Perlin Estate Planning

A Buggy Inheritance - Unintentional Wrongs Don’t Make a Charitable Gift Right

Institution seeks judge's help to alter Carl J. Drake's will, who left the museum money to buy more bugs, now considered ‘wasteful.’

You commit to charity with nothing but the greatest of intentions. But when it comes to unique or truly large gifts of charity, good intentions are not necessarily all it takes to do the most good. Without proper planning and consideration of all options, a gift of charity can actually be a future burden to your institution of choice.

Consider the case of the Smithsonian Museum and the entomologist Carl J. Drake, as relayed in a recent article in the Guardian titled “Smithsonian Museum is bugging out over insect inheritance.” Most museums across the globe really only start out and build their vast collections through the largesse of charitable donors. The Smithsonian is no stranger to gifts of the oddest collections coupled with the most peculiar needs and married to various limiting conditions. That said, Drake’s bug collection is beginning to bug them. The Museum is actually petitioning the courts in an attempt to modify the gift.

Drake left his vast collection of preserved specimen (dead bugs) to the museum through his last will with various rules attached to protect the collection and ensure its preservation. In addition, he left his entire fortune to the museum with the express purpose of purchasing new bug collections. Unfortunately, Mr. Drake’s rules regarding his gift were written several decades ago, making them as onerous as they are dated. Legal changes have made it hard to buy collections, so the money sits unused. While you can read more in the original article, when it’s all said and done, the gift cuts against the museum’s own ability to effectively manage the collection; the Smithsonian laments the waste.

Clearly, Drake loved his bugs and thus thought hard about ensuring his collection would live on. We can all — even the squeamish — appreciate his motivation and his planning. This case illustrates both what you can do intentionally right and what you can do unintentionally wrong. Accordingly, the case is instructive on several levels. 

If you have a very specific gift to make there is much to do and think about. Proper planning can mean building your gift with more appreciation for its receipt and its longevity.

For more information about Charitable Giving, Collections & Wills, as well as General Estate Planning in South Florida, please visit my website.

Reference:  The Guardian (June 12, 2014) “Smithsonian Museum is bugging out over insect inheritance”

Image: By Edward Donovan [Public domain], via Wikimedia Commons

Intellectual Property (IP) and Selling Your Business in Miami & South Florida

Picture yourself at the table negotiating the sale of your company. Are you worried about any intellectual property (IP) skeletons in your closet?

For every beginning there is also an end; in every plan for the beginning of your company there should also be a plan for its ending. Whether all goes well or all goes south, how does the sale of your business fit into your overall asset structure and estate plan? This is a heady issue, but increasingly in this information economy, the most vital aspect of a company is its intellectual property.

Have you planned to structure the sale of both your business and your intellectual property? To what degree are the products of your company products of an intellectual property? Who owns the property, you or the company? Is it possible that a previous employer has claim to your intellectual property?

Heed some advice given in a recent Forbes article titled “Start With The End In Mind: Four Must-Dos For Intellectual Property.” 

The simple fact is that with a personal business, so much of your own life – your blood, sweat, tears and ideas – go into the business. Accordingly, any business planning is truly a bit of your own life planning. 

How can you protect your intellectual property? What is your intellectual property in the first place? And, if you are already at the point of sale for your business, how do you go about protecting and valuing that intellectual property?

For more information about Small Business, Intellectual Property, Valuations & Sale of Your Business, as well as General Estate Planning in South Florida, please visit my website.

Reference:  Forbes (June 9, 2014) “Start With The End In Mind: Four Must-Dos For Intellectual Property”

Filling in the (Estate Planning) Gaps with a Letter of Intent in South Florida, Kendall & Miami, FL

One element of estate planning that is little discussed but can be very useful is the Letter of Intent. Generally contained within an estate plan, a Letter of Intent contains instructions on how the estate and the decedent’s executors should care for a child, particularly a child with special needs.

Your estate and your plan for it are more than just a set of documents. It is only through through these documents that you and your wishes truly get a voice after your death. These are the legal documents that speak to the court, however, they don’t necessarily do all of the speaking you need them to. When you need to leave that much more instruction behind, there is an important tool to be found in the Letter of Intent.

