Cramer Law Center is moving! We have outgrown our Baymeadows location, but we’re remaining in the Mandarin area.  Starting April 1, 2013 (no foolin!), you can find us at CONCORDE I, 3030 Hartley Road, Suite 290.  We’ll be in the Concorde complex, which is behind the Wells Fargo Bank, just north of I-295 and San Jose Boulevard.  The new office will be located on the opposite side of San Jose Boulevard from the Whole Foods Market. Even though we have to pack and unpack, we’re excited about the move. Not only will we have our own larger space, but we’ll also have access to a 30-seat training facility in the adjacent building to use for our workshops.  The move is just in time, because we had a record crowd at our March “Truth About Estate Planning” workshop!  Hopefully, we won’t have to turn away anyone in the future.

While we’re talking about us, here are some quick tidbits about our team:  Jeff recently had a grandson and was excited to visit him in Santa Fe, New Mexico; Amelia has returned from Indianapolis completing the first phase of her cutting-edge estate planning training with the National Network of Estate Planning Attorneys; Valentina was a pace setter in the recent 26.2 With Donna National Marathon for Breast Cancer; and Debbie was the second runner up in Carriage Club’s 2013 Annual Chili Cook-Off!

To see photographs of us in our new office space and stay up-to-date on all of the activities at Cramer Law Center, please “Like” our Facebook Page at facebook.com/cramerlaw.

Cramer Law Center offers full, flat fee estate planning services including wills, trusts, durable powers of attorney, health care surrogate designations, living wills, designations of preneed guardian, and more.

The next “Truth About Estate Planning” workshop will be held at the Cramer Law Center Concorde 1, 3030 Hartley Road, Suite 290, Jacksonville, Florida 32257 on April 4, 2013 at 10:45 a.m. Please call us at (904) 448-9978 to reserve your seat.

Recently, I consulted with a young woman who has been married approximately one (1) year.  Her husband is waiting on a liver transplant and has been for some time.  Despite his precarious health situation, the couple did not do any estate planning after being married.  She told me she felt like they had “plenty of time” to get around to estate planning.

However, while the husband was recovering from a fairly routine knee surgery, something went horribly wrong and he now suffers from brain damage.  He no longer is capable of making decisions on his own.  In fact, before his condition was fully understood, he emptied his bank account and ran up his credit cards to buy a boat (which wasn’t even worth close to what he paid for it) and the family is now broke, except for his social security and retirement income.

The wife came to me to talk about establishing a guardianship for her husband.  When I explained that it would cost a minimum of $5,000 to $6,000 to establish a guardianship, she indicated that they could not afford to do this.  All of their savings are gone.  Had they only come to me for basic estate planning, the total cost would have been $1,250 for a complete will package for both of them, there then would have been no need for a guardianship.  Instead, the only planning that the husband had done has placed an additional burden on his wife.

He had a several year old power of attorney in which he named an old Army buddy in south Florida as his agent.  The Army buddy would prefer not be involved and to let the current wife handle everything.  Unfortunately, he is forced to be her go-between because he is the only one with the legal power to manage her husband’s finances.

We always explain that the cost of estate planning involves not only the initial cost, but the costs of updating or “failing to update.”  Here is a vivid example of both the financial and emotional cost of “failing to update.”

The beginning of May always brings national attention to the Jacksonville area when the Players Championship comes to town.  For one week each year, the Players is the hot ticket in town and for good reason; the tournament, which is part of the PGA tour, brings international golf superstars to town and raises millions of dollars for local charities.  As Jacksonville estate planning attorneys, we find two different meanings in the words “the players”: we are reminded of all the positive energy that flows through the city at the time of the tournament, but also think about the players of estate planning.

Your estate planning “players” are the people you choose to protect your assets during your lifetime and distribute or manage them after your death.  This would include the trustee(s) of your trust, the executor(s) of your will, and anyone to whom you have given a durable power of attorney.  Other important players are those individuals to whom you have granted access your health care information or the power to make health care decisions for you, such as your designated health care surrogate.

The players you choose for your estate plan should be people that you trust completely and who know you well enough to make the decisions you would have made.  They must also be willing and able to perform their duties.  If it has been more than a couple years since you designated your estate planning players, you should review them to ensure that your choices are still appropriate and relevant today.

I have just returned from Indianapolis where I attended the 49^th Collegium of the National Network of Estate Planning Attorneys.  I wanted to share the highlights of my trip, including continuing my technical education, benefitting from the experience of preeminent colleagues, and a reminder of estate planning done right by one of the founding fathers.

