Andrew Ewalt's Law Blog

Gifting and Taxes

If you are looking for a good opportunity to benefit others (especially your family members)consider gifting. 

One overlooked and under-utilized opportunity under the tax code is the annual gift exclusion. The exclusion allows individuals to give up to $12,000.00 annually to as many people you want without incurring any gift taxes on the gift. It is even better for married couples who are allowed to combine their annual exclusion amounts and thus can gift up to $24,000.00 to each individuals without incurring any gift tax. 

When faced with potential federal estate taxes rates exceeding 40% gifting can be a technique to remove the value of the gift from the donor's estate but also any future appreciation on the asset. 

Please note: Competent professional advice should be sought before making gifts.

Protection For Key Employees

The business world can be very competitive. One of the worst things that can happen to a business is to lose a key employee.  That is why it is important to consider options for protecting your key employees.

What if a business owner or key employee where to die?  What process would be used to:

1.  Find, hire and train to take that employees place.

2. Pay bills to maintain the company's good credit rating.

3. Paying off business loans,  which lenders may call after the death of an owner/key employee.

4.  Make up for the loss of revenue caused by the subsequent disruption in the business.

One option is to purchase "Key Employee" life insurance. 

Title Insurance Pros and Cons

During a recent real estate closing I was asked whether “title” insurance was necessary (for those of you who are unfamiliar, title insurance is a form of insurance that guarantees that no other individuals can claim an interest in your property.) 

The answer to this question is that it depends on whether a buyer is taking a mortgage or not. 

Whenever a bank or lending institution is involved in providing funds (mortgage) for an individual to purchase real estate the bank or lender will require the buyer of the home purchase a title insurance policy on behalf of the bank or lender.  The reason for this is that the bank or lender wants to be certain that their interest in the property is protected. Thus the value of the bank or lenders title policy is often equivalent to the amount of money that the buyer has borrowed.  However, though the lender requires the borrower purchase a title policy on the lenders behalf they do not require that the borrower purchase a separate “owner’s” policy for themselves. 

An owner’s policy is a separate policy from that of the bank or lenders policy and is designed to protect the buyer’s interest in the real estate.  The value of the owner’s policy is equivalent to the purchase price (property value) of the real estate.

As noted previously owner’s policies are not mandatory and as such it is important to determine that one is being provided.  However, the one time cost associated with an owner’s policy is generally not much more then that of the bank or lenders policy. As such the title insurance company often bundle these policies together providing your bank or lender with their insurance while providing you with a policy without much additional cost.  Ultimately, it is the decision of the buyer in counsel with their attorney to determine whether there is a need for an owner's policy. However, for the peace of mind the one time cost of this insurance can provide, it is highly recommended.

More Tips to Help Avoid Identity Theft

Unfortunately, identity theft can happen to anyone, anywhere, and if someone really wants to get your personal information badly enough there is really not much you can do to stop them.  Personal information can be obtained from people’s wallets and purses and from obtaining credit reports.  They can also get your information legally by going through your garbage.  Personal information can also be obtained through work, discarded credit card receipts, local government agencies and through the internet (try typing your telephone number into www.google.com and see what comes up). Information like where you live, your phone number and even your mother’s maiden name can be purchased as well.  It may seem hopeless but there some things that can be done to help make you safer. Consider these tips.

1. Do not give personal information over the phone, through the mail or internet unless you have initiated the contact
2. Shred all documents, including pre-approved credit card applications received in your name, insurance forms, bank checks and other financial information
3. Minimize the number of credit cards you carry
4. Do not carry your Social Security card, birth certificate or passport unless necessary
5. Do not put your phone number on checks

Wise Woman And The Law

Woman have many roles in in life, daughter, aunt, wife, friend, mother, grandmother and even great-grandmother.  Traditionally, women are the nurturers and caregivers in our society, let alone our families.  However, a woman in the workforce can expect to earn less than her male counterparts, woman are less likely than men to have their own retirement nest egg and only 21% of widows receive survivor income from their husbands pensions. Not to mention the many legal and financial problems that come with divorce.

Long-term financial and legal security of woman can be a real challenge.  Without proper planning some fundamental legal challenges can make matters  even worse.  For example, who will take care of a woman, the important people in her life and her assets, if she is incapacitated? Who will be her legacy at death? Will she leave an estate that is orderly or a mess?

Through proper planning, a woman can appoint the agents and fiduciaries to make her personal, health care and financial decisions if she becomes incapacitated. In addition, she can appoint guardians to rear her minor children to adulthood and trustees to manage their inheritance.  Along the way she can protect the inheritance from her ex-spouse or even from her husband's next spouse.

In short, an ounce of planning in advance is worth a pound of cure without it.

Trust Services and Fees

As an attorney who advises clients regarding their estates I am often asked about trusts.  In my opinion trusts are an invaluable tool that provide countless solutions to most individuals estate planning goals and objectives.  As such there are many different types of trusts. Essentially, there is a trust option for every estate planning circumstance and way to many to discuss in this short message.  However, one very important consideration a trust creator (Grantor or Settlor) must ask themselves when drafting a trust is who the trustee will be.  One of many options is a professional trustee or trust company.  There are many advantages of using a professional trustee.  Here are a list of some of the advantages. 

1.  Professional management by trained experts. Trustees who do not deal with trust on a regular basis can be overwhelmed by the duties required of them. 

2.  Impartiality in making investment decisions and dealing with a beneficiaries.  Naming an independent trust company removes the emotional elements often associated with friends or family members and assures your wishes are fulfilled exactly as they are spelled out in the trust.

One question  that is often raised when clients are considering a trust is the cost of trustee services.  Generally, fees for trust services are spelled out in the trust document.  Under most circumstances, the fees are calculated annually, based on the level of responsibility assumed by the trustee and the value of the assets in the trust. 

Trusts and trust services can be confusing, but not learning about them could be devastating to your family's future.  If you would like more information about trusts and trust services please contact me for an appointment. 

Connecticut Probate Fees

I have received a number of questions regarding probate.  A recent Hartford Courant article outlined many of the concerns facing families and fiduciaries administering an estate in a Connecticut Probate Court.  One of the many issues are court fees.  Here is an outline of Connecticut's Probate Court fees for estate administration.. All fees are determined by the gross estate for estate tax purposes, plus all damages recovered for injuries resulting in death, less hospital and medical expenses and attorney's fees and costs, Less 50% of any portion of the property passing to the surviving spouse.

Value of Estates           Fee

$0 to $500                       $25

$500 to $1000                 $50

$1000 to 10,000              $50 plus .01 of all in excess of

                                        $1000

$10,000 to $500,000     $150 plus .0035 of all in excess of

                                      $10,000

$500,000 to $4,754,000     $1,865 plus .0025 of all in

                                           excess of $500,000

Over $4,754,000            $12,500