Everyone who kept up with the recent changes in the estate tax laws—and the flurry of speculation, news stories and blog posts that came with it—knows just how important estate taxes are to estate planning. Although we make it clear on our blog that estate planning should be at least as much about family and personal legacy as it is about money and taxes, the truth is that much of the technical planning that goes into creating your estate plan is hugely affected by the estate tax laws and regulations.

This is why we thought our readers might like to have a little sneak peek at what you might owe in estate taxes were you to pass away under the current laws. SmartMoney.com recently published an interactive Estate Tax Calculator which can help estimate the amount you might owe based on your current financial information.

Although it is certainly interesting to see what you may end up owing in estate taxes, and it is absolutely helpful to see a list all of your assets and liabilities in one place, please remember that what this calculator provides is only an estimate. There is more to estate tax calculation and estate planning than can be provided in one form. What we hope is that this calculator may pique your interest, and inspire you to contact our office for the more thorough planning you and your family deserve; planning based on face to face discussions about your unique goals and situation.

We’ve recently seen a number of news stories with disturbing figures about the rising cost of college education, and the growing inability of graduates to pay off the debt they incur from student loans. In fact, recent studies reveal that student loan debt now exceeds credit card debt in the U.S.!

All of this has motivated many grandparents to find a way to help pay for their grandchildren’s college education. According to this article in the Wall Street Journal “Recent tax-law changes are making it easier for families to help pay education bills for multiple grandchildren and even future generations. But grandparents have to make some tough decisions first.”

For grandparents whose grandchildren are already in school there may be fewer tough decisions to make, these grandparents will find it easy to “pay an unlimited amount of tuition directly to an accredited school for their grandchildren’s education without incurring any gift tax or using their exemption.” Additionally, under the annual gift tax exclusion, anybody—including grandparents—can “give up to $13,000 to an unlimited number of people each year free of tax.”

Grandparents with younger grandchildren are finding that they also now have more options if they want to contribute to their grandchild’s future college education. “Under the Tax Relief Act of 2010, the federal gift-tax exemption increases to $5 million from $1 million for individuals, as does the exemption for the generation-skipping tax… The changes make it easier to pass along money for education to future generations free of taxes—at least through 2012, after which the exemption is scheduled to revert to $1 million.” The only question is how is the best way to set aside the money until the child reaches college age?

The most popular method right now is for the grandparent to set up or contribute to a 529 College Savings plan for their grandchild. “Assets you contribute to a 529 account are no longer part of your estate. If you are the account owner, you can withdraw the assets later without penalty.” However, care must be taken with 529 plans because “When the assets are withdrawn they will be counted [for tax purposes] as the student’s income.”

Other options for savings include “setting up a ‘pot trust,’ or dynasty trust, which names all of the grandchildren, including any future babies, as beneficiaries. The length of such a trust varies by state but generally can serve at least a few generations of college students.” Of course setting up a trust with such a long intended duration means choosing a trustee who is likely to outlive you. Many grantors choose one of their own children (a parent, aunt or uncle of their grandchildren) or a trusted financial advisor, although corporate trustees (such as a bank) are also an option.

If you are interested in contributing in some way to your grandchildren’s college education please contact our office—we can help you understand your options and choose the one that’s best for you and your family.

News sources such as the Washington Post entertainment section promise that this summer will be flush with celebrity newborns and proud mamas and papas. Some of the stars expecting additions to their families include Natalie Portman, Kate Hudson, Jennifer Connelly and more. Here at our office we wonder how many of these new parents will remember to update their wills or estate plans after the birth of their child… and how many of our readers have remembered (or will remember, if they are currently expecting a new child or grandchild) to update their own estate plans after an addition to their families.

Every parent knows that the time after the birth of a new baby can be a tired, busy and chaotic transition, and updating their estate plan is probably the last thing on any new parent’s mind. But after the first few months, when things have calmed down and you’ve settled into a routine, updating your estate plan to include and provide for your new little one should take top priority.

