Estate Planning Opportunities Created by the New Tax Law

The Tax Cuts and Jobs Act (“The Act”) passed by Congress and signed by the President at the end of last year included significant changes in the Estate and Gift tax provisions of the Internal Revenue Code that open planning opportunities for limited time. For clients looking to insure their estates take advantage of every opportunity it is now time to review whether more advanced planning strategies are appropriate.

With the adoption of the Act, Congress changed the Estate, Gift, and Generation-Skipping Transfer (GST) tax exemptions under the Internal Revenue Code. The prior law exempted the first $5 million (as adjusted for inflation in years after 2011) of transferred property for each taxpayer from Estate and Gift Tax. This allowed a married couple a total exemption of  $10.9 million of assets in 2017.

Under the new law, for estates of decedents dying and for gifts made during lifetime after December 31, 2017 and before January 1, 2026, the exclusion amount is doubled from $5 million to $10 million (again as adjusted for inflation occurring after 2011) and is expected to be approximately $11.2 million per person or $22.4 million per married couple in 2018. The Act does not make changes to the tax rates for Estate, Gift, and GST, which remain subject to a maximum tax rate of 40 percent. Additionally, the current basis step-up under Code §1014 for property inherited from a decedent remains in place.

Despite the early discussions regarding the Act, it is important to note that there is no provision in the final legislation for ultimate repeal of the Estate, Gift, or GST taxes, and the increased exemptions remain in place only until December 31, 2025, at which time they revert to the current $5 million level (indexed for inflation).  These circumstances open a significant, once in-a-lifetime opportunity for clients with estates above the above the exemption limits to protect more assets from taxation. Some clients may be tempted to take a wait and see attitude given that the new limits do not expire until December 31, 2025, but delaying this discussion comes at their peril as the tax legislation may be modified significantly if the 2018 midterm elections or 2020 Presidential election bring changes in the control of Congress and the White House. In addition, although death is inevitability, none of us knows when, so planning is important.

The tax changes, when combined with valuation discounting, open the door for strategies that can shield significant assets from Estate and Gift taxation through the use of direct gifts, gifts in trust, and gifts of business interests (such as family partnerships, LLCs and corporations). Such gifts will also shift future appreciation of the assets to children and grandchildren, who may also be in lower tax brackets for income tax purposes. It is also possible to make use of legislation adopted in 2017 by the Michigan legislature to create self-settled trusts which are likely to provide creditor protection and allow clients to take advantage of the higher exemptions. 

While clients may initially be reluctant to make larger gifts immediately, a review of the options and strategies to protect assets from Gift or Estate tax while still providing some control of the assets should be considered immediately. As always, the tax rules are complex and retaining attorneys experienced in complex estate planning is important because errors in implementation of sophisticated strategies can be very costly if done incorrectly.

Al and Matt

Tax Reform "Framework"

     Following in the footsteps of the recently released estimates of the 2018 inflation adjusted exemptions for the Estate and Gift Taxes, yesterday the President unveiled what the White House refers to as a "framework" for tax reform. This framework contains a number of significant proposals, many of which are similar to ideas put forward during the President's campaign including:

• reducing the number of individual income tax brackets from 7 to 3,

• nearly doubling the current standard deduction,

• increasing the child tax credit to an unspecified higher level, 

• significantly reducing the corporate income tax rate, and

• reducing the tax rate on income received from "pass-through" companies (such as LLC's, partnerships, and S-corps).

Also significant in the framework is a renewed effort to reduce individual and corporate tax deductions and repeal the Estate and Gift Tax.

     Economists, pundits, and reporters will have much to say about this effort to reform the tax code, but for our purposes it is important to remember that this framework is essentially a “wish list’ and not a well-defined bill Congress can discuss and pass. The framework omits significant details, including basic, but integral, information such as where the individual bracket thresholds start and stop. While this is clearly a statement of intent regarding how the administration would like to move forward on tax reform, the lack of specifics make it little more than a compilation of common Republican talking points on the subject of tax reform from the last 10 years.

     From our point of view, any discussion of tax reform is an important issue to stay abreast of in order to understand how it will impact our clients planning. The potential repeal of Estate and Gift Taxes reinforces this belief, as any change of that magnitude is likely to create a ripple effect reaching other aspects of the tax code, including whether inheritors receive a step up in basis and the rules regarding the distribution of inherited IRAs. That said, it is our philosophy to keep track of tax proposals but not to spend a significant amount of time gazing into our crystal ball to determine how proposed legislation that may never come to pass will affect our clients.

     Rest assured we will continue to stay abreast of tax proposals and their impact on the planning landscape so that if and when a tax reform proposal becomes law we will be prepared to provide our clients with the expertise necessary to adapt their planning to the changed landscape and ensure that it continues to achieve their goals moving forward.

Alan and Matt

Changes to Gift Tax Exclusions for 2018

Bloomberg and Thomson Reuters released their predictions for 2018’s inflation-adjusted figures related to the Unified Estate and Gift Tax Exclusion amount and the Annual Gift Tax Exclusion this week. While these are not final numbers released by the IRS, they are likely to reflect the 2018 increases.

For gifts made and estates of decedents dying in 2018, the Estate and Gift Tax exclusion amount will likely increase to $5,600,000 (up from $5,490,000 for gifts made and estates of decedents dying in 2017). This increase raises the threshold for Estate and Gift Tax liability to $11,200,000 for married couples.

For gifts made in 2018, the Annual Gift Tax Exclusion will also likely increase to $15,000  per person (up from $14,000 for gifts made in 2017).

Finally, the Exemption from Generation-Skipping Tax (GST) is will likely increase to $5,600,000 for transfers in 2018 (up from $5,490,000 for transfers in 2017).

These increases will allow clients to make further use of planning strategies which allow them to reduce their tax liability by making gifts during their lifetime. Feel free to call or email us if you have any questions or if you want to discuss planning strategies.

Alan & Matt

Federal Estate Tax: Onerous & Unfair or Much Ado About Nothing?

     A common worry for nearly every adult is the impact of taxes on their lives. This is especially true for estate planning, where clients worry about the taxes their beneficiaries will be liable for at their death. The good news for all of these clients is that their beneficiaries generally are not liable for any amount of taxes on their inheritance, because the tax liability is the primary responsibility of the estate prior to distributions, and not the beneficiary. In addition, clients are relieved to learn that because of the most recent estate tax changes, they are unlikely to have any estate tax liability at all. 

