Friday, January 29, 2010

The Gifts That Give Back

Over the next few decades, it is estimated that trillions of dollars will be transferred from the parents of baby boomers to their children. Charitable giving will play an enormous role in this transfer of wealth. Charitable giving provides many personal and tax benefits. The top five tips of charitable giving include (1) making sure your charity is a qualified charity (2) taking advantage of your deductions (3) maintaining appropriate records (4) creating a legacy and (5) educating your children.

First, you want to make sure your charity is qualified by the IRS as a charity. The charity should provide you with the documentation if the status as a charity is unclear to you.

Secondly, when you contribute to a qualified charity, you are entitled to an income tax deduction based upon your income and the amount of the contribution. You can also set up charitable trusts that allow you to give stock, real estate or other property to a charity while you continue to benefit from the asset during your lifetime. These trusts are referred to as split interest trusts because the charity and you benefit.

In addition, you must make sure to maintain adequate records. Regardless of the amount of any contribution, you must substantiate that it was made. This can be done by retaining the canceled check, bank record, or any written communication from the charitable organization that shows their name, the date, and the amount of contribution.

Also, your charitable giving could serve as your legacy. If you have a lifetime passion or interest in something, then you could give to a charity that might represent that passion or interest. For example, some people may have been photographers, artists or collectors. You could give your collection to a charitable organization in order to create or preserve your legacy.

Finally, you may choose to set up your own charitable organization. An individual or a family could set up a private foundation to give money to other charities. A private foundation can serve to transfer assets to the next generation. This is accomplished by involving the younger generation in the foundation’s administration, management, and grant making. Children can learn about and engage in philanthropy at an early age.

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Wednesday, January 27, 2010

Multiple Streams of Income Helps Create Wealth

When you think of estate planning, many are of the opinion that it is all about wealth. I remind people that it is all about your loved ones and you. However, if money is of interest to you then I thought I would share this video with you as you look to build your wealth for your loved ones. In today's economy and actually at all times multiple streams of income can serve as a safety net for you and your family. Enjoy the information.

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Monday, January 25, 2010

Incentive Trusts

Do you want to make sure your beneficiaries do not misuse their inheritance? Well, your trust could be drafted in such a way to provide incentives to direct your loved one on the right path. When things go as you direct, money is earned. When they fail to meet your expectations, the money is held until they do. This can be for anything that you feel is important.

We all may know situations where children have encountered problems including drug, alcohol or gambling addiction. How can that be handled when you are no longer available to help them? The Incentive Trust can be there for them to get the necessary help. It can also serve to teach children to be fiscally responsible. If they "earn" their own money, the trust could match their earnings. The options are as limitless as the situations that exist.

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Friday, January 22, 2010

Selection of Trustee - Final Note

The last couple of days I have discussed the importance of making the correct selection of your trustee. A trustee serves in a legal capacity as your fiduciary. There are laws specific to the role and responsibility of fiduciaries and laws applicable to trust management. Today, we will address the Pros and Cons of selecting a bank or financial institution as your trustee.
(1) A financial institution has longivity. Unlike individuals, you do not have the issue of incapacity or death.
(2) A lot of time does go into training and education in the specific area of trust and financial management.
(3) Generally, you have more focus attention to one area. There are departments for each area of expertise with individuals trained in that area of focus.
(4) Financial institutions have the resources to deal with complex matters and serve to be the deep pocket if anything should go wrong with trust management.
(1) Financial institutions are subject to merger and closure as we have seen over the last 18 months.
(2) The fees charged by financial institutions are of significant concern to many.
(3) You have to have resources at a certain level in the trust for a financial institution to become your trustee.
(4) Beneficiaries can find working with a financial institution to be a little impersonal with specific individuals handling the trust subject to change at any time.

So, for choosing a trustee make sure you do your homework thoroughly. Seek professional guidance in the selection process. Leave your comments here or contact us at

Thursday, January 21, 2010

Selection of Trustee - Continued

Yesterday, I discussed the pros and cons of selecting a family member or close friend as trustee. Today, I will look at the pros and cons of selecting a professional advisor as your trustee.

