Estate Planning and other legal discussions

The term “Joint Tenancy With Rights of Survivorship” is most commonly associated with real estate transactions.  Usually when real property is owned by two or more persons, (most commonly spouses), Joint Tenancy is preferred because when the real property is owned in this manner, upon the death of one joint holder, the other joint holder(s) become the owners of the entire property.  As an example, when husband and wife own real property jointly and one spouse dies, the other has immediate ownership of the entire parcel.  Owning the property in this manner is especially helpful when the estate is administrated.

Owning personal property in this fashion can be an entirely different issue and one that more commonly creates significant issues when it comes to estate planning.  The biggest issue with owning tangible personal property jointly is that usually the property is not held between spouses, but rather, among different family members or even persons not related at all.  In this scenario, the “desires” of each joint holder must be considered before the property can be transferred.  From an estate planning perspective, this can be a nightmare.

By example, lets say you and your friend are car enthusiasts and you purchase a vintage automobile of significant value, and hold title jointly.  In this fashion, when one of you dies, the other will own the vehicle solely and will acquire all of the value as well; an even greater benefit if the vehicle increases in value over the years.

As time moves on, you decide that upon your death, you want to hand down your interest in the vehicle to your son, who also loves vintage automobiles.  Or, perhaps you want to rid yourself of the automobile to lower the value of your estate upon death for estate tax savings.  In either scenario, you can’t, unless the other owner agrees to change the type of ownership, and that might be impossible.  He certainly knows the value he would lose if he survives you.

So what are your options?  Obviously, you should always deeply consider the ownership type options before you acquire the property.  If you failed in that regard, and the other party agrees, change the ownership to a different tenancy.  Failing these options, you can place the property in a variety of Trust instruments such as a Charitable Trust, a Retained Interest Trust, or a Lead Trust.  You can also create a Limited Liability Company, or a Family Limited Partnership that can assume ownership.  Many of these instruments will allow you to continue to enjoy the property during your lifetime and avoid ownership upon death.

The issues outlined above are common in estate planning, but are too often not considered until it’s too late.  When dealing with significant assets of tangible property, not owned between spouses, it can very quickly become an estate planning nightmare.  If you are experiencing this issue currently, you should consider your options now.

Anthony J. Medico, Esq., has practiced law for over 18 years.  To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151.  You can read most of his previous columns on his estate planning blog on the internet.  Just go to http://www.greenwichtime.com/blogs and search the name “medico”.

The Law Offices of Anthony J. Medico

7 Benedict Place v Greenwich, Connecticut 06830

Telephone (203) 661-8151 v Facsimile (203) 625-9612

Anthony@ajmedico.com v www.ajmedico.com

Most estate plans which incorporate Trusts, generally don’t consider using the Trust for retirement benefits.  This is because retirement plans already have a designated beneficiary, so the assets don’t necessarily need to be considered as part of the estate upon death.  Hence, there is no need to change that as part of the estate plan.

However, there are certain situations when this general rule of thinking can have a negative effect on the resulting distributions as intended by the decedent.  There are a variety of reasons why considering a Trust for the distributions of retirement benefits is worth considering.  Situations such as spendthrifts, poor investment management, health care concerns and the various needs of certain non-spouse beneficiaries are typical concerns.

However, another, more common, yet more complex reason is when there is a remarriage but the decedent has children from a previous marriage.  In that situation, the second spouse is typically named as the retirement benefits recipient.  However, once the spouse receives the benefits, she can do whatever she wants with them, which may not necessarily include the children from the decedent’s first marriage.

This situation can be avoided by naming the Trustee of the Trust as the beneficiary of the benefits.  Remember that one of the main purposes of setting up a Trust is the ability to control the assets via the terms of the Trust.  Control that “extends from the Grave”, so to speak.

Of most importance when even considering this type of estate planning is that there are many specific rules which must be followed exactly in order to avoid any tax consequences and more importantly, to avoid losing the unified credit entitlement.  However, if the Trust is carefully planned and written so that the assets “look through” the Trust to a Trust beneficiary, it is possible to avoid these taxation issues.  It’s a little tricky, but definitely worth doing if you have a difficult situation such as that listed above.

Second marriage situations where one or both spouses have children from a prior marriage often call for estate planning that is more detailed than the typical or common plan.  However, there are many estate planning techniques, which are designed specifically for this type of family.  If you have this situation, and you want to prepare your estate so that you can better prepare for your children and control their share of your estate, including your retirement benefits, I suggest speaking with your attorney or a qualified estate planner to discuss the use of a Trust to accomplish your goals in this regard.

