The most common vehicle of asset transfer in estate planning is the last will, and everyone is aware of what this document is intended to achieve. In addition to the last will most modern estate plans will also include advance health care directives, and a living will.  What a living will does is elucidate your health care preferences so that they are known should you fall into an incapacitated state and become unable to express them at a time  it is needed. The issue that is at the core of living wills is usually going to be life-support systems and whether or not you would want to be kept alive via the use of artificial means should you fall into a terminal state.

There is however another type of will that is much less commonly understood, and it is called the ethical will. Ethical wills have been part of the Jewish tradition going back to biblical times. These documents are used to express thoughts and feelings that you would like to share with your loved ones after you pass away. Traditionally these renderings would include your spiritual and moral values, and the “rules to live by” that you yourself saw fit to honor throughout your life.  Ethical Wills are not written by your attorney, but rather by you.

However, the document need not be strictly instructive and didactic. Ethical wills are today recommended by many of those who work with our elders as a way to “get things off your chest” as it were and let your family know things that you may have never said out loud. You can ask for forgiveness for any transgressions that you feel as though you may have been guilty of, and perhaps offer explanations to family members with regard to things that you have done that have been misunderstood.

An ethical will can be a priceless addition to your estate plan, and composing it can be a labor of love that may have more lasting meaning to your loved ones than anything else that you bequeath to them.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

Estate planning can seem on the surface to solely involve preparing your assets for distribution after you pass away.   Of course this is the primary objective.   However, there are other issues to consider.

One of the things to take into consideration is the possibility of incapacity. Everyone has heard about Alzheimer’s disease but when you hear the statistics surrounding this health challenge you may be quite surprised. Approximately one out of every eight individuals in the United States who have reached the age of 65 are suffering from Alzheimer’s, and about 40% of the “oldest of the old”, those are at least 85 years of age, have the disease. It should also be mentioned that more and more people are living to be at least 85 years of age, and in fact this is the fastest growing age demographic subset in America today.

Alzheimer’s disease is the leading cause of dementia in our seniors, and among other things dementia can prevent people from making sound decisions. To prepare for this possibility the wise course of action is to execute the appropriate powers of attorney. When you draw up a power of attorney you appoint an attorney-in-fact to act in your behalf legally, but a standard power of attorney does not remain intact upon incapacitation of the grantor.

So you want to execute a durable power of attorney that does remain intact should the grantor become incapacitated. To cover all your bases estate planning attorneys will usually recommend a durable medical power of attorney (sometimes referred to as a Medical Proxy) and a durable financial power of attorney.  Of course, you are able to name a different person to act as a representative for each of these respective purposes if you so choose.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

As a result of the passage of the new tax relief measure at the end of last year the lifetime gift tax exemption was raised from $1 million to $5 million and the rate of the tax was reduced to 35%. This brings it in line with the estate tax with which it is again unified.  What this “unification” means to you is that between gifts and your estate you can pass along a total of $5 million before you are taxed.

There are however some additional gift tax exemptions that can be used to great advantage as a way to bring the value of your estate under the estate tax exclusion amount. For one, each taxpayer is entitled to give gifts equaling as much as $13,000 to an unlimited number of recipients.  These gifts. no matter how many, are  free of  gift tax each year, and these gifts do not impact the lifetime unified exclusion discussed above.

In addition, there is an educational gift tax exemption. You can pay the tuition of students without incurring any gift tax liability, but you do have to make the payments directly to the institution and not the student. This is a tuition-only exemption so you can’t pay for books, fees, and living expenses as a tax-free gift using the educational exemption. But you could use the $13,000 annual exemption to address these other costs.   If you are married you and your spouse could give as much as $26,000 per year to a given individual.

You can also pay the medical bills for others totally free of the gift tax, and this includes the payment of health care insurance premiums. So when you combine these three different forms of tax-free gift giving in an intelligent manner utilizing sufficient foresight you can facilitate the tax-free transfer of assets to your loved ones while you’re still alive and reduce the taxable value of your estate in the process.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

Any time you are interested in developing a relationship with a legal professional it is important to identify the correct resource. This is extremely important when it comes to estate planning attorneys in particular on a number of different levels.

For one, when you are engaged in estate planning there is invariably going to be a great deal of money in play. Many people will engage the same attorney to assist them with retirement planning and incapacity planning along with their estate planning efforts. This makes the financial stakes even higher, so you need someone who has the experience that it takes to take on such an enormous responsibility.

This may sound somewhat out of context to some, but the fact is that you would do well to identify an estate planning lawyer that you actually like and feel comfortable with. Depending on the details of your estate you will be discussing some rather personal matters, and you want to feel as though you can be totally forthcoming. If you call an attorney’s office and the people that you speak with aren’t willing to answer your general questions patiently and politely, look elsewhere.

