Archive of Utah Laws & Information Blog

Posts Tagged ‘Estate Planning’

Business and Succession Planning

Monday, March 21st, 2011

Business and Succession Planning

Something that I have learned over the years in working with small business owners and with clients’ estate planning is that very often these areas overlap. One of the most common deficiencies is not having a current buy-sell agreement between the owners of a business. The purpose of such an agreement is to provide a mechanism to avoid disputes in the event an owner dies, becomes disabled, or wants to retire or just leave the business. In the absence of an enforceable agreement all of these occurrences can end up in court. The best time to sort out these issues is when all of the owners are actively involved in the business since any of them could either be a buyer or a seller of their interest in the business and that tends to keep the discussion balanced and fair. The climate changes dramatically when the spouse of a deceased owner who is inheriting the business is desperate to get as much money as possible from the business. The other issue that arises at that point is whether the surviving owner(s) can continue to work with the spouse or family of the deceased owner. Most buy-sell agreements contemplate a fair buy-out of the deceased owner’s share so that a problem does not arise. A common method of funding these buy-sell agreements is with life insurance.

Business Upkeep and Maintenance

Another common deficiency is maintaining good records in the business. If it is a corporation or LLC (limited liability company) the annual filing with the state must be maintained or the business could be administratively dissolved and the limited liability protection may be lost. When clients come in for business or estate planning we review the filing records and quite often this has happened. With corporations it is important to maintain the corporation book with updated articles and bylaws as well as copies of shareholder and board of directors meeting minutes. The stock ledger needs to be properly maintained consistent with stock ownership. With LLC’s or partnerships it is very important to review the operating or partnership agreement to make sure it is consistent with the understanding of the owners. These documents can become critically important if there is a dispute among the owners or if one of them dies or becomes disabled.

Business Divorce Litigation

The attorneys at HAO look for these kinds of issues and have many years of experience in formulating solutions for these problems, but the law suits that arise when business owners cannot resolve their differences look and act very much like divorces. We have been involved in a number of cases involving disputes that have arisen in these circumstances and are skilled in litigating them. However, our experience has taught us that it is a lot easier and cheaper to keep our clients out of trouble than it is to get them out once they are in. We would be happy to help you avoid these kinds of problems so give us a call.

Tags: , , , , ,
Posted in Estate Planning Update, General, HAO Blog | No Comments »

New Estate Tax Implications of Law Signed on December 17, 2010

Saturday, March 12th, 2011

We wanted to make you aware of a new law that may significantly impact you and your family. On December 17, 2010, Congress enacted the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (H.R.4853). Along with extending many of the individual and capital gains tax cuts enacted during President Bush’s administration, Congress provided temporary modifications to estate, gift, and generation-skipping transfer taxes. Please see the next page for further details. These modifications are set to sunset on December 31, 2012, assuring that these issues will once again be discussed in the year of a Presidential election.

What Does This Mean For You?
Now that the new law is in effect, we suggest that you contact us to determine if your estate plan needs to be modified. Please contact one of HAO’s Tax, Estate & Benefit Planning Section Members: Gary N. Anderson, Dale G. Siler, Brian G. Cannell, or Monica N. Howard, at (435)752-2610 to schedule an appointment.

HAO Attorneys
Hillyard, Anderson, & Olsen, PC is a full-service law firm, and we are pleased to offer legal services in the following areas, among others:

  • Wills/Trusts
  • Probate
  • Power of Attorney
  • Trust Administration
  • Guardianships / Conservatorships
  • Corporate, LLC & Other Business Formation

  • Business Succession Planning
  • Pre & Post-Nuptial Agreements
  • Divorce & Family Law
  • Custody
  • Personal Injury
  • Criminal Defense/DUI
  • Civil Litigation/Appeals

  • Real Estate
  • Collections
  • Juvenile Court
  • Pension Plans/ERISA
  • Water Law
  • Tax Law
  • Adoptions
  • Contracts


Professional Resource
We often receive questions from our clients about their personal financial strategies. One such financial planning resource, with whom we have been pleased, is the firm of Allegis Financial Partners (AFP). AFP provides strategies for IRA distributions, estate and insurance planning, and policies which combine a Long Term Care and Life Insurance policy. If you have any questions regarding your personal financial strategies, and would like to arrange for a complimentary (FREE) financial review with someone from AFP, please contact Kim Jenson, Estate Planning Paralegal. She may be reached at the phone number listed above or by email at kim@hao-law.com for scheduling purposes.
Highlights of the New Law

Estate Tax
Congress increased the estate tax applicable exclusion amount to $5 million per individual ($10 million per couple) with a maximum estate tax rate of 35%. If Congress had not acted, then starting on January 1, 2011, the estate tax applicable exclusion amount would have only been $1 million dollars with a maximum tax rate of 55%. Congress also eliminated the modified carryover basis rules. Therefore, any property in a decedent’s estate will generally receive a step-up in tax basis to the amount of the property’s fair market value on the date of the decedent’s death.

