Congress did it! The Bush tax cuts have been extended, which means that no one should get a tax increase come Jan 1st..In fact, if you’re working, your social security withholding will be decreased (but it may take til 1/31 to see the results). Most significantly, we have the Obama tax cuts for estate taxes. The new exclusion is $5 million, and you can also give that amount away during your lifetime. Step-up basis is back, and the estates of those who died in 2010 get to choose if they want the 2010 law to apply or the 2011 law. Biggest negative? It’s only good for two years!

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Have you been named as an executor for a loved one’s estate? As an executor your job is to organize and settle the affairs of your family member. Whether you have been named by a Last Will and Testament or by a court of law in the case of an estate without a Will, it is important to understand your duties.

Organize the Estate

The first step is to identify what the estate includes. Try to locate all estate documents. If you have been appointed by the court, you may not have to worry about this step since it may have already been determined that no estate documents exist.

If a Will does exist you should use it to list all beneficiaries. If no Will exists, heirs will be determined by state law. In either case, you will have to locate assets and debts on your own.

Probate the Estate

Once you have a general idea of the estate, you should meet with an attorney to begin probate. Probate is the court-supervised process by which you will settle the decedent’s affairs.

Every estate asset must be appraised for the date of death value. Next, with the help of an attorney, you must contact all known creditors. In case any creditors are unknown, you will place a notice in the local newspaper.

You will use estate funds to pay debts. If funds are not available, you may have to sell property. You will also be responsible for paying all taxes associated with the estate from its assets. You must file the final income tax return for the decedent, as well as the estate tax return if estate and inheritance taxes are applicable. You may wish to contact an accountant for assistance.

When all taxes and debts have been paid, the Court will order you to give the beneficiaries what remains of the estate. If there was no Last Will and Testament, your attorney can help you determine who the heirs at law are based upon the state intestacy laws.

It is very important to make sure all taxes and debts are paid and you receive a Court order before you hand out inheritances. If you do not, you will be financially responsible for unpaid debts and taxes.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

The primary difference between a Revocable and Irrevocable Trust is flexibility. Revocable means you can make changes to your trust. Irrevocable means that once it is created the terms are final and you cannot alter fiduciaries or beneficiaries.

What Revocable Does

A Revocable Living Trust is a common estate planning document that can help property to easily pass from a decedent to his or her beneficiaries. Because a Revocable Living Trust allows you to make changes as you need, you can alter your Trust throughout your life. You can fund new property or assets into it, change your beneficiaries or even name a new successor trustee.

There are three common reasons to use a Trust. First, a well executed and fully funded Trust can help your estate avoid probate. Second, you can use your Living Trust as part of a disability plan. If you should become mentally incapacitated, your successor trustee would step forward and manage your Trust assets for you. Many people also use a Trust for privacy. A Last Will and Testament is a public legal document. After your death, anyone can obtain a record of your holdings. With a Trust, your estate assets and beneficiaries are kept private.

One problem with a Revocable Trust is that you cannot use it for asset protection. The assets within are still considered yours.

What Irrevocable Does

An Irrevocable Trust is one you cannot change after it is created. This type of trust is common for asset protection. Once you transfer items into the Trust, they no longer belong to you and cannot be used to settle a debt or lawsuit. Irrevocable trusts are also a great way to minimize estate and income taxes. Because the assets in such a trust do not belong to you, they will not be included in your estate’s tax liability. A charitable irrevocable trust allows you to donate to a cause of your choice upon your death and receive an income tax deduction for the year that you place funds within the Trust.

When Revocable Becomes Irrevocable

If you have a Revocable Living Trust, it will become Irrevocable upon your death. Your living trust can break apart into several irrevocable lifetime trusts for the benefit of your spouse, children and grandchildren or other beneficiaries.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

If you own your own company, you know that running a business is a complicated venture that takes loads of planning time. Besides planning to grow and expand your business, you must alsodetermine what will happen after your death.

No Business Estate Plan

If you don’t include your business in your estate plan, then it may not survive your death. If you have full or partial stake in a business, it will be considered a part of your estate upon your death. If you have not named someone to take over after you die, or if you have multiple partners fighting over your part of the business, your business may flounder while the matter is worked out in probate court. Because probate is a lengthy process, your company may be greatly affected by a large time period of indecision, disagreements and possibly mismanagement.

Dissolve the Business

If you own a family business, you may wish to pass your business along to your family members. What if no one wants to take over? Even if a family member is running the business with you at the time of your death, he or she may wish to take the opportunity to pursue other ventures. In this case, since you have created no plan and no one is willing to take over, your company will have to be sold or dissolved. If you plan ahead, you will already know that your business will close after your death, and you can make prearrangements to ease the process. If you do not, unwilling family members may be placed with the burden of running the business for a short time while probate works out a sale.

