Advanced Estate Planning Strategies for Larger Estates

Advanced estate planning is a good option for individuals and families who have a larger net worths and desire not to pay significant estate taxes when they pass away. Such high net worth individuals generally have assets totaling near five million dollars, as the current federal gift tax exemption is $5.43 million per individual (doubled for married couples).

Keep in mind that the gift tax exemption does include lifetime gifts made to others (including family) that exceed the annual gift tax exclusion for the year the gift was made. In other words, gifts under the annual exclusion limit (which is currently $14,000) do not require disclosure and are not counted toward the $5.43 lifetime tax-free gifting limit. However, gifts over the annual limit must be disclosed by filing a gift tax return for the respective taxable year and are counted toward the $5.43 lifetime tax-free gifting limit.

Advanced estate planning tools may be used to reduce your taxable estate (or the taxable assets you own at death) by removing assets from your estate by voluntarily placing them in the control of other individuals such as trustees. Such transfer must occur inter vivos, or during your lifetime. One such advanced estate planning tool may be the irrevocable trust. The irrevocable trust may be used in conjunction with other planning tools such as the qualified personal residence trust and/or the irrevocable life insurance trust to achieve supreme planning objectives.

Another way to reduce your taxable estate which may have significant real estate is by using defective grantor trusts in conjunction with limited liability companies and/or other legal entities. By doing so, you transfer the ownership of the real estate you personally own and therefore reduce your taxable estate.

Contact the Attorneys of The Noble Law Firm, P.A. to discuss your estate planning needs and whether you should utilize advanced estate planning to distribute your assets to the next generation.

Benefits of Business Entity Conversions

If you already have a business, but have realized or suspect that it may not be the best entity choice, its not too late to change your entity structure. This can be done with most entities, but is often seen the greatest with the limited liability company (“LLC”) and/or the corporation.

You may desire to convert your LLC to a corporation for many reasons. One may be that you initially only intended to operate your business as a private company, but now have the opportunity to take your company public. This may have to be done on both the state and federal levels. For instance, your LLC will have to be converted to a corporation with the Secretary of State using certain forms and procedures. And, your limited liability company may also have to change its tax structure (subsequent to the conversion), as only C corporations may be taken public.

If you have a corporation and have realized the benefits of the LLC or the limited liability company envelope, then you may have to do the same (change the entity structure on the state level and then change the taxation structure on the federal level). If you are considering changing your tax structure, it is important to understand that there may be positive and/or negative tax consequences to such change and proper formalities must be followed. Your Certified Public Accountant (“CPA”) will know how to advise you to complete such conversion with minimal negative consequences.

Contact the Attorneys of The Noble Law Firm, P.A. to discuss whether a business entity conversion would be beneficial for your business goals.

Overview of the Probate Process

Probate is the process of passing one’s assets to family members (also called beneficiaries). Distribution of an individual’s assets may occur in one of two ways (intestate and testate succession). Intestate succession occurs when an individual passes away without a last will and testament in place at their death. If a person passes away intestate, the court makes all of the decisions with regard to that person’s estate. That means your wishes may not be followed and unintended beneficiaries may become titleholders of your assets rather than intended beneficiaries. Testate succession occurs when an individual passes away with a last will and testament designating who shall administer the estate and which beneficiaries should receive the assets. You have freely made choices during your lifetime, why stop at your death.

There are two kinds of probate administration processes. These include formal probate administration and summary probate administration. It is best to plan your estate so that the personal representative (or executor) does not have to probate your assets at all. However, at the very least, you should set up your planning so that your personal representative will only have to use summary probate administration and/or determination of homestead.

The first process is a simpler process called summary probate administration. Summary probate administration can be utilized if a person’s probate estate (assets owned in the deceased person’s name at death) does not exceed $75,000 and/or does not consist of assets other than homestead property (which has its own procedure for succession). This process requires limited court supervision and significantly less formalities.

The second process is a more complex and traditional process called formal probate administration. This is necessary for estates with probate assets exceeding $75,000. Formal probate administration requires significant court supervision and should be avoided if at all possible.

Contact the Attorneys of The Noble Law Firm, P.A. to assist you with minimizing your probate assets or assist with the probate administration of a loved one who has recently passed away.

Basic Estate Planning

Basic estate planning documents are necessary for every individual. Estate planning is the process of planning for an individual’s incapacity and/or death by selecting specific agents to make decisions for them when they cannot do so for themselves as well as detailing how one’s assets will pass upon their death. Failure to plan for your estate can lead to the necessity of court intervention and headaches for your family members who are already in duress or grieving.

The basic estate plan consists of the following: health care directive/surrogate document (for healthcare related decisions), living will (directions on life prolonging measures desired), durable power of attorney (for financial decisions) and a last will (appointment of personal representative and asset distribution directions). In certain cases a revocable living trust may be used in conjunction with a last will and testament. Not every individual needs both a last will and testament and a revocable living trust.

