Florida Estate Planning: Power of Attorney Dangers - License to Steal

A couple was recently charged with theft and elder abuse for taking money from their elderly parents, under authority of a power of attorney to pay for personal expenses. These included vacations, plane tickets, lodging and meals.

A Power of Attorney grants the agent (attorney-in-fact) broad powers to act in the best interest of he person. Often agents who accept this power do not understand that the money is not theirs to use as their own but the authority grants the agent the power to act in the other person's best interest.

If you suspect that someone is misusing the Power of Attorney granted to them, report the information immediately to the local police who will be able to properly investigate the case. If you have been affected by this misuse you may have a claim against the agent for the harm they have caused you and should contact a Florida Estate Planning Attorney.

Florida Estate Planning: Florida Wills And Trusts - What Happens With Each

Often the decision of whether to use a Florida Will or Florida Revocable Trust depends on issues surrounding distribution of assets, disability, and death. This summary of issues should help you determine which is best for your circumstances. Of course, it's always best to talk to a qualified Florida estate planning attorney before making any decisions.

Privacy

• What happens with a will: No privacy. All documents and proceedings after death are public.
• What happens with a trust: Totally private unless court intervention is required, usually due to improper drafting or lack of funding.

Disability Planning

• What happens with a will: No provisions for mental or physical disability. The disabled person is subject to the court process for guardianship and conservatorship. Can also use powers of attorney.
• What happens with a trust: Trusts privately handle assets upon disability without court intervention. Disability is determined privately by family members.

Tax Planning

• What happens with a will: Available only if assets are correctly titled to pass through the probate process. Funding of trusts through the probate process will generally take longer and cost more than funding a living trust.
• What happens with a trust: If the trust is properly funded and continually updated for changes in the law and personal situations, tax planning is ensured. Funding of trusts is quicker and easier than trusts funded through the probate process.

Disposition of Assets

• What happens with a will: Can be used for disposition of assets upon death either outright to beneficiaries or in trust. This is done through the probate process and generally takes longer and costs more than a living trust.
• What happens with a trust: Can be used for disposition of assets upon death either outright to beneficiaries or in trust. This is done privately and much faster because the probate process is totally avoided.

Creditor Protection

• What happens with a will: None while alive. Creditors have only a specified amount of time to present claims or they are forever barred.
• What happens with a trust: None while alive. No creditor claim “shutoff” period. However, most trusts provide that valid debts be paid.

Effort Required

• What happens with a will: Less now unless you require tax planning and asset protection for your heirs; A great deal of work for your heirs after disability or death.
• What happens with a trust: More effort to properly design the trust to accomplish all of your goals today, upon disability and after death. Far less effort by heirs later.

Cost Now

• What happens with a will: Usually small
• What happens with a trust: Moderate

Costs to Amend

• What happens with a will: Usually small
• What happens with a trust: Usually small

Cost Later

• What happens with a will: Can be small, but generally extremely high due to probate court intervention
• What happens with a trust: Usually minimal if the trust has been fully funded and is properly maintained

Florida Estate Planning: Senate About To Vote on Permant Estate Tax

Members of a House and Senate negotiating committee have worked out a compromise resulting in permanently keeping the estate tax at 2009 levels.

Specifically, individuals could exempt $3.5-million from taxes ($7-million for couples), with amounts above that taxed at a 45 percent rate.

This is essentially the House version of the legislation.

SENATE ACTION:

A budget recently passed by the Senate would have cut the estate tax by raising the exemption for individuals to $5-million ($10-million for couples) and would have lowered the tax rate to 35 percent.

Senators, Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz., proposed an amendment that would exempt estates up to $5 million per person and levy a maximum rate of 35 percent, as long as the tax cut didn't increase the deficit.

Every Republican and 10 Democrats voted for the amendment. It passed 51-48.

HR 2023:

Numerous bills have been introduced but just last week, Rep. Jim McDermott, D-Wash introduced a bill that would tax estates over $2 million per person at a maximum rate of 55 percent. (More on this below).

CONFERENCE COMMITTEE:

When the House-Senate conference committee met, it settled on the House version.

WHAT KICK STARTED CONSENSUS

Perhaps some of the impetus for that settlement came from The Combined Federal and State Marginal Estate Tax Rates Under H.R. 2023 Sensible Estate Tax Act of 2009.

H.R. 2023, introduced by Jim McDermott, a Washington Democrat, would amend the Internal Revenue Code of 1986 to reform the estate and gift tax.

The 2009 system uses a 45% marginal federal rate on all taxable estates in excess of the $3.5 million applicable exclusion amount. State death taxes may be deducted in arriving at the taxable estate.

H.R. 2023 would have sent estate tax rates to the moon by disallowing the deduction for state death taxes, lowering the applicable exclusion amount to $2 million (although the AEA is portable between spouses) and adopting the following tax rate schedule:

Taxable Estates Over	Federal Rate
$2,000,000	45%
$5,000,000	50%
$10,000,000	55%

Assuming state estate tax rates are the "old" state death tax credit rates, formerly known as the "pick up tax," here are the combined marginal rates under H.R. 2023:

Taxable Estates Over	State	Federal	Combined
$2,040,000	8.0%	45%	53.0%
$2,540,000	8.8%	45%	53.8%
$3,040,000	9.6%	45%	54.6%
$3,540,000	10.4%	45%	55.4%
$4,040,000	11.2%	45%	56.2%
$5,000,000	11.2%	50%	61.2%
$5,040,000	12.0%	50%	62.0%
$6,040,000	12.8%	50%	62.8%
$7,040,000	13.6%	50%	63.6%
$8,040,000	14.4%	50%	64.4%
$9,040,000	15.2%	50%	65.2%
$1,000,000	15.2%	55%	70.2%
$10,040,000	16.0%	55%	71.0%

Here's how that compares to what we have in 2009:

Taxable Estates Over	Old Combined Rate (45% federal, deduction state death tax allowed)	Rate Increase	Percentage Increase In Combined Marginal Tax Rate
$2,040,000	49.4%	3.6%	7.3%
$2,540,000	49.8%	4.0%	7.9%
$3,040,000	50.3%	4.3%	8.6%
$3,540,000	50.7%	4.7%	9.2%
$4,040,000	51.2%	5.0%	9.9%
$5,000,000	51.2%	10.0%	19.6%
$5,040,000	51.6%	10.4%	20.2%
$6,040,000	52.0%	10.8%	20.7%
$7,040,000	52.5%	11.1%	21.2%
$8,040,000	52.9%	11.5%	21.7%
$9,040,000	53.4%	11.8%	22.2%
$1,000,000	53.4%	16.8%	31.6%
$10,040,000	53.8%	17.2%	32.0%

So, a $4 million estate gets a 9.2% tax hike, and an $11 million estate would have been hit with a whopping 32% tax hike.

WHAT'S COMING? WHERE'S IT GOING? (IT AIN'T OVER TILL IT'S OVER!)

Ronald Aucutt, a partner at McGuireWoods, said that "people interested in the estate tax should focus on what happens as the House and Senate try to work out their differences in the budget reconciliation process."

The most likely outcome, he says, is that the 2009 estate tax is made permanent, with the $3.5 million exemption indexed to inflation.