Here are a few things new parents will want to consider as they prepare to update their estate plan:

• Guardians for your child. Who are the people who will raise your child if the unthinkable should happen to you and your spouse? Many people choose close family members, others choose trusted friends.
• Keep your child’s inheritance in trust. Settling your entire estate on a 5, 10 or 16 year old is never a good idea. Consider instead creating a trust for your child which will provide for him until he reaches maturity.
• Trustees of your child’s inheritance. Who do you trust to invest and distribute the estate for your child while she is still a minor? Some parents choose to have the guardians also serve as trustees; others prefer to nominate separate trustees and guardians who will work together, providing a natural system of checks and balances.
• Providing for your child’s special needs. If your child has special needs he will need special planning to ensure that his needs continue to be provided for. Ask us (or your own local estate planning attorney) about a special needs trust.

Guardians, trustees, trusts and special needs planning are the very basics of estate planning for families with minor children, and should serve as a jumping off point for further discussion with your estate planner.

It’s all over the news lately that Prince William and his fiancé Kate Middleton will likely not sign a prenuptial agreement before the royal wedding on April 29^th. Although many reasons have been given as to why the couple will forgo signing a prenup, one of the reasons is that “while prenuptial agreements are common in the United States, they are far less prevalent in the UK. Only in the last year have British courts agreed to recognize such deals.” This is a statement that has some Americans asking exactly how legally binding are prenuptial agreements here in the States?

The answer to that question depends on a number of factors: your state of residence, the terms of your prenuptial agreement, how long you stay married, and more. Fortunately, the longer prenuptial agreements are around, and the more common they become, the more respect they get from the courts. But if you’re worried that your prenuptial agreement won’t hold up in court, here are few tips to help ensure the validity of your agreement.

Neither party must be signing under duress. The more time each party has to review the agreement before the wedding the better. Any prenuptial agreement signed the day of or the day before the wedding could be looked upon as being signed under duress.

The agreement should include full disclosure of income and assets. If you live in a state where it is possible to waive full disclosure of assets then BOTH parties should specify that they do so knowingly.

Each party should have their own legal representation. In order to be sure that neither party is being taken advantage of, each party should have their own independent attorney review the document before it is signed.

Details regarding children or child support in a prenuptial agreement may not be enforced by most courts. Partners my want to include details about possible custody or child support arrangements in a prenuptial agreement, but keep in mind that any court will always give the best interests of a child the highest priority, even if it means disregarding those sections of the agreement between spouses.

Of course, every couple hopes that a prenuptial agreement will never come into play, but these tips can help ensure that your agreement will be considered valid by a court if the worst should happen. Contact our office if you have any questions about prenuptial or marital agreements, we’d like to help.

The recent passing of Elizabeth Taylor has many wondering what will now happen with Ms. Taylor’s sizeable fortune? According to this article in Forbes Ms. Taylor’s fortune includes not only the millions she made in the Hollywood movie industry, but the even greater amount made she made with her fragrance line.

“In her most savvy business move, Taylor licensed her name to Elizabeth Arden and came out with several perfumes, including Passion, White Diamonds, and Black Pearls. Her fragrances have reaped a reported $200 million in sales over the years. Perfumes are one of the highest margin products out there, which is why celebrities love them. Taylor was doing it before anyone.”

Furthermore, a recent article in ABC News reports that Elizabeth Arden has no plans to discontinue the Taylor brand anytime soon. “White Diamonds remains a best seller almost 20 years after its 1991 introduction, a testimony to her transcendent and enduring appeal… Our best tribute to Elizabeth Taylor will be to continue the legacy of the brands she created and loved so much.”

The question now is, what will happen to this sizeable (and growing) fortune now that Ms. Taylor has passed away? ABC News has some guesses: “On the question of what could happen to her estate now that she has passed away, many speculate it will be distributed to her four children and 10 grandchildren [with whom she is reported to have been on good terms]… And Taylor most likely bequeathed a substantial amount of money to her charitable work. Taylor was a devoted AIDS activist, helping form the American Foundation for AIDS Research in 1985 and the Elizabeth Taylor AIDS Foundation in 1991.”

Thus far no last will and testament has been released, which suggests that Ms. Taylor may have had a trust, an extensive document which protects your family and assets while remaining private. But given what we do know about Ms. Taylor, it is not unreasonable to believe that her estate will be split between her family and her charitable endeavors, especially the AIDS Foundations to which she gave so much in life.

