February 14, 2013 Valentine’s Day Edition
BETA TEST OUR FREE SOFTWARE TO AVOID MAKING THE $28,000,000 MISTAKE
LESTER PERLING’S HEALTH LAW HYPOTHETICALS
CRAIG HERSCH’S ARTICLES: PART 1 OF A 3 PART SERIES: WEALTH PRESERVATION LESSONS FROM ATHLETES
OUR BLOOMBERG BNA WEBINAR ON THE TOP 10 2013 ESTATE PLANNING STRATEGIES: BEYOND THE OBVIOUS
We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Ruggiero at Janine@gassmanpa.com.
This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.
INVITE A FRIEND: Do you know anyone who might enjoy the Thursday Report? Or do you know anyone that you do not like who will not enjoy the Thursday Report? Either way, please let us know their name and email address and this can be your special Valentine’s gift to them. They may also win Kentucky Fried Chicken Gift Cards, and we guarantee they will get buckets of fun and good information.
TRY OUR FREE SOFTWARE TO AVOID MAKING THE $28,000,000 MISTAKE
Is it safe to have a married couple with $6,250,000 worth of assets, a good income, and a 30-year life expectancy rely on portability to avoid federal estate tax on the surviving spouse’s death?
If one spouse dies this year and the surviving spouse earns what has been considered a reasonable rate of return on investments in the past 30 years, you can count on a $28,000,000 estate tax using the assumptions and analysis described in our Leimberg Newsletter entitled Gassman, Crotty, Buschart & Moody on the $28,000,000 Mistake: Underestimating the Value of a Bypass Trust and Overestimating the Value of Spouse Estate Tax Exclusion Portability, issued on February 7, 2013. This newsletter can be viewed by CLICKING HERE.
The only way to understand the dynamics of this planning technique is to run the numbers. We have taken our primitive but thorough Excel spreadsheet program to the next level by hiring a programmer, David Archer, who, along with Ken Crotty, has spent countless hours updating this program. Their updates have made this program more user friendly and users can now input 16 variables across the left hand side of the screen and see the results on the right hand side.
Then you can change any variable and see the results immediately.
You can beta test this software at no charge through February 28, 2013 by CLICKING HERE or emailing janine@gassmanpa.com to request a copy.
All we ask is that you consider providing us with comments so that we can improve this product to make it available for friends and colleagues.
The program assumes that one spouse will die in 2013 and allows for the surviving spouse to have the benefit of a Credit Shelter Trust or no Credit Shelter Trust to the extent selected.
The program also provides for annual savings by the surviving spouse, annual gifting using all or a percentage of the $14,000 per person (and increasing) allowance, and discounted gifting by inputting the discount percentage and the portion of gifting that will consist of discounted entity transfers. The program allows you to input an anticipated consumer price index for the surviving spouse’s exemption, values for real estate investments, and rates of growth and values for other investments.
It should take you about 3 minutes to boot up the program, 4 minutes to decide which information input options you want to change, and 15 minutes to stop off at Kentucky Fried Chicken on your way home to review the results and to check out the new spicy crispy brand and get an extra empty bucket to display proudly on your conference room table for other Thursday Report fans.
We also need help naming the new software.
What is your favorite?
- Lighthouse Estate Tax Software (“LET’S”)
- Archer Projection System (“A.P.S.”)
- Computational Reasoning Uni-view Diagram (“C.R.U.D.”)
We thank computer programmer David Archer for learning how the estate and gift tax system works and matching our spreadsheets to a program that will hopefully not be named C.R.U.D. Unfortunately, the name Kentucky Fried Software is already taken.
You can see a demonstration of how the software works by taking a look at a two-page before and after print out by Click Here for Chart 1 and Chart 2, which shows a husband and wife having $1,000,000 in real estate and $5,250,000 in assets. The surviving spouse will be able to save $100,000 a year but, from that, can gift up to $28,000 to the two children. We further assumed that the assets grew at the historical S&P growth rate for the last 30 years.
Based upon the above scenario, the estate tax in the 30th year would be $27,976,980 if there is no Credit Shelter Trust established on the first death.
If a Credit Shelter Trust of $3,000,000 is established on the first death, then the estate tax would be reduced to only $11,908,202.
FREE WEBINAR FOR BETA
TESTERS OF OUR SOFTWARE:
Next Thursday, February 21, 2013 at 5 p.m. we are having a 15 minute estate tax projection software clinic for any and all interested individuals. This will be a live webinar demonstrating how this software works on screen. We will demonstrate the $28,000,000 mistake and show you how to use this very easy system, which can be a great help to your practice and clients.