I first took an intensive two day course concerning irrevocable life insurance trusts. An “ILIT” is a technique that can be used to allow life insurance proceeds to escape the estate tax.  Although this has not been that much of a concern in recent years with the individual estate tax exemption ranging from $3.5 million to $5 million, if that exemption is lowered to $1 million on January 1, 2013, as is currently the law, then we expect many more people will inquire about setting up ILITs.  Besides the technical component of the education, we also learned from life insurance professionals about concerns that life insurance policies previously placed inside ILITs run the risk of “blowing up” (becoming far more expensive then anticipated) and sabotaging the purpose for which the ILIT was constructed. This highlights the importance of monitoring the performance of your ILIT on a regular basis.

Besides having the time to focus on legal technical subjects, what I most enjoy about these gatherings is learning best practices from leaders in the estate planning field.  We heard from Susan Bradley, author of the book “Sudden Money,” and from John A. Warnick, chairman of the Purposeful Planning Institute, concerning ways to go above and beyond the norm to assist our estate planning clients to “leave their wisdom along with their wealth.”

Passing on wisdom along with property is one of our core planning philosophies, and I was reminded that it goes back to the time of the founding fathers. In George Washington’s Last Will and Testament, he left his collection of swords to his nephews and, in addition to personal observations directed to each nephew, he said the following:

“These swords are accompanied with an injunction not to unsheathe them for the purpose of shedding blood, except it be for self-defense or in the defense of their country and its rights, and in the latter case, to keep them unsheathed, and prefer falling with them in their hands to the  relinquishment thereof.”

Estate planning really can provide the setting for bringing out the very best in people.  We would be happy to help you hand down your life experiences as well as your assets.

            For those of you who are married and have not had your own Will or Living Trust prepared, the Florida Legislature has just changed your “Will”.  The bill was sent to the Governor for his signature on June 13^th and was signed in June 21^st. 

            Previously, your government-made “default will” provided that if you are survived by a spouse and children of that spouse, the surviving spouse would receive the first $60,000 of your estate and then one-half (½) of the remaining estate.  The other half (½) would be divided equally among your children (or their descendants).  That now has been changed.  In the traditional marriage situation, where all of the decedent’s surviving children are also the children of the surviving spouse, the surviving spouse now receives one hundred percent (100%) of your estate (providing the surviving spouse has no children or grandchildren [descendants] from another relationship). 

            This change in the “default will” does bring the state’s version of estate planning more in line with the typical choices of married couples.  Most married couples do choose to leave everything to their surviving spouse. 

            In cases of second marriages and/or blended families, the State’s “default will” remains unchanged.  Fifty percent (50%) of the estate goes to the surviving spouse and the other fifty percent (50%) is divided equally among the decedent’s lineal descendants (children/grandchildren).  This new law does not have any effect on Florida’s current elective share, homestead, exempt property or family allowance provisions.   

            So, if you like the Will the Florida legislature has prepared for you, stand pat.  If you’d like to make your own choices and/or learn how the laws mentioned in the previous paragraph affect your “default will”, call us…we can help. 

            We begin the New Year with temporary estate tax relief.  The key word is “temporary.”  Congress, at the last minute, finally has acted to modify the estate, gift and generation-skipping transfer taxes.  However, this modification of the estate, gift, and generation skipping transfer taxes will last only for two years, unless Congress passes a more permanent law.  If Congress does nothing, on January 1, 2013, the estate tax exemption will be reduced to $1,000,000.00 and the estate tax rate will increase to 55%.  Essentially, the last Congress has “punted” forward the sunset provisions of EGTRRA (the Economic Growth Tax Relief Reconciliation Act) for two years.  No one can predict what will happen then.  This newsletter will highlight the key elements of this temporary estate tax relief.

1.         First, the estate tax has returned.  However, it has returned with a much larger personal exemption of $5,000,000.00 and a lower 35% tax rate. 

2.         Second, the gift tax is reunified with the estate tax, so that everyone now also has a $5,000,000.00 lifetime gift tax exclusion amount and a 35% gift tax rate. 

3.         Third, the generation skipping transfer tax exemption will be Five Million Dollars ($5,000,000.00) in 2011, indexed for inflation beginning in 2012.  The GST tax rate for 2011 and 2012 will be 35%. 