Anthony J. Medico, Esq., has practiced law for over 18 years.  To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151.  You can read most of his previous columns on his estate planning blog on the internet.  Just go to http://www.greenwichtime.com/blogs and search the name “medico”.

The Law Offices of Anthony J. Medico

7 Benedict Place v Greenwich, Connecticut 06830

Telephone (203) 661-8151 v Facsimile (203) 625-9612

Anthony@ajmedico.com v www.ajmedico.com

Let’s say a distant family member, who you hardly knew (but who obviously remembered you) died and left you a huge house in their Will. At first, you would think WOW!  That’s terrific.  I won the lottery.  A huge place to call my own, a big pool, tennis court; a real Newport Mansion type house.  So what’s the problem?  Well, after the swelling goes down and your headache subsides from celebrating all night, you might begin to think about it deeper.  Then the headache starts to come back.  “I can’t afford this great gift”, you think to yourself.  Its one thing to own it, but quite another to maintain it.  Let’s see, you begin to think.  I can’t afford the taxes on my mansion.  That’s half my annual salary.  And what about the landscaping and maintenance?  Whew!  I better just say thanks, but no thanks.

Mansions aside, this is not a fairy tale.  Rather, it’s a common issue in estate planning.  People are often gifted items that they truly can’t afford to take.  In the sample above, the typical response is to take the house and turn around and sell it.  That’s an obvious choice.  But there are many instances where a beneficiary is named and a bequest is made and the beneficiary simply doesn’t want it AND, there is no profit to be made.  In that situation the only choice is what’s known as a “disclaimer”.

Any person who is entitled to some or all of the property of a decedent may not want to accept it and they can disclaim all or some of it.  However, there are rules in disclaiming property that most people aren’t aware of.  Rules which, if not followed, will result in an “assumption of ownership and acceptance”.  If the “rules” aren’t followed the right way, the IRS can make a determination that the property you think your disclaiming was actually an acceptance and then a subsequent “gift” which can result in a tax liability.  A HUGE tax liability.

The rules for a “qualified disclaimer” are simple to follow, but you need to know what they are.  1) There must be a irrevocable and unqualified written refusal to accept the property; 2) that written refusal must be received by the estate’s representative within nine (9) months of either the date of the transfer or of when the recipient reached age 21, whichever is later; 3) you cannot refuse the gift, but retain or accept an interest or benefit in the property; and 4) the property must pass in another manner in which you have no direction or control.

In layman’s terms, you have 9 months to say no, in writing, to the estate representative without enjoying some sort of benefit from it and you can’t direct where it goes if you say no!  Hence, you can’t sleep in the house after telling the representative to give it to your sister instead.

If you don’t play by the rules, the taxman will get you and the results can be big.  Very big. And that’s no joke.  The best way to say no is to work closely with the attorney for the estate and if there is none, make sure you get complete guidance from the probate court every step of the way.

Anthony J. Medico, Esq., has practiced law for over 18 years.  To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151.  You can read most of his previous columns on his estate planning blog on the internet.  Just go to http://www.greenwichtime.com/blogs and search the name “medico”.

The Law Offices of Anthony J. Medico

7 Benedict Place v Greenwich, Connecticut 06830

Telephone (203) 661-8151 v Facsimile (203) 625-9612

Anthony@ajmedico.com v www.ajmedico.com

Providing care for a minor child is one of the most important factors in estate planning and is usually on the top of the list for most parents when they consider creating an estate plan.  Caring for a child in the event of the death of a parent is complex to say the least.  It’s something that most people either don’t want to think about and those that do simply don’t consider what’s involved and how difficult it will be if a parent doesn’t plan appropriately.  A quality estate plan will consider not only the care of the child’s person, but also the care of the property the child will own during the parent’s lifetime, and what the child will inherit upon the death of a parent.

The appointment of a Guardian is the first issue which must be addressed.  The Guardian will be responsible for the care of the child and/or the child’s property.  He or she will be responsible for the daily care of the minor as well as the determinations of the child’s residency, education, religious affiliation and medical care.  One responsibility that a Guardian doesn’t have is financial support and, in fact, is entitled to be reimbursed for incurred costs from the child’s assets.

Family members and close family friends are a logical choice as Guardians.  However, Grandparents are not a wise choice.  Although they are great for weekend parenting, they are usually not the best choice for every day parenting because as children grow, so do their issues, which can be too overwhelming for grandparents to handle.  Also, appointing someone of advanced age will most likely result in the Guardian dying before the child reaches the age of majority.

Caring for a child’s person is quite a bit different than caring for a child’s finances.  When determining Guardians, the parent should consider those who will provide care in a manner that emulates what the parents’ wishes would be.  However, when considering the Guardianship of property, the parent should consider the person best qualified to handle finances, preserve assets and is most capable of making financial decisions relating to health, education and wellbeing.

