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The thought of having a conservator appointed for a parent or relative – even a friend or neighbor – is something we all seem to loath. It has all sorts of negative connotations, including the fact that a conserved individual will be paraded through the probate courts with psychiatric and medical evaluations open for all to see. But, most of all, it’s the loss of dignity that results when the state declares an individual incapable – and takes away his or her right to vote, or marry, or divorce, or write a check, or pay a bill, or make any other meaningful decisions. It’s a position that no one wants to come to in this life.

But, despite all the negative aspects of being conserved, there are times when the appointment of a conservator is actually a good thing. Consider the case of Jane Wiederhold, a Barkhamstead, Connecticut, widow who was left an estate worth roughly $12 million by her husband, John Wiederhold. The Wiederholds had no children and the closest relatives lived out of state. At the time of her husband’s death in January of 1998, Jane Wiederhold showed signs of dementia and the inability to manage her finances. A friend of the family reportedly stated to the police that she was unable to write a check to pay for her husband’s funeral and she couldn’t remember how to spell her name.

Prior to his death, John Wiederhold had an attorney, Peter K. Sivaslian, from Torrington, Connecticut. Immediately after John Wiederhold’s death, Attorney Sivaslian started settling John Wiederhold’s estate. He also began to assist Jane Wiederhold with her personal finances. Within three months after her husband’s death, it is alleged that Attorney Sivaslian started purchasing bearer bonds and stock from the money in the Wiederholds’ accounts, the bulk of which were later traced into accounts held by Sivaslian and his wife, Lillian Sivaslian, according to a warrant served on Attorney Sivaslian by Connecticut state police. The warrant charged Attorney Sivalslian with two counts of first-degree larceny and two counts of second-degree larceny. It is alleged that Attorney Sivaslian stole as much as $4.8 million from Jane Wiederhold over several years, although the actual loss is somewhat less because some of the stocks and bonds have been recovered. He also charged a fee of $2,000 a month to handle Jane Wiederhold’s financial affairs, and he paid himself $200,000 to settle John Wiederhold’s estate.

The situtation didn’t come to light until three years after her husband’s death, when Jane Wiederhold told her nephew that Attorney Sivaslian had not provided any accountings of her finances and she suspected that half her money was gone. The nephew said he would look into it.

Despite the concern of friends and the funeral home director, no one seemed to do anything to protect Mrs. Wiederhold or her money until the nephew got involved. “No one suspected an attorney would commit any wrongdoing, her relatives, friends and home assistants reported to police,” according to an article published by the Register Read more…

Question: Dear Mr. Pancheri, I read your great article ?Gifting Real Estate Under the Annual Gift Tax Exclusion.? In this article you explain that an LLC can be used to accomplish this. I am considering an LLC as a method to gift my house to my son. I have two questions:

- Is there any change in the basis when membership units are transferred (that is, can I take advantage of the Capital Gains exclusion)?
Question: Dear Mr. Pancheri, I read your great article ?Gifting Real Estate Under the Annual Gift Tax E
-Can property taxes continue to be used as an income tax deduction when property is in an LLC?

I appreciate your help. Thanks. E.R.

Answer: Dear E.R. – You ask some very good questions that need to be addressed before you start giving away your home, whether through an LLC or otherwise.

First, let?s step back a bit and consider the consequences of selling your home outright to a third party rather than gifting it to your son. Under ?121 of the Internal Revenue Code, you can exclude up to $250,000 of gain realized from the sale or exchange of your personal residence if you owned and used the property as your personal residence for at least two years during the five-year period ending on the date of the sale or exchange. This can be an important tax benefit if you meet the requirements and your personal residence has appreciated considerably in value. For example, if you purchased your home for $300,000 and then sold it for $550,000, your gain of $250,000 would normally be subject to a tax of around $37,500. However, under I.R.C. ?121, this tax is avoided on the sale of a personal residence.

If you give your house to your son instead of selling it to a third party, the tax consequences are different. By gifting it to your son, you will avoid the capital gains tax. That?s because a gift is not a sale or exchange of the property. In that case, your son would step into your shoes and assume your tax basis (i.e., $300,000 from our hypothetical above). If he later sells your home, he would pay a capital gains tax on the difference between the sales price and his $300,000 basis. Of course, if he meets the requirements of I.R.C. ?121, he would be able to avoid the capital gains tax on the first $250,000 ($500,000 if he’s married) of appreciated value as well.

Now let’s consider the estate-tax benefits of gifting your home to your son rather than selling it. Let’s assume that your overall estate is currently valued at more than $2 million ($4 million if you?re married). In that case, if you simply deeded your home over to your son, you would pay no income taxes or gift taxes on the transfer. However, to eliminate the gift tax, you would have to use a portion of your unified credit against the gift and estate tax.

