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Attorney News
Jonathan H. Ellis will be the Course Planner for an upcoming Pennsylvania Bar Institute Program entitled “Wills v. Trusts: A Primer on the Right Tool for Your Clients.” The course will be given at four locations: Philadelphia on Tuesday, July 13, 2010, Pittsburgh on Wednesday, July 28, 2010, Mechanicsburg, PA on Thursday, August 19, 2010, and Media, PA on Tuesday, July 20, 2010.
Jon will also be participating on the faculty for another Pennsylvania Bar Institute Program, “Common Estate Planning Blunders – How to Correct and Avoid Them.” This course will be held in Philadelphia on Wednesday, August 11, 2010, and Jon will be speaking on the topic of “Errors in Federal Estate Tax Planning.”
Lisa Shearman has been asked to co-chair the Pennsylvania Bar Association’s “Wills for Heroes” Program with Daniel McKenna, Esq., the founder of the Pennsylvania Program and a Wills for Heroes Foundation National Board Member. On April 17, 2010, Lisa coordinated the first Wills for Heroes event at a Pennsylvania Law School at Widener Law School’s Harrisburg campus. At that event she trained five new county coordinators for the program.
On behalf of Wills for Heroes, Lisa recently accepted a $1,000 grant from the Montgomery County Bar Association, a portion of which was the 2010 Birdsall Impact Grant award. She participated in a special Wills for Heroes Program on Ellis Island on June 12, 2010, and has upcoming Bucks County events scheduled for July 31, August 7, and August 28, 2010. Another event will be held in Montgomery County on September 25, 2010, and she will also participate in Lackawanna County’s kick off of their Wills for Heroes Program on Sept. 11, 2010 in commemoration of the 9/11 Terror Attacks.
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Plotnick & Ellis is pleased to announce that Sean Norton is joining the firm as an associate attorney. Sean is a graduate of Villanova University School of Law, and is currently completing his Master of Laws in Taxation at Villanova.
We are also happy to announce that Susan L. Fox has recently been admitted to the Florida Bar, and now joins Jonathan H. Ellis as a Plotnick & Ellis attorney offering advice to our Florida clients. Susan sat for the Bar Examination in February 2010. She is also admitted to practice law in Pennsylvania, New Jersey, and New York.
Lisa Shearman is continuing her volunteer work with the “Wills for Heroes” Program, for which she has recently been named Coordinator for the Montgomery County and Bucks County programs. “Wills for Heroes” is an innovative nationwide program that provides legal services to police, firefighters, and emergency medical personnel and their spouses for the preparation of essential legal documents, such as Wills, Powers of Attorney, and Health Care Directives.
Attorneys working with the “Wills for Heroes” Program donate their expertise and time to meet with our dedicated first responders and prepare documents so that their families will be protected in the event of disability or death. Lisa’s recent “Wills for Heroes” events were February 20 and 27, 2010; March 6, 2010; and April 17 and 24, 2010. Upcoming dates are June 12, 2010, and July 10 and 31, 2010.
Status of Estate Tax Law
At the end of 2009, we fully expected Congress to extend the $3.5 million exemption from Federal Estate Tax into the current year. However, Congress adjourned in December without extending the 2009 Federal Estate Tax rules and created a great deal of confusion as to the estate planning approaches which need to be taken.
At present, the Federal Estate Tax and Generation Skipping Tax have been repealed. However, unless Congress takes action, the Estate Tax will be reinstated in 2011 with a $1 million exemption. At first blush, the current absence of the Federal Estate Tax appears to be a positive development, but as part of the repeal, Congress also repealed the “step-up in basis rules.” The step-up in basis rules can be somewhat complicated, but essentially these rules provided that when an individual died, any capital gains associated with their non-retirement assets would largely be eliminated.