A recent article in the Wall Street Journal shines the light on a new program being instituted by a growing number of states called “Physician-Orders for Life Sustaining Treatment,” or POLST. “A POLST, which is signed by both the patient and the doctor, spells out such choices as whether a patient wants to be on a mechanical breathing machine or feeding tube and receive antibiotics.”

Creating a POLST is an important step toward getting the care and medical treatment you want at a time when you may no longer be able to communicate those wishes to your family or medical staff. As estate planners we know just how important it is to communicate these preferences for health care; in fact, creating an estate plan with our office includes drafting a document called an advance directive, in which you specify which medical treatments or interventions you would or would not like, and more importantly, it is the document in which you nominate a health care agent to serve as your proxy if and when you are unable to speak for yourself.

Keep in mind that although the POLST is an important step in making your wishes known, the POLST is not intended to replace an advance directive. The POLST programs “are meant to complement advance directives, sometimes known as living wills, in which people state in broad terms how much medical intervention they will want when their condition no longer allows them to communicate.”

The WSJ article states that “A study supported by the National Institutes of Health last year found that patients with POLST forms were more likely to have treatment preferences documented than patients who used traditional documents such as living wills and do-not-resuscitate orders.“ This comes as no surprise, considering that executing a POLST includes getting the document signed by your doctor, thus ensuring that you doctor is not only aware that you’ve expressed your wishes for end-of-life care, but has also likely had a part in helping you understand exactly what your options are.

Our office recommends that our clients go one step further—in addition to having your doctor sign your POLST, give your doctor a copy of your advance directive as well. Once you have things squared away with your doctor we also recommend sending a copy of your POLST and your advance directive to the person you’ve named as your healthcare agent.

The more informed you doctors and family are about your wishes for end-of-life care, the more likely it is that you will receive the treatment you prefer.

Only a few days ago the world was shocked by the terrible earthquake and tsunami in Japan. Our hearts and prayers go out the people affected by the tragedy, and many people are asking what they can do to help.

The sudden violence of nature has many of us looking at our own situations as well, wondering if we are prepared—as a country and as individuals—should an equally devastating natural disaster strike our own shores. Of course the first thought most of us have in this regard is whether or not we have a well-stocked supply of emergency rations, but as this article from CBS MoneyWatch.com points out, there is much more to surviving a natural disaster than the first 24 hours. “Most people never think about the items to take that help protect your financial assets.”

Author Steve Vernon includes in his article a list of things you can do to prepare for what comes after the first 24 hours of a natural disaster, including:

• A stash of cash in case ATMs are shut down for a long period of time.
• Contact information for family members, close friends, and work contacts.
• A cell phone and charger, plus batteries and chargers for other necessary electronic equipment.
• A list of account numbers and contact information for all your regular bills and payment obligations.
• Your insurance company contact information.

These are only a few of the things you’ll want to have ready (or at least have thought about) if disaster strikes here at home.

Some natural disasters are so big in scope they are almost impossible to comprehend, let alone try to prepare for; but preparation is the best way to keep fear and panic at bay. It doesn’t help anybody to dwell too much on what “might happen,” but having a basic emergency plan in place gives you the freedom to go on with your everyday life, knowing that you’ve done what you can to be ready if disaster does strike.

For more information about disaster preparedness please visit the FEMA website here: FEMA Emergency Planning Checklists.

For more information about how you can help the disaster victims in Japan please check the Crisis Response Page on Google.

If you are the executor of the estate of a decedent who died in 2010 you may think you’re in the clear.  After all, there was no estate tax in 2010 right?  Making distributions should be a piece of cake.  Wrong.  Because of the estate tax election available on the estates of 2010 decedents, administering those estates will actually be more work than you may think.