Area of specialization is key when you are looking for the right estate planning attorney. There are lawyers who do not specifically specialize in estate planning who are willing to do what they can to assist you, but you would do well to avoid the dabblers and engage a dedicated estate planning specialist. To have a comprehensive understanding of the ever-changing tax laws and the myriad financial instruments that are routinely employed in complex estate planning strategies you really have to stay within this area of focus.

You can look for experience, personal resonance, focus, and expertise on your own, but perhaps the best way to identify the ideal estate planning attorney is through personal recommendations. If someone that you know and trust is willing to refer you to an attorney that he or she has had a good experience it is likely that you will be satisfied as well.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

Creating your will can seem like a matter that is largely between you and your family. And though it is an emotional exercise it could appear on the surface as though there isn’t anything particularly complicated about it. There are websites glory that fan the flame of this misconception, claiming that all you have to do is purchase their handy-dandy do-it-yourself will kit, fill in the blanks, and you are then good to go. As convenient and inexpensive as this may sound to some people, the reality is that the matter isn’t quite as simple as that.

The thing about a will is that it is not going to administer itself, and it does not exist in a vacuum. Your will must pass through the process of probate, and though probate is smooth and hassle-free in the state of New Jersey the surrogate court follows certain guidelines that must be considered when your will is being created. This is one of the things about do-it-yourself will creation software that you need to beware of because there really is no single document that is appropriate for every jurisdiction in all 50 states and the District of Columbia. The appropriate document for a resident of New Jerseywill probably be quite different than a will that is intended to pass through the probate process in South Dakota.

New Jersey probate attorneys are familiar with the procedures of the surrogate court and they know exactly how to prepare a will that will be legally binding in the Garden State. When you engage the services of a probate lawyer to help you draw up your will you are not only making sure that your wishes are carried out, but you may also gain insights that enable a smoother transition than you would have thought possible before speaking with an attorney.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

The majority of people here in the United States feel a sense of patriotism and there has always been a strong underpinning of common sense grounding the populace. Everyone knows that roads don’t fix themselves, bridges aren’t built for free, and policemen, firefighters, and teachers need to get paid. So we pay our taxes quite willingly as long as the rate seems fair and we can see the ways that we benefit from our contributions. But one thing people don’t want to do is pay their taxes more than once.

This is what makes the estate tax so hard to swallow. We have all heard about the reduction in the estate tax rate down to 35% from the 55% that had been anticipated. Any reduction is great, but how in the world was the tax set at 55%? How can you justify a tax that takes more than it leaves? Since it was so high, 35% seems almost reasonable, but it really is not. If it took you your entire life to accumulate the assets in your estate, how disappointing is it for your heirs to watch more than a third of its taxable portion disappear instantly upon your death?

Plus, the resources that comprise your estate were all acquired with money that you had left over after you paid income and payroll taxes. So the estate tax is inherently an instance of double taxation. But after your children pay the estate tax, when they ultimately leave the remainder of what they inherited from you to their children, the estate tax will be levied yet again!

One response to this double and triple taxation is the legacy trust, which is also called a generation skipping trust. With these vehicles you name your grandchildren as beneficiaries rather than your children. Your children can benefit from the trust and receive cash distributions but claimants against them can’t target the trust’s assets and no estate or gift tax is due. When they die, your grandchildren assume ownership of the assets and the estate tax is levied just once though the resources were used by two generations.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

When you are planning your estate you need to identify an attorney who is focused on this particular area of specialization because of the fact that there are so many financial instruments involved. It takes time and dedication to this aspect of the law to fully understand all that is available to you and when you should implement one strategy rather than another.

With this in mind we would like to take a look at a very effective device that can achieve multiple estate planning goals simultaneously: the charitable remainder trust. Through the creation of such a trust you can gain tax efficiency, provide yourself with a source of income for life, and satisfy your philanthropic urges all in one fell swoop.

The way that these instruments work is that you fund the trust and name yourself as the beneficiary (if you want to receive the income rather than naming a different beneficiary). You can also serve as the trustee if you so desire, but many people engage a bank or trust company to serve this function. If you fund the trust with appreciated securities they will not be subject to capital gains tax and this is one of the primary appeals of the charitable remainder trust.

You as the beneficiary have to receive at least 5% of the fair market value of the trust annually, but your distribution may not exceed 50%. The charity that you choose must wind up with a remainder of at least 10% of the original value of the contribution into the trust at the end of its term. Your are entitled to a charitable deduction on your income tax return for the year in which you fund the trust, but IRS tables will determine the amount you may deduct.

