FLORIDA ESTATE PLANNING AND PROBATE LAW BLOG

The Florida Estate Planning and Probate Law Blog is focused on recent federal and state case law and planning ideas.

PROTECTING INHERITED ASSETS IN CASE OF DIVORCE

♠ Posted by Marc J. Soss in ,,,,,,,
For those happily married, there are usually no objections to sharing gifts received from parents or grandparents. In contrast, when divorce is on the horizon the sharing of gifts is not an option. Unfortunately, past actions may subject those gifts or bequests to joint ownership and division upon divorce (separate versus marital property). To avoid this potential land mine it is important to consider the following options:
 
Pre-Marital and Post-Marital Agreement:
 
These agreements can protect inherited assets (business, property, art collection, etc.) should a divorce occur. Each spouse can agree to forgo his or her rights to any inheritance or major gift given to the other spouse before or during the marriage.
 
Maintain Separate Accounts:
 
Inherited or gifted funds should be maintained in a separate account so that it is not commingled with the other spouse’s assets or marital funds. 
 
Utilize a Trust:
 
Utilization of a Trust can prevent a gift from becoming a marital asset. For example, the Trust could own a gifted residence and charge the couple rent to live in it while they remained married, or financial account and preclude it from being a marital asset at divorce.
 
Keep Title in One Name:
 
Maintain ownership solely in the inheriting or receiving spouse’s name alone. However, the way in which the property is used and from what source its maintenance expenses are paid can change its classification from separate to marital property. 
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SELECTION OF THE STATE OF YOUR DEATH AND ESTATE TAX BILL

♠ Posted by Marc J. Soss in ,,,,,
While it is not unusual for states to claim that they are the best place to live or have the best beaches. However, states are now promoting themselves that they're also great places to die. In 2015, four states will increase the amount that's exempt from state estate taxes, reducing or eliminating the tax that heirs will owe. On January 1, Tennessee's estate tax exemption will jump to $5 million from $2 million, Maryland's exemption will increase to $1.5 million from $1 million, and Minnesota's exemption will rise to $1.4 million from $1.2 million. On April 1, 2015, New York's estate tax exemption will increase to $3.125 million from $2.062 million. All still well below the federal estate tax exemption amount.
 
In 2016, Tennessee's estate tax will disappear, Maryland and New York will increase their exemption thresholds every year until 2019 (when they'll match the federal exemption amount) and Minnesota's exemption will rise in $200,000 annual increments until it reaches $2 million in 2018. These changes are important because taxes are one of the most common reasons, besides the weather, retirees relocate to another state.
 
Currently, 14 states and Washington, D.C., have state exemption amounts below the federal threshold, with maximum tax rates ranging from 12% to 19%. New Jersey's estate tax threshold is just $675,000, which could affect heirs of relatively modest estates. Seven states have an inheritance tax, with maximum rates ranging from 9.5% to 18%. Unlike an estate tax, which is levied on an estate before it's distributed, an inheritance tax is typically paid by the beneficiaries. Maryland and New Jersey have both estate and inheritance taxes.
 
One of the biggest reasons people live in Florida is because it has NO estate tax (only the federal applies). If you already have a comprehensive estate plan, make sure it's regularly updated to reflect revisions in your state's law. More changes are likely as states try to make their jurisdictions more attractive to retiring baby boomers. For example, legislation has been introduced in New Jersey to phase out the state's estate tax over a five-year period.
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