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The KRASA LAW, Inc. Estate Planning Blog

Thursday, May 30, 2013

When You Need a Little Help From Your Friends

Upon creating your estate plan, you have the capacity to not only formalize your wishes, but you also have the capacity to manage your finances.  The original intent of your estate plan is to ensure that your affairs can be handled efficiently by the persons of your choice in case of a future invent such as incapacity or death.  As a result, you typically name third parties who will have the legal power to handle your affairs in the future, while retaining sole control over your finances and personal decisions in the meantime.  However, at some point, you may decide that you need a trusted person to have legal authority to help you with your finances such as writing checks and dealing with financial institutions on your behalf.

When you are ready to give a third party current authority to handle your finances, you have to make sure that you execute the correct documents for the appropriate situation.  Most laypersons – and even many attorneys – simply think of executing a power of attorney document.  It seems simple enough and many people assume that a general durable power of attorney will give the agent authority over all assets.  However, if your estate plan includes a living trust, your power attorney alone will not be sufficient.

With a trust-based plan, most of your assets are titled to the trust and are not held in your individual name.  Technically, you do not actually own the assets – your trust is the owner.  However, you are the trustee and the beneficiary and thus you have the power to manage your assets for your own benefit.  Most trusts do not allow a trustee to delegate authority to a power of attorney agent and most power of attorney documents specifically do not apply to trust actions.  As a result, a general durable power of attorney will not give any legal authority to the power of attorney agent over trust assets.  If most assets are titled to the trust, the general durable power of attorney will not accomplish the goal of giving a third party the legal authority to manage the majority of your assets.

In addition to executing a general durable power of attorney that gives an agent immediate authority, you must also amend your trust to add the third party as a current co-trustee.  Once the amendment is executed, you must deliver a copy of the amendment to each financial institution and have the new co-trustee added to the signature cards.  Although this is basic estate planning knowledge, it is astounding how often the step of amending a trust to add the third party as a co-trustee is overlooked.  Often, the power of attorney agent will go to the financial institution assuming that the general durable power of attorney document will be sufficient, only to get turned down by the bank.  
Even with an amended trust that adds the third party as a co-trustee, a general durable power of attorney document is still prudent.  First, there are assets that are not titled to your trust during your lifetime such as retirement plans, annuities, and life insurance policies.  Second, there are other tasks that might need to be performed on your behalf that can only be handled through a general durable power of attorney such as having the ability to access your mail, signing your tax returns, and entering into contracts on your behalf. 

What seems to be a very simple task is more complicated than it first appears.  As with all legal issues, it is important to make sure that the goals you are trying to accomplish are addressed comprehensively by an attorney who has the expertise to navigate the various legal rules and technicalities to ensure that you avoid unnecessary delays and hurdles due to a misunderstanding of the law. 


Friday, May 3, 2013

Safeguarding Your Estate Plan Documents

You finally got around to establishing your estate plan, consisting of a revocable living trust, pour-over will, power of attorney, an advance health care directive, and other important documents.  You are proud of yourself that you finally took the very important step of executing a plan that will help your trusted loved ones manage your assets in the event of incapacity or death.  However, you suddenly realize that the estate plan will only be useful if your trusted loved ones have access to your estate plan documents upon your incapacity or death, otherwise, it would be as if you never executed your estate plan in the first place.  You wonder where to keep your documents to ensure that they will be available in case of an emergency.

Historically, the drafting attorney customarily would offer to keep the clients’ original estate planning documents.   In addition to being a service to the client, many attorneys figured that the client or the client’s loved ones would almost be “compelled” to go back to the same attorney for future business.  Although there is nothing that requires the client or the client’s family to use the same drafting attorney for future business, the fact that the attorney held all the originals strongly encouraged the client’s or the client’s family to use the same attorney. 

However, today most attorneys realize that holding all of their clients’ original documents creates a significant liability.  Most law firms do not have fireproof storage and one office disaster, such as a fire or a flood, could destroy thousands of original estate planning documents.  Furthermore, most attorneys realize that holding clients’ documents is a futile way to encourage future business.  Good client service, availability, and periodic contact with information that might be useful to the clients is a much better way to encourage future business than to “hold hostage” original estate planning documents.  If your law firm will not hold your original estate planning documents, where should you safeguard them?

