Proposal
How to Thrive in the Under $5 Million Estate Market
Senate Bill Threatens Life of Stretch IRAs
IRS Extends Deadline to Make Portability Election
Whitney Houston Leaves Behind a Legacy of Music and Estate Riddled With Confusion
Forbes.com: Obama Declares War On Rich Folks And Wealth Advisors
Bloomberg: Senate Proposes Tougher Requirements for Inherited IRAs
U.S. Treasury Announces President Obama's 2013 Budget and Proposed Estate Tax Law Changes
The eBoot Camp's Valentine's Day Gifts to You
Financial Planning Magazine: Top Tax Strategies For 2012
Practical Planner: Checklist: More Heckerling Nuggets (Volume 7, Issue 1)
Betting On A Roth Conversion
Michelle Ward & PLR 201203033: Trust Qualified as Designated Beneficiary After Beneficiary Released Certain Powers
Practical Planner: Nuggets from Heckerling (Volume 7, Issue 1)
Forbes.com: The Roth IRA Back Door
Do You Have What Baby Boomer Investors Are Looking For?

January

Retirement Benefits in the Context of Estate Planning
Top 50 Independent Broker/Dealer Women Advisors in 2011
Interview on Dynasty Trusts with Guest Expert, Steven J. Oshins, Esq.
Top 10 Trends in Wealth Management
Full Report of The 46th Annual Philip E. Heckerling Institute on Estate Planning
Bob Keebler on Roth Conversions in 2012: Now's the Time to Convert
8 Ways Leaders Can Motivate Employees Beyond Money
Nevada Ranked as the #1 Jurisdiction for Domestic Asset Protection Trusts
Lawyers & Social Media - What You Need to Know
Sophisticated Trusts in English: DAPTs, BDITs, IDITs and More
NEWS RELEASE: WealthCounsel® and Trusts & Estates® Announce Findings from the Fifth Annual Industry Trends Survey
New Website Launched!
New Blog for The Ultimate Estate Planner, Inc.

The Ultimate Estate Planner, Inc. was formed to assist in the development and growth of estate planning professionals throughout the United States, including but not limited to estate planning attorneys, financial advisors, CPAs, life insurance agents, paralegals and much more. Through education, products and coaching, it is our goal to help estate planning professionals throughout the country unlock their practice’s potential.