Important-Year-End-Legal-Reminders

Gifting: 12/31 Deadline

Annual Gifts:
One of the simplest and most common ways to provide for your loved ones is by giving annual gifts. This year, you may give up to $13,000 per gift recipient ($26,000 for married couples), gift tax-free. Gifts may be made in any form, be it cash, investments, percentages of family business, real estate, etc. With Real Estate values remaining relatively low, there is opportunity again this year to take advantage of the lower gift calculation for tax purposes. Remember, also, that you can pay for someone else's medical or tuition expenses without having those payments count toward the annual limit.

The New "Use It Or Lose It" Gifting Opportunities:
Conditions for gifting have never been better in modern times. For the time being, we have a $5 million unified estate, gift, and generation skipping exemption (indexed for inflation) and a 35% combined estate, gift and GST tax rate.

Add to that, historically low federal interest rates, relatively low asset values and no legislation at this time restricting the use of various effective wealth transfer tools, such as the Grantor Retained Annuity Trusts (GRATs), Family Limited Partnerships (FLPs), Intentionally Defective Grantor Trusts (IDGTs), Generation Skipping Tax Trusts for Grandchildren and/or valuation discounts on family controlled enterprises.

Exemption Portability:
The Tax Relief Act provides for "portability" between spouses resulting in a maximum exemption of $10 million ($5 million per spouse) for a married couple. However, such portability is assured only for one more year and the availability of this portable exemption amount requires an election to be made on a timely filed federal estate tax return. There is no portability for any unused Generation skipping Tax exemption.

Other Personal Planning 12/31 Deadlines:

"Crummey" Letters:
If you made or plan to make any gifts, either in cash or other property, to an Irrevocable Trust this year, you must memorialize those gifts with a "Crummey" letter to each beneficiary of the trust, in order to remain compliant with IRS gifting rules. Children's and Grandchildren's Trusts, Irrevocable Life Insurance Trusts, and Credit Shelter Trusts are all examples of Irrevocable Trusts to which you might have made gifts this year. Please contact our office if you would like us to prepare the required Crummey letters or if you have any questions regarding this IRS requirement.

Trust Accounting:
If you are a Trustee of an Irrevocable Trust, Florida Trust Code rules require that you provide a copy of the annual accounting of the Trust's assets to each beneficiary of the trust (a beneficiary may waive his or her right to an accounting). If you are a trustee of such a trust and have not yet completed your annual trust accounting for the 2010 tax year, we recommend that you do so as soon as possible.

Updating Beneficiary Designations -No Deadline, But Extremely Important:
If any changes occurred in your personal situations that may affect how you want your estate to be passed on, updating your beneficiary designations on all accounts, policies, trusts, retirement plans etc., is crucial.

12/31 Deadlines For Small Business Owners:

Corporate minutes and special resolutions must be documented for any major events that occurred during the year. (Examples: real estate acquisitions or sales, addition or termination of corporate retirement plans, the dropping or addition of 401(k) matching, changing or adding officers, acquisitions, etc.).

Buy-sell agreements, operating agreements, and other business agreements must be reviewed on a yearly basis to ensure they are up-to-date. For example, many buy-sell agreements require that the shareholders agree on a valuation of the business each year or every other year.

Estate Planning Updates And Priorities For 2011-2012

Changes To Florida Power Of Attorney Laws
The Florida Statute (Chapter 709) that addresses powers of attorney was revised substantially by the Florida Legislature's passage of Senate Bill 670 on May 4, 2011. The new statute became effective on October 1, 2011. While the new law does not make a power of attorney properly executed prior to the effective date void, the new statute nevertheless does apply to those powers of attorney that were executed prior to the effective date. Therefore, it is important to review existing powers of attorney to understand which terms will be subject to a different set of rules. Overview of New POA Laws.

Special Planning Needs:
Planning should be considered to protect interests of beneficiaries that may have spending problems, special needs, substance abuse problems, divorce issues or are just too young to receive a significant amount of property. Special planning may be required when there are children from previous marriages. Protecting beneficiaries in these situations is a crucial estate planning goal, regardless of tax considerations.

Estate Planning documents executed before 2011, should be reviewed by an attorney to make sure your wishes will be actualized in light of tax law changes. Problems with spouses being inadvertently excluded can arise with wills crafted with trust/exemption formulas that were based on the previously lower exemption amounts.

Please contact us if you have a single-member LLC to discuss how you can maintain the asset protected status of your assets in light of the recent Florida Supreme court ruling regarding such entities.