One idea is to keep your original estate planning documents in a safe in your home.  Many safes are fire-resistant, though nothing is foolproof.  I distinctly remember my grandfather’s “fireproof” safe was destroyed in the Oakland Hills fire of 1992 – it melted in the heat.  In addition, the tsunami in Japan a few years ago washed many household safes hundreds of miles away from their original locations.

Another idea is to keep your original estate planning documents in a safe deposit box at your bank.  Often estate planning documents are too thick to fit into a standard safe deposit box.  As a compromise, you might simply keep your original signature pages in your safe deposit box and keep photocopies or electronic copies of the rest of your estate planning documents in other locations.

Liza Horvath, a trust management professional in Monterey, decided to solve this storage problem herself – she installed a vault at her office!  The vault, ordered online (yes, you really can order anything online), resembles what you might see in a bank.  Through her program, EstateDoc Vault, anybody may keep original estate planning documents in her vault for an annual fee.  “I always felt that the storage of original estate planning was a dilemma for most clients,” said Liza. “When I opened my own trust management business last year, I knew that offering a safe place and reliable storage place for original estate planning documents that are too large for a standard safe deposit box would be a valuable service.” 

With the proliferation of cloud storage today, another simple solution is to keep electronic copies of estate plans in an online backup storage plan such as Dropbox, Carbonite, Barracuda, or LegalVault.  Furthermore, cloud storage is so inexpensive today that it often makes sense to backup important legal documents in multiple cloud storage programs as a “belt and suspenders” approach.  Although you cannot store the original “wet signatures” of your estate planning documents in an electronic storage program, the original “wet signatures” are not really necessary as long as you have an electronic copy or a photocopy of your signatures. 

In addition, you might put electronic copies of your estate plan on a disk that can be stored in a safe deposit box and you might give physical or electronic copies of your estate plan to your loved ones.

Regardless of which storage solution you prefer, you want to take steps to ensure that your loved ones have easy access to copies of your signed estate planning documents in case of emergency.


Friday, April 19, 2013

No Handwriting Please!

Most people understand the importance of seeking the counsel of a qualified attorney to draft their estate plans.  The law is complex and estate planning involves everybody they love and all the assets they own.  Furthermore, after death, family members might get into disagreements about the intent of the plan.  It is therefore definitely worthwhile to make sure the estate plan is drafted clearly and correctly, carefully navigating tax, legal, and practical pitfalls.  

Most estate plans are revocable, meaning that the testator can make changes to the plan at any time, provided that he or she is living and has mental capacity.  After investing a significant amount of time, expense, and effort into creating the estate plan, it might be tempting to simply write in “a simple change,” such as switching the designation of a trustee, altering the amount of a cash gift to a particular beneficiary, or even removing a beneficiary all together.  One might reason that while it was important to initially seek the counsel of an attorney in drafting the original estate plan, it is not worthwhile to invest additional time, expense, and effort to make a minor modification to the plan.  However, writing in a change – even if it appears to be simple and straightforward – can create a whole host of problems and litigation after death.

“Interlineations” is the legal term for handwritten notes or modifications to an existing estate plan.  The quickest way to a lawsuit over the interpretation of an estate plan is to make interlineations in a document.  

The first question to be explored would be whether or not the testator was actually the person who made the interlineations.  There are hundreds of examples of disgruntled beneficiaries who – after the death or incapacity of a testator – attempted to make changes to estate plans to better suit their wishes or expectations.  While the handwriting might look like that of the testator’s, it might not be clear whether that handwriting was forged or not.

Second, even if it is clear that the testator in fact made the interlineations, the next question will be whether or not the testator intended that the interlineations be legally binding.  Often, people will examine their existing estate plans and think about possible future changes, but never make the final decision to actually effect the proposed change.  The interlineations could simply be the notes of a brainstorming session but the requisite intent to actually make those notes legally binding might be absent.  If the testator did not take the notes into an estate planning attorney for review and final drafting, it is reasonable to doubt whether the testator intended for the proposed changes to be legally binding.

Third, an additional question will be whether the testator was under duress, menace, fraud, or undue influence when making the interlineations, or whether the testator was even of sound mind at all.  If a testator makes changes on his or her own, it is not clear what the circumstances were.  Was the testator alone when he or she made the interlineations?  Was the testator influenced by a mischievous third party?  However, if a testator met privately with an attorney, there is less chance that the testator was not acting of his or her own free will and volition as the circumstances of the execution of the modification are clear and controlled.  

