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Wednesday, October 29, 2014

Protecting Your Legacy with Estate Tax Planning

You spend your whole life building your legacy but sadly, that is not always enough. Without careful estate tax planning, much of it could be lost to taxes or misdirected. While a will or living trust is essential for dividing your estate as you wish, an estate tax plan ensures you pass on as much of your legacy as possible.

Understanding estate tax laws

For the past decade, estate tax laws have been a sort of political football with significant changes occurring every few years.  The good news is that the 2013 tax act made the basic $5 million estate tax exemption “permanent,” but at a higher rate of 40%, though the law continues to adjust the exemption level for inflation. With this adjustment, the 2013 exclusion is $5.25 million per person ($10.5 million per married couple). The law also retained exclusion “portability” which means that if one spouse dies in 2013, the surviving spouse may pass on the unused portion of the deceased spouse’s exclusion. This portability is not automatic, however. The unused portion needs to be transferred by the executor to the surviving spouse, and a special tax return must be filed within nine months. The surviving spouse does not have to pay estate taxes at this time, they only become due after both spouses have died.

Optimizing your estate plan

One way to maximize the amount you can pass on is through annual gifting while you are alive. An individual is allowed to give $14,000 each year to another individual, tax-free. If you give more than that, it will reduce your basic lifetime exclusion. So, if you give a child $50,000 this year, your basic $5.25 million exclusion will be reduced by $36,000 at the time of your death. You can gift as much as your full $5.25 million exclusion before incurring taxes, although doing so would “exhaust” your estate tax exemption at death. Gift tax rates were raised to 40% in 2013 and are paid by the giver, not the recipient.

An experienced estate tax planning attorney can help minimize potential gift and estate taxes by:

  • Identifying taxable assets
  • Transforming your wishes into a will or living trust
  • Keeping you apprised of federal and state tax law changes
  • Establishing an annual gifting plan
  • Creating family and charitable trusts
  • Setting up IRA charitable rollovers
  • Setting up 529 education savings plans
  • Helping you create a succession plan for your family business

It’s never pleasant to consider the end of your life, but planning for it will help ensure that the things you care about are cared for. It is one of the greatest gifts you can give your loved ones.


Tuesday, October 21, 2014

Traveling Vietnam Wall Memorial

This weekend, Ryan and Michelle Monk took their children Hannah, James and Liam to the traveling Vietnam Wall Memorial. The Wall is a reminder of the enormous sacrifices that our military and military families have made and continue to make. We are forever grateful. 


Thursday, October 16, 2014

Family Foundations: What, Why, and How

Families with significant net worth who have a tradition of philanthropy often consider establishing a charitable foundation as part of their estate plans.   While there are a number of advantages to using family foundations as a philanthropic vehicle, families need to seek guidance from estate planning and tax professionals to ensure it is the best option for achieving their objectives.

According to The Foundation Center, there are over 35,000 family foundations in the US, responsible for more than $20 billion in gifts per year.   While some foundations have tens of millions in assets, more than half report holdings totaling less than $1 million.  

Advantages
Minimizing various tax burdens is one benefit of creating a family foundation.  However, if tax issues are your primary concern, then a different asset management and distribution vehicle will probably better suit your needs.  While it is true that family foundations offer certain tax advantages—both in terms of current income tax obligations and future estate tax burdens—family foundations are also under many legal and regulatory obligations.  These ongoing obligations mean that your family should choose to build a family foundation only if ongoing philanthropic giving is an enduring family goal.

Non-tax-related benefits of a family foundation include the following:

  • Managing the foundation may provide employment for one or more family members
  • A family foundation allows founders to involve family members in family wealth management, especially those who lack interest in the family business
  • The foundation founder can maintain influence over recipients of charitable giving for generations to come
  • A family foundation makes an excellent repository for all charitable giving requests.  A formal process can be established to ensure grant applicants are not arbitrary.
  • A family foundation can serve as a formal manifestation of a family’s philanthropic culture.

Types of Family Foundations

There are many different types of family foundations, each with certain advantages, disadvantages, and tax and regulatory obligations.  The main types of family foundations include:

  • Private non-operating family foundations which receive charitable donations from the family, invests those funds and makes gifts to other charitable organizations or individuals.
  • Private operating family foundations which actively engage in one or more philanthropic activities, as opposed to making donations to other foundations that perform active charitable work.
  • Supporting organizations which are designed to provide financial support to one or more specific public charities
  • Publicly supported charities can be seeded with family philanthropic funds but then also take donations from the public. Publicly supported charities must meet specific Internal Revenue Service requirements to maintain their status as publicly supported charities.
     

