Yes, as expressly set forth in that law which repealed the ominous Estate Tax (otherwise known as the “Death Tax”), that repeal was just temporary! If Congress didn’t make it a permanent repeal, then the tax would be automatically reimposed in the year 2011.

Guess what. Congress did not make the Estate Tax repeal a permanent repeal. They need your money. You see how extravagent and profligate Congress is in spending their constituents money. I can’t count the zeroes in the new national debt.

In any event the Estate Tax is reintroduced as of January 1, 2011. Yes, that’s just next year. But not to worry. The Estate Tax is a tax on only the very wealty. But contrary to popular opinion, many Americans will now find themselves eligible for this tax.

In 2011 the Estate Tax exemption amount will be a whopping big $1million. That means only estates worth more than One Million Dollars will be subject to the Tax. So, you see, it’s only for the wealthy to worry about. Unless you’re a cash strapped farmer, or small business owner, with a nice net worth. In those cases the families of the deceased may have to hold “fire sales” to raise enough money to pay the Tax.

Uncle Sam doesn’t accept intangible such as stock, or even tangibles like farmland, to pay the tax. And it must be paid within nine months of the death. This can, and often does cause great stress and consternation.

Why is something taxed at death, when it has all been taxed while being earned? Doesn’t that amount to double taxation? In the wisdom of Congress it’s just a small tax on those who can afford it.

A small tax? The maximum tax rate is increased by this un-repeal to a whopping fifty-five percent (55%). Yes, that’s more than half the total estate.

If you find yourself in that category of the wealthy who can afford this tax, do you need to do some planning?  Would you rather pay this tax with whole dollars or at a discounted rate? Most of my clients prefer a discounted rate instead of a payment of the whole dollar amount. How can you do that?

You can choose to pay the tax with discounted dollars. It’s now easy with the use of Life Insurance. But it takes some serious planning.

Without the right planning your life insurance death benefit payment may also be subject to that same fifty-five percent death tax. An experienced estate planning attorney can help you with the details. This is when an experienced person can be worth is fee in gold.

 Both sisters had established revocable living trusts with me many years ago.  That’s the good part.  Betsy lived with Abby to take care of her in her later years.   Abby was so grateful for her sister’s help that she changed her trust beneficiaries so that Betsy would be the only one to inherit through the trust.

 Abby, on the recommendation of her investment advisor, sold her shares of stock when the market was plummeting in 2002.  That was a smart move.  She could have lost more of her nest egg, and she didn’t have time to make up her losses.

 The investment advisor helped Abby purchase a single premium fixed annuity with a reputable insurance company.  That proved to be a wise move.  She would lose no more of her principle. It was fully insured.

The investment advisor was informed that Abby had a revocable living trust and so he wisely named the trust as the “owner” of the annuity.  That was also a good move.

 But here’s where the bad news starts.  An annuity has three distinct parties.  One, the annuitant, or the person whose life expectancy is used to determine the value.  Two, the owner, the party who is listed as the one who actually holds the policy.  And Three, the beneficiaries.  The beneficiaries are those who will receive the funds accumulated in the annuity upon the death of the annuitant.

 As indicated, Abby was the annuitant.  Her trust was the owner.  But the beneficiaries were the original trust beneficiaries and those individuals would eventually receive the funds upon Abby’s death.

 That doesn’t sound too bad.  EXCEPT that later Abby wanted to change her beneficiaries and leave everything to her sister, Betsy.  You see, her original trust beneficiaries hadn’t kept in touch with Abby, hadn’t taken care of her, and were mostly out of her life.  So a change was in order.

 Abby then amended her revocable living trust to do just that.  Change her beneficiaries.  Her trust was listed as the owner of her annuity, so she assumed that the terms of the trust would control who would receive her assets.

 And it would have IF her investment advisor had just named the trust as the beneficiary of the annuity.  But he didn’t.  He named the original beneficiaries individually.  Guess what controls the distributions of the annuity proceeds?  Yes, it’s the form held by the insurance company which names the beneficiaries.

 If the investment advisor had simply named the trust as both the owner and the beneficiary, then everything would have turned out all right.  But he didn’t.  So instead of Abby taking care of her sister, as the sister had taken care of her, the entire $200,000.00 from the annuity will be distributed to the original beneficiaries of the trust and not to Betsy.

 The sad news in all this is that Betsy, after diligently looking after her sister, does not receive one dime of the annuity proceeds.  This is not what Abby wanted.  She wanted to express her thanks to Betsy for all her care, by leaving her the home, the bank accounts, and most of all, the annuity proceeds.

 This isn’t the first time something like this has happened.  That’s why I knew I’d better warn you to look over your documents.  Check your annuities and your beneficiaries.  See if you need to protect your estate like Abby had intended to.  