4.         Fourth, there is now “portability” of the unused exemption between spouses.  This means that a husband and wife together essentially have a $10,000,000.00 exemption, the unused portion of which can pass between spouses without any special estate planning being required.  In the past, we have often used two trusts, in husband and wife planning, to obtain such a doubling effect of the exemption amount.  However, such portability is assured only for two years and the availability of this portable exclusion amount requires an election to be made on a timely filed estate tax return.  Moreover, the provision does not allow a surviving spouse to use the unused generation skipping transfer tax exemption of a predeceased spouse.  So, we likely will continue to recommend trust planning for many of our clients.

            What is the effect of this temporary estate tax relief on estate planning going forward?  The $5,000,000.00 gift exclusion amount and GST exemption beginning in 2011 provide an individual with the ability to make $5,000,000.00 in lifetime gifts to family members or others without having to pay gift taxes; and provide couples with the opportunity for making gifts of up to $10,000,000.00 without having to pay gift taxes.  This paves the way for immediate gift planning opportunities to reduce the value of your gross estate.  This can be done by giving simple gifts or by utilizing leveraging strategies such as gifts to grantor trusts and other techniques to effectively transfer far more than $10,000,000.00 out of your estate.  However, gifting strategies should consider the cost basis rules.  Let us know if we can assist you in the gift planning process.

          There still are several reasons for continuing to use bypass trusts at the first spouse’s death, such as asset protection and flexibility, which we will discuss in detail at our “Truth About Estate Planning” workshops throughout the upcoming year.

            By now you probably all have heard about the “deal” reached between the President and Republican Congressional Leaders concerning taxes, including the estate tax.  No language on the estate or gift tax actually appeared in the document released by the White House, but it has been widely reported that it includes an estate tax provision for 2011 and 2012 that has a top rate of 35% and an exemption of $5 million per individual.  This agreement appears to draw on the Lincoln-Kyl estate tax proposal introduced earlier in the Senate, which also proposed to top 35% rate and $5 million exemption, but further details are unavailable.  It is also unclear how or if the estates of those who died in 2010 would be affected by this agreement. 

            So, if this tentative agreement passes both Houses of Congress before the end of this year, the estate tax will return in 2011 with a $5 million personal exemption and a tax rate of 35%.  Many congressional Democrats oppose the proposal, so passage remains uncertain.  If the agreement does not pass prior to December 31, 2010, then the estate tax will return with a $1 million personal exemption and a 55% tax rate. 

            If the Bill passes, many of you undoubtedly will breathe a sigh of relief and feel that there is less urgency to either prepare or update your estate plan.  However, this deal will affect only people dying in the calendar years 2011 and 2012.  The next Congress then will have to strike another deal or the estate tax likely will default back to the $1 million exemption and 55% tax rate on January 1, 2013.  As this newsletter is written, much uncertainty remains over the passage of this Bill.  Stay tuned.

            How can this chaos be managed?  We have a process in place that relieves our clients of worry about any curve ball Congress may throw at us.  Our annual maintenance program is a key part of this process.  We keep our clients informed and keep their estate plans updated to stay in tune with whatever legislation comes our way.  In an unending period of uncertainty, this planning process provides true peace of mind.

          We often talk to people who have moved to Florida and have “heard” that their Will, which was drafted and signed in another state, is no longer valid.  The myth that an out of state Will is automatically invalid once you move to Florida simply is not true.  A Will signed by a non-resident of Florida is valid in Florida if: (1) it complies with the Florida statutory formalities for executing a Will or (2) the Will is valid under the laws of the state where the Will was signed:  UNLESS the out of state Will was either verbal or hand written. A verbal Will (like “deathbed” wishes) is not valid in Florida.  In Florida a Will must be in writing to be valid.  A Will in the person’s own handwriting is not valid unless it meets the formal document signing requirements of either Florida or the state in which it was signed.  (If you fully understand this, you may pass “go” and collect your $200.)

          BUT there is a big difference between a Will being VALID and being EFFECTIVE.  Some provisions of your out of state Will may not be valid under Florida law.  For example, if you named a friend or neighbor from your old home town as guardian for your minor children, that person may not be qualified to serve as guardian under Florida law.  Only a Florida resident or close blood relation who resides out of state may serve as a Florida guardian.  Some states recognize “common law” marriages.  Florida does not.  Some states have “community property” rights. Florida does not.  A Will provision based on such laws may not be effective in Florida.  