Issues to Consider when Establishing a Family Foundation 

  1. How much money do you plan to give to the foundation at its inception?
  2. Do you anticipate volunteer help from your family to run the foundation, or will the foundation need to pay one or more salaries?
  3. Does your family wish to support one or more specific charities, or do you want to fund a foundation which can ultimately choose among other charities in specific fields of philanthropic work?
  4. Does your family want to actively engage in philanthropic work or make gifts to other organizations that are already engaged in such work?
  5. Does the foundation founder prefer to exert strict control over gifts the foundation makes, or only to generally specify the types of philanthropic work he or she wishes the foundation to support?

Once you and your family have carefully thought through these considerations, you should consult with an estate planning attorney and other tax advisors to determine which type of family foundation most effectively meets your family’s giving objectives.


Wednesday, October 8, 2014

A Simple Will Is Not Enough

A basic last will and testament cannot accomplish every goal of estate planning; in fact, it often cannot even accomplish the most common goals.  This fact often surprises people who are going through the estate planning process for the first time.  In addition to a last will and testament, there are other important planning tools which are necessary to ensure your estate planning wishes are honored.

Beneficiary Designations
Do you have a pension plan, 401(k), life insurance, a bank account with a pay-on-death directive, or investments in transfer-on-death (TOD) form?

When you established each of these accounts, you designated at least one beneficiary of the account in the event of your death.  You cannot use your will to change or override the beneficiary designations of such accounts.  Instead, you must change them directly with the bank or company that holds the account.

Special Needs Trusts
Do you have a child or other beneficiary with special needs?

Leaving money directly to a beneficiary who has long-term special medical needs may threaten his or her ability to qualify for government benefits and may also create an unnecessary tax burden.  A simple vehicle called a special needs trust is a more effective way to care for an adult child with special needs after your death.

Conditional Giving with Living or Testamentary Trusts
Do you want to place conditions on some of your bequests?

 

If you want your children or other beneficiaries to receive an inheritance only if they meet or continually meet certain prerequisites, you must utilize a trust, either one established during your lifetime (living trust) or one created through instructions provided in a will (testamentary trust).

Estate Tax Planning
Do you expect your estate to owe estate taxes?

A basic will cannot help you lower the estate tax burden on your assets after death.  If you think your estate will be liable to pay taxes, you can take steps during your lifetime to minimize that burden on your beneficiaries.  Certain trusts operate to minimize estate taxes, and you may choose to make some gifts during your lifetime for tax-related reasons.  

Joint Tenancy with Right of Survivorship
Do you own a house with someone “in joint tenancy”?

“Joint tenancy” is the most common form of house ownership with a spouse.  This form of ownership is also known as “joint tenancy with right of survivorship,” “tenancy in the entirety,” or “community property with right of survivorship.”  When you die, your ownership share in the house passes directly to your spouse (or the other co-owner).  A provision in your will bequeathing your ownership share to a third party will not have any effect.

Pet Trusts
Do you want to leave money to your pets or companion animals?

Pets are generally considered property, and you cannot use your will to leave property (money) to other property (pets).  Instead, you can use your will to name a caretaker for your animals and to leave a sum of money to that person for the animals’ care. 


Tuesday, October 7, 2014

81-year-old Oak Park resident takes skydiving in stride

When Irene Moeller heard that some Oak Park Retirement residents might go sky diving, she was interested. Adventure is nothing new for the 81-year-old Brooklyn, N.Y., native. She has flown in a stunt plane, doing spirals and loops as part of an air show, and also spent time in a helicopter. Moeller has already experienced white water rafting, horseback riding and a zip line while a resident of Oak Park.

Ryan Monk, owner of Monk Law Firm, sponsored Moeller for the cost of her skydiving adventure.

“I do a lot of estate planning for the elder residents at Oak Park,” Monk said. “I want to serve those folks who have served our community for many years. This is an opportunity to celebrate life and pay it backward to them. But I can tell you that this is the closest I am ever going to come to jumping out of an airplane.”