In addition to the selection of appropriate Guardians, parents should also consider the appropriate instrument for holding the minor’s property.  Due to the fact that no minor is allowed to maintain his own property, a Trust will be mandatory.  In a quality estate plan, the type of Trust created can (and should) be tailored to both the needs of survivors as well as the size of the estate.

Typically, a Trust is created which will include a single fund for all of the beneficiaries, including a surviving spouse which is commonly known as a “Pot Trust”.  Later on, the Trust assets will be divided into separate Trusts for the benefit of each of the minor beneficiaries.  This is often times known as “Special Needs” Trusts or “Separate Shares” Trusts.

One of the most important reasons for converting a Pot Trust into a Separate Shares Trust is the individual financial requirements of different children.  Many parents fail to consider that as children grow, their needs become individualized.  Therefore, by providing for each of the children independently, through separate Trusts, each child can be provided what they require without creating an adverse financial affect on the other beneficiaries.

The considerations for children in estate planning are almost boundless.  However, it is the one factor that should be the most prominent aspect of your estate plan.  If you have not considered proper estate planning for your minor children, I encourage you to learn more.

Anthony J. Medico, Esq., has practiced law for over 18 years.  To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151.  You can read most of his previous columns on his estate planning blog on the internet.  Just go to http://www.greenwichtime.com/blogs and search the name “medico”.

The Law Offices of Anthony J. Medico

7 Benedict Place v Greenwich, Connecticut 06830

Telephone (203) 661-8151 v Facsimile (203) 625-9612

Anthony@ajmedico.com v www.ajmedico.com

It’s that time of year again; the time to start thinking about whether you have exhausted the annual tax savings portion of your estate plan.   As I have written about in many of my previous columns and spoken about at my seminars, one of the best tools of Estate planning is the benefit of gifting.  This is due to the annual exclusion provided by your favorite taxing authority.

Unfortunately, so many people are unaware of the gifting exclusions (tax free gifts) allowed by the IRS each and every year!  In a nutshell, the IRS allows you to make certain unlimited gifts annually without facing a gift tax, which can be pretty darn steep.

Although the amount of the exclusion changes annually, (usually increasing) every individual and married couple enjoy(s) this opportunity.  For 2010, the gift tax exclusion is $13,000.00 per individual and $26,000.00 per married couple.  What does this mean?  Well, for the remainder of this year, you are entitled to gift away up to $13,000.00 to any number of donees, regardless of their relationship to you, and married couples can double that amount to $26,000.00.  All without paying a dime of tax.

At this point you’re probably asking, “How does this help me”?  How can giving my money away possibly be good for me?  Well, there are a variety of reasons. The best reason is to lower the value of your estate for estate tax purposes, especially if you are older.  If you know that you are planning on giving your estate to specific people or organizations upon your death, you can start giving to them now, instead.  They’re going to receive the asset anyway, so if you gift it in annual portions, you will lower the value of your taxable estate leaving more to your family, friends and charities instead of paying more in taxes.

Here’s an example.  Let’s say Jim & Betty, a married couple with an estate valued at $260,000.00, have three children, are involved in a variety of community charitable organizations and have lots of friends in need.  All of these people and organizations would be beneficiaries of their estates upon their death.  If Jim & Betty are beyond retirement age and feel that they can live on half the value of their estate, the can make five gifts of $26,000.00 this year to each of their three kids, one friend and a charity.  The money would be a tax free transfer, and their estate value is now cut in half which means less estate taxes paid at death and more of the estate flowing to loved ones.

Take it one step further.  Let’s say they have a multimillion dollar estate.  Regardless of their ages, they would be utilizing a great estate planning tool if they gifted a significant portion every year using that same formula.  There are also a variety of ways in which you could make the gifts and still control the use of the funds, especially gifts to minors.

In addition to the annual exclusion of $13,000, every person has lifetime gift tax exclusion, currently capped at $1,000,000.00.  This means that you can gift more than the $13,000.00 and the overage won’t be taxed either if you put it towards you lifetime exclusion.  (The $13,000.00 doesn’t count towards the lifetime exclusion.)

Gifting for tax savings purposes can be tricky, but it’s not difficult to understand.  Obviously, the IRS has some rules which apply to gifts that aren’t cash based such as interests in businesses, etc.  Therefore, you should visit your attorney or accountant before starting this type of estate planning.  However, the benefits to the estate are outstanding.  So don’t let the year expire without considering this tax savings option.