So, what’s the benefit of gifting your home to your son now instead of giving it to him upon your death? By giving it to him now, you avoid the estate tax on the value of the appreciation of your home from the time of the gift to the date of your death. That could be significant in view of rapidly increasing property values. For example, if your home increases in value from $550,000 to $1 million from now until you die, then you will have avoided the estate tax on $450,000 – a tax of approximately $207,000 under current estate tax laws.

But, wouldn’t it be better if you could eliminate the estate tax on the entire value of your home – not just the future appreciation? In my article, entitled “Gifting Real Estate Under the Annual Gift Tax Exclusion,” I discussed the use of an LLC to do just that, by bringing the entire gift under the annual gift tax exclusion (currently $12,000 per year per recipient). That would not only avoid the estate tax on the appreciation in value, it would also exempt the current value from the estate tax simply because you wouldn’t have to use any of your unified credit in the process. In our hypothetical, the net estate tax savings wouldn’t be just $207,000 (the tax on the appreciated value), it would be roughly $460,000 (the tax on the $1 million date-of-death value.

The technique is quite simple. In order to give your home away in increments that are valued at less than the annual gift tax exclusion (currently $12,000 per year), you would transfer your home to an LLC in exchange for 100% of the membership units. It?s important that you create enough membership units in the LLC so that the value of each unit is somewhat less than the amount of the annual gift tax exclusion. Then you can give your son one membership unit each year without having to pay a gift tax or use any of your unified credit against gift or estate taxes. Over a period of time, your house will be transferred entirely to your son without any gift or estate taxes. Of course, the article also discussed ways to accelerate this whole process by having your spouse elect to join in on the gift, and by making gifts to your son?s spouse and/or children.

Now that we?ve put all this into perspective, let?s tackle your specific questions. You asked, first, whether there is any change in the basis when membership units in the LLC are transferred to your son and/or others? Under current income tax laws, if you transfer your home to an LLC in exchange for 100% Read more…

Question: I am listed as the Successor trustee, my bother is listed as the Durable Power of Attorney for property management of my father’s estate. Does one have more power than the other. Does the POA have the power to sell my dad’s property or do I the successor? Thanks ahead of time – really confused. N.H.

Answer: Dear N.H. – Generally speaking, you can have as much power under a power of attorney as you can as a successor trustee. As a practical matter, however, the laws of most states are better defined with respect to trustee powers and financial institutions are more accustomed to dealing with trustees. So, that sort of gives the edge to trustees. If you’re concerned about a specific type of power, you’d have to check the laws of your particular state.

Your question, though, is whether your brother has the power to sell your dad’s property under his power of attorney or whether you have the power as successor trustee. It’s not clear to me whether your dad is still living or not. Assuming that he is, then he’s probably the sole trustee of his trust and you’re just waiting in the wings until he steps aside. If that’s the case, then you don’t have any power to manage his property. If there is any property in your dad’s trust, your dad would be the only person who could manage it since he is the sole trustee.

If your dad is still living, then your brother would have the power to manage his property right now, even though your dad is able to do it on his own. In most cases, however, the intent is that the power of attorney would be used only in the event the principal (i.e., your dad) is unable to attend to his own affairs.

The real issue here is who owns the property? If your dad owns the property, then your brother has the power to manage it under his power of attorney. If your dad’s living trust owns the property, then the trustee has the power to manage it under the terms of the trust instrument. That would be your dad, if he is the trustee, or you, if you are the trustee.

If your dad is no longer living, then your brother’s power of attorney would be null and void, and any property owned solely by your dad would become probate property. That property would then be managed by the executor under your dad’s will or by a court-appointed administrator. The property in your dad’s living Read more…

?It’s all about quality of life and finding a happy balance between work and friends and family.?

-Philip Green

Probate and estate sales usually occur when someone wealthy dies. Estate sales have to be conducted because the decedent did not leave a will and everything is in his name. If there is more then one person who can receive the inheritance then it must be shared.

Sharing can become a problem. Even if everyone involved cooperates, if they live in different places and have different lives sharing a house and cars can be difficult. What usually occurs in this instance is that all the property is sold at a probate or estate sale, and the profits from that sale are split between the heirs.

The second type of situation is when a person dies and leaves behind a great deal of debt. For example, perhaps the decedent owed taxes or had huge credit card bills. If this occurs, then the decedent’s property is sold to make enough money to pay his debts. The heirs can split what is let of the estate.

The sale is usually done by a personal representative. Usually the court appoints someone who is subjective but knew the family. His responsibility is to sell the estate or place it up for auction. He must do everything with the family’s consent.

