Mike Kilbourn speaks about his newly released book, Florida Domicile Handbook 3, and the advantages of moving to Florida.
A charitable remainder trust (CRT) is an irrevocable trust that allows you to make a charitable contribution and diversify your assets without paying immediate income tax while retaining an income stream.
Grantors typically transfer property, usually appreciated stock or appreciated real estate, but other assets can also be contributed. The donor of the property typically designates himself or herself as trustee. The donor and spouse generally are the income beneficiaries of the CRT for their lifetimes. This allows the donor-beneficiary to retain control of and receive income from the contributed assets.
Once transferred into the CRT, the assets are often free from the claims of creditors. Upon the death of the income beneficiaries, any assets left in the CRT are distributed to one or more charities designated by you as grantor.
Read more about the benefits of a Charitable Remainder Trust and other wealth preservation strategies in 2nd Edition of The Florida Domicile Handbook.
Some prospective Florida residents feel that splitting domicile between themselves and a spouse will allow them to have the best of all worlds. While there are certain circumstances that could call for splitting domicile, it may not be advisable.
The state of Florida will not allow you to retain your Florida homestead exemption if your spouse is claiming a homestead exemption in another state.
A split domicile raises additional issues. Some states require a married couple to file a joint state income tax return, if the couple files a joint federal income tax return. Additionally, a split domicile may limit the amount of your total federal capital gain exclusion (from $500,000 to $250,000) for the sale of a principal residence after one spouse changes domicile.
Learn more about Florida’s tax benefits in the new updated of The Florida Domicile Handbook. Make sure you consult with a Florida attorney and carefully consider the advantages and disadvantages of a split domicile.
In the State of Florida, condominium associations must provide a minimum standard of insurance coverage. The “association policy” must cover all structures and other common property.
Before you purchase a condominium in Florida, you should thoroughly review the association’s policy to learn what it covers. Your share of the premium will be included in periodic condominium maintenance fees.
To protect your investment, you will want to consider purchasing condominium “interior” insurance. The policy typically covers property such as interior wallpaper, trim, built-in bookcases, carpeting, fixtures and your personal property. Interior policies are separate from the association policy and the additional cost is your responsibility.
There are many benefits and protections afforded to Florida residents. Read more about them in the updated version of The Florida Domicile Handbook.
Looking to buy a condo in Florida? Be sure to use a qualified Realtor. Discover what you need to know before you negotiate and purchase a home in Florida in The Florida Domicile Handbook.
When congress convenes and approves President Barack Obama’s federal budget for 2011, The Constellation Program will officially end. This leaves a black hole in the hearts of many Americans that envisioned human space exploration into the future.
Attend one of the last two remaining manned shuttle launches in America. Find out when they are HERE.
The three “soon-to-be-retired” shuttles – The Discovery, The Endeavor, and The Atlantis – will be placed in museums across the country, with Discovery heading to the Smithsonian Air and Space Museum in Washington, D.C.
Since the first flight in 1981, the space shuttle fleet has completed more than 100 missions and carried more than 600 passengers into space. The fleet has accumulated more than 2.5 years in orbit and yet has 75% of its design life remaining.
But the Kennedy Space Center is not closing; it will redirect some of the Constellation program money into building a Center of Excellence for Commercial Space Transportation. This new initiative partners with universities and will perform research and development to help build a safe and strong U.S. commercial space industry. The Kennedy Center will also serve as a flight test center for Center of Excellence research efforts.
To learn more about Florida’s Space Coast and how you can make it part of your future, read the 2nd Edition of The Florida Domicile Handbook.
Join Mike Kilbourn, CLU, ChFC, CCIM, AEP, MSFS, MBA, President of Kilbourn Associates, on Thursday, February 25th for a free educational seminar on Florida Domicile.
Date: Thursday, February 25th
Time: 10 a.m. – 12 p.m.
Location: Naples Daily News Community Room, 1100 Immokalee Road, Naples, FL
RSVP: Call (239) 263-4856
Copies of The Florida Domicile Handbook will be on sale, with proceeds benefitting your local Newspapers in Education Foundation.
On Tuesday, January 26, meet the author of The Florida Domicile Handbook, E. Michael Kilbourn, CLU, ChFC, CCIM, AEP, MSFS, MBA, president of Kilbourn Associates, Naples, Florida.
Meet the author and learn:
- The benefits of domicile for you & your family
- Why you should be domiciled in 2010
- Steps to making your intent legal
- The tax advantages of residency
- The estate plan protections for Floridians
- How to shortcut the process
- The backlash of splitting your domicile
Date: Tuesday, January 26, 2010
Time: 10:00 a.m.
Location: Naples Daily News Community Room, 1100 Immokalee Road, Naples, FL
RSVP: Call Karen at (239) 263-4856
Limited space, so please reserve early.
The Florida Domicile Handbook will be available for purchase at this event. At your request, proceeds will benefit your local Newspapers in Education Foundation.
Florida does not just come with beautiful beaches, and green golf courses. Florida provides it’s domiciled residents with tax benefits, homestead exemptions, and much more.
Unfortunately, the majority of residents do not understand that to obtain these advantages you have to establish domicile. The Florida Domicile Handbook: Vital Information for New Florida Residents explains how to establish domicile along with the financial benefits.
As explained in chapter three of The Florida Domicile Handbook, domicile is principally a matter of intent. Domicile is determined by where you intend it to be. Once the decision to establish Florida domicile is made, you must support your intent to change domicile with action.
The more steps that are taken to prove intent, the stronger the case that Florida domicile has been established and, in turn, your former domicile will be abandoned.
Below are twelve of the many ways to establish domicile (all explained in chapter three of The Florida Domicile Handbook):
- File a Declaration of Domicile with the Clerk of Courts of the county where you now reside.
