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Estate Planning Services
Assistance with Living Trusts, Wills (simple & complex), Powers of Attorney, Living Wills, Irrevocable Trusts, Family Limited Partnerships, and Charitable Giving.

When Loved Ones Pass Away
Probate Assistance, Trust Administration, and Probate Litigation.

Incapacity Planning
Assistance in pre-planning the handling of a client's affairs in the event they become disabled before passing away.

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Business Succession Planning, Small Business Planning, and Lawsuit and Asset Protection.

Elder Law & Medicaid Services
Helping clients qualify for government benefits legally and ensuring their estates are preserved in the process.

Estate Planning for the GLBT Community
Guidance and assistance with Living Trusts, Health Care Powers of Attorney, and Asset Distribution.

Planning for Those With Special Needs
Assistance in creating plans with disabled family members in mind.

Financial Advisor Education Corner
Comprehensive resource center that includes timely Educational Alerts and FYIs, along with Continuing Education Programs for Financial Advisors, covering fundamentals to advanced estate planning and taxation topics.

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HOME > Financial Advisor Education Corner > Educational Alerts

Educational Alerts
Educational Alerts are written on topics that effect various aspects of estate planning and the laws that govern it. They are usually published and posted to this site at the end of each month. Occasionally newsworthy events will initiate the release of additional alerts at the time the news breaks. The purpose of an Estate Planning Update is to bring important information to the financial advisors in the community. Our hope is that this information better equips you to assist your clients.

Reddish Law Firm, P.L. releases important estate planning and related articles on a regular basis. Please take a moment to register to receive full access to our Educational Alerts and FYIs.

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Fate of Some Forms of Medicaid Planning in Jeopardy as Planners Await Final Vote on Budget Package from Congress
A look at the current status of the Budget Reconciliation that will enact punitive new transfer rules for gifts in connection with Medicaid planning, as well as other substantive changes. Because of some last minute maneuverings of the Senate Democrats, the Bill will need to win another majority vote by the House before it becomes law. The proposed changes will significantly impact Medicaid planning opportunities in many circumstances, so it is imperative that all Medicaid plans be reviewed in light of the contents of the Bill.

Upcoming Estate Tax Reform May Bring Changes
This provides a look at proposed estate tax reform and how it may affect planning.

Katrina Emergency Tax Relief Act Offers Short-term Charitable Tax Planning Opportunity - But Be Careful!!
The article examines the charitable planning aspects of the hurricane Katrina legislation. It provides a strategy for charitable gifting of retirement plan assets.

Enrollment Period for Medicare Part D on the Horizon
This article gives a brief explanation of Medicare Part D, the new prescription drug plan. Seniors will begin receiving information about this plan between mid-October and year-end.

Fifth Circuit Releases Long Awaited Strangi Opinion
This month's alert highlights the findings of the Strangi 4 FLP case. This is the second appeal to the 5th Circuit. The opinion is a partial victory for the IRS, but the key points of the case are the issues regarding implied agreements (and use of FLP assets to pay estate administration expenses, debts of the decedent and estate taxes) and what is business and non-business purposes are sufficient to meet the "bona fide transfer for fair value" exceptio under IRC 2036.

FDIC Simplifies Trust Rules: Expanded Coverage Could Benefit Many Consumers
In 2003, the Federal Deposit Insurance Corporation ("FDIC") solicited comments to its two proposed alternatives for simplifying the rules for insuring bank accounts owned by trusts. After reviewing the comments it received, on January 13, 2004 the FDIC announced a new regulation for trust bank accounts.

Limited Liability Company Provides Answer to Trust Termination

It is becoming more common to leave assets at death in trust for children and other beneficiaries. In many instances, this strategy affords the beneficiaries protection from creditors and protection of their inheritances from divorcing spouses. When trust assets consist of business holdings, real estate or a diverse portfolio of securities, it also provides for centralized management and potential economies of scale.

Important Estate Planning Numbers for 2004
Starting in 2004, the estate tax and gift tax systems are no longer in pari materia. How will this affect your clients giving?

Circumstances Surrounding Drafting, Execution, and Administration of a Prenuptial Agreement Determine Its Effectiveness
The planning done before marriage is often as important as planning after marriage in assuring that a client’s estate planning wishes are carried out. Laws governing prenuptial agreements vary somewhat from state to state, but often the circumstances surrounding the drafting, execution, and administration of a prenuptial agreement are crucial to the effectiveness of the agreement.