As discussed, the selection of those to serve in a fiduciary capacity is a very important decision and serves to protect your assets and distribute them in the manner you would desire. A professional advisor could be an attorney, accountant, insurance agent or financial advisor.
The PROS for selecting a professional are:
(1) they understand the laws under applicable to fiduciaries and trust management
(2) they have served to provide you guidance in your estate affairs and therefore understand your specific wishes and would be in a better position to deal with conflict among beneficiaries
(3) in addition to the laws governing those acting as fiduciary, generally their profession, ie attorney, has an additional code of ethics and professional responsibility imposed upon them when acting on your behalf.
The CONS are:
(1) there is a cost for professional advisor's to serve
(2) they may not have the back up staff to serve if the professional advisor should become incapacitated.

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Wednesday, January 20, 2010

Selection of Trustee

Last night I attended a seminar on the Selection of Fiduciaries & Advisors. I thought it would be informative to share the important highlights of this meeting over the next few days. Your fiduciaries & advisors generally fall into 3 major categories. They can be individual family members or friends, professional advisors or corporate/institutional advisors.

Today my discussion will center on the selection of family members or close friends as trustees. Any one who serves as a trustee does so in a fiduciary capacity which means the role is govern under the laws pertaining to fiduciaries. What are the pros and cons of selecting family members or close friends as trustees?
(1) Generally the fee for the service is nominal or none. Family members are often times beneficiaries under the trust and so therefore would not also charge a fee for managing the trust. Family friends agree to serve to be of assistance and may only expect to get reimburse for expenses incurred on behalf of the trust.
(2) Family members and friends know the beneficiaries and understand the needs. They understand the dynamics of the family relationship and the intent/desire of the person creating the trust.
(3) Knowledge of the trustworthiness of family members or friends is known through experience. The person creating the trust will choose family members or friends who have already proven their loyalty and trustworthiness.
(1) Family members or close friends probably will not be familiar with the laws applicable to Trust or Fiduciaries. They are govern by these laws and must become familiar with them so that they are not in violation and subject to fines and penalties.
(2) Sometimes the closeness to the beneficiaries can cause a conflict and make it difficult for the trustee to make the tough/unpopular decisions.
(3) What if the trustee were to become incapacitated or die? This is always a potential issue for longer term trusts with individuals as trustees.

Understanding the pros and cons will help you decide how you might want to proceed with appointing individual trustees. Tomorrow, I will discuss having professional advisors as trustees. Leave your questions or comments here or contact us at

Tuesday, January 19, 2010

ESTATE - What Does it Mean?

Yesterday I received a call from an adult child of one of my 80 year old clients. My client is in great physical and mental health. She understands the importance of getting her affairs in order and further understands that with 4 children she needs to provide direction on the handling of her affairs.

Well, her son's concerns were expressed as follows:

"My mother does not have an "estate". There is nothing "complex" about what she has. Therefore, she does not need any "estate planning". Her children can take care of her affairs for her."

My answer to him was to help him understand just what an "estate" is. So, I said:

"Your mother's "estate" is not just about tangible things but the intangible as well. On the tangible side, she has (1) her home which is very valuable - great location, well maintained and no mortgage; (2) her original art work and (3) some antiques. On the intangible side, she has (1) one child in transition after a divorce and needs to have a place to stay with her children; (2) her other children whom she would like to leave an inheritance; (3) her passion as an artist that is also a part of her legacy. More importantly, your mother would like for her wishes to be known and not have her children in disagreement over the handling of her affairs."

I encourage families to sit down and discuss these matters because he represented what could happen if there are no plans, children second guessing the wishes of their parents. With an estate plan there is no second guessing.