In addition to the aforementioned uncertainties that interlineations often cause, meeting with a qualified attorney to make changes to an estate plan can ensure that the testator has covered all bases.  Often an estate plan includes many varied parts that work together.  The testator might recognize the need to change one part of the plan, but fail to identify other parts of the plan that are related, which can cause discrepancies or unintended consequences.  A qualified attorney can help identify all aspects of an estate plan that might be affected by the testator’s desired changes.  Furthermore, a qualified attorney can also suggest other changes of which the testator might not be aware.  

Although a testator might have a “simple change,” making that change without the guidance of a qualified attorney can turn a “simple” idea into a complex problem.  It is definitely worth the time, effort, and expense to seek the counsel of a qualified attorney when addressing changes to an estate plan.  


Monday, April 15, 2013

A Kinder, Gentler Attorney

When I went to law school, I knew that I wanted to practice estate planning.  I usually joke that the reason it is unusual for law students to focus upon this subject matter is because there are no TV shows about estate planning attorneys: it’s not the flashiest area of the law.  Most people’s impressions of the law and lawyers are shaped by the entertainment industry which focuses on litigation or criminal law which is adversarial by nature.

Most people realize that the entertainment industry is more interested in creating drama and interesting story lines rather than accurate portrayals of the legal profession.  In fact, when preparing for the Bar Exam, we were actually advised to watch “any TV show or movie about lawyers” as a way to study legal ethics by identifying all the ethical or procedural rules that are constantly broken by the characters.  This proved to be an effective study method!  

Nevertheless, our popular culture strongly influences the way people view lawyers and their expectations of the law.  As a result, many people might feel uncomfortable with the idea of visiting an attorney for estate planning.  Not only are they already hesitant to discuss topics such as death, disability, and taxes, they are not sure if they will be able to get along with an aloof and abrasive attorney.  However, most people are presently surprised at the process as estate planning is a very different area of the law than what some expect.

Unlike the adversarial litigation attorney from a favorite TV show, an estate planning attorney acts as the clients’ trusted adviser, helps the clients identify their concerns, and develops a plan that accomplishes their goals and navigates the complex law.  Rather than a stuffy corporate environment, most estate planning attorneys strive to create a warm and friendly setting that makes clients comfortable to discuss these otherwise uncomfortable topics.  Most clients find the process to be a pleasant surprise. When the plan is complete, most clients express a sense of accomplishment and the feeling that a great weight has been lifted off their shoulders.  

There are probably good reasons why there are no TV shows about estate planning attorneys: no drama, no scandal, and no legal ethics rules being broken on a regular basis.  These same reasons, however, make estate planning accessible, comfortable, and rewarding, not only for the clients but also for the attorney.

Most people realize that they should address their estate planning but are hesitant to do so for a variety of reasons.  It is important to know that the process is not nearly as intimidating as one might think.  A qualified estate planning attorney can act as a trusted adviser to help clients navigate the law and plan for their loved ones.


Friday, March 22, 2013

Does Your Business Have an Estate Plan?

Most people are aware of the fact that they should have a personal estate plan that provides an efficient mechanism for the management of their assets during incapacity and the transfer of their assets upon death.  However, entrepreneurs who run their own businesses must seriously consider a business succession plan in addition to a personal estate plan.  Owning a private business presents unique challenges that those who work for third parties do not face.  At the same time, with proper planning, a private business may also present unique opportunities for transferring wealth to the next generation.

Often, the owner of a private business is essential to the operation.  The founder might have unique skills, goodwill, or a professional license that cannot easily be transferred or taught to a successor.  Upon the death or incapacity of the owner, the same profitable business that the owner’s family relied upon for steady income suddenly falls into chaos.  The owner’s family does not have the expertise or the authority to run the business.  Key employees may execute their own “plan b” and hang up their own shingles, taking customers/clients, goodwill, and other resources of the business with them.  Furthermore, they likely will become competitors with a head start.  

Most entrepreneurs do not want to think about the need for business succession planning because they are too busy running the day-to-day operations of the company, working on the vision for the company, do not view their business as an asset, or simply do not want to face their own mortality.  Furthermore, developing a comprehensive business succession plan takes a lot of time and requires the business owner to face tough decisions.  The best way to start is to identify the most realistic goals of a succession plan.