A “Letter of Intent,” like the business version used in and around business transactions, is not a document that does the ‘legal heavy lifting,’ but it can move things along. Letters of intent are meant to supplement and complement a will or trust arrangement, not to do the work standing alone. LifeHealthPro offered some important perspective on the Letter of Intent in a recent article, with some special attention to planning for special needs children: “Letter of intent: a useful component of an estate plan.”

If the will tells the probate court what you want to do with your assets, the Letter of Intent is your voice for all other topics, ranging from your hopes and wishes to very practical instruction regarding this or that. If you have a child with special needs, then a Letter of Intent can provide the arena to offer all manner of practical instruction that simply cannot fit within a will, or that may be inappropriate for a legal document in the first place. That’s the rub, of course. The Letter of Intent is not the will and is not legally binding. 

For a bit more on the Letter of Intent as a tool and for a great deal more advice on how to use it, particularly with regard to children with special needs, check out the original article. Sometimes this little letter can mean all of the difference. In any event, it might help you organize your thoughts and provide meaningful guidance to your loved ones after your passing.

However, if your objectives require that some essential legal concerns are addressed, then legal documents must be properly drawn up. What are your needs and how will you put them to paper?

For more information about Letters of Intent & Special Needs Trusts, as well as General Estate Planning in South Florida, please visit my website.

Reference: LifeHealthPro (June 3, 3014) “Letter of intent: a useful component of an estate plan”

Value of Art: Not Just in The Eye of the Beholder When It Comes to Estate Planning & Taxes in South Florida, Miami & Coral Gables

The value of a particular work of art depends on various objective and subjective factors, which often lead to varying opinions as to the work's fair market value.

Art is gauged by two entirely different and often mutually-exclusive vantage points. There is the subjective ‘eye of the beholder’ that gauges beauty, and then there are the no less subjective eyes of the market, the appraiser and/or the taxman. While your heirs may adopt the ‘eye of the beholder’ stance, during your estate planning, you must view the artwork through the eyes of the taxman. Be sure to plan properly for your artworks and ensure that they are appropriately (if usefully) valued, as seen through the eyes of the taxman.

The issue of valuation is always pivotal when it comes to taxes – be it with regard to real property, stocks or something as mercurial as an easement – but with art, there is both a special importance and a special irony.  The concept of the truly valuable in art is art that is deemed ‘priceless’; however, in the marketplace there is nothing that is considered without a price. 

For perspective on the issues and even some practical advice, check out a recent article in Mondaq titled “Valuing Artwork For Federal Taxation Purposes: Income, Estate & Gift Tax Issues.”

As anyone with a sizable art collection will quickly understand, the value placed on a piece of art is, on the one hand, entirely based on the whims of the market. On the other hand, every valuation is both a blessing and a curse. A high valuation leads to a high price for sale and/or a high tax deduction when/if donated to charity. A low valuation, on the other hand, can make a piece of art cut that much less against estate and/or gift taxes. It is difficult to predict which value you will want when the time comes. That is a dynamic the IRS is well attuned to; when it comes to finally pegging a value it is vital to have a reasonable valuation of the “fair market value.” 

Admittedly, it is a tricky topic and after reading the original article you will agree that it is a good idea to review your own collection and plans for it. Given this, what do you think about your art collection? Will it pass the taxman’s tests or will it be a flaw in your estate plan?

For more information about Art Valuations, Charitable Giving & Tax Planning, as well as General Estate Planning in South Florida, please visit my website.

Reference: Mondaq (June 3, 2014) “Valuing Artwork For Federal Taxation Purposes: Income, Estate & Gift Tax Issues”

Image Credit: Tintoretto [Public domain], via Wikimedia Commons

Think Twice: Trusts as IRA Beneficiaries? Potential Consequences for South Florida Estates.

Consider the consequences of using a trust as an IRA beneficiary carefully. Make sure the results are what you would want for your spouse or your children. 

