Showing posts with label asset planning. Show all posts
Showing posts with label asset planning. Show all posts

Wednesday, December 2, 2009

Interesting Article

PROTECTION FOR DIGITAL ASSETS
Do heirs need to know your online passwords?
Monday, November 16, 2009 5:23 AM
PITTSBURGH POST-GAZETTE

After an American soldier died in Iraq five years ago, his father wanted to save copies of his son's e-mails sent through a Yahoo account. But the Internet company's privacy policy allowed access by only the soldier, triggering a legal fight.

The case highlights a growing discussion concerning what happens when the owner of a password-protected online account dies. To whom does the account belong? Can digital assets be passed on to heirs?

"If you use a computer, you need to have an estate plan that deals with digital assets and paperless transactions," said Lawrence H. Heller, an estate lawyer in Santa Monica, Calif. "People need to think about how to give their heirs access to information that may be stored online, but without the risk of unauthorized access."

Many important documents and personal treasures once kept in file cabinets and safe-deposit boxes are now stored electronically. Photographs, videos, music, letters and book manuscripts that might have monetary value -- or be priceless to loved ones -- often are saved exclusively on computer drives.

Legal disputes involving digital assets are relatively rare, but as the computer-literate population ages, after-death lawsuits are likely to become more common. "What we are trying to do is anticipate and avoid the problem," Heller said.

Until now, estate planning has primarily focused on tangible assets such as real estate, autos and jewelry and intangible assets such as stocks and bonds.

In exceptional cases, artists and musicians face issues involving copyright, trademark or patent law. But now, anyone who owns a computer could end up dealing with those issues, too.

"If I have created something in the digital universe, it's not free game. I may have a hard time protecting it, but I own it," said Steve Seel, an estate and trust lawyer in Pittsburgh.

Sometimes, heirs don't even know these things exist. As more companies move away from paper, online bank accounts, investment accounts, insurance polices, time shares and frequent-flier miles might become trickier to locate and access if someone dies without telling heirs of their existence.

According to a recent study by HSBC Direct, 49 percent of the online population conducts most of its banking via the Internet.

Meanwhile Internet blogs, as well as MySpace, e-mail and Facebook accounts, could be owned by an even greater percentage of the population.

In a growing number of cases, checking a deceased person's computer or other digital devices is becoming a crucial step in executing an estate.

Executors of estates often get special privileges giving them access to most assets. But privacy laws might prevent Internet companies from releasing username and password information to executors.

If a digital asset is stored on someone else's server, ownership becomes especially complicated. Yahoo mail, for example, has a provision in its user agreement that gives the account owner no right to transfer the ownership. All rights are terminated with the owner's death, and all content can be deleted.

The rules were tested in the high-profile case involving the father of Lance Cpl. Justin Ellsworth, a combat engineer with the Marine Corps who died in Iraq in November 2004. The two men were in constant e-mail contact during the deployment, and when the son died, the father wanted the e-mails from his son's account for sentimental reasons.

But the son had changed his password a few weeks before his death and had not shared it with his dad, who lives in Detroit. It took a five-month legal case to work out an arrangement to release copies of the e-mails.

Thursday, November 19, 2009

Asset Protection Seminar

Presented by

Stephen J. Lacey, Esq.

McClelland, Jones, Lyons, Lacey & Williams, LLC

1901 S. Harbor City Blvd, Ste. 500 Melbourne, FL 32901

Workshop presented in the law office conference room

Wednesday, December 9th (10:30 am to noon)

There is no charge. But since space is limited, reservations are required. (So R.S.V.P. A.S.A.P.!)

Please call (321) 984-2700 for reservations or email slacey@mjlandl.com.

Visit us on the web at www.mjlandl.com for more information.

Sunday, October 18, 2009

RAISE YOUR HAND IF YOU NEED AN ESTATE PLAN

There is a common misconception that estate planning is only for the rich. So let’s do a test to determine whether you need an estate plan.