 I recommend that you name your trust as both the owner and the beneficiary of any annuity funds.  That way, when you decide to amend your trust and change your beneficiaries, you won’t have to remember to file a change of beneficiary form with your insurance company. There are slightly different rules for ownership of IRAs and 401Ks but again, you need to review all the beneficiary designations

Both sisters had established revocable living trusts with me many years ago. That’s the good part. Betsy lived with Abby to take care of her in her later years. Abby was so grateful for her sister’s help that she changed her trust beneficiaries so that Abby was now the only one to inherit through the trust.

Abby, on the recommendation of her investment advisor, sold her shares of stock when the market was plummeting in 2002. That was a smart move. She could have lost more of her nest egg, and she didn’t have time to make up her losses.

The investment advisor helped Abby purchase a single premium fixed annuity with a reputable insurance company. That proved to be a wise move. The investment advisor was informed that Abby had a revocable living trust, and so he wisely named the trust as the “owner” of the annuity. That was also a good move.

But here’s where the bad news starts. An annuity has three distinct parties. One, the annuitant, or the person whose life expectancy is used to determine the value. Two, the owner, the party who is listed as the one who actually holds the policy. And three, the beneficiaries. The beneficiaries are those who will receive the funds accumulated in the annuity upon the death of the annuitant.

As indicated, Abby was the annuitant. Her trust was the owner. But the beneficiaries were the original personal relatives who would eventually receive the funds upon her death.

That doesn’t sound too bad. EXCEPT that later Abby wanted to change her beneficiaries and leave everything to her sister, Betsy. You see, her original trust beneficiaries hadn’t kept in touch with Abby, hadn’t taken care of her, and were mostly out of her life. So a change was in order.

Abby then amended her revocable living trust to do just that. Change her beneficiaries. Her trust was listed as the owner of her annuity, so she assumed that the terms of the trust would control who would receive her largess.

And it would have if her investment advisor had just named the trust as the beneficiary of the annuity. But he didn’t. He named the original beneficiaries individually. Guess what controls the distributions of the annuity proceeds. Yes, it’s the form held by the insurance company which names the beneficiaries.

If the investment advisor had simply named the trust as both the owner and the beneficiary, then everything would have turned out all right. But he didn’t. So instead of Abby taking care of her sister, as the sister had taken care of her, all the money from the annuity will be distributed to the original beneficiaries of the trust and not to Betsy.

The sad news in all this, is that Betsy, after diligently looking after her sister, does not receive one dime of the annuity proceeds. This is not what Abby wanted. She wanted to express her thanks to Betsy for all her care, by leaving her the home, the bank accounts, and most of all, the annuity proceeds.

This isn’t the first time something like this has happened. That’s why I knew I’d better warn you to look over your documents. Check your annuities and your beneficiaries. See if you need to protect your estate like Abby had intended to.

I recommend that you name your trust as both the owner and the beneficiary of any annuity funds. That way, when you decide to amend your trust and change your beneficiaries, you won’t have to remember to file a change of beneficiary form with your insurance company.

Better yet, come see me for your annuity, insurance, and asset protection needs. I’ll make sure you get the right kind of policy, and the right kind of protection. And that your funds will always be consistent with your overall estate plan.

A living trust on the other hand, has nothing to do with your health care or medical needs. It has everything to do with your home, your possessions, and your financial assets.
A living trust is a written document which governs how your home, your possessions, and your financial assets will be managed during your lifetime. And it describes how your several assets will be used or distributed in the event or your incapacity or upon your death.
Because your home, your possessions, and your financial assets will be titled in your trust’s name, there will be nothing in your name to require court interference should you die or become incapable of managing your own affairs.
The trust has three parties. The Settlor (or Grantor) is the person setting up the trust. The trustee is the manager of all the trust assets. The beneficiary is the person or persons who have the benefits of the trust assets while they are in trust.
If you set up a trust for yourself, you can be all three parties. You will be the Settlor, you may still manage the trust assets as the trustee. And you can be the lifetime beneficiary.
Your written trust agreement also names someone to replace you if you can no longer act as trustee. This person is called a successor trustee. You are the lifetime beneficiary, but you name others to become beneficiaries upon your death. The trust avoids a probate at the time of your death because there is nothing in your name. It’s all in your trust. The terms of the written trust agreement specify how your estate will be distributed.
For the same reason, your trust also avoids the need for a court conservator to be appointed in the event of your incapacity. The terms of your trust will govern in all matters consistent with its terms and without judicial interference.
Just think, all your instructions can be followed without the need for judges, lawyers, and nosey relatives. Don’t you think you should have a living trust? And also a living will?

With proper planning, upon your death or incapacity, your business entity, or even your network marketing company, will not be tied up in the expensive, time-consuming, and public process of judicial interference called “Probate.” You want to do all you can to create a seamless transfer of your business upon your death. This is what a living trust will do for you.