With the repeal of the step-up in basis rules, Congress enacted some modified relief in the form of providing a $1.3 million step-up in basis, together with a $3 million step-up in basis if the assets passed to a spouse in a qualifying manner. This means that, while step-up in basis used to be automatic, it will now require a great deal of planning.
Therefore, anyone with non-retirement assets in excess of $1.3 million should meet with an estate planning attorney to review their existing documents. They may need to have certain language added to their documents in order to maximize the planning opportunities available. Also, people with existing plans designed to minimize the estate tax with the creation of marital trusts and credit shelter trusts, may need changes to their documents.
If anyone were to die this year without the proper changes in their documents, their existing estate plan may not work properly, since most estate planning documents were designed to operate where there was a Federal Estate Tax. In the current environment, the objective now is to maximize the step-up in basis opportunities.
We realize that this uncertainty creates a great deal of confusion, but unfortunately these are issues that need to be addressed. It is also important to keep in mind that Congress can modify these rules. Therefore, we recommend that you contact an estate planning attorney to make certain that your documents are properly updated.
Retirement Accounts and Roth Rollovers: New Savings Opportunities
2010 has brought with it some great opportunities, among them the chance to convert your Individual Retirement Account (IRA) into a Roth IRA regardless of your income. The tax impact can be spread over two years. You may then enjoy tax-free growth in your account, and you will never be subject to the mandatory minimum distribution rules. That means, if you do not end up needing the money, you can pass the account out to your beneficiaries.
While the market appears to be rebounding, it is still off its historic highs. Therefore, the tax impact will be minimized since you will be paying income tax on the depreciated value of your account. Such a conversion can have even more impact if, as many believe, income and estate tax rates will increase in the future. Income taxes paid at today’s low rates have the added benefit of reducing your taxable estate. Moreover if you make a mistake or change your mind, you are afforded the ability to “recharacterize” your Roth rollover back to a traditional IRA, so long as you follow the rules and timing requirements.
Whether you meet with one of our attorneys or your accountant to crunch the numbers to determine whether you would benefit from a Roth rollover, there are several important considerations which your estate planning attorney should evaluate with regard to any retirement account. For example, what happens if your beneficiary designation on your account provides that the account will be payable to your children, John and Joanne? What if Joanne dies, and you do not change your beneficiary designation? Would you want Joanne’s share to pass to John, or would you prefer it pass to Joanne’s children?
In order to assure that your account passes in the way you prefer while retaining the ability to have the proceeds paid out over your beneficiary’s lifetime, it is advisable to have a special “beneficiary designation” drafted by your attorney. If Joanne’s children are minors, this document can provide that her share pass into trust for them. This trust must be drafted in a particular way so that the favorable payout over a child’s life expectancy is preserved. Especially with regard to a Roth conversion, the tax planning in your documents should be reviewed to divert taxes away from the Roth and also to determine which Trust should ultimately be the recipient of your Roth.
As is true for many persons, if your retirement assets comprise a substantial part of your estate, your retirement account beneficiary designations may ultimately be more valuable than your Will in determining how and to whom these assets pass. Your Will and the trusts under your Will should be drafted to carry out the plans you have for your retirement assets.
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Charles K. Plotnick has been named a 2009 “5-Star Best In Client Satisfaction Wealth Manager” in a survey of 100,000 high net worth consumers in the Philadelphia area. The announcement will appear in the November issue of Philadelphia Magazine.
Jonathan H. Ellis will again be teaching the Family Wealth Planning course at Villanova University School of Law for the Spring 2010 semester. His next scheduled speaking engagement for lawyers, accountants and financial planners is the “Pennsylvania Complete Trust Course,” sponsored by Professional Education Systems, Inc. in February 2010.
Lisa A. Shearman again participated in the “Wills for Heroes Program” on September 19, 2009. The “Wills for Heroes Program” provides essential legal documents to police, firefighters and emergency medical personnel and their spouses. Attorneys donate their services free of charge to make certain that the families of our dedicated public servants will be protected in the event of their death or disability.