Passing on the Business

If someone in your family or one of your business partner’s wishes to keep the business alive after your death, he or she may face opposition from others who wish to sell the business or who also wish to have a say in running the company. If you know that you can pass the business on to a ready and willing person, say so in an estate plan. Like a guardian plan for your children, an estate plan for your business allows for an easy hand off, so your company can maintain stability.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Everyone knows that an estate plan can ensure your heirs receive the right inheritance. But did you know there are other benefits too? Here’s five things a good estate plan can for you.

1. Protect Against Disability – No, your estate plan can’t prevent disability from striking but it can certainly ensure that you and your estate are protected if it happens. Using Powers of Attorney such as an Advanced Health Care Directive and General Durable Power of Attorney can ensure that your medical wishes are followed and that your finances are handled by someone you trust.
2. Provide Incentives to Your Heirs – With the right planning tools, you can do much more than leave your heirs a lump sum estate. Instead, you can create incentives for them to excel and achieve by offering inheritance bonuses for graduating college, getting married or other milestones. You can also set it up so that your heirs’ inheritance matches whatever income they earn each year. If they want a bigger inheritance, they must find a way to earn a better living.
3. Avoid Probate – Yes, with the right tools, your estate plan can help your heirs stay out of probate court. This makes the whole property distribution process much smoother and ensures that the details of your estate remain private.
4. Sponsor A Charity – There are certain types of trusts that allow you to structure assets so that they benefit both your heirs and your favorite charity. Donating this way also provides significant tax breaks to all parties involved.
5. Protect Disabled Dependents – A Special Needs Trust can ensure that your disabled dependent continues to qualify for important government assistance programs while still enjoying the benefits of his or her inheritance.

Of course, that’s not all an estate plan can do, but it’s a good start. To learn more about how a good estate plan can make your life easier, contact our office today.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Even though you have your estate plan in place, it could still face legal problems if any part is deemed invalid. What you thought was a perfectly sound estate plan could turn into a probate nightmare for your family. So, how you do make sure your estate plan will work?

Hire an Estate Attorney

Unless you are up-to-date on inheritance, tax and other laws that govern estate preparation, you will have to become an expert overnight to create your own plan. Writing a Last Will and Testament yourself or even purchasing a cookie cutter Will from a website can cause inheritance problems. Such Wills may not take into account every circumstance of your estate and loved ones such as step-children or a live-in partner may be mistakenly disinherited.

Saving money is great as long as it doesn’t cost more money in the end. If you are considering creating an estate plan without the assistance of an attorney, you may create costly probate issues for your family instead. An estate attorney knows the laws and can make sure your estate plan is legally sound.

Properly Signed Documents

If any estate document is not handled correctly a court of law may deem it invalid. This is why you must take care when you sign and date your documents. Your estate attorney can help with this since he or she will know state laws regarding signing, dating and notarizing.

Regular Maintenance

If you do not keep your estate plan well-maintained, your documents and assets may face probate issues. Maintaining your estate plan simply means checking every couple years or less to see if changes need to be made. Changes in your estate may be due if estate laws have changed, you have purchased or sold property, you have new heirs, heirs have passed away, or you have married or divorced.

If you do not maintain your estate plan and you pass away with property, assets or heirs not included in your Last Will and Testament or Revocable Living Trust, your estate could face a protracted probate. And don’t forget, when you create a new Will be sure to get rid of old copies to avoid confusion.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Having an idea of what you’d like your estate plan to do is a great first step to creating the plan itself. Setting goals will help you identify the tools you need to make the estate plan right for you.

And although no two estate plans are the same, there are some basic objectives that are common across the board:

• Maintain the value of your assets. This is actually one of the primary goals that many people have when they consider estate planning.

• Provide for your family in the event of death or disability. Will your family have the financial support they need when you’re no longer around? Creating an estate plan is a good way to ensure they do.

• Naming a guardian for minor children.. If something should happen to you before your children are old enough to care for themselves, your estate plan ensures you’ll have a say in who raises your children.

• Naming the executor for your estate. Having an estate plan allows you to decide who will oversee your estate and the distribution of your assets.

• Naming your heirs. It’s your property – you should get to decide who gets what. An estate plan gives you that ability.

• Minimize taxes and legal fees. Depending upon how you construct your estate plan, it is possible to minimize taxes and in some instances, avoid probate and all the fees that go with it.

Once you’ve identified your estate planning goals, a qualified estate planning attorney can help you identify which goals are obtainable, and advise you on aspects of your estate plan that you may have overlooked.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Estate planning is all about protecting you and your loved ones from the unknown. One of the ways to do that is to use an estate planning tool called a Durable Power of Attorney.

This legal document enables you to choose someone to act on your behalf in the event that you become disabled or incapacitated. The person named in your Durable Power of Attorney would be able to pay your bills, transfer money to and from your accounts and enact financial transactions for you.

And if you’re thinking you don’t need a Durable POA, think again.