Gift and Generation Skipping Transfer Tax
During 2010, an individual had an applicable exclusion amount of $1 million dollars. Any lifetime gifts totaling more than $1 million, excluding gifting using the annual gift tax exclusion amount ($13,000 per donee, in 2010 and 2011, for a total of $26,000 for both spouses), were taxed at a maximum tax rate of 35%. Going forward, the temporary modification reunifies the estate and gift tax to provide an applicable exclusion amount of $5 million, with a maximum tax rate of 35%. Effectively, such taxable lifetime gifts reduce the estate tax exclusion amount that would otherwise apply. There was no GST tax for direct transfers made during 2010. In 2011 and 2012, there is a $5 million exemption with a maximum tax rate of 35%. These changes may provide some unique gifting opportunities.

Portability
A surviving spouse may now have their applicable exclusion amount increased by the deceased spouse’s unused exclusion amount. For example, if David dies on January 1, 2011 and only uses $2 million of his applicable exclusion amount, then if a timely election is made, David’s surviving wife could potentially have up to an $8 million dollar applicable exclusion amount. In order to take advantage of this portability, a timely special election is required by the executor of the deceased spouse’s estate. If someone in your family passes away during 2011 or 2012, please contact us so that we can ensure that a timely election is made to preserve this benefit for your family. This portability feature, like the estate tax changes generally, is also set to expire on December 31, 2012, unless otherwise continued by Congress in that election year.

Decedent Passing Away in 2010
The new law allows the estate of a decedent who passed away during 2010 the option of either (1) paying no estate tax but have modified carryover tax basis rules apply, or (2) using the new $5 million exemption/35% rate with a step-up in basis to market value on the date of death. If someone in your family passed away during 2010, we would be happy to work with you and your accountant to make an advantageous election for you.

*For related post click here.

Tags: , ,
Posted in Estate Planning Update | No Comments »

The Need to Review Your Beneficiary Designations

Tuesday, June 1st, 2010

Do you have any of the following?
Individual Retirement Accounts (IRAs)
Life insurance policies
Stocks, bonds, other financial instruments
Retirement plans through your employment (e.g. 401k, defined benefit plan, 403(b), military retirement, federal retirement, etc.)

Do you know who the beneficiaries of these assets are in the event you die? Often, the beneficiaries of these assets are governed by beneficiary designation forms.  If you are completing your estate plan or have been recently divorced, you need to review your beneficiary designations.

Beneficiary Designations and Estate Planning

Even though you have a will or a trust, it may not govern who will receive certain assets when you die.  IRAs, life insurance policies, stocks, and certain retirement plans allow the owner to designate the beneficiary through a beneficiary designation form. This means that the asset may not be distributed by your will or trust.  If you would like an asset to be distributed via your trust, your trust would need to be the named beneficiary of the asset.  Reviewing your beneficiary designations is one of the most important steps in completing your estate plan.

Beneficiary Designations and Divorce

Clients often overlook the importance of reviewing their beneficiary designations after they have been divorced.  This can be a costly mistake.  In a recent United States Supreme Court case, the Court held that plan administrator performed its duty by paying retirement benefits to an ex-spouse, even though the ex-spouse waived the retirement benefits in the divorce decree.   Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 1295 S.Ct 865 (2009).  Here’s what happened:

William Kennedy was a participant in his company’s retirement plan.  While married, William named his wife, Liv Kennedy, as a beneficiary of his retirement plan.  William and Liv later divorced.  In the divorce decree, Liv disclaimed her interest in William’s retirement plan.  William neglected to change his beneficiary designation with his company.  William died.  Even though the divorce decree stated that Liv disclaimed her interest, Liv still received William’s retirement funds, and William’s estate received nothing.

What Does this Mean For You?

Whether you are completing or reviewing your estate planning, or whether you have recently been through a divorce, it is important that you review your beneficiary designations forms to ensure that the desired beneficiaries are named.  You may also benefit from seeking competent professional advice regarding the tax and legal ramifications of naming a beneficiary.

Disclaimer: The above information is a high-level overview of the need to review beneficiary designations.  In many contexts, it is important to seek competent professional advice regarding: (1) who the named beneficiary can or should be (e.g. federal law requires that a spouse of a married individual be a named beneficiary of a 401k plan, unless a waiver is obtained); (2) the tax and legal ramifications of naming the beneficiary (e.g. in the context of an IRA, it may be advantageous to have the spouse named as a beneficiary instead of a trust), and (3) to review the process of appropriately changing the beneficiary designation forms.

Tags: , , , ,
Posted in General, HAO Blog | No Comments »


SEO Powered by Platinum SEO from Techblissonline