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Monday, January 18, 2010

Martin Luther King Holiday

The Martin Luther King Holiday is a day of remembrance and service. We remember the man who dedicated his life to equality, to basic human rights. The nation recognizes his contribution and sacrifice by not just taking a day off but taking a day on for volunteerism. It is one of many opportunities to be charitable to those less fortunate. We salute those who regularly give to others in need and we use this day to teach our children the importance of giving.

When I think of legacy in its broadest sense, it is about those intangible things we leave behind. The legacy of Martin Luther King is one of Peace, Social Change, Justice, Non-Violence and Equality. Each of us has a legacy big or small that makes a difference for the next generation, whether it is your nation, your community or your family. Think about it!! Plan for it!! YOU MATTER!!

Celebrate this day in your own way to honor one man's legacy!!!

Thursday, January 14, 2010

An Earthquake's Unimaginable Devastation

"Walking the streets, all I was seeing was dead bodies" was the report of a survivor. It is devastation in the poorest country at the worst time in the history of the world. The earthquake has destroyed what infastructure may have existed in the Haitian city of Port-Au- Prince. Thousands, maybe hundreds of thousands, have died from the earthquake that shook Haiti on Tuesday, January 12th.

The pictures, the stories, the men, the women, the children, the lost of human life moves me to do whatever I can to help. Even with this blog to express my thoughts to others who also might want to help. If you want to make the world a better place... This act of nature requires us to respond with our humanity. Those who still live (the injured, the hungry, the thirsty) are stretching out their arms to us, to the world for help.

Let us all be moved to action at this time of unimaginable need.

Tuesday, January 12, 2010

Your Taxes - What to do in 2010

This is an interesting year with the repeal of the federal estate tax and the unknown of what lies ahead. Those in the estate planning business and consumers alike just wonder and hope that certainty is around the corner. But, what should one do until we turn that corner? There is lots of commentary out there and I am always browsing, reading, researching and myself opining.

I thought this CBS article was informative and thought I might share it here. Learn about ways to at least lower your taxes this year as we all wait for our economy to improve.

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Monday, January 11, 2010

A Friend's Death

I pause for a moment to reflect on a friend's recent death. She was not a colleague, client, co-worker or childhood friend but among those wonderful individuals you meet during your lifetime for no apparent reason other than your paths cross and a lifetime connection is made. She was a 2 time cancer survivor and had learned to really cherish each and every day, though she was one to live her life fully before experiencing any illnesses. She was ahead of herself in many ways, advocating advancement in technology among organizations, cities and countries long before some technological changes became standard operating procedure. She was a leader among leaders with her own genuine style. She could be a mover and shaker while attending who's who events or while being a "lazy lima bean" at elite retreats where others crossed deserts, climbed mountains, rode rapids or jumped out of planes.

Carole I. Smiths' legacy will live on in her daughter who has her own unique way of addressing those issues her mother found important. I have watched the relationship among mother and daughter and realize that their relationship and what Carole leaves to her daughter is what I seek to accomplish in an estate planning law practice.

I pause and give my condolences to the family.

Friday, January 8, 2010

Durable Power of Attorney

I received a call the other day from the daughter of one of my clients. Her parents have been my clients for about 5 years. The wife, an avid swimmer in her late 70s, was the caregiver of her husband who now has advanced dementia. Unexpectantly, the wife died and with her the location of the power of attorney for her husband which had been removed from the safety deposit box since she had been using it given his illness. The daughter was the alternate agent.

In my practice, I counsel my clients to maintain their documents in one of 2 places, a safety deposit box or a safe at home that is waterproof and fireproof. My clients had followed that advise. With the Durable Power of Attorney, also referred to as the General Power of Attorney, it is important to have more than 1 original, 3 is preferable. Fortunately, for my clients' daughter, I maintain one of the 3 originals. Without the power of attorney, the daughter would have had to institute costly guardianship procedures in order to handle her father's affairs. Her parents' advanced planning alleviated that expense.