The three most common goals of a business succession plan are (1) owner’s exit strategy; (2) wealth transfer; and (3) business continuity.  

For some owners, the most important objective is to allow the owner to maintain a stream of income while scaling back on his or her involvement in the business.  To achieve this goal, the plan might involve a sale of the business or a transfer of company stock to the owner in exchange for goodwill, expertise, or business secrets.

Some owners might be more concerned about transferring wealth to their loved ones (i.e., spouses or children).  In this situation, the owner is not concerned about the business continuing after death but rather “harvesting” the company’s assets or wealth for his or her family.  

Still other owners might view their business as more than just a job or a source of wealth but rather a legacy.  They might have an interest in making sure that the business thrives long after their involvement or their death.  The plan in this case might focus on identifying key employees who can be groomed to succeed in running the company’s operations and provide a mechanism for the key employees to buy interests in the business from the owner or the owner’s family.     

Business succession planning often involves the owner’s attorney, accountant, and financial advisor meeting with the family and key employees to identify realistic goals and to develop an appropriate plan.  It often takes several months to develop an appropriate plan and the business succession plan will be separate from – and in addition to – a personal estate plan.  Although it is a time-consuming process that forces the owner and the owner’s family to face stark realities and choices, a comprehensive business succession plan can protect the owner and his or her family when he or she inevitably is no longer able to run the business.   


Wednesday, March 20, 2013

How to Stretch Your Retirement Savings

A significant degree of wealth is currently held in Individual Retirement Arrangements (“IRA’s”).  Most people focus on accumulating wealth in IRA’s – saving, contributing, and investing.  However, very few people contemplate the best methods for transferring IRA’s to the next generation.  The tax rules regarding IRA’s are unique and complex.  Failure to properly address IRA’s in your estate planning often causes unnecessary tax and loss of opportunities for your beneficiaries.  Conversely, understanding how to properly navigate the unique IRA taxation rules increases their value for your loved ones.

IRA’s are savings / investment vehicles that have special tax treatment which allows the assets to grow in a tax-free or tax-deferred manner.  A Traditional IRA offers a tax deduction for contributions made but requires income tax to be paid on every dollar withdrawn from the plan.  Roth IRA’s offer the reverse approach: no tax deduction for contributions made but no tax on amounts withdrawn from the plan.  Both types of IRA’s provide compound interest which allows the investments to grow at a rapid rate.

The purpose of these special tax rules with regard to IRA’s is to encourage retirement savings.  Both Traditional IRA’s and Roth IRA’s prevent you from withdrawing funds without penalty before attaining age 59.5 except under certain specified conditions.  The idea behind this rule is to ensure that, in general, the IRA funds are being used for retirement and not for vacations, boats, cars, etc.  With regard to Traditional IRA’s, the rules require the IRA owner to begin making Required Minimum Distributions (“RMD’s”) by the year after the year in which the IRA owner attains age 70.5.  The RMD’s are based upon the IRA owner’s life expectancy according to tables published by the IRS.  The idea behind this rule is to once again ensure that the IRA funds are being used for retirement and not to create a legacy for the next generation.  With regard to Roth IRA’s, the IRA owner does not have to begin taking RMD’s, but the beneficiaries of a Roth IRA will have to take RMD’s.  

When it comes to inheriting IRA’s, it is advantageous for your beneficiaries to leave as much of the assets in the IRA’s as possible in order to take advantage of the compound interest.  If your beneficiaries simply cashed out their inherited IRA’s, they would pay significant income tax immediately on Traditional IRA’s and with regard to both Traditional IRA’s and Roth IRA’s, would sacrifice the opportunity for compound interest years into the future.  Under certain circumstances and with careful planning, beneficiaries of IRA’s may “stretch out” IRA distributions over their lifetimes.  

The key is to make sure that you have a “designated beneficiary” of your IRA’s.  First, failure to name any beneficiary at all will force your beneficiaries to liquidate the IRA’s at a very rapid rate, realizing immediate taxation and foregoing years of compound interest.  Secondly, failure to name the “correct” beneficiary might produce the same result.  A “designated beneficiary” is a defined term that generally means a living individual (as opposed to an estate) or a trust under certain specified conditions.  