However, he does not need the court’s approval unless there is some sort of problem with the family cooperating. Most states, and counties have their own rules for how probate or estate sales are conducted. Probate and estate sales can be fairly rough on the family and have to Read more…

Anguilla is another jurisdiction with misleading bank secrecy. Commercial confidentiality is contained in the statues, BUT the government of Anguilla will co-operate fully with law enforcement agencies and regulators in other jurisdictions, think wholesale fishing expeditions and inquiries related to ?possible? income tax violations. In other words records may be requested just to see if in fact there were any taxation violations that citizens of a certain country may have committed using Anguilla as a jurisdiction. In common with other less than reliable jurisdictions, the Department of Financial Services of Anguilla is legally able to share regulatory information with overseas regulatory authorities.

This is always not good. Anguilla has no anonymous or bearer share companies so you can forget about Read more…

In the UK the new mental capacity act is due to come into force on the first Monday in April 2007.

The Act governs decision-making on behalf of adults who lack mental capacity, both where they lose capacity at some point in their lives, and where the incapacitating condition has been present since birth.

This act covers all decisions, including personal welfare and financial matters, and covers decision-making on their behalf by attorneys, or court-appointed “deputies”. It also clarifies the position if formal process has not been adopted.

As things stand today you can draw up a basic Power of Attorney to have someone act for you and help with straightforward tasks such as fetching money from the bank. But it runs out once you become unable to manage your affairs. An Enduring Power of Attorney or EPA provides more facilities than a standard power of attorney. With an EPA you hand power over your property and money to someone else you trust. The power can start right now while you are well if you want it to, but the point is that it continues when you’re unable to manage.

The person to whom the arrangement applies is called the “donor” and once the donor becomes mentally incapable, the “attorney” he or she has appointed has to apply to the Court of Protection to have the EPA registered and pay a fee of ?120.

Existing arrangements will be allowed to continue, but from April 2007 anyone wanting to put control of their money and property into the hands of a trusted family member or friend will have to follow a new procedure.

The EPA is to be replaced by a new Lasting Power of Attorney. A Lasting Power of Attorney (LPA) is a new statutory form of power of attorney created by the Mental Capacity Act.

Anyone who has capacity to do so may choose a person (an “attorney”) to take decisions on their behalf if they subsequently lose capacity. The LPA will replace the Enduring Power of Attorney (EPA) currently provided for by the Enduring Powers of Attorney Act 1985. Unlike an EPA, an LPA can extend to personal welfare matters as well as property and affairs

But the Lasting Power of Attorney will only be valid once it is registered with what’s called the Office of the Public Guardian and a new fee paid to the Public Guardianship Office. The proposed new fee is ?150 for each Read more…

A recent new development in estate planning is helping thousands of affluent people across the country with IRAs over 100,000 transcend estate tax and income tax. It keeps your beneficiaries from blowing all of the money you?ve worked so hard for.

Its gives YOU the control over the conditions which must exist before your beneficiary can access the funds (other than the mandatory IRA distributions).

It gives YOU control of your money long after the time you pass away.

It keeps your assets away from the spouse of the beneficiary you never liked or just keeps it out of the wrong hands.

It?s called an IRA Inheritance Trust, which only a very elite group of estate planning lawyers can do and they are few and far between. But armed with the ?know how? it can literally protect your money from your worst nightmares and insure that the assets we both know you worked so hard your whole life for are protected and even multiplied for future generations!

Warning: If you have IRAs in excess of $100,000(including any amounts you may rollover from a 401k or other employer plan),thanks to new tax laws, they may eventually be worth millions to your loved ones OR may be seriously exposed by your current estate plan!

Your Living Trust or Will more than likely will NOT properly protect your IRAs.

Now there is another thing I want to tell you about, and this is a little unique, that is we actually care about our clients? financial well-being beyond just doing a will or a trust.

Most of us seniors, I have found, have even more trust in some financial areas that affect them immediately today than in planning their estates! If you want to avoid probate (a costly and time consuming legal process), you set up a Living Trust. If you want to maximize your IRA, protect it and use this tax stretch-out for your beneficiaries it can provide, you must PLAN NOW!

You may say that your IRA is NOT you biggest asset?One of the secrets I am going to help you discover is because of new income tax rules, your IRAs, when inherited, may, in fact, wind up being the LARGEST ASSET YOUR LOVED ONES RECEIVE FROM YOU!

But guess what? Your IRAs, while potentially being the largest assets you leave your loved ones, can also face Triple Taxation! AND you also have a potential estate tax up to 48%!

The bottom line: Do you want to maximize your IRA so that it is potentially worth millions to your family in the future (left and distributed in your exact wishes to charity and family) OR will you take the risk and leave it unprotected and ready for the government to eat chunks out of it?

If you plan properly today, you can pass more wealth down to several generations of beneficiaries. Let?s look at this real life example (one that we see on a very regular basis).

A lot of people tell me that their kids ARE responsible. They say,

?I know who my beneficiaries are and they will make the right choices.? First of all most people don?t know the rules regarding taxation on IRAs.