     The estate tax, is a tax on the transfer of assets from one person to another at death. People tend to understand the requirement of paying income taxes or sales tax, but feel differently about the estate tax because of the perception that taxes already been paid on the assets to be transferred at death and should not be taxed again with the estate tax. While this is a common belief today, estate taxes have existed in various forms around the world for hundreds of years. Only recently has the perception that such transactions are different from other exchanges gained popularity. 

     A reason for this change of perception can be traced back to as early as the 1940s when opponents of the tax began to refer to it as a "death tax," but the most recent push against the tax began during the late 1990s when Newt Gingrich served as Speaker of the House. Since that time, rarely has a federal legislative session passed without someone proposing a complete repeal of the estate tax. In the current Congress, Senator John Thune recently proposed such a repeal. Like many others who attempt to raise the population’s ire towards the estate tax, Sen. Thune takes liberties with the facts about the law. In his most recent statements on the proposed legislation, Sen. Thune attempted to garner support from small business owners and farmers by stating that one-third of businesses who owe estate tax will owe more in taxes than the assets of the business. Unfortunately for Sen. Thune is incorrect, based on the law as it stands today. The Senator’s office later confirmed that Sen. Thune was quoting from a more than decade old report from a time when the estate tax exemption threshold was $675,000, and also omitted the fact that the statistics he cited only referred to liquid assets of the business and not the total value of the business. These sorts of distortions are precisely the reason that a tax that affects so few people presents such a common concern for clients.

     The truth is that the estate tax has almost no impact on the vast majority of people. This is because there are two major exemptions to the estate tax that result in almost no one paying any tax. The first major exemption is the Marital Exemption, which allows the spouse of a deceased individual to inherit any amount of money without paying any estate tax. This means that no matter how large an estate may be, if it passes to the decedent’s spouse there will be no tax liability. With the Supreme Court's 2014 Windsor decision, this exemption applies to both legally married opposite sex and same-sex couples.

     The second major exemption, known simply as the Estate Tax Exemption, creates a threshold under which an estate will not have any tax liability. Currently that threshold is $5,430,000 for a single individual and the decedents surviving spouse may roll over any unused portion of the exemption at their death. This means that a married couple must have an estate larger than $11,860,000 before they will pay even one dollar of estate tax. As a matter of fact, in 2013, 2.6 million people died in this country and only 4,700 of them had to pay any estate taxes, less than .2%. 

     A benefit of this very high threshold for taxation is once clients understand that their estate is not subject to the estate tax it frees them up to focus on what is really important in estate planning--. designing a plan to distribute their assets to their loved ones in a manner that is in the beneficiaries' best interests without requiring any complex legal maneuvering to mitigate taxes. 

Using LLCs to Expand Lifetime Gifting

So far, our discussion regarding the use of gifting an estate plan has revolved primarily around cash gifts, it is important to understand that gifts can consist of any type of property, including interests in real estate and business entities. A family owned Limited Liability Company is an excellent tool for transferring a variety of assets from one generation to the next, often at a reduced value, while allowing parents to retain control of the assets during their lifetime.

     While the use of cash gifts provides clients with a tool for reducing their potential estate tax liability, clients may be able to gain greater benefits through by using a Limited Liability Company (LLC) in their estate planning. The client can establish an LLC with two classes of Membership Interest, voting and nonvoting, and can retain control over assets by keeping the voting interests and gifting the nonvoting interests to beneficiaries..

     To make use of this gifting strategy, clients first establish a LLC (or modify an existing LLC) with a 1% Voting Member Interest and a 99% Nonvoting Member Interest. This allows the owner of the 1% Voting Member Interest to control the company regardless of who owns the 99% Nonvoting Member Interest. Clients then transfer ownership of other assets, such as real estate or business interests, to the LLC. Now the client is able to make gifts of the Nonvoting Member Interest, without giving up control of the assets. This allows clients to begin transferring highly appreciating assets during their lifetime, reducing any potential estate tax liability because the appreciation of the assets is now out of the Estate, and providing a potential source of income to their loved ones. Clients can transfer these  Nonvoting Member Interests in the LLC using either their lifetime estate exemption and/or their annual gift tax exemption, further reducing potential tax liability. These nonvoting member interests can be given to adult children as well as minor children and grandchildren, with trust holding the interest for these minors. These trusts can then be used to provide funds for education for the minors as income is distributed from the LLCs

     Another benefit of including an LLC in an estate plan is the potential to receive a valuation discount when making gifts of Nonvoting Member Interests. The IRS recognizes that a member interest in an LLC which does not allow the owner control over the company and which restricts the owner's ability to sell or transfer the member interest has less value than an unrestricted interest. Thus, a properly structured LLC may allow clients to transfer larger portions of the Nonvoting Member Interest as part of an annual gifting plan. While using an LLC in this manner is a well-established practice, it is important to acknowledge that without proper appraisals and planning, and such transfers may be subject to IRS scrutiny.

     In order to comply with the law and IRS regulations is important to manage and operate the family-owned LLC as a separate entity, and not just an extension of the client’s own affairs. The LLC should not contain all of the client assets, especially not the client’s residence, because the IRS argues that the LLC is necessary to maintain the client’s lifestyle and therefore, under estate tax rules, the IRS may deem the LLC's assets part of the client’s estate.

     For many clients the use of an LLC as part of their estate planning is an excellent strategy to increase the value of annual gifting. It is also an excellent tool for transferring ownership of family-run businesses to the next generation while ensuring that the clients retain control of the business operation. It is important to remember that this is a complex planning technique that clients should not attempt without consulting qualified professionals for assistance in reviewing the tax and legal implications.

The Changing Role of the Irrevocable Life Insurance Trust

Today we look at an advance trust, the Irrevocable Life Insurance Trust, whose role in the the estate planning process continues to evolve in response to changes in the tax code.

     With the Estate Tax Exemption now over $5,000,000 for an individual and $10,000,000 for a married couple, the Irrevocable Life Insurance Trust (ILIT), a once common tool for offsetting estate tax liability, is used less often. While the benefits of an ILIT as a tool to offset the estate tax liability have decreased for the majority of individuals, there are other situations where an ILIT can still be a very useful tool in estate planning.

     An ILIT is designed to own a life insurance policy, normally on the life of the Grantor, without the proceeds from that policy being included in the Grantor’s estate for the purposes of estate taxes. The premiums for the insurance policy are paid by the Trustee, most often with contributions made to the trust by the Grantor using the Annual Gift Tax Exclusion. In order for these contributions to qualify for that exclusion, they must be what the IRS regulations refer to as "present gifts". This means that the recipient of the gift must have the ability to take the gift outright and free of trust if they so choose. The terms of the ILIT require the Trustee to give the trust beneficiaries written notice of a limited window of time during which they may withdraw their gift from the trust. After that time period passes, the gift becomes a trust asset and the Trustee can use it to pay the premiums on the insurance policy owned by the trust. This notice is often referred to as a "Crummey Notice", and is named after a tax case named Crummey vs Commissioner.

