Posts Tagged ‘attorney’

“Durable Power of Attorney”

sunshine-stealth-by-attorneycavanaughEvery complete estate plan should include a Durable Power of Attorney.  A Durable Power of Attorney is a document where you give another person the authority to act on your behalf.  This person is called the attorney-in-fact. 

The attorney-in-fact will have the legal authority to make certain decisions on your behalf (similar to them “stepping into your shoes” for that decision”).   Even though another person has the authority to make decisions on your behalf, does not mean that you cannot make such decisions for yourself.  The Power of Attorney is only giving another person the right to act on your behalf in case you are otherwise occupied or unable to handle your affairs.

For example, if you are in the hospital, the person you name as yourhusband-by-jorielom attorney-in-fact can take care of important legal and financial matters for you, e.g., paying bills, depositing checks, etc.

The Durable Power of Attorney can take effect immediately or upon your incapacity (“Springing Durable Power of Attorney”).

The Durable Power of Attorney can be revoked by you at any time for any reason.

A Durable Power of Attorney cannot be executed if you are mentally incapacitated because at the time of execution you must know and understand what you are doing.

If you do not have a Durable Power of Attorney and you are unable to handle your affairs (e.g., become incapacitated), your loved ones will be required to go to court to get authorized to handle your affairs.  The court case can be lengthy and costly, as well as emotionally draining.  Therefore, taking the time now to execute a Durable Power of Attorney is worth the minimal effort it takes.

Federal Transfer Taxes

irs3Federal Transfer Taxes include the estate tax, gift tax and generation skipping transfer tax (the “Three-Part Transfer Tax System”). Changes were made to the Three-Part Transfer Tax system by the Economic Growth and Tax Relief Reconciliation Act of 2001 (the “Act”), which was signed into law by President Bush on June 7, 2001. The Act had the effect of reducing transfer taxes (by decreasing the rate of tax and increasing the exemption amount) from December 31, 2001 through December 31, 2009, with a “repeal” of the estate tax and generation skipping transfer tax in 2010. The repeal will only be effective for deaths occurring during calendar year 2010, i.e., no estate or generation skipping transfer (“GST”) tax will be due for persons dying in year 2010.

For calendar years after 2010, the estate and GST tax system in effect prior to the Act will be reinstated. However, the gift tax will not be repealed, but rather the exemption for lifetime gifts made after December 31, 2001 is increased to $1 million and remains at that level for all future years. The following is an explanation of the Three-Part Transfer Tax ystem “pre-Act” and “post-Act”; an explanation of both systems is necessary, because the pre-Act law will be reinstated as of January 1, 2011 unless a new Act is signed into law by President-elect, Obama.

irs21Pre-Act Law:

The Three-Part Transfer Tax System is based on the value of property and money transferred to others, either during lifetime or at death. Two components of this Three-Part System Transfer Tax System, the gift tax and the estate tax, are part of a unified method of transfer taxation whereby the aggregate value of both lifetime and death-time gifts was subject to a single graduated tax. Viewed as a unified system, the federal gift tax begins at 18% on the first $10,000 of taxable gifts and increases to 55% for the aggregate value of transfers in excess of $3 million. The “unified credit” permits an individual to make taxable transfers by gift during life or at death to the extent of $1 million in value without having to pay the federal gift and/or estate tax on such transfers. However, the first dollar subject to the payment of the gift or estate tax would be taxed at a rate of 37%.

Any federal gift tax payable on lifetime transfers generally must be paid by April 15thirs4 of the year following the year of the gift, or, with respect to federal estate taxes, within nine months after the date of death. Extensions to filing the transfer tax return are permitted upon a showing of reasonable cause.

In addition to federal gift and estate taxes, the third component of the Three-Part System Transfer Tax System is the generation-skipping transfer tax (“GST” tax). The GST tax is imposed on a transfer of property from one generation to another generation that is two or more generations below the transferor’s generation. For example, if you give assets directly to your grandchild, such gift would be subject to the GST tax. The GST tax is a flat 55% and it is in addition to the gift tax imposed on lifetime gifts or the estate tax imposed on bequests made at death. The GST tax was designed to prevent individuals from avoiding federal estate tax on each generation by only providing family members with life interests in a perpetual trust. Similar to the unified credit for the gift and estate tax, there is a separate lifetime exemption of $1 million from the GST tax for each individual.

Post-Act Law: A summary of the changes to the Three-Part Transfer Tax System is provided in the following chart (please note the exemption for federal gift tax has not changed, it is and will remain $1,000,000):


Estate Tax and GST Tax Exemption for Death Time Transfers

Maximum Estate, Gift and GST Tax Rate





Estate & GST taxes repealed

highest individual income tax rate will apply for gift tax only




Due to these changes, your estate planning documents IRS Building should be reviewed every few years as the exemption amounts change to ensure that the tax planning contained therein continues to apply to your individual situation. President-elect Obama has indicated his desire to maintain the $3,500,000 exemption for estate and GST Tax. Please note the estate and gift tax are still unified, e.g., if you make 1 million dollars of lifetime gifts and use your entire $1,000,000 gift tax exemption, then you will only have 2.5 million of the estate tax exemption remaining at your death.

Daily Yoga Practice

suptakurmasana1My daily ashtanga yoga practice is critical to my well-being. I stumbled over ashtanga yoga at a gym. I fell in love with it the first moment I stepped on my mat. I had tried yoga a couple of times before, but I was not fond of it. I am a gym rat at heart and did not think any other form of fitness would interest me. (“I love the weights“.) Boy was I wrong. I have completely done a 180 and only practice yoga 6 days a week. I have been absent from the gym (i.e., any type of weight training or cardio) for 6+ months. I do intend to go back and balance the two forms of fitness , but for right now I need to continue to develop my flexibility. Basically, I will not return to the gym until I can get both of my legs behind my head like a pretzel (this posture is called supta kurmasana–pictured below)…and believe it or not I am not far out. Let me tell you, when I started practicing yoga suptakurmasana41(around Feb 2007), I could not even touch my toes. All the sports I played during my childhood, multiplied by all the running and weight training does not make for a flexible person. But, to my surprise all that can be counteracted by a dedicated yoga practice. Without yoga I would be an even more stressed attorney, with no release for relaxation. Yoga provides me with a way to slow down and appreciate the moment and time for myself.suptakurmasana31

To read more about ashtanga yoga, I have links on the right side of this blog.

Flickr credits: ryuichinagayamai, govindakais and gbsk

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