LESTER PERLING’S HEALTH LAW HYPOTHETICALS
You can CLICK HERE to receive Lester Perling’s four hypotheticals that all Florida lawyers who represent medical groups will want to be familiar with.
We also enclose an invitation to the free Tuesday, February 19, 2013, 5 p.m. webinar that we are hosting for Mr. Perling to explain these hypotheticals. Mr. Perling can be reached at (954) 764-7060 or via email at lperling@broadandcassel.com
OUR BLOOMBERG BNA WEBINAR ON THE TOP 10 2013 ESTATE PLANNING STRATEGIES: BEYOND THE OBVIOUS
Please consider attending our Bloomberg BNA Tax & Accounting 90 minute webinar next Wednesday, February 20, 2013 at 12:30 p.m. entitled The Top 10 2013 Estate Planning Strategies: Beyond the Obvious.
We are very pleased that Tom Ellwanger has recently joined our firm and will be participating in this program with Alan S. Gassman, Kenneth J. Crotty, and Christopher J. Denicolo.
This is our 28th Bloomberg BNA Tax & Accounting webinar, and we thank everyone who has attended one or more of these webinars, and everyone who has commented on our materials and given us planning ideas and pointers.
The materials for this webinar will be available to Thursday Report participants the week after the presentation and can be requested by emailing Janine Ruggiero at Janine@gassmanpa.com.
CRAIG HERSCH’S ARTICLE: WEALTH PRESERVATION LESSONS FROM ATHLETES
It’s more than just taxes and asset protection planning – what about family values and making the children proper stewards for family wealth?
Let’s face it – the main challenge to passing family wealth to a third generation is the second generation! Even after we preserve assets from taxes, creditors, divorces, and all other threats known to mankind, how can clients help assure that their children and grandchildren act responsibly to allow hard earned wealth to be used for proper purposes and not as a catalyst for personal, professional, and financial disaster?
Our friend Craig Hersch of the Sheppard, Brett, Stewart, Hersch, Kinsey & Hill law firm in Ft. Myers has written the following article on this topic, which we feel has a lot of meaning. Mr. Hersch can be reached at 239-334-1141 or hersch@sbshlaw.com.
The Sheppard, Brett, Stewart, Hersch, Kinsey & Hill law firm also has a fantastic website that you can view by CLICKING HERE. They have excellent videos that explain a number of basic concepts to clients. Hats off to Craig.
Wealth Preservation Lessons from Athletes
©2013 Craig R. Hersch. Learn more at www.sbshlaw.com
Despite earning more than $27 million in salary, and millions more in endorsements, basketball superstar and cultural phenom Dennis Rodman appeared in Court this past March because he was unable to pay $800,000 in past due child support. He claimed that he was broke.
Scottie Pippen, a teammate of Rodman’s on the Chicago Bulls championship teams, found himself near bankruptcy just a few years after his retirement despite career earnings in excess of $110 million.
In May of last year, World Series superstar Curt Schilling announced that he had lost his entire $50 million baseball fortune on a failed video game company.
Professional boxer Mike Tyson earned and squandered an estimated $300 million net worth.
Seventy percent of NFL players are completely broke three years after leaving the game, despite an average annual salary of just under $2 million.
A common theme amongst all of these tales is that those who earned and lost enormous sums had no prior experience with monetary success. Like a lotto winner, they suddenly found themselves bathing in millions. Unable to manage their newfound fortunes, and unable to create a high-quality vision of their post-athletic careers, these athletes lost what took them a lifetime of training, sacrifice and hard work to achieve.
There are lessons to be learned for those planning estates – even for those of more modest means.
Traditional estate planning works to divide financial assets among family members without considering the other things that lead to the success that generated the wealth in the first place. Speaking as one inside the industry, estate planning professionals have become very adept at economically dividing up the money amongst the heirs with little regard to transferring the intangible wisdom, values, experience and relationship assets to future generations.
What appears to be the philosophy underlying traditional estate planning? Beat the taxman and ultimately dump all you can on your heirs, regardless of their ability to handle sudden wealth. As we’ve seen with the athlete examples, an heir to an estate can in a few years wipe out what took a lifetime to create. Moreover, dividing up the financial assets all too often ends up dividing the family.
