Tag Archives: Financial 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.

Florida Business Taxes

Despite the fact that there are a little over thirty kinds of taxes that a Florida business can be subjected to, there are only five that need to be studied if you are planning to start up or move your business to any Florida county. These five taxes are the sales and use tax, discretionary sales surtax, unemployment tax, communications services tax and corporate income tax. These are imposed on a majority of business in the state of Florida.

Starting a business can be difficult whichever state you choose. Fortunately, there are many local agencies such as the Small Business Administration (SBA) who can help new residents with their businesses whether its a new or relocated from another state. You can also approach the appropriate government agency. The Department of Revenue has several service centers that give you the advice and direction you need if you are thinking of starting a business, whether big or small, or if you are shopping for a new location for your business. You can attend one of the educational seminars which they host around the state from time to time. You can get in depth information about the taxes imposed on Florida businesses. Get in touch with DOR Taxpayer Services to get a complete list of required business taxes.

In the Florida Domicile Handbook, you will find more information about the opportunities for financial growth as a Florida domiciled resident. You can also find contact information on agencies that can help you, including the DOR Taxpayer Services, in the book.

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.

How to Protect Your Condo’s Contents

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.


File for 2011 exemptions now

It is now time to file for exemptions for the 2011 tax year!

If you live in Florida, you should be thinking about getting in your application for homestead, portability, widow, widower, disability, veterans, senior (older than 65), conservation, religious and charitable exemptions before March 1.

Persons filing for any exemption have to have a Social Security card. A husband and wife must both have Florida driver¹s license, if both drive. A widow must provide a copy of their spouse¹s death certificate.

Applicants filing for Homestead Exemption for the first time, must apply in person and have their recorded deed and proof of residency which includes Florida driver¹s license (with current address), Florida vehicle registration, Florida voter registration (with current address) and resident alien card, if not a citizen of the United States.

Applicants for disability exemption must provide a letter from a certified Florida physician verifying a totally and permanent disability.

Veterans Exemption applicants must provide documentation of percentage of service-connected disability from the US Department of Veterans Affairs.

Source: Polk County Property Appraisers office.

Tax advantages of a Revocable Living Trust

A revocable living trust can provide you with benefits you cannot receive with a will and will help minimize federal estate taxes.

A married person who leaves everything to his or her spouse in what is known as an “I love you” will avoids any federal estate tax at the death of the first spouse because of the unlimited federal marital deduction.  There is no tax on assets left to your spouse.

At the surviving spouse’s death, the property owned by that spouse, including the property inherited from the first spouse to die, is then subjected to the federal estate tax. The problem with this simple arrangement is that it wastes the “applicable exclusion amount” of the first spouse to die.

With a properly worded revocable living trust, it is possible to preserve your exemption by leaving the exemption amount either directly to others or to a trust that is set up to benefit your family, including your spouse.

A common arrangement involves the use of a revocable living trust that splits into two trusts upon the first death:
• A marital trust – also known as a qualified terminable interest property (QTIP) trust or the “A” trust
• A family trust – often referred to as a bypass trust, a credit shelter trust or simply a “B” trust

The family trust preserves the applicable exclusion amount of the first spouse to die while providing for the needs of the surviving spouse, while the marital trust preserves the unlimited marital deduction for the balance of the estate.

Discover how to protect your spouse and children and leave them a legacy free of legal headaches. Purchase your copy of The Florida Domicile Handbook today!

How a Revocable Living Trust Can Beat The Odds

You are four to six times more likely to become disabled than to die in the next year.

Many people feel that they have adequately planned for incapacity because they have a durable power of attorney. Unfortunately, many of these documents are dated and do not contain specific language required by state law, which can cause problems.

A revocable living trust, on the other hand, allows you to choose how you want your affairs handled if you become incapacitated and lets you set the priority of your wishes. Financial institutions are more likely to recognize and follow revocable living trust instructions when the grantor of the trust is disabled or incapacitated.

Without a durable power of attorney or an revocable living trust, if you become incapacitated, your spouse or your children would have to go through the legal process of guardianship. A spouse or an adult family member would likely be appointed to manage your affairs; he or she would be saddled with legal expenses and the red tape of the court system.

Fortunately, this can all be easily avoided with a revocable living trust. Your successor trustee manages your affairs beginning the moment you become disabled without any legal proceedings or court intervention.

Want to know more about what type of trusts are best for Floridians? Purchase a copy of the Florida Domicile Handbook today and protect what took you a lifetime to build.

Who gets your Florida home?

For estate planning purposes, the homestead residence in Florida may be the most difficult asset to transfer freely.

In general, when a homestead is owned solely by one spouse and that spouse dies, the surviving spouse obtains a “legal life estate.” The legal life estate gives the surviving spouse the right to posses and use the home for the remainder of his or her life. However, the remainder interest in the home goes to the original owner’s lineal descendants.

For example, assume you are married and currently live in a state other than Florida. You own a Florida home that you have used as your vacation home. In a will, you leave the Florida home to your children from a prior marriage. In this case, the Florida home is not your homestead and can be freely

However, if you move into the Florida home, declare Florida as your domicile and your spouse does not waive homestead rights before your death, your spouse will have a life estate in the home and your children from your prior marriage will receive the home only upon your spouse’s death, regardless of what your will says.

Discover how to best transfer your assets as a Florida resident by reading my book, The Florida Domicile Handbook.

Avoid the Pitfalls of Increasing Investment Taxes: Establish an Estate Plan

Continuing my discussion of the upcoming changes to federal estate taxes, one specific change concerns a noteworthy increase in taxes for savers and investors.

Among the lengthy list of expiring tax provisions, as of 2011, the capital gains tax will rise from 15 to 20 percent and the dividends tax will rise from 15 to 39.6 percent. In addition, these rates will rise an extra 3.8 percent in 2013.

As a saver or investor, this can certainly be a hindrance. However, you should be aware of two options that can help you avoid the pitfalls of this new taxation:

  1. Maximize Contributions to a Qualified Plan: There is no dividend tax or capital gains tax for transactions in a qualified plan, such as an IRA or 401(k) account. Thus, it would make sense to maximize contributions to these plans if you currently have one in place.
  1. Convert an existing IRA to a ROTH IRA – This Year: This may cause you to pay a tax (unless you have some loss carry forward or other write off to offset the amount converted), but 2010 is the last year you will be able to take advantage of the 35% bracket. The ROTH IRA will build up tax free, like a regular IRA, but withdrawals of the growth and earnings will be tax-free after five years. Also, you will not be required to take “Required Minimum Distributions” (RMDs) starting at age 70 ½. If you don’t have an IRA to convert, consider starting a ROTH IRA in 2010.

As a saver or investor, your ultimate goal is to preserve your estate. To ensure that your wealth is properly managed and preserved, a well-prepared estate plan is necessary, as it will allow you the power to give what you have, to who you want, when you want, in the way you want.

At Kilbourn Associates, we dedicate the time that is needed to properly evaluate your current situation, discuss your goals and develop the best plan for you and your family. Get on the path to financial independence and security by contacting us today, (239) 261-1888 or mike@kilbournassociates.com.