Tag Archives: Estate Planning

Protecting your assets in Florida

I read an interesting article online called “Dynasty trusts let wealthy beat the taxman” that explained why a dynasty trust is becoming more popular and wanted to share it with you.

In the article, author Elizabeth Ody, explains that “A dynasty trust funded with $10 million from a couple today could be worth as much as $184 million in 50 years, assuming no intergenerational transfer taxes and a 6 percent annual return, and before subtracting any federal income or capital-gains taxes paid on the trust’s investment returns. By comparison, assets not placed in a trust and taxed twice as an estate in that period could be worth $39 million at the end of 50 years, assuming a $1 million exemption and 55 percent top rate.”

This is a significant benefit to consider and should not be overlooked when you’re preparing your estate plan.

Many families in Florida have turned to funding dynasty trusts as a way to keep assets within the family. This type of trust has no expiration date, and assets (such as cash and stocks) can be passed on to multiple generations while increasing in value.

A dynasty trust essentially holds assets in trust without transfer of ownership to a beneficiary. Instead, future generations receive distributions from assets within the trust. The trust allows assets to grow safely and for tax purposes, assets remain valued at the amount they were worth when the trust was originally created, and for as long as they stay in the trust. Appreciation on those assets is exempt from estate taxes.

Protection provided by the dynasty or the “generation-skipping” trust is absolute so that future creditors of current or future family members cannot touch it. In Florida, an Irrevocable Life Insurance Trust (ILIT) can be designed as a dynasty trust. The ILIT allows proceeds to reach future generations and is not limited to the generation immediately following the grantor. Plus, each beneficiary will avoid being levied a tax.

Proper estate planning is vital to any family: not solely for millionaires. If you have assets that you want to protect or ensure the inheritance of your life’s accomplishments, then Florida law provides such protection through vehicles like the ILIT at generally less tax impositions compared to other states.

In my book, the Florida Domicile Handbook, you can find more information on these benefits of trusts.

But I’m certain you’ll find the reasoning is undeniable. Florida domicile offers one the most sensible asset protection destinations in the United States today. To find out more about Florida’s tax haven status, purchase a copy of the Florida Domicile Handbook.

The Repeal of the Estate Tax

The hot issue over in Ohio right now is the repeal of estate tax by 2013. There are those who want estate tax removed and there are others who want it retained.

An estate or inheritance tax is levied on an heir’s inherited assets if the value exceeds a threshold set by the state. In Ohio’s case, the exclusion limit is set at $338,833.

A coalition, called Protect Ohio’s Communities, contends that the estate tax constitutes a significant portion of the state’s budget. Repealing estate tax will adversely affect community services. Further, to make up for the lost budget, some other area will only be taxed or existing taxes will be raised.

On the other hand, Sen. Grendell supports the repeal of the estate tax in Ohio. To quote, it is “socialist and un-American.” He maintains that taxing estates has caused residents to move to Florida. And since this tax is dependent on deaths, the annual amount cannot be consistent hence should not be relied on to fund community services and expenses.

The House bill 153 for the repeal of the estate tax is now being considered by the Senate.

The battle continues in Ohio, while Florida continues to enjoy freedom from a separate state estate tax. The Economic Growth and Tax Relief Reconciliation Act of 2001 ensured that a separate estate tax would not be levied on Floridians without voter approval. When the Act went into effect, Florida opted not have another form of taxation to replace it.

Ohio, like a handful of states, is waking up to the reality that reducing taxes is a way to create jobs and keep people from moving to other states like Florida which are much more tax friendly. Ohio and the rest of the “rust belt” states need to focus on what is best for their residents. In my opinion, they should start by reducing taxes and the size of government. If they don’t more people will flock to states like Texas and Florida where the burdens imposed by government are much less severe.

To learn more about Florida’s taxation (or freedom from it), read Chapter 2 of the Florida Domicile Handbook.

Derek Jeter’s Tampa Mansion

American Baseball League player, Derek Jeter who plays shortstop for the New York Yankees has changed the landscape, if not the skyline of Tampa, Florida. A year after they started building, the biggest home in Hillsborough County is completed.

Jeter has long planned this project, buying adjacent lands in Davis Islands since 2005. The mansion, built in an English Manor style and situated near the water, cost $7.7 million.

With seven bedrooms and nine baths, the 30,000 square feet domicile sits on three lots in the Bahama Circle. It has two 3-car garages, a swimming pool that overlooks the ocean, a billiards room and a memorabilia room. Of course, it also comes with a small pier. All this to be protected from the public eye with a 6-foot privacy fence.

The Yankee reportedly made $21 million last year, so the $7.7 million mega mansion should be covered. Jeter also has another smaller house in Avila. Smaller because it is only 4,000 square foot and only cost him a mere $1 million. It is situated in Avila Golf and Country Club, north Tampa.

Aside from his homes in Florida, Jeter’s other assets include homes in Marlboro, New Jersey, Greenwood Lake, New York and a Trump World Tower apartment in Manhattan – the latter being currently in the market.

Jeter has claimed Florida residency, hence his exemption from state income tax. Although he works in New York, his residency and majority of assets are in Florida. Since 1994, Jeter has maintained a Tampa residence when he first started out with the Yankees.