     A keen observer might ask what is to keep the ILIT beneficiaries from simply withdrawing their gifts immediately and leaving the Trustee without any assets to pay the policy premiums. The answer to this question lies in the beneficiaries' understanding that not withdrawing this gift from the trust in the short term will result in a larger benefit in the long term. If that logic fails, the Grantor can simply refuse to make gifts subject to the Crummey withdrawal rules, not providing the beneficiaries with the ability to withdraw gifts. The negative of this strategy is that the gifts do not qualify for the annual exclusion.

     An ILIT's benefit is that the proceeds from a life insurance policy owned by the trust is not considered to be in the estate of the grantor and therefore not counted for calculation of estate tax liability. For those couples with estates in excess of the $10,000,000 estate tax exemption this means a pool of assets that can offset the portion of an estate used to pay the tax bill. For those clients who do not have a taxable estate, there are also benefits.

• For clients who own small, or not so small, businesses that they intend to leave or sell only to children active in the business, an ILIT allows them to create a pool of assets that can pass to the children who will not inherit the family business, creating equity among children and minimizing interfamily squabbles after death, without increasing the size of the client’s estate and risking potential estate taxes. 
• An ILIT also can be used to provide assets for the benefit of a second spouse, protecting client's other assets for the benefit of children of a prior marriage 
• If a client has substantial charitable inclinations, an ILIT can be used to provide children or other loved ones with a certain amount of inheritance while leaving the remainder of an estate to the client’s favorite charities, creating a charitable estate tax deduction. 
• As with other trusts,  for those clients who want to make gifts, but retain some control over the gifted assets, an ILIT allows them to provide and additional benefit to their loved ones while retaining control over the circumstances under which those loved ones may receive distributions from the trust.
• The ILIT also can leverage the grantor’s generation skipping transfer (GST) tax exemption because the grantor’s GST tax exemption can be allocated to an ILIT holding a life insurance policy that may substantially increase in value. As a result, numerous generations may benefit from the trust assets free of federal estate and GST tax.

     While the value of using an ILIT has been reduced by the current ever-growing Lifetime Estate Tax Exclusion, there are still circumstances where an ILIT may be useful to clients. Like any other tax and estate planning strategy, it is important to consult with experienced professionals before deciding to make use of the technique in order to ensure that clients do not expose themselves to unintended consequences.

Understanding the Estate and Gift Taxes

     One of the most misunderstood areas of estate planning involves the impact of Federal Estate and Gift Taxes. While most people understand they pay Federal Estate Tax on inherited assets and Federal Gift Tax on gifts made, few people truly understand what creates liability for these taxes and who is responsible for paying them.

     The first point to understand is that Federal Gift and Estate taxes are integrated into a single transfer tax under a unified rate schedule and with a unified credit that imposes a single tax on transfers during life and at death. The Internal Revenue Service group gifts and inherited assets together for purposes of determining total tax owed and the amount of assets excludable before payment of either Federal Gift or Estate taxes

     Let us begin with the Estate Tax. The estate of a deceased individual pays Estate Tax on the assets transferred to non-spouses at the individual's death. The estate tax rate is a sliding scale that tops out at 40%.  The Tax Code includes an Exclusion, which currently allows an estate to transfer $5,430,000.00 before incurring any Estate Tax liability. In addition to this large Exclusion, the Tax Code provides that any assets transferred to a surviving spouse are exempt from tax liability. In addition, any portion of the Exclusion that the estate of the first to die of a married couple does not use can be used by the surviving spouse's estate at his or her death. This ability, commonly known as Portability, means that a married couple will need to transfer nearly $11,000,000.00 at death before paying any Estate Tax. The Tax Code ties the Exclusion amount to the cost of living and therefore each year the Exclusion grows allowing ever-greater tax-free transfers.

     A person can choose to make gifts during lifetime instead of making bequests at death, making Gift Tax an important consideration. The person making the gift is liable for paying the Gift tax, if any is due. As indicated above, Gift and Estate taxes are integrated into a single transfer tax, so that the exclusion from tax becomes a "lifetime exclusion" rather than an exclusion at death. Any exclusion used during lifetime against Gift taxes will reduce the exclusion available against Estate taxes. 

     As noted above, we offset any Gift Tax against the Lifetime Exclusion before any tax becomes due. There is also another exclusion against Gift Tax--the "Annual Exclusion. A The Annual Exclusion on Gift Taxes allows any person to give up to $14,000 to any number of people, each year without creating any Gift tax liability. This means that a husband and wife together can give the each of their three children and their spouses $28,000 each year, reducing the parents' taxable estate by $168,000 each year without paying any tax on those transfers, and without using the Lifetime Exclusion. If our couple wanted to give their children additional amounts in a year, every dollar over $14,000 per beneficiary then reduces the parent’s Lifetime Exclusion.

     As an example, if the parents want to make a $200,000 gift to each of their three children so that the children can purchase a home, the parents can give a total of $28,000 to each child and $28,000 to each child’s spouse tax-free using the Annual Exclusion. The remaining $432,000 in gifts to the children and their spouses will reduce each of the parent's Lifetime Exclusion by $216,000 and reduce their remaining Estate Tax Exclusion by the same amount.

     In estate planning, we employ strategies that can increase the benefit of each of these Exclusions for people able to make substantial gifts. We will discuss some of these in our next blogs. 

Making the Most out of Year End Gifts to Family

This time of year, many of our clients begin considering making gifts to family members. Some of our clients will use the annual gift-tax exclusion ($14,000 in 2013), to make family gifts tax-free. Others, who desire to make larger gifts to family members, are willing to use of a portion of their lifetime exclusion amount (totaling $5,250,000 in 2013).

Many of our clients attempt to keep things simple by giving cash. "Cash makes no enemies" as they say, but it still can remove a significant amount of assets from a client's estate in the event of future estate tax liability. For example, a couple I represent, who will have a taxable estate, give $14,000 each to a total of 33 children, grandchildren, and great-grandchildren, as well as to spouses of some of those beneficiaries. Each year they give away more than $900,000, which will save over $360,000 in federal estate tax liability at their death. I suggested the clients give interests in LLCs holding real estate rather cash because it would have allowed them to give away more than $1,100,000 under their current gifting scheme. Unfortunately, many of their beneficiaries have gotten used to living outside of their means and need these cash gifts to help balance out their annual expenses.