Even if you set up the beneficiary designations correctly to allow your beneficiaries to stretch out their inherited IRA’s, your beneficiaries must be educated on the benefits of keeping as much of the assets within the IRA vehicle as possible, otherwise they might liquidate the IRA’s immediately or more rapidly than necessary without realizing what they are sacrificing.  

Furthermore, if you have concerns that your beneficiaries might not have the financial discipline or wisdom to limit distributions from their inherited IRA’s, you might want to consider establishing an estate plan that encourages or even forces your beneficiaries to limit withdrawals from inherited IRA’s to allow the compound interest to continue.

Focusing on accumulating wealth in IRA’s is only half the battle.  The other half is to focus on how you can transfer your IRA’s to the next generation in the most advantageous manner.  If you have a significant amount of wealth in IRA’s, it would be prudent to work with a qualified attorney to ensure that this important part of your IRA planning is addressed properly.


Friday, February 22, 2013

Do You Need to Change Your Retirement Plan Beneficiaries?

Retirement plans are unique and require special planning.  Unlike most other assets, you cannot place ownership of your retirement plans into your revocable living trust during your lifetime.  Instead, even with a trust-based estate plan, the distributions of your retirement plans are controlled by the beneficiary designation documents held by the account custodian.

Because you may not place retirement plans into your revocable living trust during your lifetime, historically retirement plans that represented a significant portion of a client’s estate posed a unique planning challenge. 

Prior to the Fiscal Cliff Legislation (formally known as the American Taxpayer Relief Act of 2013), the only way to guarantee the use of both spouses’ estate tax exemptions (the amount that may be shielded from the estate tax) was to draft an “A/B Trust” which subdivides into two sub-trusts upon the death of the first spouse.  The “A Trust” represents the surviving spouse’s share of the estate while the “B Trust” represents the deceased spouse’s share of the estate.  The “B Trust” uses the deceased spouse’s estate tax exemption. 

A problem would arise if the decedent had significant wealth in retirement plans because such non-trust assets would not automatically flow to the “B Trust.”  The result would be that although the deceased spouse could have shielded a significant amount of his/her assets from the estate tax by allocating those assets to the “B Trust,” the retirement plans would fall outside of the “B Trust,” creating unnecessary estate tax.  This problem is known as “underfunding the ‘B Trust.’”

One common way to address this problem was to name the “B Trust” as the beneficiary of the retirement plan on the beneficiary designation documents.  Although you may not place ownership of a retirement plan in your revocable living trust during life, under certain circumstances, you may name a trust as a beneficiary of a retirement plan upon death by listing the trust as the beneficiary on the beneficiary designation documents held by the account custodian.  The idea behind naming the “B Trust” as the beneficiary of the retirement plan is to ensure that the retirement plan assets would be shielded from the estate tax.  There are two main problems with this solution. 

First, unless there are concerns about giving the surviving spouse unfettered control of the retirement plan, often it makes sense to name the spouse as the primary beneficiary of a retirement plan as the surviving spouse has unique options with regard to inheriting a retirement plan that other beneficiaries do not have. 

Second, naming the “B Trust” as the designated beneficiary of a retirement plan assumes that the retirement plan owner would be the first spouse to die because the “B Trust” is for the first-to-die spouse while the “A Trust” is for the second-to-die spouse.  If the retirement plan owner was not the first spouse to die and he or she did not update the beneficiary designation, there would be a significant problem with the retirement plan designating the wrong sub-trust as the beneficiary of the plan upon the surviving spouse’s death.     

An alternate solution that addresses the two problems listed above is to draft a customized beneficiary form that spells out various contingencies in detail.  The customized beneficiary form would typically leave the retirement plan to the surviving spouse if the retirement plan owner was the first to die.  The customized form would also state that if the surviving spouse chose to “disclaim” (i.e., say “no thank you to”) any portion of the retirement plan, the form would direct that the asset flow to the “B Trust.”  Finally, if there was no surviving spouse, the customized form would direct the retirement asset to the remainder beneficiaries (i.e., children or sub-trusts created for the children).  This allows the most flexibility and covers as many contingencies as possible, but the customized beneficiary form is cumbersome and not all retirement plan custodians would accept such a customized form. 