Back in 2007, Jeter was hounded by New York tax officials. The issue was his failure to pay taxes between the years 2001 to 2003. His apartment purchase in the Manhattan Trump World Tower and an $8,000 monthly rental in Long Island brought him under tax scrutiny.

This new mega mansion in Tampa will help prove his intent and slide the scale in favor of Florida domicile. Assuming Jeter has filed a declaration of Domicile in Florida, his homestead will be under the vast umbrella of the asset protection laws of Florida.

Read all about Florida Homestead laws and protection in Chapter 3 of the Florida Domicile Handbook.

Documentary Stamp Tax

Documentary stamps are imposed on documents drawn to serve as promissory notes, mortgages, security agreements and other written agreements to pay money. In a real estate transaction, deeds are attached with actual stamps to show that the said document has paid its due to the county. Cash payments are not levied with this kind of tax. Basic amount of the doc stamp tax is 35 cents per $100 while documents that transfer an interest in real property are charged 70 cents per $100 or any portion thereof. Transfer of interest in real property documents include warranty deeds, quit claim deeds and contracts or agreements for a deed among others. For bigger loan amounts, tax is flat rated at $2,450. That is the maximum amount of expenditure for documentary stamp tax.

To illustrate, for a promissory note of $40,000 which is eligible for the basic documentary stamp tax of 35 cents per $100 the computation would be as follows:

Tax = $0.35 × ($40,000/$100) = $140

For a transfer of interest on a $1 million parcel of Florida real estate, 70 cents per $100 in documentary stamp tax will be paid. Calculation of tax will be as follows:

Tax = $0.70 × ($1,000,000/$100) = $7,000

For more information on documentary stamp tax and other related topics, grab your copy of “Florida Domicile Handbook” or subscribe to our blog at http://floridadomicileman.wordpress.com/.

Don’t Write a Check to a Charity

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.

Healey’s split domicile to take advantage of Florida residency

According to the Boston Globe, former Massachusetts Lieutenant Governor Kerry Healey and her husband are splitting their domicile to take advantage of Florida residency.

While there are times that a split domicile might be appropriate, there can be unintended issues for married couples.

First, it starts the clock ticking on one of the couple’s two $250,000 real estate exclusions. (a sale of a residence qualifies if it was a “primary residence” two out of the last five years). So if the home is sold after 3 years from the date of changing residence, there is only one $250,000 real estate exclusion available, not two ($500,000), as is the case for most couples.

Second, Florida does not allow a couple to benefit from two homestead exemptions, thus no Florida homestead exemption for the spouse changing to a Florida domicile – if the northern home is enjoying a homestead exemption.

Third, some states require a couple to file joint state tax returns if they are filing a joint federal return.

If you want to learn more about the benefits of Florida residency, buy The Florida Domicile Handbook and join me for my last Florida Domicile seminar of the season on Tuesday, March 22, 2011.

A Marital Obligation or is it Just Guilt?

A client sent me an e-mail asking this interesting question:

Q: Am I required to leave a certain portion of my estate to my surviving spouse?

With co-author Brad Galbraith’s help, here’s the answer we gave the client:

A: Under the laws of Florida, your surviving spouse may “elect” to receive 30% of your estate plus the value of certain lifetime transfers at your death even if such a gift would be against your wishes. This right is called the elective share. Consult with an attorney to ensure that your estate plan takes this elective share into account.

For example, your estate plan may be designed to hold your spouse’s elective share in trust instead of being distributed outright. Your spouse’s right to this elective share may also be restricted or eliminated with a pre- or post-marital agreement.

If you have a question that you would like answered on this blog, email me at mike@kilbournassociates.com.


6 questions to answer in your Revocable Living Trust

If your Revocable Living Trust will also act as a will, you may want to consider the following questions:

1)     Who do you want to inherit your assets and in what amounts or percentages?

2)     What should be the timing of the distributions of your assets to your various heirs?

3)     Who would you like to receive specific assets, such as your personal effects (e.g. car, watch, jewelry and artwork)?

4)     Should you leave assets outright or, as suggested above, in one or more trusts?

5)     If you decide on leaving assets in trust, who should be the trustee of each trust?

6)     Does it make sense to have a co-trustee, such as a trust company, for certain trusts for a period of time or for the life of the trust?

If you have questions about preparing your Revocable Living Trust, call me directly at (239) 261-1888 or email mike@kilbournassociates.com.


The Will to Live: What’s the Role of a Living Will?

A living will is a document that states your wishes for the use of life-sustaining procedures should you become terminally ill, you have an end-stage condition, or you are in a persistent vegetative state. Florida, like most states, has specifically approved the use of living wills by statute.

Florida’s living will laws contain safeguards to ensure peace of mind, such as a requirement that two physicians examine the patient and determine that recovery is no longer likely before life-sustaining treatments may be withdrawn. If you sign a living will, you can revoke it at any time by destroying it, directing its destruction or by signing a written revocation.

Although it may be unpleasant to think about, a Living Will can protect you, your estate and your heirs. For more information read the 2nd Edition of The Florida Domicile Handbook.