Click here to read more.


Thursday, October 2, 2014

Come visit us at our new location in Baxter Village!

Monk Law Firm is pleased to announce our new location in Fort Mill, SC, Baxter Village business center. We now have two convenient locations in North Carolina and South Carolina.

Baxter Address:
1184 Springmaid Ave., Suite 201, Fort Mill, SC 29708

Charlotte Address:
13315 Carowinds Blvd., Suite Q, Charlotte, NC 28278 

Call today to schedule a free consultation to discuss your estate planning needs. Receive a FREE MEDICAL RELEASE FOR MINOR CHILDREN.

* Free Medical Release only available for Baxter Residents who schedule an in-office appointment by 12/31/2014.


Tuesday, September 30, 2014

How to Keep Your Affluent Children From Turning Into … Well, … Brats

Congratulations are in order—you have accumulated enough wealth to be concerned about eventually passing it along to your children and grandchildren in a manner that will encourage them to lead positive and productive lives.  Like many, your objective is to allow your children to enjoy the rewards of wealth without becoming irresponsible, overindulgent or feeling entitled to anything money can buy.

When it comes to sharing one’s wealth with adult children, there are some general principles that may help you guide your children as they shape their values.  Two quotes about sharing wealth with children are an excellent starting point:

I wanted my children to have “enough money so that they would feel they could do anything, but not so much that they could do nothing.” – Warren Buffett

“It’s better to give with warm hands than with cold ones.” – Unknown

Establish Inter Vivos Trusts for Your Children, And Use Restrictions Creatively

You can establish inter vivos trusts (trusts that go into effect during your lifetime) and appoint professional trustees during your lifetime.  Consider some combination of the following restrictions on the trust funds to help your children develop into competent, capable adults:

  • Make receipt of funds dependent on employment
  • Use trust funds to match income from employment
  • Prohibit distribution of trust earnings until the child reaches a certain age (it is not unheard of to distribute trust earnings to children once they reach age 65)
  • Make attaining a certain level of education a prerequisite to distribution of trust income
  • Consider establishing a charitable trust or family foundation, with room for employment of your adult child in the foundation’s management

Consider a generation-skipping trust, so that your wealth is shared directly with grandchildren

Make Gifts or Loans During Your Lifetime—And Not Just Gifts of Money

This is the meaning behind the quotation above regarding warm hands and cold ones.  It is better, in so many ways, to give gifts during your lifetime rather than after your death.  In addition to gifts, consider making strategic, interest-free loans to your children to help them achieve certain goals without losing a lot of their own income to interest payments:

  • Interest-free loans for higher education
  • Interest-free loans for private education for grandchildren
  • Interest-free loans for home purchases

In addition to giving gifts of money or making strategic loans, there are other “gifts” you can give your children to help them learn to live with wealth.  Consider the following suggestions,:

  • Hire a professional to teach your children how to manage their money, instead of banking on your children listening to your own lessons.
  • Pay for family vacations that serve a philanthropic purpose, such as travel to Africa to deliver medical equipment to a remote town or travel to South America to help clean a national park.
  • Begin or continue a family tradition of local volunteer work with disadvantaged people in your own community to ensure that your children get firsthand knowledge of how fortunate they are to have the resources your family has accrued.

In general, experts agree that families fare better when their wealth is used to enrich their lives and to help others less fortunate.  Give your children opportunities to learn to use money in responsible ways, from as early in their lives as possible.  Show them the difference between buying a new sports car and donating the same amount of money to a program that sends food to people in need.  That isn’t to say a new sports car shouldn’t be on the shopping list – but perhaps it shouldn’t be the only thing on the shopping list.


Wednesday, September 17, 2014

Don't Disinherit with a Small Amount

There are a lot of myths and misconceptions surrounding estate planning. Many people think that a last will and testament is the only estate planning document you really need. This of course is false. Others assume that you only need to have an estate plan in place if you’re a millionaire. This too is false. Another popular myth in the world of estate planning is that the best way to disinherit a relative (particularly a child) is to leave him or her a single dollar in your will. You probably guessed it- this too is entirely false.