The repeal of the estate tax in 2010 also brought with it a repeal of the “step up in basis,” meaning that heirs selling inherited assets were taxed based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death.  This generally resulted in a higher tax paid on assets than the normal estate tax rate—not good for taxpayers. But 2010 estates don’t have to go by these rules. The legislation passed in December of 2010 gave 2010 estates the opportunity to elect whether they wanted to use the 2010 estate tax laws, or the new laws for 2011.  This article in Forbes explains what this means:

“The 2010 Tax Relief Act restored the estate tax for individuals dying in 2010 with a $5 million per person exemption and a maximum rate of 35%. It also repealed the modified carryover basis rules for property acquired from a decedent who died in 2010. However, estates of individuals dying in 2010 can elect zero estate tax and the modified carryover basis rules that would have applied before they were repealed. That means the basis of assets acquired from the decedent would be the lesser of the decedent’s adjusted basis (carryover basis) or the fair market value of the property on the date of the decedent’s death.”

In general this tax election is a good thing, it allows executors to choose which tax formula will cost the beneficiaries the least in taxes; but it does mean a lot more paperwork and a lot more attention to detail.  If you are the executor of an estate of a decedent who died in 2010, don’t hesitate to call us.  We can answer your questions and help you explore your options.

It’s that time of year again; the time of year when everyone starts gathering receipts, assessing income and expenses, and making appointments with tax advisors. Tax time can be a very stressful time for many families, but—with the help of this article from MSN Money—perhaps tax season can be made a little bit easier. The article lists 13 tax breaks from 2010 that can help save you money, including:

* The tax credit for first time homebuyers (if you’re not a first time homebuyer don’t give up, there’s a credit for existing homeowners too.)
* The parking and transit credit
* The college tuition tax credit
* The credit for energy-saving home improvements

And then of course there are the two we’ve been mentioning here on our blog for the past few months:

* The estate tax exemption, and
* The annual gift tax exemption

Of course, not every item on the list is going to apply to every reader, but if even one or two credits apply to you or your family it can be a huge help.

Don’t rely only on this article to ease your 2010 tax burden, your own advisors and tax planners—who know more about your family’s personal and business finances—will be able to give you much more in-depth advice on how best to address your own tax situation. In addition, talking to a professional advisor right now provides the perfect opportunity to tackle any issues in 2011, hopefully making this time next year a much happier and less stressful time for everybody.

We all know from the many news stories of last  year that estate tax laws are not set in stone, they can fluctuate and change both at the state and the federal level; and as this article in Forbes points out, keeping up with those fluctuations can be of the utmost importance to you and your loved ones.

The many celebrity news stories we saw last year provide all the examples we need of what can happen when you plan well (as was the case with Brittany Murphy’s estate plan) or when you neglect your estate plan—or even worse, when you fail to plan at all. Here are some celebrity examples of common estate planning pitfalls and mistakes:

Failing to update your estate plan. We tell all of our clients how important it is to review and update your estate plan every 2 to 5 years; Gary Coleman provides a prime example of what can happen if you neglect to follow through on those updates and reviews. “[Coleman] created a handwritten codicil to his will in 2007 leaving much of his estate to his wife, Shannon Price. After they divorced, however, Coleman never updated his will or created a new one. That led to a court fight after he died about whether Coleman was still married to Price. Even though they never officially tied the knot for a second time, Price claimed they had a ‘common-law marriage,’ which would mean that the handwritten will would be valid.”

Failing to fund your estate plan. A revocable living trust is a wonderful tool, but it’s just an empty vessel until you fund it by re-titling your assets in the name of your trust.  Michael Jackson created what is most likely a wonderful living trust, but his failure to fund it properly means that 2010 saw “The estate of Michael Jackson… dragged on with no end in sight.”

Waiting too long to create your plan. If you are a senior citizen, waiting too long to create your plan leaves you open to the exploitation or undue influence of acquaintances or family members who might try to take advantage of you.  Even if nothing of the sort has taken place, just the suspicion of undue influence can land your estate in a lengthy court battle. “Does the Anna Nicole Smith case come to mind? The United States Supreme Court ruled in 2010 that it will hear her case for the second time. Did she wrongly take advantage of her 90-year old husband, or did his son use fraud and other improper means to stop the billionaire from leaving money to Anna Nicole?”

We can all benefit from the very public airings of these celebrity estates.  Our office can help you avoid the mistakes listed here, plus many more.  The new laws of 2011 provide the perfect opportunity to create a plan (or update your existing plan), and ensure that your family will be well protected now, and in the future.