Trusted Counsel of Tampa Bay

Florida's New Divorce Law                                Last month, Florida enacted a new law concerning beneficiary designations on life insurance policies, annuities, IRAs, 401ks and other employee benefit plans.  This is great news for estate planners as it removes some uncertainty and concern over an ex-spouse's rights to these assets at death.      The statute generally provides that the entry of a final judgment of dissolution or annulment will result in a divorced former spouse being treated as having predeceased the other spouse for purposes of these non-probate assets.  This is now consistent with the statutes for Wills and Trusts, which treat a former spouse as having predeceased the testator (removing him or her as a beneficiary of an estate/trust).  The legislature, though, did not include joint accounts with rights of survivor-ship in this law.  In other words, certain jointly held assets could still pass to a surviving ex-spouse, even if that is not desired!      Before this change, we saw significant litigation between a surviving ex-spouse and a decedent's surviving children (usually from a prior marriage).  In many cases, courts would not look past the language of a beneficiary designation, meaning that an ex-spouse would receive those benefits.      While this change are helpful, it is really just a band-aid, of sorts, for those who may not get around to updating their estate planning upon divorce.  In reality, when you experience a significant life event, such as a divorce, a complete review of your estate plan, including beneficiary designations and asset titling, remains important and necessary.  This One Hurts...At Least a Little                                 How would you like to get a gift worth $65 million at someone's death? Sounds great until you learn that you owe $29 million in estate tax.  That still sounds okay until you find out that the gift is a stuffed bald eagle that cannot be sold under Federal Law.      The IRS believes that this work of art is worth this amount and is in court challenging to get $29 million in estate tax plus $11 million penalties.  Quite a stiff penalty!  (Bad joke, but I could not resist)      Check out the article on Fox News.    Estate Tax Update (sort of)                                 In many of our meetings this year, we have been asked about what is happening with the estate tax.  Many of you know that the estate tax exemption for this year is $5.12 million, which means that you can pass either during lifetime or at death this amount without expose to a transfer tax, with a tax rate of 35%.  This amount, though, is scheduled to go down to $1 million on January 1, 2012, with a top tax rate of 55%.  This drastic change suggests opportunity for some of our clients who wish to reduce their estate tax exposure.      The question, then, is what is really going to happen?  The only fair answer to that question is that no one knows.  Both Houses of Congress have attempted to draft bills and pass legislation that would effect the estate tax, albeit differently.  Some legislators would like to extend the so-called Bush tax tax cuts through 2013, which may mean that the $5+ million estate tax exemption will continue for at least one year.  Others would like something more "permanent," perhaps an exemption of $3.5 million.      Perhaps we will know more after the election in November.  However, do not think that you do not need an estate plan if your estate is less than either of these amounts - if you want to minimize the government's involvement in the disposition of your assets at death and you want to protect your family, then you need to have a plan in place!     "Keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great." Mark Twain