Anthony J. Medico, Esq., has practiced law for over 18 years.  To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151.  You can read most of his previous columns on his estate planning blog on the internet.  Just go to http://www.greenwichtime.com/blogs and search the name “medico”.

The Law Offices of Anthony J. Medico

7 Benedict Place v Greenwich, Connecticut 06830

Telephone (203) 661-8151 v Facsimile (203) 625-9612

Anthony@ajmedico.com v www.ajmedico.com

The term Elder Care generally refers to the health and maintenance of the elderly and may or may not have anything to do with estate planning depending on your concerns.  From an estate planning perspective, planning for either an elderly loved one or for your own benefits when you reach that age is a very common request.

Some of the concerns I’ve heard range from the ability to pay for health related costs, to where to place elderly loved ones who are showing signs of dementia or other health related issues, to how to acquire state aid, or what can be done to allow “me” to make certain decisions on that person’s behalf.  Of all the concerns I have heard, by far the biggest are financial and control issues.

The biggest mistake I see with clients who approach me for advice on elder care is that it’s too late because they waited too long.  Usually, they see me after a parent or grand-parent is showing signs of diminished capacity and by that time it’s simply too late to prepare many of the instruments which would have been extremely useful and could have saved my clients a significant amount of money.

As it relates to elder care, any good estate plan will include instruments designed to ease your loved ones from the litany of red tape that surrounds the ability to care for you and make decisions on your behalf. Instruments such as Powers of Attorney and the designation of Conservators, Living Wills and Irrevocable Trusts are just a few.

A Durable Power of Attorney is a basic instrument which can be used to give anyone the power to make necessary decisions on your behalf, and because they are durable, they are valid beyond your incapacity.  With this instrument, your designated person can make medical and financial arrangements on your behalf.  However, once you are no longer of sound mind, you lose the capacity to execute such an instrument forever.  In that case, your only alternative is to go to court and seek a Court Ordered Conservatorship which is extremely costly and requires hearings, medical affidavits, medical records, etc.

Living Wills are designed to provide medical providers with a concise definition of your intentions as it relates to medical care once you can no longer make those decisions on your own behalf.  A good living Will will not only describe your desired medical care, but you can also designate people as your health care representatives and proposed conservators.  Again, once you are no longer of sound mind, you lose the capacity to execute such an instrument forever.

Another great concern regarding elder care is medical costs.  In Connecticut, the general term for the state Medicaid program is “Title 19” benefits.  Title 19 provides the minimum requirements necessary to apply for state benefits for medical costs.  The biggest hurdle in acquiring such aid is the financial capacity of the person in need of medical care.  In order to qualify, your assets, income, and expenses will be evaluated and if you have too much, you may be denied.  Instruments such as Irrevocable Trusts and scheduled gifting can be an avenue to rid yourself of certain assets which would then qualify you for Title 19 Benefits.

Elder care is a complete section of law which is bountiful in its own right.  However, as it relates to estate planning, many are amazed at how just a little preparation can result in great relief when the need for significant medical care becomes necessary.  Having these instruments in place prior to that need is essential and ultimately rewarding on both a personal and financial level.

Anthony J. Medico, Esq., has practiced law for over 18 years.  To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151.  You can read most of his previous columns on his estate planning blog on the internet.  Just go to http://www.greenwichtime.com/blogs and search the name “medico”.

The Law Offices of Anthony J. Medico

7 Benedict Place v Greenwich, Connecticut 06830

Telephone (203) 661-8151 v Facsimile (203) 625-9612

Anthony@ajmedico.com v www.ajmedico.com

My column usually focuses on a particular aspect of estate planning such as a type of Trust or various Wills.  I define them, and then explain how they work and how they can be of benefit.  However, one aspect of estate planning that is rarely discussed is when the appropriate time in your life is to actually consider a plan.

As any estate planning attorney will tell you, most people simply don’t want to focus on that part of their lives.  The smart ones do, however.  During the summer when you were traveling or at friends homes for parties and barbeques, did anything happen to make you consider the need to protect your assets?  Was there a close call or did someone suffer a minor injury that could have been worse, while at your house or in your car?  Did it make you stop and think, am I protected?   What would happen to my family if anything like that happened to me?

If any of those thoughts went though your head, then you obviously have something or someone in your life that you want to protect and take care of.  I always tell my clients that there are three events in a person’s life when estate planning MUST be considered. 1) When you get married, 2) when you have children, 3) when you purchase your first home.  With each of these events, there is an estate planning tool that will protect your spouse, children and family home.  At the very least you will need a Will which will provide for your spouse and family financially and protect your minor children.

