Tuesday, December 29, 2020

Why Estate Planning Is Critical for Same-Sex Couples

By Carol (Cara) K. G. Lutz, LL.M., Law Clerk, Morris Law Group

After the 2015 case Obergefell v. Hodges, same sex marriage is legal in all 50 states and comes with the same advantages that opposite-sex marriages do, such as tax considerations, intestacy law, and even in hospitals when only family is allowed to see the patient. All estate planning that is effective for heterosexual married couples now works in the same way for homosexual married couples. 

Issues of portability and marital deductions, to list a few examples, are treated the same way for all married couples, regardless of sex. Just like any other couple, same-sex couples should have the basic estate planning documents: Wills, Durable Powers of Attorney, Living Wills, and Designations of Healthcare Surrogate. These documents can name anyone, but as same-sex marriage is now legal, all couples who are married may refer to their partner as “spouse” and there will be no confusion.

Even so, unmarried same-sex couples require more advanced planning. Like any unmarried couple, there is no portability or marital deduction, and nothing will go to the partner in the case of passing intestate (dying without a will). Therefore, it is even more critical to have the necessary estate planning documents in place if the couple is unmarried. Without these documents, the partner of the descendant will not have a claim over any assets and could very likely receive nothing and have no decision-making ability in the event of an emergency. Especially for same-sex couples, the people that do have the ability to make decisions (e.g., family members) by state statute may not be aware of the relationship and assume it is platonic and not a romantic partnership, causing further grief.

This said, one major issue that the Supreme Court did not address in 2015 and continues to be a planning issue is children. Currently, it is not scientifically possible for a same-sex couple to both be the genetic parent of the same child. Other than adoption of a child that is not biologically either spouse’s, the typical solution is for the egg or sperm of one spouse to be used and a third party donor for the remaining required cell. What does this mean for the spouse that is not biologically related?

After a Florida case in 2015 to seek enforcement of the law, both same-sex parents are now permitted to be listed on the child’s birth certificate. While this does not solve all the potential legal issues, it does help with the day-to-day issues, like registering a child in school and being recognized as a parent by the school.

The simplest way around this and all legal issues is for the non-biological parent to adopt the child. This gives the parent all the legal rights he or she would otherwise have if there was a biological relation. Adopted children are treated the same as biological children for estate planning and tax purposes. It is no different than adopting a child with whom neither parent is biologically related.

However, there are some additional concerns for same-sex couples in conceiving a child that heterosexual couples who are unable to have children face as well. Sperm donors and some types of surrogates have given up all legal rights to any children born from their donations, assuming a preplanned adoption agreement has been signed as required. However, a female surrogate retains more rights if her egg is used and she carries the child. A surrogate in this scenario can renege on the arrangement within 48 hours of the birth and decide to keep the child, regardless of a preplanned adoption agreement: an upsetting idea to any couple. That is why it is extremely important to select a surrogate the couple trusts completely.

For more information about estate planning and advance directives, please contact Morris Law Group to schedule a consultation with one of our attorneys by calling (561) 750-3850 or emailing Info@Law-Morris.com.

Thursday, November 19, 2020

How Will the New Biden Administration Affect Your Estate Planning?

Now that the presidential election is over, with Joe Biden as the presumptive president-elect, what changes can be expected in regards to estate planning with the new Biden administration? 

President-Elect Joe Biden is expected to make some major changes after his inauguration in January 2021, including lowering the marginal tax and capital gains rates, reducing the federal gift and estate transfer tax exemption (currently at $11.58 million) and eliminating the step-up in basis. 

To optimize their clients' estate planning, Morris Law Group is advising clients to utilize their exemptions by making monetary gifts now prior to year end. 

Founding Partner Stuart R. Morris, Esq., CPA, B.C.S. discusses the impact of the 2020 election on estate planning with some action steps you can take now prior to year end in this new video on post-election estate planning. Click on the video below to watch it on YouTube. 

Time is of the essence, so please watch this short video and then give us a call to discuss the steps you can take to ensure your estate plan is ready for the new year. For more details, please contact Morris Law Group or call (561) 750-3850.