As I mentioned above, clients can get even greater advantage against future tax liability by using the annual exclusion gifts to give highly appreciating property rather than cash. The current value of the gift and any future appreciation escapes taxation. Giving children a portion of real estate or minority interests in closely held companies are two common methods of taking advantage of this technique. In addition, it is possible to discount gifts or a minority interest for gift tax purposes because of lack of marketability and lack of control. For example, using a 20% discount allows clients to treat a gift of minority interest valued $18,000 as a gift valued at $14,000. Depending upon the asset the clients choose to transfer, sometime greater discounts are possible.

Others of my clients have taken advantage of the possibility of discounts by giving awayclosely held stock or minority interests in LLCs, which may hold real estate or other invested assets. Can clients not only leverage the annual exclusion gifts, but also can actually leverage the lifetime estate tax and gift exclusion. If there is a desire, a client can make gifts above the annual exclusion amount by using some or all of their lifetime exclusion. If only a 20% valuation discount is available, the current $5,250,000 lifetime exclusion could support gifts of over $6,500,000, not including future appreciation. One client in particular gave away a 99% nonvoting interest in an LLC holding real estate that is leased by his other businesses. Not only were we able to use discounts because the interest was nonvoting, but his retained 1% voting interest allows him to control the entity. This particular client did not need the income from the leases so we structured the LLC to distribute that income to the children. Another client used a similar strategy and distributed income to his grandchildren for their education expenses.

Even if the clients do not have a taxable estate, making gifts to children may be a good idea because it allows them to see if their children will use or invest the money wisely. If the children make mistakes with small amounts, they can modify their estate planning documents to provide guidance to children after their deaths so assets are not wasted. In addition, it can allow them to enjoy seeing their children do things and have things while they are still alive.

Any time during the year is a good time to make gifts to help facilitate planning, but as the days grow short and the year nears an end, there is a finite amount of time for clients to take advantage of gifting opportunities using the annual exclusion gifts or lifetime exclusion gifts. It is important for us as planners to help clients understand the opportunities and facilitate good planning. We need to remind them that if an annual exclusion gift is not made in any particular year, it lapses and cannot be carried over to a following year.

This time of year is also an excellent time for clients to consider charitable gifts, and next week we will discuss some of the planning opportunities for charitable donations.

Alan Ferrara and Matt Ferrara

2014 Inflation Adjusted Tax Limits

     As you are aware, a number of tax figures are adjusted each year for inflation. The Government has released Inflation adjusted 2014 figures for Estate and Trust Tax brackets and other Transfer Tax items. The adjustments are based on the average Consumer Price Index (CPI) for the 12-month period ending the previous August 31. The August 2013 CPI has been released by the Labor Department, and using the CPI for August 2013, (and the preceding 11 months) some of the tax figure adjustments for 2014 are: 

• Unified estate and gift tax exclusion amount. For gifts made and estates of decedents dying in 2014, the exclusion amount will be $5,340,000 (up from $5,250,000 for gifts made and estates of decedents dying in 2013).
• Generation-skipping transfer (GST) tax exemption. The exemption from GST tax will be $5,340,000 for transfers in 2014 (up from $5,250,000 for transfers in 2013).
• Gift tax annual exclusion. For gifts made in 2014, the gift tax annual exclusion will be $14,000 (same as for gifts made in 2013).
• Determining 2% portion for interest on deferred estate tax. In determining the part of the estate tax that is deferred on a farm or closely-held business that is subject to interest at a rate of 2% a year, for decedents dying in 2014, the tentative tax will be computed on $1,450,000 (up from $1,430,000 for 2013) plus the applicable exclusion amount.
• Increased annual exclusion for gifts to noncitizen spouses. For gifts made in 2014, the annual exclusion for gifts to noncitizen spouses will be $145,000 (up from $143,000 for 2013).
• Kiddie tax. The exemption from the kiddie tax for 2014 will be $2,000 (same as for 2013). A parent will be able to elect to include a child's income on the parent's return for 2014 if the child's income is more than $1,000 and less than $10,000 (same as for 2013).
• 2014 Estates and Trust tax rate brackets:

If taxable income is                                                                       The tax is:

Not over $2,500..................................................................................... 15% of taxable income

Over $2,500 but not over $5,800........................$375.00 plus 25% of the excess over $2,500

Over $5,800 but not over $8,900.................... $1,200.00 plus 28% of the excess over $5,800
Over $8,900 but not over $12,150...................$2,068.00 plus 33% of the excess over $8,900
Over $12,150..............................................$3,140.50 plus 39.6% of the excess over $12,150

Alan Ferrara

Grantor Retained Annuity Trusts as a Tool for Wealth Transfer

We often discuss the benefits of including Living Trusts as part of an estate plan, but there are other types of trusts that may provide our clients with significant benefits as part of a larger estate plan, depending upon the client’s particular situation.

A Grantor Retained Annuity Trust (GRAT) is one method for wealthy clients to maintain an income stream for a period of time yet transfer property (often which is highly appreciating) to a child with minimal gift or estate tax. A GRAT consists of assets transferred into an irrevocable trust with the transferor retaining the right to annuity payments for a fixed term of years or their lifetime. If income earned by the trust assets is insufficient to cover the annual payment, the Trustee will make the required payments from principal. When the set time period ends, the remainder of the trust, including any appreciation, can go to a named beneficiary. Alternatively, it is possible to structure the GRAT to return the principal and a certain amount of income to the grantor, and distribute the excess income to the remainder beneficiary.

The gift tax value of the transferred assets is determined at the time of trust creation and funding by subtracting the value of the annuity interest from the fair market value of the assets transferred to the trust. The value of the annuity interest will depend on the interest rate used, the value received by the grantor, and the value of the remainder beneficiaries’ interest. The IRS Regulations set rules for determining what interest rates may be used in the calculation of valuations, especially when family members are involved.

As an example, if a 60-year-old client sets up a GRAT to last two years and uses the following provisions:

• Contributed Asset Value: $1,000,000,
• the §7520 interest rate required by IRS Regulations: 2%, 
• the asset earns 5% per year
• the asset appreciates at 5% per year 

Over the term of the Trust, the client will receive two annual payments of approximately $515,000, and the remainder beneficiary will receive approximately $130,000 remaining in the GRAT with no gift tax cost. If the asset is anticipated to appreciate faster than 5% per year, the benefit to remainder beneficiaries is even greater

Since the GRAT permits payment of both income and trust principal to satisfy the annuity payments, it is important to treat the GRAT as a grantor trust for income tax purposes. This means the client retains liability for taxes on income and realized gains on trust assets even if these amounts are greater than the trust's annuity payments. This further enhances this tool's effectiveness as a family wealth-shifting and estate tax saving device because the client pays the income tax, thus reducing the their estate.