Walking Through the "Basic" Estate Plan
Start your clients off with the very basics so that they appreciate the value of each planning strategy you employ.

JGTRRA Brings Tax Relief for Businesses
In this e-alert, we summarize how JGTRRA brings tax relief to small businesses and corporations.

Tricks and Traps Concerning Annuities
Because there are many tax traps concerning annuities, it is important for the financial advisor to know the treatment of annuities when advising clients.

Care Must Be Taken When Disinheriting an Heir
It is not uncommon for a person to place provisions in his or her will or trust to exclude an heir from receiving an inheritance. Such was the desire of Mary Bartels, who wished to disinherit her daughter, Deborah Smith, and whose will was the subject of dispute in the case In the Matter of the Estate of Mary Alberta Bartels, Deceased, 184 Or. App. 448, 56 P.3d 501 (October 23, 2002).

IRS Scores Two Victories in Recent FLP Cases!
In recent years it has become rather common place for the attacks on Family Limited Partnerships ("FLPs") by the IRS in Tax Court and District Court to result in losses for the IRS. So it was rather unusual to see the IRS score a win, much less two wins, in recent months.

IRS Releases Final Regs for IRAs and Retirement Plans
The Internal Revenue Service recently released, in T.D. 8987 (April 16, 2002), the long awaited Final Treasury Regulations for Internal Revenue Code ("IRC") § 401. These regulations replace Proposed Regulations dating back to 1987, with modifications. The Final Regulations are effective starting January 1, 2003, but can be used in calculating Minimum Required Distributions ("MRDs") for calendar year 2002, as described below. Some of the key provisions of the Final Regulations are as follows:

So You Thought Estate Taxes Were Going Down?
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") provides for a gradual decrease in the highest marginal federal estate tax rate between 2002 and 2007. EGTRRA also provides for a periodic increase in the Applicable Exclusion Amount, or the size of an estate that can escape the federal estate tax, between 2002 and 2009. For instance, in 2002, the highest marginal estate tax rate is scheduled to drop from 55% to 50%, and the AEA is scheduled to increase from $675,000 to $1 million. With these changes one would expect that estate taxes paid by all taxpayers will decrease in 2002. Unfortunately, that isn't true.

Recent Events Affect Estate Planning
The tragedies of September 11th led to an erosion of consumer confidence and an increase in economic uncertainty that prompted the Federal Reserve to lower short-term interest rates to the lowest levels in over thirty years. Not only does the lower interest rates effect your clients' financial and retirement plans but, it also impacts the effectiveness of certain estate planning strategies.

Clients Should Use Attorney-Drafted Powers of Attorney for Property
After the incapacity of an individual, powers of attorney often are used to initiate or continue annual gifting programs to reduce the size of the incapacitated individual's estate for estate tax purposes - or as part of a Medicaid qualification strategy. Using a generic power of attorney obtained off the internet or from the legal forms department of a book, stationery or office supply store can often lead to problems. This is even true of the use of statutory power of attorney language provided by a state's legislature.

Liability for Failure to Conduct Post Mortem Estate Planning and Administration
More and more, the failure to properly discharge fiduciary duties and to find and exploit various post-death options and elections to reduce estate taxes have resulted in large damage awards against executors, trustees and their professional advisors.

Alternative Valuation Provisions and Other Basis Provisions Under the Internal Revenue Code
In our last Fax Alert, we defined basis step-up (or step-down) and discussed how it was calculated with regard to Spousal Joint Tenancy (or Tenancy by the Entireties), Non-Spousal Joint Tenancy and Community Property. In this edition, we will start off by discussing how the use of the Alternative Valuation provisions under Internal Revenue Code ("Code") Section 2032 affects the basis of property; how basis is determined for assets where special valuation has been elected for estate planning purposes, such as with farm land (Code Section 2032A), family business interests (Code Section 2057), and conservation easements (Code Section 2055(f)).

Getting a "Step-Up" Under the Internal Revenue Code
Many people have heard of the "step-up" in basis for property received by inheritance, but don't know exactly what that means. One's "basis" in property is what determines if there is a gain or loss upon sale and Internal Revenue Code (hereinafter "Code") § 1012 generally defines basis as the cost of such property. But what about property that doesn't have a cost to the holder, such as property acquired by inheritance or gift?