In light of the fact that the Fiscal Cliff Legislation makes the estate tax exemption permanent at $5 million adjusted for inflation ($5,250,000 in 2013), most estates are not subject to the estate tax and worries about underfunding the “B Trust” are greatly reduced.  Furthermore, the Fiscal Cliff Legislation makes permanent the concept of “portability” which allows the surviving spouse to claim the deceased spouse’s unused estate tax exemption regardless of whether they executed an “A/B Trust.”  The result is that even if a decedent’s estate exceeded the estate tax exemption, the surviving spouse could still shield the non-trust retirement plans from the estate tax by claiming portability, making an elaborate plan to direct the retirement plan assets into the “B Trust” completely unnecessary. 

If you have a retirement plan that represents a significant portion of your estate, you might want to examine your beneficiary designation to see if the “B Trust” is named as a beneficiary or if you have a customized beneficiary form.  If so, you might want to consider simplifying your beneficiary designations in light of the Fiscal Cliff Legislation.  Keep in mind that the estate planning rules regarding retirement plans are extremely complex and you should seek the counsel of a qualified attorney who can help guide you through your options. 


Thursday, February 14, 2013

Family Story

Although my column focuses on issues related to estate planning, it is really all about family: planning for and protecting the ones you love. Sometimes it is nice to take a break from the technical aspects of the law and share a family story. Below is an article about my participation in the U.S. Pond Hockey Championships in Minneapolis last month written by Minnesota writer Michael Rand. It includes a part about my son and I thought I’d share it with you.

I want to thank both Michael Rand and Touchpoint Media who both gave me their permission to reprint this article. I hope you enjoy it!

Pond Hockey: How the Game was Meant to be Played

01/16/2013

By Michael Rand

It’s January in Minnesota. The vast majority of citizens here are dreaming of hopping a flight to California—not vice-versa, like Kyle Krasa of Monterey Bay.

But for the second year in a row, that is exactly what Krasa will do. His dream again involves playing in the U.S. Pond Hockey Championships in Minneapolis. But on his maiden trip last year, he figured out just how unusual his plans were: The flight was so empty that he was upgraded to first class, where he had an entire row to himself.

That perspective changed, however, after he arrived and saw first-hand what all the fuss is about. It’s a chance to get outside and capture some nostalgia—it’s hockey with some modified rules, literally played on a frozen body of water, with a series of side-by-side rinks created so hockey players from all over can experience what it’s like growing up in the northern U.S. and Canada.

It has also evolved into a guy’s weekend destination complete with beers, laughs, competition, and like-minded strangers who quickly become friends.

There are several entrants in the pond hockey tournament fray, including the National Pond Hockey Championships (Feb. 8-10 in Eagle River, Wis.), the North American Pond Hockey Championships (Jan. 25-27 in Excelsior, Minn.) and the World Pond Hockey Championship (Feb. 7-10 in New Brunswick, Canada).

This weekend's U.S. Pond Hockey Championships, on Lake Nokomis in Minneapolis, Minn., ranks as one of the more established pond hockey events in North America. When the event is held Jan. 18-20, it will mark the tournament’s eighth year. The challenges of organizing the entrants, setting up boards, and constantly fretting about the weather are plentiful, USPHC co-commissioner Carson Kipfer says, but so are the rewards.

“It’s totally become this underground subculture,” Kipfer explains. “Some of (players’) best childhood memories were spent during hours and hours on the ice. Tournaments like this are great opportunities to bring those childhood, high school, college friends back together. It’s a great place where guys can just talk smart and drink beer.”

The rules of pond hockey typically foster competition in a more relaxed environment than, say, an advanced indoor league. At the USPHC, there is no checking or icing. Players basically referee their own games—four-on-four contests with no goalies and no lifting of the puck above the knees.

“It’s rare to have a competitive sporting event that captures the essence of youth at the same time,” Kipfer says.

Niels Heilmann, who lives in New York City, is getting ready for his fourth trip to the USPHC. His team also has a player from Alberta and had a former player who traveled to the tournament from Germany, but the core is a group of guys, including Heilmann, who play in a Monday night league in New York. But why travel halfway across the country?

“It’s the whole weekend experience,” Heilmann says. “Some guys do Las Vegas or golf trips. We come to Minnesota. It’s a place to just hang out and compete.”