- Spend as much time in Florida as is practical (preferably more than 180 days per year) and own or lease and occupy a residence in Florida. Register at hotels as a resident of Florida.
- Obtain a Florida driver’s license and license for your car in Florida.
- Register to vote in Florida after notifying the Voting Registrar in your former state to remove your name from their voting records.
- Establish relationships with Florida attorneys, doctors, accountants, brokers, a financial planner and insurance agent.
- Transfer financial assets (i.e., securities, bank accounts, brokerage accounts, etc.) to institutions in Florida or Florida offices of financial institutions in your former state. Do not maintain a safe deposit box in your former state. Transact business in Florida and declare Florida to be your state of domicile in all written communications concerning your principal residence.
- File your Federal income tax returns in Atlanta, Georgia, and notify taxing authorities in your former state of your change of residence. File Florida intangible personal property tax returns by June 30th (or earlier for a discount) each year.
- Discontinue filing tax returns in the state where you were formerly domiciled, except when your income has its source in that state (i.e., rental income generated by real estate located in your former state), in which case non-resident returns should be filed.
- Estate planning documents, such as wills, trusts, living wills, and durable powers-of-attorney, should state that you are a Florida domicile. Have existing documents reviewed by a Florida attorney to make sure they conform with Florida law.
- Withdraw your membership from non-Florida clubs or institutions where residence in your former state is a prerequisite to membership and establish affiliations with social and religious organizations in Florida. Request a change to “non-resident” status for organizations in your former state.
- Change your mailing address and use your Florida address for all correspondence.
- Transfer family possessions, paintings, heirlooms and collections to Florida.
The loss of tax revenue has prompted many state taxing authorities to assert income and estate tax claims against their “former” residents. It is constitutionally permissible for more than one state to tax you and your estate on the basis of domicile. Read more about this issue and others facing new Florida residents in The Florida Domicile Handbook.
One of the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was the phasing out and repeal of the credit that is allowed against federal estate tax liability for payments made for state estate and inheritance taxes. As a result, starting in 2005, the states no longer receive the credit, which typically ranged from 2-16 percent of a deceased person’s total estate.
In response to budget difficulties and the elimination of the state death tax credit, a number of states have “decoupled” their estate tax system from the federal estate tax. Some states had pre-existing inheritance taxes, but there are a number of states plus the District of Columbia that have passed legislation which imposes a new estate or inheritance tax to make up for lost revenues. Those states are: Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, Washington and Wisconsin. Other states are likely to follow suit in future years and amend their tax laws to bring in more revenues.
Thus, if a person from one of these states dies, the top federal rate of 47 percent will be added to the top state rate of 16 percent. And, although a deduction will be allowed for any state estate taxes paid (instead of a credit), the deduction will be worth only 7.52 percent, making the effective federal rate 39.48 percent. Therefore, the combined state and federal rate will be 55.48 percent.
To make matters worse, many decoupled states have not linked the value of assets exempt from state estate taxes to the increased estate tax exemptions enacted under EGTRRA. For example, Wisconsin, New Jersey, Rhode Island and the District of Columbia have all set their exclusions at $675,000. Most of the other decoupled states have set their exemptions at $1 million or below. Estates in these jurisdictions may owe state estate taxes even if they are exempt from federal estate taxes.
A few states, such as Florida, have a constitutional prohibition against a separate state estate tax. However, if a Florida resident has property located in a decoupled state, such as Illinois, it may impose taxes on that property on the difference between the Illinois and federal exemption amounts.
In light of the increasing federal deficits, many estate planning professionals believe Congress will revise the provisions of EGTRRA, possibly increasing the exemption amount to as high as $3.5 million per individual and freeze the estate tax rate at 45-47 percent. Even if this occurs, many states will have enacted their own taxes which they are likely to keep in place – with the associated planning problems and a combined tax rate that exceeds the previous high of 55 percent!
Q: Should I cash in my old insurance policy if I no longer need it?
A: Circumstances in life can change over time in such a way that maintaining an old insurance policy may become burdensome. Many things can affect your need to keep a policy including:
- Premiums that are no longer affordable
- Out-living your beneficiaries
- Tax law changes
- Sale of your business
In the past, your choices as to what to do with an unwanted policy were limited to either letting it lapse or surrendering it in for any cash value. Now you have another option, which for most is a better alternative – sell the policy for more than its current cash value.
The process of selling an existing insurance policy is known as “life settlement” and represents a growing industry. The companies that purchase policies are often backed up by large financial institutions, and purchase any type of policy, including term insurance – which has no cash value. Generally, the criteria for purchase include:
- Policy is over two years old
- Face amount of policy (or policies) is $500,000 or greater
- Insured has had a change in health
- Insured is over 65
If you meet the criteria, you may benefit in several ways. The proceeds of the sale could be used to:
- Allow you to dramatically reduce, sometimes even eliminate, the premium payments of a new replacement policy – with additional benefits, such as an extended guarantee
- Provide cash for investment purposes
- Use sale proceeds to fund a long term care policy
- Make gifts to family members
- Provide funds for charitable gifts
When your policy is sold to a life settlement company, the company becomes the owner and beneficiary of your policy and you receive a lump sum cash settlement. The company may offer other alternatives, including taking over premium payments and guaranteeing a portion of the death proceeds to your beneficiaries at your death. The net effect of a life settlement transaction is to provide you with either a higher amount of cash than if you had surrendered your policy or help relieve you of insurance premiums while allowing your family to share in the death benefits – on a guaranteed basis.
Life settlement is an important alternative to lapsing or surrendering an existing insurance policy that you no longer need and/or can afford. To learn more, contact your insurance specialist who can review your situation and show you various alternatives.