Disability can strike at any time. Strokes for example, often strike seemingly healthy people with no real medical concerns. Suddenly, you’re unable to take care of yourself and must rely on family members and friends to it for you. But when it comes to writing checks on your account or discussing payment plans with creditors, not just anyone can do that. They must first have your written authorization – something you’re no longer able to give.

Now without that authorization, your family will have to go to court and have you declared incompetent. This can be a lengthy and costly process, not to mention personally humiliating for you.

See why a Durable Power of Attorney is so important?

Fortunately, your estate planning attorney can help you draft a Durable POA that addresses all your concerns. You can make it active only in cases where a doctor has certified a need or it can be active from the time you sign, something that might come in handy for married couples.

A Durable Power of Attorney will end upon your death and it can also be revoked by you and by court order.

To learn more about drafting your own POA and other estate planning tools, give our office a call today.

Michele A. Tutoli is a Member of the American Academy of Estate Planning Attorneys.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

2010 has been one strange year for the U.S. tax code. We have a huge estate tax issue that is still not fully resolved. Let’s take a look at where things stand for the estate tax year in terms of changes, amendments, additions and considerations.

The estate tax and GSTT have been repealed for 2010, but they may be enforced retroactively.

Even though the Obama administration preferred having an estate tax in 2010, Congress was preoccupied with other matters as 2009 drew to a close. So no action was taken, and as EGGTRA stipulated in 2001, the estate tax is 0% in 2010. [1]

So far, anyway. The longer we go with no action taken, the harder it gets for Congress to take action and put a retroactive estate tax in place. (You could easily argue that a retroactive estate tax would be unconstitutional.)

Of course, the estate tax and the generation-skipping transfer tax (GSTT) are scheduled to return in 2011. Congress may restore things to 2009 levels, $3.5 million exemption for estate tax and GSTT with 45% estate, GSTT, and gift tax rates. By doing nothing, though, estate taxes would reset to pre-EGGTRA levels in 2011 (the exemption level at just $1 million with 55% estate, GSTT, and gift tax rates). [1]

With no estate tax in place for 2010, the step-up basis rules have been replaced by carryover basis rules.

This year, assets in an estate are subject to capital gains taxes when sold based on the original price paid for the asset. This could mean some big problems for heirs if an asset was bought by Mom or Dad 20 or 30 years ago. Let’s say the asset is a stock. If Mom or Dad purchased shares off and on through the years, you’ll have quite an assignment to find that paper trail, and you may end up paying capital gains tax on the appreciation if the estate is really large. Fortunately, each estate can exempt $1.3 million of gains from the carryover basis rule, and another $3 million exemption applies to assets inherited from a spouse – so as much as $4.3 million of an estate, if transferred to a spouse, can retain the step-up in 2010. [2]

The federal gift tax rate is 35% for 2010, not 45%.

Yes, there is still a gift tax in 2010 on gifts above the lifetime exemption amount of $1 million. However, the tax bite is just 35% for 2010. Of course, if you end up gifting less than $1 million during your lifetime, you won’t have to worry about the gift tax at all but you will need to be sure to file a gift tax return.[3]

IRS CIRCULAR 230 DISCLOSURE: Tax advice contained in this communication (including any attachments) is neither intended nor written to be used, and cannot be used, to avoid penalties under the Internal Revenue Code or to promote, market or recommend to anyone a transaction or matter addressed in this communication.

[1]moneywatch.bnet.com/retirement-planning/article/estate-tax-what-you-need-to-know-for-2010/378294/ [1/5/10]

[2] articles.moneycentral.msn.com/RetirementandWills/PlanYourEstate/5bigMythsAboutTheEstateTax.aspx [4/14/10]

[3] moneywatch.bnet.com/retirement-planning/blog/financial-independence/why-is-everyone-afraid-of-the-gift-tax/843/ [4/14/10]

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

When a person passes away there are usually some bills to be paid by the estate. There might be medical bills, credit card bills or even purchases. If you have been named the Personal Representative of a loved one’s estate, then you’ll need to understand how you will tackle these bills. Of course, you’ll have the guidance of your attorney, but it’s good to have a basic understanding of how debt works when it comes to probate.

Pending payments for bills are known as debt in legal language. Comparing the amount of debt carried by an estate to the amount of estate assets tells you whether the estate is solvent or insolvent.

What is a Solvent Estate?

A solvent estate includes enough assets for paying off all bills. The assets are more than the total value of the bills. The Personal Representative is responsible for paying off the bills. At the end of probate, 12 – 18 months in CA, once all legitimate expenses are paid – including clearing all debt – then the assets are distributed to the beneficiaries. The Personal Representative has to ensure that the beneficiaries receive their share.

What is an Insolvent Estate?

In an insolvent estate, the assets are not enough for paying off all bills. When an estate is insolvent, then the Personal Representative has to list all bills in order of priority in accordance with state law. Your attorney can explain how to prioritize the bills. The assets would then be used to pay off bills – wholly or partially. Those bills that cannot be paid would have to be written off as bad debt. Beneficiaries are not responsible for paying off an estate’s debt.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.