When it comes to planning for your estate, you must keep in mind all of your various accounts and their various beneficiary designations. While it’s important not only to ensure that you’ve updated your beneficiary designations, it’s crucial that you’ve elected the most efficient beneficiaries in the first place. For this, it’s not about which heir is best suited economically as a beneficiary. If you are electing a trust as a beneficiary to an IRA or other retirement account, it is simply not the same as electing one of your heirs as a beneficiary. The difference between a trust and an actual person as a beneficiary of an IRA or other retirement account is an important concept to understand.

The confusion between IRA beneficiaries, trust beneficiaries, and IRA trusts by way of IRA beneficiaries is a common confusion; it’s also one that may end up costing your estate and heirs. The Slott Report took up the charge recently and offered a definitive answer worth considering for those hoping to mix their trusts and IRAs. 

The question (and article): “How Many Beneficiaries Are There With a Trust?” 

The answer? Just one: the trust. Even if there are 20 beneficiaries to the trust, there is just the one beneficiary to the IRA - and that is the trust itself.

The difference comes out in the balance and the math at the end. Naming a trust as beneficiary can seem like or even be an easy way to spread an IRA amongst the heirs you have already chosen to be beneficiaries of the trust. It is not the same thing, however, and that may affect the usefulness of the IRA. After all, IRAs can make for uniquely useful bequests because they can be stretched out over the life of the inheritor; however, when the trust is the beneficiary, the math changes entirely. How? It is the eldest beneficiary that determines the age. 

How and when distributions happen is, further, at the discretion of the trustee rather than the would-be IRA owner. Sometimes this multi-tiered approach can work for a family, but more often than not it is not understood before the papers are signed and only dealt with after the fact. 

Always consult your attorney when considering the trust, its assets, and any time you might wish to elect the trust as a beneficiary to this account or the other.

For more information about Retirement Accounts, IRAs, Beneficiary Designations & Trusts, as well as General Estate Planning in South Florida, please visit my website.

Reference: The Slott Report (May 30, 2014) “How Many Beneficiaries Are There With a Trust?”

Preventing Inheritance Wars in South Florida, Miami and Coral Gables, FL

The specifics don’t matter: where inheritance is concerned, both in terms of monetary value and sentimental value, emotions can run high – and the fallout can last a lifetime.

When planning for your estate, and for who should get what, there is an undeniable element of self-expression. Sometimes this is a direct mode of expression, whether in direct appreciation for a person or by extolling his or her virtues, and so is written large in your estate plan. Other times, and especially as a family-loving person, you can express yourself far more subtly by ensuring that your heirs and/or the entire family can come together peacefully after your passing.  Preventing family arguments with regard to the inheritances you leave by using proactive and proper planning is a worthy goal. Allowing your family to be happy together after you’re gone is ideal, yet I’m sure you would settle for just ensuring that they can and do still talk to one another!

Estate planning for the entire family is a difficult balancing act. It can take a good deal of thought, but is well worth the effort. Forbes recently offered a bit of wisdom on the topic and a goal too: “How To Make Sure Your Children Keep Speaking To Each Other After You Die.” 

Inheritance is often conceived as the tool to ultimately show your favorites or to spurn your less-loved family members. Of course, this is something of a Victorian fascination (and an age-old scandal that makes for good drama) than a life-goal commonly shared by those planning their estates. Nonetheless, the thought is out there and the anxiety is as well. 

Inheritances can become charged whether you want them to or not. Keeping the family talking after you are gone, as a loving unit no less, can mean a number of things within the peculiar context of each individual family. More often than not, communication is key. So, how do you intend to keep the peace? Have you planned accordingly already?

For more information about Inheritance Issues, as well as General Estate Planning in South Florida, please visit my website.

Reference: Forbes (June 4, 2014) “How To Make Sure Your Children Keep Speaking To Each Other After You Die”

Is This a Hot Time to Sell Your Business in Miami, Coral Gables or South Florida?