So rather than discuss a particular estate planning instrument this time, perhaps you should simply read today’s column as a reminder to consider your current estate plan.  And remember that not having an estate plan at all is, in fact, a plan.  It’s just not a good one.

Now that we’re all back to work and the kids are in school, take a few moments to list what you have in the way of a plan and compare it to your list of assets and loved ones.  Then ask yourself, is my family adequately protected?  Is my estate protected from taxes?  Have I prepared my estate so that my children will be cared for both financially and personally if something should happen to me?

And don’t forget the very important aspect of asset protection during your lifetime.  Remember that a good estate plan doesn’t just prepare for your departure from this wonderful life.  It also protects you, your family and possessions from being subject to creditors, liens and spendthrifts.

Now’s the time.  Before you know it, you’ll be consumed with the winter holidays.  I understand that considerations such as death and family losses are not hot topics for anyone, but I guarantee you that once you have taken the steps to either create an estate plan or review your current one you will feel very satisfied having taken advanced care of your loved ones.

Anthony J. Medico, Esq., has practiced law for over 18 years.  To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151.  You can read most of his previous columns on his estate planning blog on the internet.  Just go to http://www.greenwichtime.com/blogs and search the name “medico”.

The Law Offices of Anthony J. Medico

7 Benedict Place v Greenwich, Connecticut 06830

Telephone (203) 661-8151 v Facsimile (203) 625-9612

Anthony@ajmedico.com v www.ajmedico.com

Many of my clients seek advice on making charitable giving a part of their overall estate plan. This is definitely a good idea, not only for the chosen charitable organization, but also from a tax savings perspective. There are significant gift, income, and estate tax benefits associated with charitable giving. In order to make such a “gift”, however, you should be aware of a few requirements which must be met before your good intentions will result in a benefit to both the charity and the estate.

Usually, small gifts to charities don’t give rise to substantial legal issues. However, with larger donations issues arise such as how much to give in any given year; what’s the best time to make such a gift; should the gift be given outright or by way of a Trust; and which organization are the best ones to benefit.

You should first consider the type of charitable organization you want to make your gift to. Usually the organization is one that has given the donor (or someone close to the Donor) some sort of benefit for a long time. I often see churches and other religious organizations as one type. Here in Greenwich, public service organizations such as the Transportation Association of Greenwich (TAG), which provides transportation services for the elderly is another type. The key, however, is that the organization MUST be recognized as a charitable organization by the IRS and has been created and organized under the laws of the United States or a State. IRS Section 501 (c)(3) provides the details of these requirements. Therefore, be aware that although giving a donation to a needy family may be a wonderful act based upon a moral desire, it won’t get you any tax benefits.

So what is the tax benefit? Well, generally speaking, gifts of cash and property are deductible for income tax purposes. However, these deductions are subject to numerous limitations which you must discuss with your estate planner before proceeding. However, if the rules are met, the deduction can amount to an enormous tax savings.

From an estate tax perspective, gifts and bequests to charitable organizations are fully deductable for gift and estate tax purposes. Therefore, if your estate is lingering above the estate tax exemption limit, you may want to consider that donation to TAG or your religious organization to bring your estate value below the exemption limit. If your already planning on making a charitable donation anyway, why not consider the savings to the estate when determining how much to give?

Finally, you can make arrangements for charitable giving by using a Charitable Remainder Trust. In its most basic form, this type of Trust allows for the use of the property by the donor or his family members during his/their lifetime, then the property passes through the Trust instrument, to the Charity. In this scenario, usually the Trust is funded with income producing property in which the Donor’s family may enjoy the interest for a certain term and then the charity acquires the principal at a certain time. This type of trust can be complicated, but in an estate plan, you can kill three birds with one stone. A), it gets the estate a charitable deduction, b) it provided for family members for a specific period of time and, c) it gifts a substantial donation to a qualified charity of your choosing.

If you are planning your estate, I would highly recommend charitable giving as part of your overall structure. Many of these organizations depend on charitable giving in order to sustain them, while at the same time providing you or your loved ones invaluable services.

Anthony J. Medico, Esq., has practiced law for over 18 years. To ask a question for this column, or to receive Medico’s free Estate Planning Survival Guide, visit his website at www.ajmedico.com, send an e-mail to Anthony@ajmedico.com or call (203) 661-8151. You can read most of his previous columns on his estate planning blog on the internet. Just go to http://www.greenwichtime.com/blogs and scroll down until you find him under the business section. Enjoy.

The Law Offices of Anthony J. Medico
7 Benedict Place  Greenwich, Connecticut 06830
Telephone (203) 661-8151  Facsimile (203) 625-9612
Anthony@ajmedico.com  www.ajmedico.com