This is more of a systemic problem within the industry comprised of attorneys, accountants and financial advisors than one associated with any one individual family’s plan. I am now in the process of addressing this issue – and you’ll read more about my findings in future columns. The problem as I see it is that it is not uncommon for estate planning professionals to focus on wealth transfer without a corresponding acknowledgement to the role of wealth responsibility.
And I am not condemning the hard work that the estate planning community does for its clients. The transfer of financial wealth while minimizing taxes is an important element that should be universally addressed. There are other components missing, however.
What is needed in addition to the traditional process is a program designed to document and transfer the family’s other, more important assets that I wrote about last week such as the family’s values, experience, wisdom and relationships. For those of you who missed that column, I asked what are the most important things that you would want to pass on to your family? Is it the financial assets, or instead is it the wisdom, experiences and values that got you there?
I pointed to an entrepreneurial client who once confidently told me that if he suddenly lost everything, he could regain it all in a couple of years with the education, experience, knowledge, wisdom and relationships that he had built over the course of his lifetime. Those are the true assets that can best set the stage for successive generations’ success.
So what kind of process needs to be put into place to achieve the transfer of these intangible family assets?
The way it happens is by transferring wealth through accountability and leadership. Notice that I didn’t say “management.” Managers are typically hired by leaders to help run things, to keep things on track. Attorneys, accountants and financial advisors are good managers so long as the family has put into place a system of vision creation, accountability and leadership.
Leaders, in contrast, set the vision for the future. They define the parameters under which managers manage. When the family leader documents his or her own core values, defines the unique abilities that helped get him or her to their perch, and can transfer his or her accumulated wisdom to successive generations, the family is ready for the next step.
This often includes determining how the other family members can fit into perpetuating the family’s success. And it’s not usually achieved by the next generation simply becoming younger versions of the family leaders. Trying to create a “Mini-Me” too often results in family disharmony, tensions and failure.
-Craig Hersch
APPLICABLE FEDERAL RATES
To view a chart of this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3 please click here.
UPCOMING WEBINARS
WEBINARS OF INTEREST:
TUESDAY, February 19, 2013, 5:00 – 5:45 p.m.
Gassman, Crotty & Denicolo, P.A. is pleased to welcome Lester Perling, Esq. for a free webinar entitled Florida Health Law Traps – 4 Hypotheticals and Discussion of Important Medical Structuring and Regulatory Issues. To register for this webinar, please click here.
WEDNESDAY, February 20, 2013, 12:30 – 2:00 p.m.
Alan Gassman, Esq., Tom Ellwanger, Esq., Kenneth Crotty, Esq., and Christopher Denicolo, Esq. will be presenting a webinar for Bloomberg BNA Tax & Accounting entitled The Top 10 2013 Estate Planning Strategies: Beyond the Obvious.
THURSDAY, February 21, 2013, 5:00 – 5:15 p.m. FREE WEBINAR FOR BETA TESTERS OF OUR SOFTWARE.
This will be a live webinar so that you can see the operation of the software on screen. We will demonstrate the $28,000,000 mistake and how to use this very easy system. To register for this webinar, please click here.
MONDAY, February 25, 2013, 5:00 – 5:35 p.m.
Alan S. Gassman will be joined by Jeff Howard of Ray Howard & Associates in Jacksonville, Florida, and Lester Perling of Broad and Cassel in Ft. Lauderdale to speak on the subject of Medicare and Medical Compliance Disasters – What To Do Before and After the Explosion.
THURSDAY, February 28, 2013, 4:00 – 4:50 p.m.
Please join us for The 444 Show, sponsored by the Clearwater Bar Association and moderated by Alan S. Gassman. This month we are pleased to have attorney David Brittain of Trenam Kemker as our guest speaker. His topic is What Real Estate Attorneys Don’t Tell Other Attorneys – What You Need to Know to Stay Out of Trouble. This webinar qualifies for 1 hour of continuing education credit. To register for the webinar, please visit www.clearwaterbar.org or email Janine@gassmanpa.com
MONDAY, March 4, 2013, 12:30 – 1:00 p.m.
