The recent Pennsylvania State football sex scandal has revealed insightful details into former head coach Joe Paterno’s estate planning efforts. Prior to the scandal recently coming to light, Mr. Paterno had transferred the home to his wife for the sum of $1. The couple originally purchased the home in 1969 for an original price of $58,000. At the time of transfer the home was estimated to be worth about $594,000.

The transfer appears to be part of a fairly common practice between spouses who wish to equalize their share of assets as part of an estate plan. The current estate tax exemption is $10 million for a couple, but only $5 million for a single person. In order to obtain the maximum benefit from this exemption, it isn’t uncommon for each spouse to create a trust and to transfer assets to one or another spouse’s trust to balance out how much assets each has.

At first glance, it appears as if the Paterno home transfer is simply a way for the couple balance out each spouse’s worth and avoid potential estate taxes later on. However, if the transfer of the home to the trust was intended as a means to protect the property from a potential lawsuit, the trust transfer may not be enough to keep it out of the hands of any lawsuit judgment that may come against Mr. Paterno. Then again, because the home was jointly owned before the transfer, any lawsuit against Mr. Paterno individually would probably not be able to seize it in settlement unless it named both husband and wife as parties in the lawsuit.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

When congress agreed to form the so-called “super-committee” earlier this year, the end goal was to create some kind of agreement that might, eventually, lead to solving the nation’s budget crisis by making a dent in the nation’s massive deficit. With the failure of the committee to reach any agreement about deficit reductions, the effects this has on you and your estate plan are not entirely clear

If congress does nothing, there are at least two events already scheduled to take place that could affect you. First, the Bush-era tax cuts will expire at the end of the year and automatic spending cuts will take place. The $1.2 trillion in cutbacks will likely include both defense spending and cuts in programs such as social security, medicaid, food stamps and veterans benefits. The other immediate effect, the expiration of the Bush tax cuts, means higher income and capital gains taxes, meaning it may be a good idea to sell stocks that have increased in value before the end of the year.

Prior to the committee’s failure, there had been talk that the group would agree to eliminate the $5 million gift tax exemption. This exemption currently expires on December 31^st, 2012, a temporary increase enacted under the 2010 Tax Relief Act. However, with the committee’s failure, the status of the exemption is, currently, unchanged.

In the end, only time will tell what the super committee’s failure to reach an agreement means for the country or for your finances. As someone with an estate plan or intending to create one, one of the key lessons to take away from this latest fiscal-political episode is to always keep one-eye on Washington. The changes that affect you and your estate plans can come at any moment, and if you aren’t ready to act to adjust your plan to fit the current state of politics and the law, your estate plan is not going to serve you as well as it can.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

The Oct 1 Women’s Only 5k for Breast Cancer, rescue dog stories from 9/11, probate seminars, identity theft, and more – we’ve got a lot going on that’s featured in our newest newsletter!   Click on the icon below to find out what’s new from The Law Offices of Cheryl David.  If you’re interested in receiving our e-newsletter, we encourage you to visit our site, www.cheryldavid.com, and sign up on the right column of our home page.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

1. Don’t make a plan. As long as you want your family to have to spend a lot of time arguing about your wishes, going to court and generally having a really hard time after you due, you don’t need an estate plan. But, if you want to make your wishes clear and ensure everyone is cared for, a good estate plan is essential.

2. Ignore taxes. How much your inheritors get depends largely on what steps you take to reduce estate taxes. If you take no steps at all, you ensure your loved ones will receive the least possible benefit from your estate. On the other hand, a carefully executed estate plan can have you leave as much as possible to your family instead of to the state.

3. Tune-out. If you want to make the most minimal effort possible, all you have to do is buy some pre-made forms and sign on the dotted line. Don’t talk to an estate planning lawyer. Don’t educate yourself about the process. Don’t give careful consideration to how you want to be remembered.

4. Do it tomorrow. If you want to make sure you never get around to creating an estate plan, just put it off until there is a more convenient time. The truth of the matter is no time is better than right now. The longer you wait, the more likely it is that you’ll not be able to ensure your wishes are followed.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

On Friday, December 17^th, President Obama signed the new tax law, which (among other things) sets the estate and gift tax rates for the next two years. Here’s where we stand:

Estate Tax

The top estate tax rate for 2011 and 2012 is 35%, and it will apply to individuals who die with estates worth more than $5 million. The law has a portability provision that applies to married couples, so when one spouse passes away, he or she can transfer his or her unused estate tax exemption to the surviving spouse, giving married couples the opportunity to pass on $10 million tax-free.

What about those who passed away during 2010?  There’s a choice.  Estate representatives can opt to apply the new tax law, and pay estate tax on the value of a decedent’s estate that exceeds $ 5 million, or they can opt to apply the 2010 law, and pass on assets free of federal estate tax. This option comes with a potential drawback, though. Along with the zero estate tax also comes the one-year-only 2010 modified carryover basis, which may result in an increased capital gains tax for heirs.