It’s the outdoor experience that originally intrigued Krasa. He grew up in California and still lives about a 90-minute drive from the nearest indoor rink. But his grandfather grew up in what is now the Czech Republic and often told Krasa stories of playing on ponds. Two years ago, while watching the NHL Winter Classic, Krasa started doing research that led him to sign up for the USPHC the following year.

He couldn’t convince any other California players to join him, so he signed up as a “free agent.” He ended up exchanging e-mails with a man from Iowa whose team was a player short. Next thing he knew, Krasa was on a plane to Minneapolis.

“We got along instantly,” Krasa recalls. “We had dinner the night before. It was the first day, and we were already talking about playing the next year.”

Virtually the entire team is headed back for a second go-round this year. It’s the first of many Krasa, 33, has planned. After all, he wants the outdoor experience to span even more generations. Krasa’s son, Jonah, is not even 3 yet, but he’s already taking the youngster on the long drives to learn how to skate.

“He loves hockey,” Krasa said. “Someday he’s going to come to Minnesota with me.”


Saturday, February 2, 2013

Reminder: Kyle A. Krasa to Speak for National Webinar About Estate Planning

 

KRASA LAW is pleased to announce that Kyle will be speaking in an upcoming Strafford live phone/web seminar, "Estate Planning Update for 2013" scheduled for Wednesday, February 6, 10:00 am to 11:30 am PST.  

The program is normally $200 but your relationship with KRASA LAW allows you to register at a 50% discount by using the code ZDFCT when registering.  You may register at the following link: http://www.straffordpub.com/estate-planning and click on "Estate Planning Update for 2013."

Description of Program

The new fiscal cliff legislation dramatically changes estate planning in several ways. Asset protection planning will now be a critical component of estate planning and wealth preservation. In light of the higher exemption, counsel should consider advising clients to restate A/B trusts as disclaimer trusts.

The impact of portability and the ways it can be leveraged must also be considered. Permanent portability provides more opportunity concerning IRA’s and other non-trust assets. The higher exemption also provides gifting opportunities for asset protection.

In trust administration for married clients, estate planners should evaluate the advisability of filing a 706 to claim the deceased spouse’s unused exemption. With the much larger estate tax exemption, counsel should contemplate whether to allocate the GST exemption to a particular trust.

Kyle and his fellow panelists will discuss the impact of the fiscal cliff package on estate planning strategies. The panel will explain how the higher exemption gives estate planners an array of new tools and ideas, focusing primarily on asset protection planning rather than estate tax protection.

The panelists will offer their perspectives and guidance on these and other critical questions:

  • How does the fiscal cliff legislation redirect the focus for estate planning counsel?
  • What asset protection strategies should be considered in light of the new legislation?
  • What advantages can be accomplished by restating A/B trusts as disclaimer trusts?
  • What are the benefits of gifting for asset protection?

After the presentations, the panelists will engage in a live question and answer session with participants — so they can answer your questions about these important issues directly.

We hope you'll join us!


Monday, January 28, 2013

New Opportunities in Light of the Fiscal Cliff Legislation

In my last column, I commented on how the fiscal cliff legislation made the estate and gift tax exemption (the amount that can be gifted during life or transferred upon death without any estate or gift tax) permanently high at $5,000,000 adjusted for inflation. I mentioned how this much higher permanent exemption made the majority of A/B Trusts unnecessary as an estate tax planning tool. The higher permanent exemption affects many other areas of estate planning, including lifetime gifting.

In addition to the estate tax (which is a tax applied to the value of an estate at death) there is also a gift tax. The idea behind the gift tax is to prevent families from averting the estate tax by making lifetime gifts, thereby reducing the size of their estates upon death. The general rule is that each lifetime gift of $1.00 reduces the donor’s estate tax exemption by $1.00. For example, if Gwen gives away $250,000 during her lifetime and she dies in a year when the estate tax exemption is $1,000,000, her estate tax exemption is reduced to $750,000. While there are exceptions to this general rule, most notably the annual gift tax exclusion (currently $14,000 per donee / per year), every lifetime transfer needs to take into consideration the reduction of the estate tax exemption.

Although the estate and gift tax exemption has been in flux for over a decade, there was always a good possibility that the estate and gift tax exemption would return to as low as $1,000,000. This meant that lifetime gifting – even if it had nothing to do with estate tax planning – had the possibility of negatively impacting the donor’s estate tax exemption. As a result, gifting had to be limited and carefully measured.