         In the right circumstances, the GRAT can be a powerful tool to transfer assets with minimal gift or estate tax consequences, but clients should carefully review their financial situation with both an experienced attorney and financial advisor before entering into such a transaction.

Alan Ferrara

The Ripple Effect of US v. Windsor on Planning

     Today marks a milestone for Plainly Legal. This is our 100th post, and we would like to thank everyone who has supported this venture and visited our Blog. That said, let's move on to today's topic, as recent weeks have produced significant news that affects our practice and those of our associated professionals.

     As we discussed in July, the Supreme Court's decision in the case of US v. Windsor, holding Section 3 of the Defense of Marriage Act (DOMA) unconstitutional, impacts planning for married same-sex clients. Since that decision, other departments of the Federal government have announced responses to this holding.

     On August 29th the US Department of Treasury and the Internal Revenue Service ruled that same-sex couples, legally married in states that recognize their marriages, would be treated as married for federal tax purposes. This ruling applies to all married same-sex couples regardless of whether their state of residence recognizes same-sex marriage. This ruling applies to all forms of federal taxation including income, gift, and estate tax. Because of this ruling, legally married same-sex couples may file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status. These couples may, but are not required to, file amended returns for the tax years 2010, 2011, and 2012, choosing to be treated as married for those years. However, Michigan has yet to weigh in on whether legally married same-sex couples may file joint returns. 

     While the IRS has readily complied with the Supreme Court's decision, other departments of the Federal government are not as quick to change their policies. The Department of Veterans Affairs Secretary Eric Shinseki announced that the Supreme Court ruling did not specifically strike down a federal regulation defining a spouse as someone of the opposite sex, and therefore the Department of Veterans Affairs would continue to limit VA benefits to opposite sex spouses. This decision was almost immediately challenged, and on August 30th US District Judge Consuelo Marshall of Los Angeles ruled that based on the Supreme Court's decision in US v. Windsor, the regulation in question was unconstitutional and approved an injunction permanently barring the VA from applying that regulation.

     In contrast to the Department of Veterans Affairs, the Pentagon has announced that as of September 3rd same-sex spouses of military members will now be eligible for the same health care, housing, and other benefits enjoyed by opposite sex spouses. This decision has been met with some resistance, especially from the State of Texas, where the Texas National Guard currently refuses to process requests from same-sex couples.

As events unfold and the scope of the Supreme Court's decision becomes clearer, we at Plainly Legal will continue to provide you with commentary that may assist you in new planning for clients covered by the decision. 

     Again, thanks to all of our readers for their regular visits to the site, and we look forward to continuing to provide you with useful and insightful information regarding estate, tax, and business planning.

Matt Ferrara

Transferring Insurance Policies to ILITS

Because of the larger estate tax exclusion of $5,000,000 per person (already $5,125,000 because of the cost of living increase), many clients no longer need an Irrevocable Trust to own their life insurance in order to avoid tax on the proceeds at death. However, an Irrevocable Trust is still an important planning tool for those whose estates already exceed the estate tax exclusion or for those whose estates increase in value faster than anticipated. 

            We previously discussed the basic concepts of an Irrevocable Life Insurance Trust (ILIT), but today we want to focus on how policies are transferred to the ILIT.  There is an estate tax rule that requires the inclusion in a decedent’s estate of life insurance transferred within three years of death.  Because of this rule, the ideal planning technique is for Grantor to execute the ILIT and then for the Trustee to apply for new insurance on the life of the ILIT’s Grantor.  If the Trust is the initial owner and beneficiary of the life insurance policy, and the Grantor never had any incidents of ownership in the policy, the three-year inclusion rule does not apply.  

            If there is existing insurance, a client will often set up an ILIT, have the trustee apply for a new policy, and then terminate the old policy when the new policy is issued with the Trust as the owner.  This protects the Grantor if the new insurance application is declined.  There is usually no need to have twice the insurance coverage, but you want to maintain the existing coverage until the new policy is issued and effective.

            Sometimes there is a need for an ILIT, but the Grantor is unable to secure new insurance coverage or the coverage is too expensive because of age or health issues.  At these times you utilize the next best strategy and transfer an existing policy to an ILIT, knowing the three year inclusion rule applies.  You need to remember that the value of the policy at the time of the transfer is a gift.  In addition, any amounts gifted to the ILIT and later used for payment of premiums are gifts.  If the policy transferred is a term policy, there is probably little value other than the unused premiums for the policy year in question.  However, if the policy is an existing permanent policy, there may be significant cash value requiring consideration for gift tax purposes.  The Crummey rules require notice be given to Crummey beneficiaries so that the gift can be considered a present gift and allow use of the annual gift exclusion.  However, if the total of premiums and cash value of transferred policies exceeds the total of Crummey beneficiaries times $14,000, a portion of the gift will not qualify for the annual exclusion.  Any gift in excess of the available annual exclusions is considered a future gift and will use a portion of the Grantor’s lifetime exclusion.

            Planning for policy transfers can be tricky and confusing and should be done with the guidance of professionals qualified in both insurance and tax issues.

Alan Ferrara

Estate Tax and Non-citizen Surviving Spouses

     In the age of growing globalization, advisors increasingly must be aware of the potential that one or both of married clients may not be a United States citizen. With estate planning, citizenship particularly is important when dealing with the marital deduction against Federal  Estate Tax. While normally all assets transferred to a surviving spouse are exempt from Federal estate taxation, this deduction is disallowed if the surviving spouse is not a United States citizen.

     However, assets transferred to a Qualified Domestic Trust (QDT) allow the noncitizen spouse to make use of the marital deduction. A QDT functions much like any other trust for a spouse in the decedent's living trust. However, a QDT must have at least one trustee who is a citizen of the United States and provide that no distribution (other than the distribution of income) may be made from the QDT unless a trustee who is a citizen of the United States has the right to withhold from such distribution the tax imposed. The typical result when using a QDT is for the surviving spouse to receive all of the income from the trust automatically with the principal of the trust being distributed after the death of the surviving spouse. If the trust provisions for the spouse do not qualify as a QDT prior to the death of the taxpayer, the statute allows the trust to be reformed by a judicial proceeding as long as that judicial proceeding is commenced before the tax return is filed. Thus, through a court ruling, the trust is judicially modified so that it qualifies as a QDT.