Wednesday, October 21, 2020

What You Should Know About Setting Up Florida Trusts with Out-of-State Beneficiaries or Trustees

By Carol K. G. Lutz, LL.M., Law Clerk, Morris Law Group
One of the benefits to living in Florida, beyond the nice weather and easy access to beaches anywhere in the state, is the lack of a state income tax. The amount of potential tax savings is what attracts many high net worth individuals, including celebrities, to be domiciled in Florida and have Florida trusts.
However, if the trust contains assets from another state, it may be subject to that state’s income tax. This can be costly for states with high taxes, like New York.
In order for a trust to be subject to New York income tax, it must be set up by a New York resident or have a New York domiciled trustee to be considered a resident trust. If neither of these facts are true, the trust is considered an exempt trust.
However, if there is any New York sourced income, the entire trust is subject to New York income tax and loses its tax exempt status. New York also has a throwback tax on distributions to New York resident beneficiaries from a trust.
This essentially means that a Florida trust with a New York trustee, beneficiary, or New York property that generates income will have to pay New York state income tax. This defeats the purpose of having a Florida trust if the entire trust must pay another state’s income tax.
If you would like more information about setting up a Florida trust or would like to meet with one of our attorneys, please contact us, call (561) 750-3850 or email us at Info@Law-Morris.com.

Estate Planning Post-Election: Biden vs. Trump on the Estate Tax

By Carol K. G. Lutz, LL.M., Law Clerk, Morris Law Group

With any presidential election, there is always the possibility of major changes in the law, especially tax law. Both Joe Biden and Donald Trump have discussed the estate tax in their tax plans, which naturally caught our attention as it is pertinent to our clients. 
With the current pandemic, recent polls have listed taxes as a primary concern of only 1% of voters at the moment, but that does not make the candidates’ tax plans unimportant. Joe Biden and Donald Trump have very different ideas when it comes to the estate tax.

Joe Biden's Tax Plan

Vice President Joe Biden's plan is to pass legislation as soon as possible to reduce the current exemption of $11.58 million to $5 million per person indexed for inflation. At the current exemption, less than 0.1% of people are subject to it. Joe Biden's plan of reducing the exemption to its previous amount, while including more people, still excludes the vast majority. 

In 2016, when the exemption was $5.45 million, 0.2% of Americans paid estate taxes. While this affects very few people, another aspect of Biden's plan does affect everyone: the elimination of the basis step-up. This feature in the tax code allows people to bequeath or devise property to another, and upon his or her death, the recipient receives it at the fair market value at the time of death instead of the purchase price. This eliminates any tax on the appreciation, which can save beneficiaries a substantial amount of money. Further, finding out the current fair market value of property is usually much simpler than trying to find out what the decedent paid for it originally.

Donald Trump's Tax Plan

President Donald Trump’s plan is less defined as far as numbers are concerned, but the strategy is clear: Make the estate tax apply to even fewer people. When running for his first term, he frequently said he would like to eliminate the “death tax,” just as George W. Bush said he would. September 11th and the War on Terror sidelined this goal for Bush and it became unlikely to pass such legislation through Congress. Donald Trump is also unlikely to be able to pass legislation eliminating the estate tax, so he has stated that he will push to increase the exemption, to what number has not been said.

The aim is to reduce the 0.1% of people subject to the estate tax to as close to zero as politically possible. Donald Trump would not change the tax code in regard to the basis step-up, allowing for gains in appreciated property to go untaxed to devisees and preventing the need to find the purchase price of every asset of a decedent.

Modifications to Your Estate Plan May Be Necessary

No matter who wins the election in November, the tax code will be subject to change and your estate plan may need to be modified. We’ll update you as the circumstances change.

For more information about the estate tax or tax planning, please contact us to set up a consultation with one of our attorneys at (561) 750-3850 or Info@Law-Morris.com.

Friday, September 25, 2020

New Video: Generation Spanning Trusts

Watch the latest video below by Stuart R. Morris, Esq., CPA, B.C.S., founding partner of Morris Law Group about a unique estate planning technique called a Generation Spanning Trust. For more information about Generation Spanning Trusts or to schedule a consultation with an attorney, visit www.law-morris.com, email Info@Law-Morris.com or call (561) 750-3850

Doing All Your Estate Planning Online?