In addition to the charitable deduction and the capital gains break, when you create a charitable remainder trust you also remove the value of the contribution from your estate for estate tax purposes.

At the end of the trust term, which can be for the life of the donor or for a specified period of time not to exceed 20 years, the remainder is passed on to the charitable or tax exempt organization named in the trust agreement.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

The estate tax was repealed in 2010 due to a provision in the Economic Growth and Tax Relief Reconciliation Act of 2001, a body of legislation that is commonly referred to as the “Bush tax cuts.” However, under the existing laws the estate tax was set to return in 2011 with some very harsh parameters. The exclusion was to be just $1 million, and when we last saw the tax in 2009 it stood at $3.5 million. So estates valued at more than one million dollars but less than $3.5 million were going to be exposed to the tax in 2011 when they were safe from it in 2009 and 2010. What’s more, the rate of taxation in 2011 was scheduled to be a very hard to justify 55%; it was 45% in 2009.

There had been a lot of talk about the possibility of changes in the laws surrounding the estate tax being enacted in the eleventh hour, and this has in fact taken place. A new tax bill has passed through Congress extending the tax cuts of 2001, and one of the provisions in the bill is an alteration of the estate tax exclusion amount and rate of taxation. The new exclusion is going to be $5 million per person so that a married couple will have a $10 million exclusion. Any portion of your estate that exceeds that amount will be subject to the estate tax. But rather than the 55% we were anticipating, the top rate has been reduced to 35%.

Of all the provisions in the bill, the changes in the estate tax parameters were the sticking point that disturbed many lawmakers the most. It is not hard to understand their logic since Americans with estates values at between $1 million and $5 million ( $10 million per couple) have already assumed an enormous tax burden throughout their lives while helping to stimulate the economy with robust participation. Many Americans can rest easier due to the passage of the new tax bill. But beware, this new law expires at the end of 2012.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

When you are planning your estate you want to be cognizant of all of your options. There are many different estate planning vehicles that can be utilized to address certain situations, and this is why it is advisable to work with a professional. When an experienced estate planning attorney absorbs what you are trying to accomplish and then examines your holdings a strategy will immediately start to coalesce in his or her mind. And since we are talking about advanced tax savings strategies involving specific legal instruments, this strategy is invariably going to include a healthy dose of acronyms. One of them is the GRAT.

GRAT stands for “grantor retained annuity trust.” This vehicle is useful when you would like to derive income from assets that you expect to appreciate and then pass that appreciation on to an heir in a tax-free manner. This is done through what is called the “zeroed out” GRAT strategy. The first thing that you do is fund the trust with volatile assets that you would expect to appreciate significantly. Of course you name a trustee and a beneficiary. When you are drawing up the trust agreement you set a term during which you will be receiving annuity payments out of the trust and the amount of these payments. It should be noted that if you die before the term has ended the strategy fails and the assets are returned to your estate.

When you funded the trust you removed those assets from your estate for estate tax purposes, but that donation is subject to the gift tax. The IRS calculates the taxable value of the gift. You “zero out” the trust by setting your annuity payments to equal this taxable value, so no gift tax is levied. But if the actual appreciation exceeds the original IRS valuation (something you anticipate), your beneficiary receives that remainder free of taxation at the completion of the trust term.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

You will hear mention of the senior population explosion often when you are seeking information about elder law and estate planning. The baby boomers are today’s seniors, and this is the fastest growing group of American citizens. Furthermore, people 85 years of age and older are the fastest growing subset of the senior demographic. This has some very profound implications when you are trying to prepare for all of the eventualities of aging.

Nobody is anxious to think about scenarios that aren’t especially pleasant, but a challenging situation is only compounded by a lack of preparation. The above mentioned statistics would indicate that it is very possible that you will live beyond the age of 85. More than half of people over this age suffer from some form of dementia, and physical incapacity is not uncommon at this age either. This is something that is very important to consider and it takes some mental discipline to do so.

To prepare for the possibility of future incapacitation you can reduce the matter to a simple question: who would you like to empower to make medical and financial decisions in your behalf? You can have a different representative for each type of decision, and this is often recommended in many cases. The person that you know who is the best financial mind may not necessarily be the individual that you would want communicating with your doctors about medical matters.

To appoint someone to act as your medical representative you would execute both a durable medical power of attorney (Living Will), and a durable financial power of attorney to name your financial representative. When you have these documents in place you can rest easy with the knowledge that your own trusted representative will be acting in your best interests should you be unable to make sound decisions for yourself at some point in time.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.