If you’re a business owner, chances are good you’ll get some potential buyers calling you, asking this question about your business. The M&A market is heating up…

Sometimes it’s hard not to think about your business as an inherent part of your life. It may or may not be your life’s work, but it is certainly the lion’s share of your everyday life’s work. Nevertheless, there comes a time when it’s worth selling the business and also a time when the market is right. Right now, the M&A market is heating up, so is the time right for you, too?

The M&A market is fickle, but currently seems to be on an upward swing. A recent article in Forbes reports that this swing seems to be catching even middle market companies. The article has a catchy title, too: “Why More Entrepreneurs Will Get A Phone Call Worth Millions.”  

As a business owner it’s important to think of the business as a business and (again) maybe your life’s work. On the other hand, it is also just as important to think of it as a marketable asset when it comes time to exit. After all, the business is likely to be your greatest financial asset and thus the cornerstone to your retirement, in one form or another. In addition, your business likely is part of your legacy to your children, whether as a family business succeeded into or as wealth transferred. 

How will you choose to exit and when? How does this fit into your overall estate plan? Whether you pull the trigger or not, it’s worth watching the M&A market and ensuring that your business is appropriately structured for sale or succession.

For more information about Selling Your Business, Business Succession Planning and Valuation, as well as General Estate Planning in South Florida, please visit my website.

Reference: Forbes (May 31, 2014) “Why More Entrepreneurs Will Get A Phone Call Worth Millions”

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A Will is NOT Enough: Update Beneficiaries for IRAs, 401k & Insurance Policies in Miami, Coral Gables & South Florida

Most people aren’t aware that their wills don’t have the final say concerning assets held in retirement accounts — 401(k) plans and individual retirement accounts (IRAs). The beneficiary provisions of these accounts supersede those of wills.

Your will is, with few exceptions, the most important element to your estate plan. However, that doesn’t mean it’s the last say in all matters. Keep your will updated, but also be sure to keep track of all of your accounts and your beneficiary designation forms — or else your estate might swiftly break apart and into the wrong hands.

This is one of those topics as an estate attorney that I have to repeat every so often so that each beneficiary designation you sign (or don’t) will stick with you as the important document that it is. An echo of my frequent reminders to my clients came in the voice of a Yahoo News recent article titled “How Your Ex-Spouse Could Inherit Most of Your Money.”

Beneficiary designations are convenient little legally-binding documents that allow you to simply list who should receive the account if you’re not around to do so. The trouble is that this “legally-binding aspect” also allows beneficiary designations to run parallel to your Last Will, and often over and above it. In fact, naming someone as beneficiary on an account-provided form can even undo anything you say in the will about who should receive what. So, say you name a spouse as a beneficiary to your IRA, and then you divorce but fail to change the designation. That spouse will STILL get the IRA even if you intend for everything to go to the kids, a new spouse, your sibling or any other party. Your ex-spouse is named on that legally-binding designation, so it’s theirs. 

Keeping these kinds of beneficiary forms all together and updated is often amongst the more important aspects of your estate planning.  Of course, beneficiary designation forms aren’t necessarily the only important element of your estate plan. Proper planning is about mindfulness with regard to all of these little asset details as well as their proper organization.

For more information about Updating Beneficiaries for IRAs, 401k, Insurance Policies & other accounts, as well as General Estate Planning in South Florida, please visit my website.

Reference: Yahoo News (May 23, 2014) “How Your Ex-Spouse Could Inherit Most of Your Money”

Posthumous Babies from Frozen Sperm or Eggs: A New Frontier for Estate Planning in South Florida

The illegitimate child who emerges from obscurity to claim a family inheritance is a staple of Victorian melodrama. Today, some families are grappling with a 21st-century twist on that narrative—one where the child is conceived years after a parent’s death, with the help of frozen sperm or eggs.

You might say that planning for your estate is about tying together all of the loose ends of your life. That’s always been easier said than done. However, it seems with every passing generation our lives get that much more complicated. Medicine, especially fertility medicine, continues to baffle the legal system. The perfect example of that is posthumous progeny (how is that even a phrase?) through cryogenics, in-vitro fertilization (IVF), and entirely understandable timing. It’s been in the news before, but MarketWatch recently took up the topic in an article titled “Your frozen sperm could inherit your estate.”