This is a true story:

Mom dies. Daughter finds out she?s the beneficiary of Mom?s IRA. Daughter goes in and cashes it out. She takes the check and the moment she negotiates that check, she has to pay all the taxes! She cannot rollback that tax.

When YOU take that money out of your IRA, you are not taxed on it if you replace it within 60 days, but your beneficiaries don?t have that same rule. So, if they take it out, even for a day, they can?t reverse that and put in back in.

Now, some beneficiaries do it this way. She calls a custodian (the bank, mutual fund, or trust company that actually holds your IRA assets. She says, ?What do Read more…

Trust deeds are considered as a convenient settlement of debts a debtor is no more able to pay off. The trust deeds are a method used in Scotland for easy clearance of debts. Usually elsewhere for lessening and time bound pay off of debts, debt management program is sought by the debt ridden person. But trust deeds are quite different from any debt management. While in debt management there is complete payment of the debts in a certain period and usually involves a fresh loan, in trust deeds the emphasis is on making an accepted debt clearing plan legally binding to the lenders.

Usually trust deeds are opted for when a debtor has come to worst financial situation where he can no longer pay for the clearing debts. In such a case the debtor usually files for bankruptcy. But trust deeds enables in avoiding bankruptcy. In other words trust deeds are a respectable alternative for bankruptcy.

Under trust deeds, the debtor makes a proposal to his creditors for paying off the debts in an agreed duration. But the preparing of the proposal requires a careful calculation of debtor?s financial position. The proposal is sent to the creditors for their suggestion and on the base of various suggestions if any, the proposal is redrafted and is sent again to creditors. When the proposal is accepted and signed by the creditors, it becomes a trust deed and is legally binding on all creditors.

The advantage of trust deeds is that lenders can not impose any interest rate anymore on the debtor as the main aim of trust deed is to clear the debts and not to take interest. Another big advantage of trust deeds is that for clearing debts a certain duration which usually is of three years is agreed upon and after the duration if the debts are still remaining then rest of the debts are written off. This way actually, the debts are cleared easily and with lesser amount.

Trust deeds allow debtors a free of worry life as far as apprehensions of legal action from creditors are concerned. Creditors can not take a legal action against the debtor after they have signed the proposal. All the queries of Read more…

What is a Trust And Who Are The Settlor, Trustee And Beneficiaries?

A trust is an institute of a special type of structure capable of holding title of the property-providing benefits to one or more people. It is a lawful relationship between the two people, the settlor and the trustee. The person who hands over his assets is called the settlor; the person who gets the control of the said assets is known as the trustee. The intention of the settlor is usually either to provide benefits to some people known as beneficiaries or to form the trust for some specific purpose. The other terms used for the settlor are creator or granter of the trust.

Gaining Popularity

Benefits of forming trusts are attracting more and more people to structure their businesses and other personal matters in the form of trusts. However, before you opt to forming a trust to get the benefits, you must ascertain that you know the legal implications of forming trusts and be clear about the people involved. Do not make any haste to get the benefits of forming trusts without getting the advice of the experts in this field. Any lawyer is capable of helping you in this regard, yet it would be better if you took the advice of a person who has specialization in this area.

Trustees Cannot Use Property For Their Own Use

It does not matter much that the trustees are the legal owners of the property of the trust because they cannot use this property for their own use. In fact, trustees are the people who are chosen by the settlor to hold the property because they are reliable to him. The main role of the trustees is to make arrangements of providing the benefits to the actual beneficiaries according to the will of the settlor.

Saving Taxes

The structure of the trusts is often seen as too flexible, so many people feel that they can take the benefit of this flexibility in running their businesses and several Read more…

As elementary as it may sound, no matter how much money you make, you still need to find ways to hold onto it. There are many small steps to take that will add up to big savings in the end. If you value the assets you have accumulated, or if you feel you should be accumulating more, take this advice and make some minor changes.

Firstly, take a look at your life insurance policy. If you have no children or grown children or if you are no longer married, then you make want to reassess your need for life insurance. The whole purpose of a life insurance policy is to safeguard the people you are leaving behind such as spouses and children. If you have no spouse and your children are self-sufficient, it is unnecessary.

Keep your car. You paid it off, you deserve it! Most people feel that once the car loan is paid, they need to go ahead a get a new car with a new car payment. It is wise to keep the car you now own for at least a few more years, ideally three or four. Smart savers will even bank the money they were using for their car payment since they are used to paying it monthly. In a high interest savings account, that money will grow before your eyes.

Pay off the plastic! High credit card balances are the downfall for many consumers. With huge interest rates averaging 15%, large balances will steal your potential savings. One solution is to shop around for a better rate. Many credit card companies will offer a lower interest rate for balance transfers. Simply locate the card with the lowest interest and transfer your big balance. One important thing to remember is that paying down that card will save you lots of money Read more…