Now imagine you have everyone you care about in your left hand, your family, friends, maybe a charity or even if it is only your dog and in your right hand, you have everything you own, all of your stuff. Now imagine someone has a gun to the head of someone in your left hand and tells you give me all of your stuff or I pull the trigger. What do you do? You give him all of your stuff. Congratulations, you need an estate plan. The reason is that you just said that you care more about the people that matter, then about your stuff. Now, let’s consider what matters to you:
Do you want to make sure you give your stuff to whom you want, when you want and the way you want?

Are you concerned about your assets going to a second spouse’s family after you have passed away? We have all heard stories of one spouse passing away, getting remarried then passing away without an estate plan. All of your assets are now passed to second spouse. Who do you think is going to benefit from her estate plan?
Do you have a child or relative with special needs? The loss of governmental benefits can devastate an estate. Moreover, designating someone (and their successors) to ensure that the child always has someone assisting him or her throughout their lifetime.

Do you want to safeguard your stuff for your spouse in case you must join the millions of residents in nursing homes at $75,000 per year? Unfortunately, nearly half of people over the age of 65 will need nursing home care during their lifetime. Proper planning is essential to not only preserve assets but also to create the most choices for your care.

Do you want to protect your stuff from your children’s creditors or divorce after your passing? Make sure your stuff is inherited by the people you want, not by their ex-spouses, creditors or the IRS.

Do you want to avoid the “lottery Winner Syndrome” whereas your beneficiaries spend all the stuff that you spent your whole life building within 18 months? Giving a child more money is not going to make them more happy, it seems that often it makes them less productive and less happy. Encourage and reward your children for making smart life decisions and not depleting all of your stuff.

Do you want to designate someone to manage your affairs if you become disabled? Without a Power of Attorney, Health Care Surrogate or sometimes a Revocable Trust, if you become disabled and unable to make decisions for yourself, someone will be forced to open an expensive and lengthy guardianship proceeding so decisions may be made for your benefit.

Do you want to designate someone to care for your minor children if something happens to you? In Florida, if a minor child receives money from an inheritance (this includes designated beneficiaries) exceeding $15,000, then a guardianship must be created for the benefit of the child until they reach 18. Moreover, do you want to designate who is raising your child? Do you want to designate someone who has similar values, religious views, educational goals, etc. as you do? Or do you want to leave it to chance?

Are there specific charities that are near and dear to your heart? If you do not create an estate plan to assist such beneficiaries, then those charities will not benefit from your estate.

If your answer is yes to any of these questions, then raise your hand, you need an estate plan.

Stephen J. Lacey, JD, LLM-Tax is a partner in the law firm of McClelland, Jones, Lyons, Lacey & Williams, LLC. Mr. Lacey concentrates his practice in the areas of Estate Planning, Asset Protection, Medicaid Planning, Probate and Real Estate. To contact Stephen call (321) 984-2700 or visit www.mjlandl.com.

Friday, August 7, 2009

Silver Lining

Silver Lining

Yes, your business is down. Yes, we may (or may not) be slowly coming out of the recession but the economic climate will not be the same as it was a few years ago. Yes, the value of your business is at its lowest point since you began the business in 1984.

Even in the darkest of times, I always try to find a silver lining. So here it is: this is the perfect time to explore gifting shares of the business to younger family members.

Let’s look at an example: Mr. Gates owns a tech business called Computers R Us, LLC (as you saw in previous article, there are advantages to owning small business as LLC rather than corporation). Mr. Gates owns 80% of Computers R Us, LLC, while his son owns 10% and his daughter owns 10%. In 2007, the business was valued at $3,500,000. It is now worth $2,500,000. Mr. Gates has a meeting with his attorney and realizes that if the Unified Credit drops to $1,000,000 as it is set to do in 2011, significant estate tax will be owed on the value of his business alone at his death. After exploring several tax strategies and planning tools, Mr. Gates decides to transfer 20% of his interest to each of his children. Now, Mr. Gates owns 40% and each of his children own 30%. So what has Mr. Gates achieved?

First, the Internal Revenue Code allows an annual gift of $13,000 to be excluded from tax. Mr. Gates is married so between the two of them, they can pass $26,000 under the annual exclusion. The above-described transfer of business interest is eligible for this gift exclusion. Currently, the marginal estate tax rate is 45%. Therefore, Mr. Gates provided savings to his family of $23,400 ($26,000 x 45% x two children).