          Additionally, even though a Will signed out of state may be procedurally sufficient, it still can be attacked on substantive grounds, such as lack of testamentary capacity or undue influence.  Having to defend the validity of an out of state Will, involving out of state witnesses, can increase costs significantly.  

          It is not only your Will (or Trust) which might be invalid, but Florida laws concerning your other planning documents may be different from the state where those documents were signed.  For example, a Power of Attorney drafted in some states loses its validity when the person who signed it becomes incapacitated.  In Florida, it does not – if properly drafted.  A “Living Will” drafted in another state may not comply with the particularities of Florida law.  Florida law provides that you may designate a “health care surrogate” to make health care decisions for you in the event that you are unable to make those decisions for yourself. 

          These are just a few examples highlighting how an out of state Will might be VALID, but not EFFECTIVE.  We believe that when someone moves to Florida they should consult with a Florida estate planning attorney to ensure that their estate planning documents are up to date and conform with Florida law.  

          If you have family, friends, or neighbors who recently have moved to Florida, please feel free to share this newsletter with them.

Change is in the air at Cramer Law Center. Many of you have noticed that our longtime legal assistant, Janet Marshall, has left us to explore other opportunities. You also know that I  took some time off to see our son get married. Because of the difficulty in finding someone who will live up to Janet’s high standard of client service and caring, we’ve had some temporary assistants over the past couple of months. I’m pleased to announce that our search for help is now over. Join me in welcoming Valentina Chapman as the newest member of our team.

Val is both an Advanced Certified Paralegal and a Certified Florida Legal Assistant with over  15 years experience. Val previously worked for one of Jacksonville’s top estate planning law firms. She has handled hundreds of probate and estate administrations, has drafted all different types of estate plans, and has helped fund numerous trusts. Her organizational skills and fresh ideas already have begun to have an impact on the office. Plus, she is a delightful individual. Val hails from Pennsylvania and has been in Jacksonville for the past 16 years.

Melinda and I are delighted that our son, Barrett,  married his longtime sweetheart,  Lexie Abramson, on May 30. They have dated for 7 years, beginning with the Bolles School senior prom. They had been in school together since the 3d grade. In fact, in the 5th grade, Barrett (in budding engineer fashion) sent Lexie a note asking if she would be his girlfriend and put boxes to check “yes” or “no”. She checked “no” then, but eventually came around. They are living in Gainesville where he is working on his Ph.D in environmental engineering and she is attending the college of veterinary medicine.

Now that these milestones have been marked, we hope to continue sending out this newsletter on its regular schedule, chock full of interesting and useful information about estate planning.

Change is in the air at Cramer Law Center. Many of you have noticed that our longtime legal assistant, Janet Marshall, has left us to explore other opportunities. You also know that I  took some time off to see our son get married. Because of the difficulty in finding someone who will live up to Janet’s high standard of client service and caring, we’ve had some temporary assistants over the past couple of months. I’m pleased to announce that our search for help is now over. Join me in welcoming Valentina Chapman as the newest member of our team.

The future of the estate tax remains a back-burner item in Congress. With so many legislative priorities ahead of it and as more and more members of Congress become preoccupied with mid-term elections, the likelihood of legislation being enacted before the end of the year grows more remote. There has been some talk of passing a bill that would permit 2010 estates to choose to follow either the 2009 law (3.5 million dollar exemption, step up in basis and a 45% tax rate) or the 2010 law (no estate tax, but carryover basis ). But it remains just talk.

Meanwhile, 2011 is fast approaching—with a return to an estate tax with a 55% rate and only a $1 million personal exemption. If this concerns you, remember that the democrats favor, and the house already has passed, a bill which extends the 2009 law into the future. The republicans want a $5 million exemption and a 35% rate. The problem with that position is that under the “pay-as-you-go” requirements, the estimated $91 BILLION cost of this change must be offset by increasing taxes elsewhere. There is no cost to extending the previous law. This proposed $91 billion reduction in the estate tax will benefit only the wealthiest ¼ of 1% of all households. Under the prior law, 99.75% of all households paid no estate tax. This should make voting to extend the prior law a ”no-brainer”, but instead it appears that the republicans have “no brains” on this issue.

Many of you will be subject to the increased estate tax next year. If you aren’t successful in lobbying your Senators to extend the 2009 law, you must seriously consider beginning the estate planning that you’ve been putting off until “absolutely necessary”. 2011 is that time.

On a lighter note, while Congress dithers, I’m taking a week off to see my son get married. I should be back in the office on June 2.