It is important to seek legal advise and guidance because it is not just the preparation of documents that is important but the details of the process. Our experience dictates the importance. Leave your comments here or contact us at

Thursday, January 7, 2010

Federal Estate Tax 2010 Repeal

I can recall when I started my solo estate planning law practice in 2004, the thought was that Congress would soon address the impending 2010 repeal of Federal Estate Tax law. Practitioners and their clients needed clarity to plan. Would there continue to be a federal estate tax and at what levels would it apply?

Well, it is 2010 and Congress did not enact an extension of the estate tax before December 31, 2009. Accordingly, there is now a one-year repeal of the estate tax for 2010, subject to future Congressional action that might reinstate the tax at any time which makes advice and planning a guessing game.

It's very important to be aware that this repeal is temporary; the entire law "sunsets" (expires) after December 31, 2010. This means that the tax structure as it existed in 2001 will take effect again. Therefore, in 2011, Federal estate tax will be assessed on property valued in excess of $1 million with a maximum tax rate of 55%.

Very few people have estates large enough to be affected by the rules recently repealed but many more will be affected if it reverts back to the 2001 standard. Leave your comments here or contact us at

Wednesday, January 6, 2010

"Baby-Oil Heiress" Dies

I often speak of our legacy, creating one and passing it on. Today’s clients want to know that the wealth they leave their children is wisely used to benefit their heirs and not something that ruins their incentive to work or achieve. Wealth should be an opportunity. It should not serve to cripple and stifle initiative, creativity, and productivity. The tabloids often follow those of inherited wealth leading meaningless and sometime destructive lifestyles. Ensuring that their heirs have more meaningful values is of critical importance to clients who realize that giving their children substantial wealth may not truly benefit them in the long run.
One can only wonder whether the inherited legacy of wealth had unanticipated consequences for Casey Johnson, age 30, whose death was reported yesterday.

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Tuesday, January 5, 2010

Wills Help Avoid Crimes

I was watching Law and Order - Criminal Intent and, once again, was reminded of the importance of having a Will. This episode addressed estate fraud. When a person dies without a Will, someone has to be put in charge of the administration of the estate. That person is determined by the legal system. Sometimes there are opportunities where the system fails the deceased persons and in this episode such was the case.

There was pilfering of a number of estates while assets were held under the protection of the state. The system failed because of the criminal intent of a state employee with access. With no direction provided by the deceased persons via a Will, their assets languished within the system providing ample time and opportunity for thievery. Clearly, this was not what the decedent intended for their assets. However, failing to take that important step in creating a Will a criminal benefitted from the persons' estate.

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Monday, January 4, 2010

Self-Discovery through Estate Planning

With each New Year, we open the door to new possibilities. Our dreams and hopes for the future are refreshed. I continue to advise everyone that the estate planning process requires that you assess your life now. At our firm, we work to help you identify your assets (traditional or nontraditional), determine your beneficiaries (family or otherwise), and control when and how your assets are distributed.

Estate planning provides you with a way of addressing your needs while you are living and developing a plan that expands beyond your lifetime. It challenges you to reflect on your life. You can engage the estate planning process as a process of self-discovery to help you understand the life that you are living. During this process, it may be the first time that you plant an idea of your purpose that can begin to germinate into your legacy. That is what is so exciting about estate planning. It is what you make it and we help make it a special and important journey for you and your family.

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Friday, January 1, 2010

Happy New Year!!!! Top New Year's Resolution!!!

It is 2010 and we can take the time to reflect on the past and plan for the future. So, what should be the NUMBER ONE New Year's Resolution? As we all now know having a will to reflect your specific wishes is important to you and your loved ones. 2010 is the opportunity to do what should have been done.

My suggestion is that you first write it down as a "to do", "goal", "objective" or whatever name suits your fancy. Second, get at least 3 recommendations for an estate planning attorney from your friends, an estate planning council or local bar association referral program. Third, call each recommendation to interview over the phone. Fourth, make a choice, set an appointment and make the visit. Your estate planning attorney will take it from there.

If you live in Pennsylvania, I can be listed as one of your recommendations. I look forward to your call and helping to make your decision easy. Leave your comments here or make that call today!!!!