Inheritance, unless you plan otherwise, legally flows from generation to generation or simply the closest kin in lieu of that next generation. It’s an age-old concept and logically follows the nature of human reproduction. On the other hand, that can get pretty complicated when people no longer reproduce as they always have in ages past (i.e., the “old-fashioned” way).

Artificial insemination for reproduction is a different concept entirely; there are enough legal battles just beginning to prove how murky it can become (i.e., child-support required of a sperm donor.) Artificial insemination plus cryogenic preservation of sperm/egg samples gives rise to the possibility that neither the father nor the mother need be alive when his or her children are born, and not by a short time frame either. For many couples, that’s expressly the point with this technology and medical advances. Many preserve genetic material so that they can ensure future children, say, before going into military service or before starting an invasive medical regimen like chemotherapy. 

Daily life has subtly begun to incorporate these new medical advances well before the legal system has had a chance to take it all in. This means you must be all the more aware of the new potential loose ends of your life as you set about to plan for your estate. If you’ve preserved or donated genetic material, it’s a topic worth thinking about.

For more information about Inheritance Planning and Planning for Posthumous Progeny, IVF & Artificial Insemination, as well as General Estate Planning in South Florida, please visit my website.

Reference: MarketWatch (May 30, 2014) “Your frozen sperm could inherit your estate”

Image Credit: ICSI sperm injection into oocyte Courtesy: RWJMS IVF Laboratory; Public Domain August 2005 by Ekem

All Gain, No Pain: Avoid Tax Hit on Inherited Stock in Miami, Kendall & South Florida

“My uncle died a few months ago and left me some stock he purchased in the 1970’s. I’d like to sell some of it, but I am worried about taxes. If I sell it, will I be taxed on the increase in value since he bought it, or on the gains since he passed away?”

Simply put, stock is not a “normal” asset; its tax treatment can get pretty far from normal too.  If you’ve just inherited stock or if you’re set to leave behind stock to your heirs, then it is well worth your time to get an idea just how far from normal this tax treatment can get AND what it can mean in the context of your overall estate plan.

There a volume to read on the topic of inherited stock, but thankfully Kiplinger posted a handy little note and Q&A on the topic last month with “The Tax Hit on Inherited Stock.” Essentially, stock is a partial ownership of something greater (a company). The value of the stock is based on the company, which in turn is based on market, which is based on when you buy and sell, how long you’ve owned the stock and/or who held the stock at each juncture. In other words, there are more than a few variables in play; these variables are what can make a serious tax headache. 

The tax code settles this complexity with a simple(r) equation of sale less basis equals taxable amount. “Basis” is the value during the point at which the present owner acquired the stock, which is the operative concept in an inheritance. Stock basis will be measured at the juncture that it is inherited. Let’s unpack that: a parent buys stock in 1990 and then leaves it to their heirs in 2014. While owned by the parents in the intervening 24 years, the stock jumps from $500 to $30,000. Thereafter (in 2014), the heirs inherit the stock, only measuring their taxable amount (sale less basis) on that $30,000 high point of 24 years of appreciation. Accordingly, a sale by the heirs down the line at $32,000 means that only that last $2,000 is taxable.

Again, there is much more to be said. Not all stock or stock taxation is so easy as that example was. Furthermore, since not everyone inherits stock by bequest, the tax rules can change. The big picture here is that when thinking about protecting an inheritance from taxation it is not just the estate tax or the gift tax that you have to worry about, and it’s not just the settlor of the estate who pays the taxes. Set up your assets inefficiently and your heirs can get stuck with a tax bill you didn’t think about. So think about your stocks, think about the capital gains tax, and, more importantly, plan for them both appropriately.

For more information about Inherited Stock and Capital Gains and Tax Planning for Estates, as well as General Estate Planning in South Florida, please visit my website.

Reference: Kiplinger (May 1, 2014) “The Tax Hit on Inherited Stock”

Image Credit: By From collection of JMWinkworth [Public domain], via Wikimedia Commons