Second, the value of the interest transferred to each child is $500,000. If the value of the business returns to 2007 levels, the value of those interests will be $700,000. Yet, Mr. Gates transferred $400,000 free from estate or gift tax because the value of the transfer is frozen at the $500,000 level (value at the time of the gift). Thus Mr. Gates provided additional savings to his family of $180,000 ($200,000 x 45% x two children).

Third, the Internal Revenue Code allows certain valuation discounts due to minority interests and lack of marketability. Often times, these discounts can be 25% or more. Due to the fact that the transfers to the children were minority interests and lacked marketability (unlike shares of stock traded on the Stock Exchange, there is no readily available market to buy interest in Computers R Us, LLC), such gifts may be discounted by 25%. As a result, the gift of $500,000 may be discounted by $125,000 resulting in Mr. Gates’ family saving $112,500 ($125,000 x 45% x two children).

Lastly, at Mr. Gates death, his estate can claim a minority interest and lack of marketability discounts against any remaining interests. Thus, Mr. Gates passes away in 2012 when the value of Computers R Us, LLC is $5,000,000. His estate may be able to claim a minority interest and lack of marketability discounts since Mr. Gates owns 40% of the company at his passing. So Mr. Gates has saved his family an additional $675,000. (45% x ($2,000,000 – $500,000).

So, yes, the economy is terrible. Yes, the value of the company is less than what it used to be. But through proper planning, Mr. Gates saved his family over $990,000 in estate taxes. See, I can always find a silver lining.

WORD OF CAUTION: Currently, there is proposed legislation threatening the viability of lack of marketability and minority interest discounts. With the White House spending into historic deficits, money will need to be raised through taxes. Therefore, please consult with a qualified attorney so that proper planning may be done specific to your factual situation and current laws.

Monday, June 1, 2009

Asset Protection for Florida Residents

While people in financial trouble often resort to bankruptcy to protect their assets and stop collection harassment, new federal laws take effect later this year that will limit that option. Florida law provides Florida residents with other options.

Following is a brief description of the major exemptions and other ways Florida residents can protect their assets:

1) HOMESTEAD PROPERTY – the Florida Constitution provides that the homestead property of Florida residents is exempt from attachment by creditors. This protection does not apply to mortgages or liens that are recorded against the homestead or most contents in the homestead. Only homestead property one-half (1/2) acre or less inside a municipality and 160 acres outside a municipality is protected. The new federal bankruptcy law will restrict this exemption for some future Florida residents.

2) JOINT MARITAL PROPERTY - real estate, bank accounts, investments and other property owned jointly by a husband and wife as “tenants by the entirety” cannot be attached to satisfy the debts of only one spouse. This protection may not extend to taxes owed the Internal Revenue Service or to jointly owned property that does not qualify as tenants by the entirety or includes additional joint owners.

3) RETIREMENT PLANS AND IRA ACCOUNTS - both federal and Florida law protect a debtor’s retirement account assets. This protection may be lost if the retirement plan is not qualified under federal law or has been established to defraud creditors.

4) ANNUITIES AND LIFE INSURANCE - Florida law provides Florida residents with creditor protection for the cash value held in annuity contracts and life insurance policies. Death benefits paid on the life of a debtor are also exempt. This protection may not apply to the annuity and life insurance beneficiaries themselves.

5) WAGES AND WAGE ACCOUNTS – both federal and Florida law provide some protection from garnishing the wages of a Head of family. Certain types of wage only accounts established in financial institutions may also be protected.

6) LIMITED LIABILITY COMPANIES AND PARTNERSHIPS – Compared to corporation stock or general partnership interests, attachment of a Debtor’s interest in these type of legal entities is restricted under Florida law and in many other states.

Readers are cautioned that the asset protection options described above are in general terms only. Exceptions and pitfalls exist that will be discussed in a future article. Readers who are debtors and creditors alike are encouraged to recognize these options and to work together toward settlements that avoid bankruptcy.