     If the noncitizen spouse prefers not to have the trust assets restricted by the terms of the QDT, the statute also allows the noncitizen spouse, to become a citizen and therefore be qualified for the marital deduction.  The noncitizen surviving spouse must be a continuous resident of the United States following the death of the citizen spouse. The spouse must also become a citizen before the day the Federal Estate Tax Return is due. However, it is important to note that when an estate tax return is filed late in order for the surviving spouse to complete citizenship proceedings, the late return is treated as if it was filed on the actual filing date and the noncitizen spouse does not receive the protection of the marital deduction. If the noncitizen spouse seeks the protection of the statute, the Estate  must file for extensions until the  completion of the citizenship proceeding.

     Even if the Estate files for and receives an extension allowing time for the completion of citizenship proceedings, it is important to file quickly after the completion of those proceedings. The Court of Federal Claims has recently upheld the IRS's imposition of a penalty on an estate when the estate delayed nine months between the surviving spouse achieving citizenship and the filing of the final Estate Tax Return.

    While it is always wise to determine if either of the parties are non-citizens when discussing estate planning and drafting documents, the Internal Revenue Code still allows for solutions in the event appropriate planning is not completed before death. It is important for clients to consult with an expert on the subject of taxation to avoid unintended consequences.

The Impermanence of Permanent Tax Changes

   While Congress may never pass many (or any) of President Obama’s 2014 Budget Proposals, there are a number of proposals in the President’s plan that would affect estate planning and bear watching. 

     The 2014 budget includes a proposal to restore the estate, gift, and generation-skipping tax (GST) rates and exemptions to their 2009 levels beginning in 2018. This would result in a top estate and gift tax rate and GST tax rate of 45 %, a $3.5 million estate tax applicable exclusion amount and GST exemption, and a $1 million gift tax exemption. 

     Another provision would require that all grantor retained annuity trusts (GRATs) have a minimum term of 10 years and some remainder value at the end of the term. This would greatly reduce the value of using a GRAT to pass value (including income) to other family members prior to death. 

     One proposal would affect the use of grantor trusts to transfer value and appreciation to other generations by treating as an incomplete transfer for gift and estate tax purposes a sale or exchange of property to a grantor trust deemed owned by the seller. 

     A fourth provision would limit using the GST exemption from the generation-skipping tax to a maximum of 90 years, where currently the protection is in perpetuity. Practically speaking this may not have much effect on the planning of most taxpayers but it is a significant theoretical cut back of protection. 

Other proposed provisions include: 

1. Requiring non-spouse beneficiaries of a decedent's IRA or retirement plan to take inherited distributions over no more than five years.
2. Limiting the amounts that can be contributed or accumulated within an IRA or qualified retirement plan to the amount necessary to provide the maximum annuity permitted for a tax-qualified defined benefit plan (currently $205,000).
3. Requiring that basis of property received by gift or from a decedent be determined consistently with the applicable gift or estate tax return. Currently there is no requirement that the recipient of a gift or bequest use the same value as that given to the gift or bequest under the applicable gift or estate tax return. For example, if the donor of the gift used a discounted value for gift tax purposes, the beneficiary can arguably use the full value of the asset in determining the basis and taxability for a sale of the asset.
4. Specifying that the GST exclusion for payments of medical and tuition costs applies only to direct payments by a donor to the provider of medical care or to the school in payment of tuition, and not to trust distributions. 

     While none of these proposals may find their way into estate planning law, they are a clear indication of the "impermanence" of the new "permanent estate tax law" passed late last year. It is important to be vigilant in reviewing what changes are possible and determine what steps might need to be taken to protect our clients.

Alan Ferrara

Leveraging IRA Accounts using Life Insurance

One interesting item in President Obama's latest budget proposal is limiting IRA accounts to $3 million, or some number calculated to purchase a maximum benefit of $205,000 at retirement. In addition to limiting the amounts that can be tax-deferred under IRAs, this would probably have the effect of minimizing the benefit of "stretch IRAs". While this idea may never be a part of the final budget it does bring to mind a planning option I have used with IRAs in the right circumstances.

Because IRAs eventually are generally fully taxable, a $3 million IRA, or even a smaller IRA, will be subject to significant income taxation. If the taxpayer's estate is above the $5 million lifetime exemption, the total tax burden on the IRA only gets worse.

If a client desires to maximize the amount going to their heirs, they may want to consider leveraging their IRA using life insurance. The strategy works as follows:

1. Presuming the client does not need IRA distributions to support their lifestyle, Instead of delaying IRA distributions until age 70 1/2, a client begins taking distributions after 59 1/2 when there are no longer penalties for early distributions.
2. After paying the income tax on the IRA distribution, the client gifts the remainder of the distribution to an Irrevocable Trust benefiting family members.
3. The Irrevocable Trust Trustee purchases a life insurance policy on the life of the client. After satisfying some legal requirements (Crummey Notices), the Trustee uses the funds to pay the annual premium of the life insurance policy.
4. At the death of the client, the Trustee collects the insurance proceeds, income tax-free, and uses them for the benefit of the client's family.

The client has succeeded in turning a heavily income (and possibly estate) taxed IRA account into a tax-free account, of significantly greater value, depending on the size of the insurance policy.

If the beneficiaries are minors or adults without a good record of handling money, the Irrevocable Trust can protect them from themselves and their creditors. If all of the beneficiaries are adults and the client is comfortable with their maturity, the client can simply make gifts to the family members who will then use it to purchase a life insurance policy on the client. Either way, the proceeds are income tax-free and, if properly structured, are not part of the client's estate.

The client can go a step further if he/she does not like the idea that the IRA benefits are going to be income and possibly estate taxable after death. The client and the client’s spouse can have full use of the IRA account during their lifetimes, and then provide that at the second death the IRA account be distributed directly to a charity, tax-free. The family members get their benefit, the charity gets its benefit, and the only entity that loses is the Internal Revenue Service.

Most of my clients are not inclined towards making significant charitable gifts, but with the right strategy, they love the idea that their loved ones are protected, they can satisfy any charitable inclinations, and the IRS is essentially paying for it. With proper planning and the help of qualified professionals, family members are better protected.