By Carol K. G. Lutz, LL.M., Law Clerk, Morris Law Group

Have you seen websites offering end-of-life planning online? These sites purport to offer estate planning and advance directive documents from the comfort of your home without having to pay attorney prices to get your affairs in order.

Some of these websites also offer online grief counseling and the ability to send condolence packages when people cannot physically be there for each other in the wake of the current pandemic. While these last two features are excellent ideas for a world that has to stay apart while trying to stay together, planning your estate is not as simple as filling out an online questionnaire. By choosing an online platform, you are not getting all of the sophisticated, personalized options an experienced estate planning firm can provide you with.

These websites might be acceptable for simple estate matters or very young adults without heirs or assets, but for anyone with significant assets or complex needs, an online form will not go far enough to ensure your wishes are met and your potential taxes are minimized. Oversimplifying can lead to all sorts of problems for the administration of your wishes. For instance, something as simple as having one too few witnesses when signing a document could invalidate your entire estate plan and have your assets go to people you may not want to receive them, or cost you significantly more in taxes.

The Morris Law Group Difference

At Morris Law Group, our team of board-certified and expert attorneys have more than 150 years of combined estate planning and tax planning experience.

We regularly deal with complicated estate plans for our affluent and business owner clients, and our attorneys have a wide array of specialties, including wills, trusts and estates, asset preservationprobate and trust administrationspecial needs planningbusiness structuring and succession planninginternational tax planning, and charitable planning.

Additionally, we offer various kinds of trusts, including life insurance, credit shelter, special needs, and domestic asset protection trusts that will protect your assets and minimize estate taxes. At Morris Law Group, we can customize your estate plan to meet your specific goals and needs.

Every plan we design shares the common objective of efficiently transferring assets to chosen beneficiaries in the most protected manner and with the least possible tax impact. This is accomplished through our unique process, the Wealth Preservation Solution.SM 

Another unique option we offer is what we call our GPS or Generational Planning Solutions program, where we can review your assets, make changes if your family situation changes due to births, deaths, marriages, etc., ensuring your legacy continues for multiple generations.

While it is great that the internet is trying to make estate planning more easily accessible for everyone during such unprecedented times, as all people need an estate plan, an online form cannot account for all the complexities of your individual situation and could cost you and your loved ones even more in taxes and time spent correcting any mistakes.

Se Habla Espanol

Our team can meet with you at your convenience in person, over the phone or by video conference. In addition, we now offer consultations in Spanish as well as English. For more information about how Morris Law Group can assist you with your estate planning, please contact us or call (561) 750-3850.  

How Historic Low Interest Rates Can Work in Your Favor

By Carol K. G. Lutz, LL.M., Law Clerk, Morris Law Group

The 7520 rate in September 2020 is the lowest rate seen historically, a mere 0.4%. Just a few months ago in February, it was 2.2%. Just as we said back in March that such low rates made it the perfect time to create charitable lead annuity trusts (CLATs) and grantor retained annuity trusts (GRATs), now it is even more opportune than ever before. For comparison, the 7520 rate in February of 1995 was 9.6% and it was 11% in June 1990. May of 1989 had the highest rate in modern history of 11.6%. 

For illustration, forming a 20-year CLAT right now with $1 million with a payout of 5.23%, assuming an 8% growth rate, would result in growth of over $2.3 million, a total payout of $1,042,600 for charity and a remainder of $2,275,385 for your descendants transfer-tax free. Click here to read more about the benefits of the current low-rate environment or watch an important video about it by Stuart R. Morris, Esq., CPA, B.C.S. 

Forming a 10-year GRAT using the same numbers and growth assumptions results in growth of $704,883 with the grantor getting an additional $22,190 from his or her initial investment and passing $682,754 transfer tax free to descendants.

With the annual growth rate, in this example assumed to be 8%, being so much larger than the 7520 rate, this maximizes the amount of money that will be passed to descendants transfer-tax free. The difference in the annual growth rate and the 7520 rate is what gets passed to descendants without a transfer tax.

Put simply, with the 7520 rate being at a historical low, proper use of CLATs and GRATs may result in huge tax savings.

For more information about trust-based estate planning, please contact Morris Law Group or call us at (561) 750-3850.