How great would it be if all those who enter into a business entity or company, would take a moment to consider what would happen to their business if they for some reason were suddenly not there. Who would take over? How would it happen? How expensive and time consuming would it be? And above all, what can they do to make sure things go the way they intend! Make estate planning a part of your business plan.

You mean you didn’t know there was an invisible line in your bank? That’s because it is invisible after all. No one will dare to point it out to you. “Then why is this important at all,” you may ask. Because what you don’t know may come back to bite you.

I’ll give you an example. One day a client of mine, Mrs. Prudent (the name has been changed to protect the gullible), went into her bank to deposit a check. It was a check for a large sum of money.

Mrs. Prudent had sold her small, home-based business. She wanted to fully retire and take things easy. She was eighty-two. She intended to open a certificate of deposit.

A CD, she knew, is insured by the Federal Deposit Insurance Corporation up to $250,000. This was the amount of her deposit. She felt good, she knew her money would be safe.

That was when the teller told her she must see the investment advisor at the bank. He would help her with her deposit.

The investment advisor was very pleasant and cordial. He certainly looked and talked like he knew what was best. He said that the bank now had an account for her that would pay more that the existing rate for a jumbo CD. This account would also grow faster than her deposit could.

Mrs. Prudent was absorbed in the banker’s explanation. She felt like she was in good hands. It was her bank after all.

When all the soothing talk from the bank investment advisor was finished, Mrs. Prudent left her money in his hands. He gave her a paper that looked like an official investment document. It didn’t look quite like her previous CD’s. But she was comfortable. She had dealt with this bank for years.

What Mrs. Prudent didn’t realize was that she had crossed the invisible line in the bank.

You see, banks can now offer financial products which are in no way associated with the bank. They are now in the investment business. The banks investment officers get paid a little differently than the bank employees. They may make commissions on the sale of other investment products.

The transactions on one side of the invisible line in the bank are insured by
the Federal Deposit Insurance Corporation. They are bank products.

On the other side of that invisible line, the banks investment officers may place your money in investments, insurance, and annuities which aren’t the products of the bank at all.
These products are not insured by the Federal Deposit Insurance Corporation. They bear the risk of other types of investments. They may fluctuate with the stock market.

This is fine, if you know that’s what you are getting. But it does come as a surprise to many.

Some time later, Mrs. Prudent came to see me about updating her medical power of attorney. While she was talking with me, she mentioned that it seemed odd that her bank CD seemed to lose some of its value.

“What do you mean,” I asked.

She produced a copy of a statement which showed that the value of her “CD” was now less than the $100,000 she had originally deposited with the bank.

After a review of the statement, I explained that the “CD” was not a CD at all. It was a variable annuity issued by a large insurance company, and it was based on the performance of the stocks held within the annuity.

“What do you mean,” she asked. “I opened this account at my bank.”

“ Yes,” I explained, “but it was issued on the financial advisor’s side of the invisible line at the bank. It was not a bank product at all, much less a CD.”

The account had lost value because the stocks which were held in her variable annuity had lost value in the stock market.

“I don’t invest in the stock market,” she argued.

“Oh, but you do,” I responded. What you ended up with at the bank was not a CD. As I explained, it was a variable annuity.

A variable annuity is a product which varies (hence variable) according to the stocks held by the insurance product, the annuity. You were not dealing with the bank, you were dealing with the investment advisor who happened to be at the bank. You crossed the invisible line.

Mrs. Prudent was flustered. “This isn’t what I wanted,” she shrieked. “I just wanted my money to be safe and earn a fixed percent. I wanted a CD!”

I had to agree. Mrs. Prudent had no business investing in the stock market. Or in a variable annuity, which is nearly the same thing.

At her age there would not be enough time to recover any loss in the value of her investments. Safety had become more important than growth, or even the potential for growth.

If the annuity Mrs. Prudent had invested in were a fixed annuity then everything would be all right.

With a fixed annuity there is no threat of losing the principal. All principal is guaranteed. Some states have even passed laws securing the funds held in a fixed annuity. It is safe from lawsuits and creditors. So all in all, a fixed annuity is not a bad investment.

And a fixed annuity would most likely have paid more interest than the banks certificate of deposit. And it would have been as sure and protected as the banks certificate of deposit.

But that is not what the bank investment advisor wanted to sell her. You see a variable annuity generally pays a larger commission to the bank financial advisor than would a fixed annuity.

We went to the bank together. When I objected to the way Mrs. Prudent was sold a variable annuity when she wanted a CD, the bank disagreed.

When I explained that Mrs. Prudent was eighty-two and had no business being in the market, the bank disagreed.