Alan Ferrara

Estate Planning for a Second Marriage

     Recently a colleague asked for information about the use of trusts in estate planning following a divorce and remarriage. Since we have not addressed this topic yet, a post on the subject seemed appropriate. It is important for client to consider estate planning issues following a divorce and remarriage to avoid inadvertently disinheriting either the new spouse or children of the first marriage. Clients (husband and wife) in their first marriage usually have common goals, such as providing for the surviving spouse during their lifetime and leaving any remaining assets to their children equally. This makes estate planning relatively simple, because a living trust holds the assets to limit tax liability, avoid probate, and ensure the assets pass to the surviving spouse for use during the spouse's lifetime and then on to the couple's children.

     Clients in second marriages, whether because of divorce or death, usually have a more complex situation with which to deal. In those circumstances there are concerns regarding the surviving spouse, children from the first marriage, the surviving spouse's children, and possibly children from the second marriage. Clients wish to ensure the surviving spouse has sufficient assets during lifetime, while also ensuring that the assets they brought into the marriage eventually pass to their children.

     A frequent concern of clients in their second marriage is ensuring that both their second spouse and their children receive gifts following the client's death. A common technique used to achieve this goal provides the surviving spouse with a regular stream of income from the trust assets, while reserving distributions of principal for the client’s children following the death of the surviving spouse. When using this technique, it is also common to provide the trustee with the discretion to make distributions of principal to the surviving spouse, under a limited set of circumstances, to ensure that the surviving spouse has sufficient assets to live on following the first spouse's death. It is important in these circumstances that the trustee understand that part of their responsibility is to balance the best interests of both the spouse and children from the first marriage in making distributions. It is a good idea for the client to discuss these issues with the named trustee.

     Alternatively, some clients opt to address this issue by distributing different assets to their surviving spouse and their children. For example, a trust might provide that the client’s children receive immediate distributions from the trust assets equal to the payout from a life insurance policy. The client may also provide that the children are beneficiaries of the client’s IRA or other retirement accounts. The trust then provides that the client's surviving spouse receive all income from the remaining trust assets, and gives the trustee broad discretion to make distributions of principal for the surviving spouse's needs. Any trust assets that remain following the death of the second spouse are distributed to the client’s children. This technique ensures that that the client’s children receive an immediate gift as well as the potential for additional assets should any remain after ensuring that the surviving spouse has sufficient assets during the their lifetime.

     A well-drafted trust is required to make use of these techniques because you need an entity maintain the trust assets instead of passing those assets directly to the surviving spouse. During a first marriage, a common technique for probate avoidance is to own property jointly with rights of survivorship. This allows the surviving spouse to remain the sole owner of the property following the first spouse's death without the property passing through probate. If this same technique is used following a second marriage, the surviving spouse becomes the sole owner of the property or bank account and then is free to do with that property whatever he or she chooses. This means that property the client intended for children to inherit following the second spouse's death could pass directly to the second spouse's children or family and completely disinherit the client's children from the first marriage.

     There is not always controversy about who inherits which assets. In many second marriages, spouses and their children from first marriages live in perfect harmony. Even in these circumstances, the spouses may wish to ensure that particular assets, such as vacation homes or collectibles, that each has brought into their second marriage are eventually inherited by their own children. With proper planning, it is possible to maintain these separate assets for both spouses’ use while ensuring that after the second death the assets will go to each spouse’s children, while assets earned jointly during the marriage are split equally amongst all the children.

     It is clear that the circumstances that exist when contemplating estate planning for a second marriage involve a level of complexity that generally does not exist when planning during a first marriage. These circumstances can become even more complex if either spouse’s children has special needs, dependency issues, creditor problems, or if there are significant personal conflicts between children and second spouses.  You may actually have a case where the new spouse has his or her own issues, which need to be addressed. An example of this occurs if the new spouse has an unpaid federal income tax liability and the spouse transfers a residence originally owned individually to the other spouse as joint tenants. Now the IRS can attach a lien to the residence. It is important to speak with an experienced attorney to ensure that the estate plan meets the goals of both spouses and is implemented with a minimum of conflict.

Keeping a Vacation Home in the Family

A number of my clients have family vacation homes or cottages that they and their children have enjoyed for many years. After getting so much enjoyment from owning the cottage those clients often ask how they can set up their estate planning documents to ensure that when they die, that ownership experience passes onto their children and grandchildren. While, in theory, this may be a good idea, it often creates significant problems if a not fully thought out and planned.

One issue that often causes an issue is the gift tax consequence of transferring a valuable piece of property. However, because of the most recent tax legislation, most people have a sufficient exemption amount so that gift tax is not an issue.

Transferring cottages to other family members can create thornier issues because of personal relationships. While family members may have enjoyed their time at the cottage, for many reasons they may have no interest in owning the cottage with their siblings or other family members. Issues that can arise include:

1. What is the most efficient manner of ownership of the cottage?
2. How to insure that the cottage remains in the "family"?
3. How to establish rules for the management and use of the cottage?

Generally, traditional forms of joint ownership, such as tenancy in common and joint tenancy with rights of survivorship, are inefficient methods for family ownership of the cottage. The primary risk in these types of ownership is that over time the ownership interest is subdivided or fractionalized as it is passed down to subsequent generations. While it is the dream or wish of the parents that the children continue to enjoy the cottages they have in the past, as family members grow into adulthood they may have different ideas. A family member might not have had a great experience at the cottage, may live too far away to be able to enjoy it, cannot afford the share of the cottage expenses, or may simply prefer the value of the cottage in cash to use as they may choose. With tenancy in common or joint tenancy, a family member may try to use his or her partition rights under state law, forcing the sale of the cottage or vacation home.

Co-ownership of the cottage may lead to other conflicts, such as:

1. Who controls the operation of the cottage?
2. How are operating, maintenance or repair expenses shared?
3. Who determines when and what improvements to make and how to pay for those improvements?
4. How are the most desired dates for cottage use determined or allocated among family members?
5. Are pets allowed?
6. Can family members rent their time to third parties?
7. Are nonfamily members, such as spouses and siblings, allowed to own an interest in the vacation home?
8. What happens if a family member wants to sell his interest in the cottage?

While many of these issues do not exist while the parents are alive because the parents pay all expenses of the cottage and determine how it is used, after the death of parents, these issues and others can create family disagreements or even permanent rifts.

 If the parents are still interested in trying to establish a "family cottage," a limited liability company (LLC) is an ideal ownership vehicle. An LLC has a perpetual existence. Parents can transfer the property to an LLC and then gift interests in the LLC during lifetime or at death to other family members. The LLC as an entity can protect owners from lawsuits by users of the cottage if injured on the premises. It can also prevent owners from being able to use the right of partition in order to sell the property. If used with a properly structured operating agreement, it can promote shared use and fair governance of the property.

