Welcome to the web site of David F. Click, Attorney at Law. Located in Jupiter, Florida, Mr. Click has been serving clients in the Palm Beach County area since 1984.
Mr. Click is one of 350 attorneys in Florida who are Board Certified in Wills, Trusts and Estates.
In addition to estate & financial planning and probate, Mr. Click also represents clients in tax planning, business planning, real estate & mortgage law and private wealth management.
For a complimentary initial consultation, please contact us.
Florida law. The Florida intangible personal property tax was repealed as of January 1, 2007. The Florida estate tax is also now suspended. The Florida Constitution permits only an estate tax based on the Federal estate tax credit allowed for state death taxes. The Federal credit until 2010 has been replaced with a deduction from the gross estate for state inheritance or estate taxes actually paid.
However, many states, including New York, New Jersey, and Massachusetts, have decoupled their estate tax from the Federal system. Clients domiciled in Florida who own property in such states may need to do additional planning.
Federal estate tax. With continuing demands on the Federal budget for the war in Iraq, hurricane relief, health care and Social Security, and the recent election of a Democratic Congress, the prospects for permanent repeal of the Federal estate tax have receded.
Under current law, the Federal estate tax exclusion amount is $2 million, and will increase to $3.5 million in 2009. The maximum estate tax bracket is now 45%. In 2010, the estate and generation skipping taxes (but not the gift tax) are repealed, but in 2011 the law reverts to the pre-2001 law unless Congress takes action to the contrary. My own view is that the estate tax will not be repealed, but that the exemptions will be kept at least as high as $3.5 million.
Due to the migration of wealthy individuals to Florida, more Federal estate tax returns are now filed in Florida than in New York. Because of the difficulty in predicting tax law changes, high net worth clients should anticipate the need for review and probably revision of their estate plans in the next five years.
Clients should consider building in flexibility with broad fiduciary powers and powers of appointment, and facilitating post-mortem planning with disclaimers and other elections.
Gifts. With estate tax repeal or at least higher exemption amounts in the future, in most cases it is not advisable to make lifetime gifts that will generate gift tax liability. However, lifetime gifts are very effective when covered by the annual exclusion (currently $12,000 per donee) or the lifetime exclusion of $1 million. Gifting removes not only the asset, but the income and appreciation on the asset, from the donor’s estate.
Basis. However, the donee’s basis for lifetime gifts is the donor’s original basis, while for gifts at death the basis is stepped up to the date of death value. Thus, assets with substantial appreciation are not the best choice for lifetime gifts. Many people do not realize that when the estate tax is repealed in 2010, gifts at death will no longer receive a step-up in basis. This will affect all taxpayers, not just the top 1% who now pay estate taxes.
Credit shelter trusts. The uncertainty about estate taxes has made flexibility in estate planning even more important. For married couples with combined assets that exceed the exemption amount, the use of credit shelter or bypass trusts remains a key strategy to avoid unnecessary estate taxation on the death of the second spouse. On the death of the first spouse, the bypass trust of the first spouse is typically funded up to the maximum Federal exemption amount. Those assets are excluded from the survivor’s estate, but the survivor may be the trustee, have the income for life, and the power to invade principal so long as it is limited to health, education, maintenance, and support.
Disclaimers. With the exemption amount increasing, the typical funding clause could result in most or all of the first spouse’s assets going to the bypass trust. If it is not clear that the couple’s combined assets will exceed the exemption amount, one approach is to leave everything outright to the survivor. The survivor can then assess whether and how much to fund the bypass trust by using a partial disclaimer. This is an example of post-mortem estate planning.
QTIP Trusts. The disclaimer option may not be suitable when one or both spouses have children from a former marriage they want to be sure will inherit on the second spouse’s death. In that case, it may be preferable to include the children as well as the spouse as beneficiaries. However, if the surviving spouse needs all of the income, the marital deduction is also available for gifts to a qualified terminable interest property (QTIP) trust. In the QTIP trust, the surviving spouse must receive all of the income for life, but on the death of the second spouse the assets pass as directed by the first spouse.
Splitting assets. The bypass trust strategy will not work if the first spouse to die ownsno assets individually or in their trust which can be used to fund the bypass trust. Thus planning frequently involves unjoining assets held jointly, which would pass by survivorship, and placing them in one or both spouse’s trusts.
Where one spouse has most of the assets, if the less wealthy spouse dies first their exemption will be wasted. However, the wealthier spouse may be reluctant to transfer highly appreciated assets because if he dies first, the step-up in basis will be lost. The wealthier spouse may also be reluctant to make a large outright gift to the other spouse. However, the IRS has approved a technique that allowed the less wealthy spouse to fully fund his or her bypass trust , using a testamentary general power of appointment granted by the wealthier spouse over a portion of his assets. Another useful technique for equalizing the estates of a married couple is the inter vivos QTIP trust.
Larger estates. For clients with estates expected to be over the exemption amount, more advanced techniques are available to minimize estate taxes. Life insurance to pay estate taxes is not includible in the decedent’s estate if held by an irrevcocable life insurance trust. Family limited partnerships can be created to facilitate gifts to the younger generation and achieve valuation discounts. Generation skipping gifts can be made which skip children and go to grandchildren or beyond. Gifts to charities or private foundations can provide tax advantages as well as helping education, religion, science and the arts. The rules in these areas are complex and require consultation.
If you are seeking legal representation in these areas of practice, contact Mr. Click by telephone at (561) 747-7077, or email DFC47@aol.com to schedule a free initial consultation.
Attorney David F. Click serves clients in Jupiter, Tequesta, Hobe Sound, Juno Beach, Stuart, North Palm Beach, Palm Beach Gardens, West Palm Beach, Palm Beach, Wellington, Lake Worth, Delray Beach, Boynton Beach, and Boca Raton, Florida (FL). The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.