Individuals with significant assets who desire to have those assets bypass probate (or court supervision) should always consider utilizing the benefits of a revocable living trust. Revocable living trusts are also great for blended families where the marital assets are passing to children of different marriages. The revocable living trust allows the trustee to place certain restrictions on asset distributions to keep them safe from beneficiary disputes.

Individuals with significant assets may also take advantage of one or more irrevocable trusts that may allow them to lower their taxable estate, also known as advanced estate planning. In Florida, advanced estate planning is advisable for those individuals who have assets totaling near five million dollars, as the current federal gift tax exemption is $5.43 million per individual (doubled for married couples).

Contact the Attorneys of The Noble Law Firm, P.A. to discuss your estate planning needs and whether you should utilize advanced estate planning to distribute your assets to the next generation.

Limited Liability Company Envelope: LLC Electing to be taxed as a Subchapter S Corporation

If you are interested in starting your own business, a good entity choice for such start-up may be the limited liability company (“LLC”). An LLC provides you with limited liability as to the debts and liabilities of the business. This keeps your personal assets safe from business debts (and vice versa) as well as serves as a much better entity choice than operating a business in your personal name.

If you were interested in receiving the tax benefits of the S corporation, you may still receive such benefits with an LLC. The limited liability company retains the benefits of limited liability, but can be federally taxed as a “subchapter S corporation”. This type of entity choice coupled with S corporation taxation benefits is often referred to as the LLC envelope.

The Limited Liability Company envelope achieves three important objectives:

  1. Protection of the owner’s interests in the company from their personal liabilities;
  2. Protection of the owner’s personal assets from the liabilities of the company; and
  3. Lower federal employment tax rates.

Further, incorporating an LLC taxed as a subchapter S corporation has asset protection benefits since the law in Florida limits a creditor’s remedy to a “charging order” [Florida Statute 608.433(4)]. In other words, the creditor may only receive distributions that the LLC owner would be entitled to in lieu of a foreclosure of the business. The owner may withhold such distributions, in certain cases, until the creditor threat has passed. This makes the LLC a great choice for asset protection.

Limited liability companies taxed as an S corporation allows the LLC to bypass double taxation (taxation to both the shareholders and the company). Second, your taxation rate may be reduced by as much as fifteen percent. However, it is important to have a knowledgeable Certified Public Accountant (“CPA”) assist you with minimizing your tax liability. The CPA will know the best way to maximize the tax benefits of the LLC envelope and reflect such tax benefit on your tax returns.

Contact the Attorneys of The Noble Law Firm, P.A. to discuss whether the LLC envelope is the good option for your business.

Can a Bank Foreclose on your house without possessing the Original Promissory Note?

Many clients ask whether a Bank is required to produce the Original Note in order for a Court to grant the Bank a foreclosure. The Bank is not required to produce the original note. However, if they do not physically possess the original note, the Bank must assert a count to re-establish the lost promissory note. This procedure is more burdensome for a Bank than a regular foreclosure. This separate cause of action must be specifically plead and must allege the elements found in Florida Statute 673.3091.  The Bank must prove the following (1) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred (2) The loss of possession was not the result of a transfer by the person or a lawful seizure (3) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process and (4) The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

Banks have a more difficult time proving these elements and therefore Defendants usually can negotiate a better settlement with the bank and receive an extended sale date waiver of a deficiency or a cash for keys settlement. Moreover, many judges throughout the state of Florida have denied Banks foreclosures based on the Banks failing to prove one of the elements of this cause of action such as failing to prove that the Bank was entitled to enforce the instrument at the time it was lost, failing to have any knowledge about how or when the Note was lost or failing to provide adequate protection to the Defendants against a claim by another person attempting to enforce the promissory note.


Will a Trustee take my car or other personal possessions in a Chapter 7 bankruptcy?

A common question that I receive when a client files a bankruptcy is whether the Trustee is going to take the debtor’s car and sell it for the benefit of creditors. In Florida, only $1,000.00 of equity is exempt from creditors.  Many times cars are upside down, so there is no need for this analysis.  However, many times a car is fully owned by the debtor and is worth several thousand dollars.  Even in this case, a trustee will usually not have a sheriff levy the car.  The reason is there are a lot of costs that go into taking, holding and selling a car.  First a Trustee will have to pay a Sheriff to levy the car, will then have to pay storage costs to store the vehicle, then will have to pay advertising costs to properly advertise the car pursuant to Florida Statutes, and then will have to pay an auctioneer to sell the car.  Additionally, this will be a fire sale and the car will  most likely only sell for a portion of the price that it is actually worth.  Of course, the sheriff, the auctioneer, the storage company and the advertising company will all be paid before any distribution can be made to the creditors.  Additionally, the debtor will receive the first $1,000.00 of any sale.  Therefore even if a car is “worth” $9,000.00 according to Kelly Blue Book, it is doubtful that the trustee will order the sale of the car as the costs clearly outweigh the benefits.  Usually, a debtor will be able to work out a deal with the Trustee in situations where cars have considerably more than a $1000.00 in equity.  This analysis can also be used for other personal positions within a debtor’s home.