It is possible to use an LLC operating agreement to meet the goals of the family, and should include:

1. A determination of who is the manager of the LLC--all members or a named managing member.
2. A procedure for determining what maintenance or improvement is to occur on the property and a method of allocating associated expenses.
3. A method of equitably allocating among family members the dates for using the cottage, especially during holidays, school vacations and most ideal seasons.
4. Rules for members using the cottage, including restrictions on allowance of pets, ability to invite guests, and the ability to rent out the member's time to outside parties.
5. A method for penalizing a member for violation of usage rules and/or failure to pay the required contribution for expenses.
6. A method for determining the transfer of member interests, including price and terms, for any member desiring to sell their interest. This could include a restriction on any sale to a non-family member.

While gift and estate taxes are unlikely to cause an issue, the consequences in regards to property taxes should not be forgotten when considering the transfer of a vacation home. Under Michigan law, if you convey less than 50% of ownership in real estate to others, there is no change in the property tax assessment rules for determining taxable value. Parents can gift up to 49% of the property to family members without any real estate tax consequence. If they prefer, the parents can first transfer the property to an LLC and then transfer 50% of the LLC to family members.

Because property values are still somewhat depressed, this is an opportune time to transfer the vacation property to family members and move value and future appreciation to family members and out of the parents' estate, while continuing to allow parents to maintain control of the asset.

While parents have the best interests of their family at heart, trying to maintain a vacation home in the family for a number of generations can create a nightmare scenario. It makes good sense to discuss this strategy with qualified counsel and the family itself to make sure there is sufficient interest to maintain the family cottage for future generations and to properly structure the transaction.

The State of Estate Planning Post Fiscal Cliff

2013 is now three days old and we at Plainly Legal are pleased to report we have survived the "fiscal cliff" that loomed so ominously at year-end. While it took a few extra hours, some arm-twisting, and likely more than a few hurt feelings, Congress has managed a compromise and begun to address the expiration of tax cuts and mandatory spending reductions that make up the “fiscal cliff.” While the legislation passed by Congress is broad and addresses many different aspects of taxation, and Congress still needs to address a number of other areas in the next few months, I wanted to take just a few moments of your time to address impact of that legislation on the estate planning process.

The final legislation’s impact on the estate planning process is rather limited as compared to earlier proposed bills, but for the most part there is good news. The most important aspects of the bill are:

• The new law makes permanent the existing $5,000,000 exemption for each taxpayer for the Federal Estate Tax, and the law indexes this exemption to the rate of inflation so the exemption will grow slowly over time. This means that estates smaller than $5,000,000 ($10,000,000 for a married couple) are not subject to Federal Estate Taxation.
• The Lifetime Gift Tax Exemption for making gifts prior to death also remains at $5,000,000. The Lifetime Gift Tax Exemption and the Estate Tax Exemption remain linked, so every dollar of the Lifetime Gift Tax Exemption used counts against the Estate Tax Exemption.
• The legislation makes permanent the exemption portability, which is the ability of a widow or widower to make use of the unused exemption amount of a deceased spouse.
• The only substantive change in the legislation from the rules that governed for the past twelve months is an increase in the highest rate of estate taxation from 35% to 40%.

For better or worse, the legislation makes only limited changes to the law affecting estate planning. Plainly Legal will leave to others the political discourse and countless opinions expressed by elected officials, pundits, and others about the scope of the changes. Instead, we take solace in the fact that this legislation creates a level of certainty in the estate tax law that has not existed for the last few years. The certainty and permanency of exemptions and provisions that no longer have a sunset date (at least until Congress decides to actively make changes again) creates an opportunity to review a client's estate planning and determine whether it is appropriate to make any changes. With higher exemption limits, it may no longer be necessary for both a husband and wife to have a Living Trust, allowing planning simplification. In addition, concerns or issues which have been weighing on clients about family situations until the federal law was clearer can be addressed. It is also a good time to review your assets and confirm they are properly titled to avoid probate.

A Happy New Year from Plainly Legal

When I sat down to write this post around noon on December 31, I intended to use today to write about the current state of the law affecting estate planning. As you likely know, one part of the Fiscal Cliff is the expiration of the present law regarding the taxes paid on transfers of wealth at death, the Estate Tax. Tied to the Estate Tax is the Gift Tax, which taxes certain transfers of wealth during a person’s life. If Congress does nothing, when the present law expires the new threshold for estate taxation in 2013 will be $1,000,000. This means that estates with a value over $1,000,000 and lifetime gifting (with some exceptions) over $1,000,000 will be subject to taxation. The rate of taxation is also set to increase from a maximum rate of 35% of every dollar over the threshold to a maximum rate of 55% of every dollar over the threshold. This is just one of the results of the nation “going over” the Fiscal Cliff and I could spend a month of posts explaining those results.

However since as I was writing this post, Congress had not managed to find the collective moral courage to set aside partisan bickering, care more for the good of the nation than their own job security, and fulfill their oath to the American people, I find it difficult to articulate the state of the law. Ultimately, no matter what the law is as the sun rises over Washington, D.C. this New Year’s Day 2013, it can (and likely will) change. Tax rates and thresholds can be set retroactively, the difference between a tax increase and tax cut depends on the day of the week the law passes, and the nation’s economy will not split like the hull of the Titanic in the course of a single day or even a single month. Instead of a dry recitation of statutory interpretation I have for you three thoughts:

1. It is a new year. Take a moment to assess your goals from the past year, see how you did in achieving what you set out to do. Once you know where you came from, it is easier to plan for the future, so start achieving your 2013 goals today. Whatever else you do with the day is up to you, but I suggest spending it with friends and loved ones. There are 364 more days to spend making money, helping others, and fixing the dripping sink,  so why not start the year off with a little enjoyment.
2. Thank you for your trust and support. We have been writing this blog now for a little over three months and we intend to continue writing it for many more. Thank you for continuing to use us as counselors, advisors, and attorneys. It is our greatest pleasure to serve you, your families, and your clients. We truly appreciate it when we receive new clients through your referrals. If there are areas of estate planning, business planning, or other law that you would like to see us discuss here, please do not hesitate to let us know in the comments or by email.
3. Go team! As we go through the season of college football bowl games and NFL playoffs, may your team  score enough points to beat their opponent (or if you are so interested, just beat the spread).

A Happy and Successful New Year to you, your family, and everyone else in your life from everyone at Finkel Whitefield Selik and the Plainly Legal blog.

Al Ferrara

Matt Ferrara