Gift Tax

As with the estate tax, the lifetime gift tax exemption for 2011 and 2012 is $5 million per person, and the maximum gift tax rate is 35%.

Estate Planning is Still Important

For the vast majority of Americans, the new law means no estate tax, at least for the next couple of years.  But this doesn’t mean you can ignore estate planning altogether. A solid estate plan is important for reasons that go far beyond taxes. For example, a well-designed estate plan can help you plan for nursing home care while protecting your nest egg; it can make sure your needs are met even if you become disabled; and it can help provide for and protect your spouse, children and grandchildren both during your lifetime and long after your death.

We encourage you to come in for a free consultation to discuss your specific estate planning needs and how these tax changes will affect your estate plan.  Call us today:  (336) 547-9999.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

As promised, big changes in the estate tax law have come about and are in effect until December 31, 2012.    What do these tax changes mean for you?

If you are a current Cheryl David Trust Client, you are protected regardless of these changes.  If you do not have a trust or any estate plan, we would be happy to help make sure that you and your families are protected.  Call us today for a free consultation – (336) 547-9999. 

In the meantime, we will be putting together information in the coming weeks for you with more details on these important changes.  For now, we invite you to read more here from forbes.com.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

There are certain things that every estate plan – even the most basic – should do.  If you only have a Will, your estate plan won’t be as effective as it needs to be.  So, what are some of  the basic functions an estate plan should perform?

• Your Estate Plan Should Keep You Out of Living Probate.  If you’re ever too sick or injured to care for yourself or manage your own finances, you’ll need to have a formal plan in place allowing someone of your choosing to take over and handle these things on your behalf.  Without a legally effective incapacity plan, you’ll be subject to Living Probate – the process by which a court appoints a guardian or conservator to take care of your physical and financial needs.  Living Probate is time consuming, expensive, and it takes control of your life away from you and your loved ones and puts control in the hands of a judge whom you’ve never met.
• Your Estate Plan Should Ensure Your Property Transfers Smoothly and Effectively Upon Your Death.  This is where a carefully drafted will or trust comes into play, as does working with an experienced attorney.  Not only do you need a plan that specifies where you want your property to go, you need a plan that anticipates potential problems and solves them before they become a reality.  For example, your estate planning attorney can suggest strategies to help head off potential will contests and can help you review all of your assets to make sure that your beneficiary designations are up-to-date so that all of your property passes to the appropriate recipients.
• Your Estate Plan Should Make Sure Your Beneficiaries Get As Much of Your Estate As Possible.  With a carefully crafted estate plan, you can minimize the costs associated with settling your estate, reduce your estate tax burden, and make sure that as much of your property as possible goes to your loved ones.

A will only becomes effective after you’ve passed away, and even then, it might not be the most effective method for transferring your assets.  The right estate planning tools can help you accomplish these basic goals, and more.

Our office can help equip you with the right tools.  Call us today – (336) 547-9999.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

This holiday season is all about making sure our clients are protected and ready for what’s to come in 2011.  Read our newsletter here for important tips and consumer alerts.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

An ILIT, or Irrevocable Life Insurance Trust, can be a valuable tool for reducing your estate taxes. Here’s how it works:

Life Insurance Counts Toward Your Taxable Estate          

When figuring the value of your estate for  tax purposes, the IRS looks at the value of all of your property, including retirement accounts, real estate, and life insurance policies.  So, starting in January when the federal estate tax is scheduled to be reinstated, removing the value of any life insurance policies from your estate can take a chunk out of your estate’s tax bill.

Establishing the ILIT

To remove your life insurance policy from your taxable estate with an Irrevocable Life Insurance Trust, you’ll first establish the trust, naming a trustee other than yourself.  Then, you’ll transfer ownership of the life insurance policy to the trustee.  The trust will be designated beneficiary of the life insurance policy, and your loved ones will be named beneficiaries of the trust.

Once the trust is established and the life insurance policy is transferred to the trust, you no longer have ownership or control over the policy.  So, the life insurance policy is no longer “yours” for estate tax purposes, and its value can’t be included in your taxable estate.

Distributing Funds to Trust Beneficiaries

When you pass away, the life insurance proceeds will be paid to the trust, and the trustee will distribute them to your loved ones pursuant to the terms of the trust.  Generally, an ILIT is established so that the funds will be held in trust for your spouse’s benefit during his or her lifetime, and then they’ll be distributed to your children.

For help establishing an Irrevocable Life Insurance Trust, we encourage you to contact us – (336) 547-9999.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

We hope you’ll take a moment to check our our November Newsletter.  With big law changes coming up in 2011 with regard to estate taxes, now is the time to make sure you (and your plan) are ready! 

Read our November 2010 Newsletter here.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.