Now that the fiscal cliff legislation has made the estate and gift tax exemption permanently $5,000,000 adjusted for inflation (the 2013 estate and gift tax exemption is $5,250,000), most middle class households will not be affected by the estate and gift tax as their estates are far below the exemption. As a result, most families are able to make significant lifetime gifts without having to worry about how those lifetime gifts will impact their estate and gift tax exemptions. This creates new gifting and overall estate planning opportunities that previously were not available.

A common estate planning problem occurs when an asset is titled jointly between on adult child and a parent for “convenience purposes” with the “understanding” that upon the death of the parent, the child will “do the right thing” and distribute the asset equally to the other children. Historically, this would create an estate and gift tax problem for the adult child who was on the account. Although the understanding between the family members was that the asset really belonged to the parent and it should be divided equally, legally the asset belongs solely to the adult child. By distributing equal shares to the other children, the adult child would be making gifts, thereby reducing his/her estate and gift tax exemption.

When the exemption was low, this could create a serious estate planning problem. Now that the exemption is permanently high, it might not matter to the adult child if he/she uses hundreds of thousands of dollars of estate and gift tax exemption as long as his/her estate is not likely to exceed $5,250,000 upon death.

As parents accumulate wealth and have more than then need to live comfortably, they might start to be concerned that old age and future medical problems might create long term care or other health care needs that would put their hard earned assets in jeopardy. They might like the idea of gifting a significant portion of their assets away while they are still free of medical problems and have no debts on the horizon. The higher estate and gift tax exemption allows them to give much more of their estate away in this situation without significantly impacting gift tax or estate tax rules.

The permanently high estate and gift tax exemption created by the fiscal cliff legislation changes many fundamental assumptions about estate planning. Whether or not it is good policy, it greatly frees up estate planning and creates new opportunities. We have only begun to understand how an ostensibly simple rule change can have dramatic impact on many areas of planning.


Thursday, January 24, 2013

Kyle A. Krasa to Speak for a National Webinar about Estate Planning

KRASA LAW is pleased to announce that Kyle will be speaking in an upcoming Strafford live phone/web seminar, "Estate Planning Update for 2013" scheduled for Wednesday, February 6, 10:00 am to 11:30 am PST. 

The new fiscal cliff legislation dramatically changes estate planning in several ways. Asset protection planning will now be a critical component of estate planning and wealth preservation. In light of the higher exemption, counsel should consider advising clients to restate A/B trusts as disclaimer trusts.

The impact of portability and the ways it can be leveraged must also be considered. Permanent portability provides more opportunity concerning IRA’s and other non-trust assets. The higher exemption also provides gifting opportunities for asset protection.

In trust administration for married clients, estate planners should evaluate the advisability of filing a 706 to claim the deceased spouse’s unused exemption. With the much larger estate tax exemption, counsel should contemplate whether to allocate the GST exemption to a particular trust.

Kyle and his fellow panelists will discuss the impact of the fiscal cliff package on estate planning strategies. The panel will explain how the higher exemption gives estate planners an array of new tools and ideas, focusing primarily on asset protection planning rather than estate tax protection.

The panelists will offer their perspectives and guidance on these and other critical questions:

  • How does the fiscal cliff legislation redirect the focus for estate planning counsel?
  • What asset protection strategies should be considered in light of the new legislation?
  • What advantages can be accomplished by restating A/B trusts as disclaimer trusts?
  • What are the benefits of gifting for asset protection?

After the presentations, the panelists will engage in a live question and answer session with participants — so they can answer your questions about these important issues directly.

We hope you'll join us.

For more information or to register >

1-800-926-7926 ext. 10 (ask for Estate Planning Update for 2013 on 2/6/13 and mention code: ZDFCT)


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KRASA LAW assists clients with Estate Planning, Elder Law, Pet Trusts, Asset Protection, Special Needs Planning and Probate / Estate Administration in Pacific Grove, CA(93950), Monterey (93944, 93940, 93943, 93942), Salinas (93901, 93905, 93906, 93907), Hollister (95023,95023) Pebble Beach (93953), Carmel By The Sea (93921), Seaside (93955) and Carmel (93923, 93922) in Monterey County and San Benito California.

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