Colleen Flynn, Esq. of the Johnson Pope Law Firm will speak at Lunch Talk this month on the topic of Hiring Procedures: What To Do and What Not to Do When You Hire a New Law Office Employee. Lunch Talk is a free webinar series moderated by Alan S. Gassman, Esq. and sponsored by the Clearwater Bar Association. To register for the webinar, please visit www.clearwaterbar.org or email Janine@gassmanpa.com
Alan S. Gassman, J.D., LL.M. is a practicing lawyer and author based in Clearwater, Florida. Mr. Gassman is the founder of the firm Gassman, Crotty & Denicolo, P.A., which focuses on the representation of physicians, high net worth individuals, and business owners in estate planning, taxation, and business and personal matters. He is the lead author on Bloomberg BNA’s Estate Tax Planning and 2011 and 2012, Creditor Protection for Florida Physicians, Gassman & Markham on Florida and Federal Asset Protection Law, A Practical Guide to Kickback and Self-Referral Laws for Florida Physicians, The Florida Physician Advertising Handbook and The Florida Guide to Prescription, Controlled Substance and Pain Medicine Laws, among others. Mr. Gassman is a frequent speaker for continuing education programs, publishes regularly for Bloomberg BNA Tax & Accounting, Estates and Trusts Magazine, Estate Planning Magazine and Leimberg Estate Planning Network (LISI). He holds a law degree and a Masters of Law degree (LL.M.) in Taxation from the University of Florida, and a business degree from Rollins College. Mr. Gassman is board certified by the Florida Bar Association in Estate Planning and Trust Law, and has the Accredited Estate Planner designation for the National Association of Estate Planners & Councils. Mr. Gassman’s email is Agassman@gassmanpa.com.
Thomas J. Ellwanger, J.D., is a lawyer practicing at the Clearwater, Florida firm of Gassman, Crotty & Denicolo, P.A. Mr. Ellwanger received his B.A. in 1970 from Northwestern University and his J.D. with honors in 1974 from the University of Florida College of Law. His practice areas include estate planning, trust and estate administration, personal tax planning and charitable tax planning. Mr. Ellwanger is a member of the American College of Trusts and Estates Council (ACTEC). His email address is tom@gassmanpa.com.
Christopher Denicolo, J.D., LL.M. is a partner at the Clearwater, Florida law firm of Gassman, Crotty & Denicolo, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law. He has co-authored several handbooks that have been featured in Bloomberg BNA Tax & Accounting, Steve Leimberg’s Estate Planning and Asset Protection Planning Newsletters, and the Florida Bar Journal. He is also the author of the Federal Income Taxation of the Business Entity Chapter of the Florida Bar’s Florida Small Business Practice, Seventh Edition. Mr. Denicolo received his B.A. and B.S. degrees from Florida State University, his J.D. from Stetson University College of Law, and his LL.M. (Estate Planning) from the University of Miami. His email address is Christopher@gassmanpa.com.
Kenneth J. Crotty, J.D., LL.M., is a partner at the Clearwater, Florida law firm of Gassman, Crotty & Denicolo, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law. Mr. Crotty has co-authored several handbooks that have been published in BNA Tax & Accounting, Estate Planning, Steve Leimberg’s Estate Planning and Asset Protection Planning Newsletters, Estate Planning magazine, and Practical Tax Strategies. Mr. Crotty is also the author of the Limited Liability Company Chapter of the Florida Bar’s Florida Small Business Practice, Seventh Edition. He, Alan Gassman and Christopher Denicolo are the co-authors of the BNA book Estate Tax Planning in 2011 & 2012. His email address is Ken@gassmanpa.com.
Thank you to our law clerks that assisted us in preparing this report:
Kacie Hohnadell is a third-year law student at Stetson University College of Law and is considering pursuing an LL.M. in taxation upon graduation. Kacie is also the Executive Editor of Stetson Law Review and is actively involved in Stetson’s chapter of the Student Animal Legal Defense Fund. In 2010, she received her B.A. from the University of Central Florida in Advertising and Public Relations with a minor in Marketing, and moved to St. Petersburg shortly after graduation to pursue her Juris Doctor. Her email address is Kacie@gassmanpa.com.
Eric Moody graduated from Stetson University College of Law in December 2012 and is currently seeking admission to the Florida Bar. He is considering pursuing an LL.M. in estate planning. Eric is also an Articles and Symposia Editor for Stetson Law Review. In 2009, Eric received a B.S. in Business Management from the University of South Florida. Eric’s email address is Eric@gassmanpa.com.
Carly Ross is a third-year law student at Stetson University College of Law. She is the Notes and Comments Editor for Stetson Law Review, and a member of Stetson’s Jessup Moot Court Team. She graduated from the University of North Carolina at Chapel Hill in 2010 with majors in History and Political Science. Carly’s email is Carly@gassmanpa.com.