The truth of the matter is that you must be very careful with leaving someone you really want to disinherit a token gift of $1 or some other small amount. By doing so, you have now made that person a beneficiary of your estate. It is possible, if not likely, that state law will require your executor to provide all beneficiaries with copies of all pleadings, an accounting, and notice of various administration activities. This may make it easier for this "beneficiary" to now complain about things and may cause problems for your executor which could cost your estate money.

Instead of leaving a token amount, you might consider mentioning the person by name so it is clear that you have not simply overlooked them. Then, you would specifically state you are intentionally disinheriting them from your estate. Also, consider if you wish to disinherit that person's children or more remote descendants and if so specifically state that as well in your will. You should consult with an estate planning lawyer to assist you in the proper wording as you will want to make sure there is as little likelihood of a will contest as possible.


Thursday, September 11, 2014

Remembering all of those lost 13 years ago today. Never forget.

The attacks of September 11th were intended to break our spirit. Instead we have emerged stronger and more unified. We feel renewed devotion to the principles of political, economic and religious freedom, the rule of law
and respect for human life. We are more determined than ever to live our lives in freedom.

--Rudolph W. Giuliani

December 31, 2001



Thursday, September 4, 2014

Is a copy of a will sufficient?

Many people keep their important documents at home where they are easily accessible. It’s not at all uncommon to find people with a filing cabinet or even a shoe box containing passports, account statements, deeds, tax returns, birth certificates and social security cards. Wills are often added to these files once the estate planning process is completed. In choosing to store your important estate planning documents at home, however, you risk having the originals lost or destroyed in the case of fire, flooding or theft. So what happens if the original version of your will is lost or ruined?

Generally when a person dies, state law determines what must happen in the state probate proceeding. In most cases, the "original" of the will must be submitted to the probate court in the county where the person resided. If the original of the will cannot be located and provided to the court, there likely is a provision in your state's probate code that would permit the submission of a photocopy of that signed will.

In many cases, the attorney who prepared the will maintains a copy of the estate planning documents. Assuming, that the copy your attorney has could be submitted to the probate court, additional steps may need to be taken, and additional pleadings prepared in order to submit a copy.

Should you lose the original copy of your will, the best practice would be for you to execute a new will which would make things easier for your family and loved ones upon your death. In that case there would be better assurances that your wishes were followed and carried out. Preparing a new will should not take much time for your attorney. He or she likely still has the word processing file on his or her computer, and could easily modify it for you to execute again. If for some reason this is not done, you may wish to execute a document stating the original was destroyed in a flood or fire but that you did not intend to revoke it. However, it’s important to note that this may not be effective in every instance as many states have very strict requirements in terms of requiring originals and execution formalities.

To keep the originals of your estate planning documents safe, even in the face of disaster, you might consider purchasing a fireproof/waterproof safe for your home or rent a safe deposit box with a local bank where you can still easily access your documents but keep them secure off-site.


Thursday, August 28, 2014

Protecting Your Vacation Home with a Cabin Trust

Many people own a family vacation home--a lakeside cabin, a beachfront condo--a place where parents, children and grandchildren can gather for vacations, holidays and a bit of relaxation. It is important that the treasured family vacation home be considered as part of a thorough estate plan. In many cases, the owner wants to ensure that the vacation home remains within the family after his or her death, and not be sold as part of an estate liquidation.

There are generally two ways to do this: Within a revocable living trust, a popular option is to create a separate sub-trust called a "Cabin Trust" that will come into existence upon the death of the original owner(s). The vacation home would then be transferred into this Trust, along with a specific amount of money that will cover the cost of upkeep for the vacation home for a certain period of time. The Trust should also designate who may use the vacation home (usually the children or grandchildren). Usually, when a child dies, his/her right to use the property would pass to his/her children.

The Cabin Trust should also name a Trustee, who would be responsible for the general management of the property and the funds retained for upkeep of the vacation home. The Trust can specify what will happen when the Cabin Trust money runs out, and the circumstances under which the vacation property can be sold. Often the Trust will allow the children the first option to buy the property.

Another method of preserving the family vacation home is the creation of a Limited Liability Partnership to hold the house. The parents can assign shares to their children, and provide for a mechanism to determine how to pay for the vacation home taxes and upkeep. An LLP provides protection from liability, in case someone is injured on the property.

It is always wise to consult with an estate planning attorney about how to best protect and preserve a vacation home for future generations.


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| Phone: 803-594-4453
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