Who Pays the Estate Tax When Someone Passes Away?
In 2001, Donald Decedent dies with an estate plan in place which leaves the residue of his estate as follows: a) $500,000 to his children from a previous marriage, b) $500,000 to his children from his current marriage, c) $500,000 to charity, and d) $500,000 to his wife at the time of his death. Who pays the federal and state transfer taxes of at least $125,250 under these circumstances? The answer is, "it depends." Liability for the payment of the estate tax would be governed by the "tax allocation clause" contained in Donald Decedent's trust agreement (or his Will, if that is the governing instrument). If Donald had no trust or Will, or if his Trust or Will was silent about the payment of transfer taxes, then liability for the payment of the transfer taxes would be governed by state law.

Analyzing the Tax Effects of Deferred Annuities: Part Two
There are three parties to an annuity contract. There is the policy owner who, as the name suggests, owns the annuity and has the authority to name the annuitant and the beneficiary. The owner may also be the party who receives the annuity payments. The annuitant is the party whose life is used to determine the length of any annuitized payments. And finally, there is the beneficiary. The beneficiary receives the annuity proceeds upon the death of the policy owner or the annuitant, depending upon the contract type. The death of these parties, specifically the policy owner and the annuitant, may play a key role as to whether the annuity's tax-deferred status continues.

An Advanced Technique to Remove Life Insurance from the Estate
Unless steps are taken to remove it, the death benefit of a life insurance policy owned by the insured is included in his or her estate under Internal Revenue Code Section ("IRC §") 2042. One way to remove the death benefit from the estate of the insured is to gift the insurance policy to the insured's children or to an Irrevocable Life Insurance Trust ("ILIT"). The value of the gift will be the interpolated terminal reserve ("ITR") of the policy (Treasury Regulation § 25.2512-6(a)), which can usually be roughly approximated from the cash value of the policy.

IRA Strategies for the Younger Surviving Spouse
A young surviving spouse who is named as a beneficiary of his or her deceased spouse's IRA is faced with many planning pitfalls and three basic distribution choices with regard to what to do with the IRA assets.

Trust-Owned Life Insurance: Who's Responsible for What?
A difficult aspect of planning for the future of a client is choosing what vehicle to utilize to realize the client's goals. Once that heavy task is accomplished, and the plan placed in action, it is easy to assume that all the work is complete. However, overlooking the ongoing responsibility for the client's estate plan can prove to be fatal. This Advisor's Fax Alert discusses the ongoing fiduciary responsibility owed specifically when dealing with trust-owned life insurance (TOLI).

Advanced Estate Planning - A Client Handout
The following text is intended to provide financial professionals with a method to inform their clients of the general principles, and some examples, of advanced estate planning without requiring that you spend non-chargeable time marketing to your client.

IRA vs. Life Insurance: It's A Balancing Act
Estate and financial planners often confront the issue of how to plan for their clients that have large IRAs, some making up most of the clients' estate. However, too often certain types of planning are overlooked in the decision making process. In the case of a client who has a large IRA account and is unlikely to need the funds for living, life insurance may be the answer.

IRAs - Planning for the Initial Required Minimum Distribution
IRAs frequently represent a major asset in the typical client's estate, and income tax planning for these investments can be as important as estate tax planning for them. In this Alert, we will describe the rules dealing with the mandatory distributions from the IRA to the owner and how advisors may reduce the income taxes due on the first required payment.

Avoid Failure to File Penalties on the Death of the Grantor of a Revocable Trust
PLR 9740009 points out the need for practitioners to carefully consider the potential for penalties for failure to file income tax returns after a client's death. 9740009 dealt with a decedent who died intestate and no formal administration of the estate was done for 8 years, and no returns were filed for the 8 years.

Make Sure Your Clients Don't Make These Estate Planning Mistakes
Financial Advisors are often their clients' first line of defense on a whole host of issues. Estate Planning is just one of them. As you work with your clients year after year, help them protect their interests by letting them know whenever they're making one of these estate planning mistakes.

Making the Most of Life Insurance: Irrevocable Life Insurance Trusts
We all know life insurance is important. But buying life insurance alone may be only part of the solution. Depending on how your clients own that policy, it can actually contribute to one of the problems they thought they were solving: estate taxes. An irrevocable life insurance trust can help your clients make the most of their life insurance investment.

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