When I asked if Mrs. Prudent’s funds could be returned and placed in a safe account, the bank said no. The bank generally refused Mrs. Prudent’s requests.

Their position was that Mrs. Prudent should have known about the invisible line in the bank, that is the difference between banking activities, and investment propositions.

The best notion it seems to me, is to let banks do your banking, and let investment advisors advise you about investments. Insurance representatives would be the ones to talk to about insurance. And annuity promoters would be most helpful when considering annuities.

In any event, see your estate planning attorney before completing any such changes. You would be wise to make sure whatever you do coincides with your estate plan. You don’t want to undo any of your careful planning. There is an invisible line.

Do you know where the invisible line is in your bank?

That’s a common misconception. But by their very nature a will has no legal effect until the death of the person who’s will it is. And for that reason, to give the will it’s authority, or to carry out the terms of a will, it must be supervised by a Court of Law. That means probate. The probate court grants the authority for the terms of a will to be complied with.

Most people, when they learn about probate, and what it is, want to avoid it in their own case. Probate ties up the estate for a period of about 1 to 2 years. Or eleven years in Howard Hughes’ case.

Probate costs an average of 5 to 10% of the value of the estate assets in court costs and attorney fees.

Court records, by their very nature, are public records. Settlement of an estate can lose all the privacy for the heirs.

Their are 3 ways to keep an estate out of the probate court upon a person’s death. One, have a will like this: “Being of sound minde, I have spent all my money while I was still living.” The danger of that is to run out of money before you run out of life.

The second way is to have an estate that is of less value that your resident State’s probate exemption amount. This is different in every State. It ranges between $5,000 and $100,000. So check your State laws to see how rich you have to be to have your estate go through probate.

The third alternative is to have nothing in your name at the time of death. The way to do this is to hold assets in joint names with someone else (which creates another problem). Or you can have your assets titled in a revocable living trust. This is becoming by far the most popular method to avoid probate. Check it out.

You see, if you haven’t drafted your own will, then yours will be the one designed by your State’s law. It’ll be the one prepared by the legislature in the State where you resided at the time of death. Such laws are referred to as intestate laws. One who dies without a will, dies intestate.

The intestate laws generally require that the decedent’s assets be distributed to their next of kin. Heirs may receive a share of an intestate estate after they have reached the age of 18. The closest relative will be chosen to administer the estate and pay the bills and make the final distributions.

So if you want any say in how your estate will be handled and distributed you must make your own Last Will and Testament.

Start by making a list of your assets and estimating their value. Then decide on your objectives: Do you wish to avoid probate, to reduce the cost of settling your estate, to minimize your estate taxes, to make specific bequests, or name a guardian? What are some of the other things you want to consider?

Then prepare a will, or a living trust, to meet your objectives with your assets. Consider what help you will need in preparing your will or trust. Ask the right questions. Then get it done. Don’t put it off–even if you don’t think it’s urgent. You’ll feel pleased about what you have done.

Change happens so often, how do I know if or when it’s time to change some legal documents such as a Last Will and Testament, or a Revocable Living Trust? Here are some things that denote changes in your life. These events should remind you to review and perhaps change your Will (with the motive of self-interest):

1. If there has been a new child born to your family.

2. If there has been a divorce.

3. If there has been a marriage.

4. If there has been a death in the family.

5. If the value of your assets has fluctuated up or down more than $50,000.

6. If there has been an inheritance.

7. If there has been a significant change in your relationship with your heirs or beneficiaries.

8. If there has been a significant change in your medical condition.

9. If your feelings towards family or friends has changed.

10. If there has been a change in the types of assets you own.

11. If you haven’t look at your will or trust for more than eighteen months.

12. If there has been a change in the law (including tax law) which could affect things.

13. If you have received a notice from your lawyer that something should be reviewed.

AND just anytime you feel like it! It’s in your self-interest.

There are bills circulating in Congress to revive the estate tax, even for this year. Some would like to even roll back the estate tax exemption amount to $1 million, and make this retro-active to the beginning of this year. This, of course, means if successful, a tax would be imposed on estates worth more than $1 million, even on those who die in the year 2010.

If you are in a situation where a spouse died in 2009 ir 2010, and your total estate is worth more than $1million, you may want to take advantage of the use of a marital deduction trust. Such a trust helps you double the exemption amount on your estate.

Just today I met with a client whose spouse died in 2009. Their total estate was just over $3 million. If the surviving wife were to die this year there would be no estate tax under the current law.

However, when we considered the possibility of a roll back in estate tax exemptions for 2010, and if the wife were to die, there could be an estate tax due of more than $1 million. So we considered it prudent to take advantage of the marital deduction trust provisions and avoid this possibility.

The family considered this a cheap insurance policy against any possible change in the law. Right now, the law in this area is uncertain.

So, ask yourself, What is your current situation?