Estate PlanningRead More Read Less
Estate planning involves the preparation of legal documentation designed to provide for the efficient management and disposition of one’s assets in the event of incapacity or death. The process begins with determining the nature and value of one’s resources, with particular attention to ownership of those assets, and considers the options for minimizing or eliminating multiple forms of taxation on the transfer of those assets. It is a process that continues with the inevitable changes in one’s family and financial circumstances.
Essential Estate Planning
Given the significant increase in the estate tax exemption, some Americans believe that there is no need to address their estate planning. The truth: it is essential to have a current estate plan, with a basic complement of legal instruments to provide for the unexpected. In the proper legal framework, one may name attorneys-in-fact for financial and health care matters, select guardians for minor children, and designate the heirs to receive assets after death, perhaps is trust for certain beneficiaries. In the basic estate plan, that framework is built with a Last Will and Testament, a Power of Attorney, and an Advance Medical Directive.
Advanced Estate Planning
The concerns which motivate a person to implement an estate plan are just the starting point, since the planning process often brings out more complex issues which require evaluation and decision. Advanced estate planning involves more sophisticated estate and tax planning techniques, such as asset protection strategies, dynasty trusts for multiple generations, new entity formation, and intergenerational and charitable planned giving alternatives. These techniques call for customized provisions for revocable and irrevocable trust instruments, one or more of which are combined to create a comprehensive estate plan designed to ensure wealth preservation for generations to come.
Planning for Blended Families
“Blended families” are families in which multiple family groups can be identified as heirs to a husband and wife, typically in a second or later marriage. While many facets of blended family life are similar to the traditional nuclear family, the potential for legal and emotional complications in the context of the estate planning process is significantly greater. Questions such as the appointment of executors and trustees or the division of assets as among the surviving spouse and children not of that marriage can present significant challenges due to the potential for conflicting interests and loss of control. We have experience in proposing alternative solutions to these sources of conflict and drafting the proper legal instruments to create a structure for protection of the respective interests of the blended family.
Estate Planning with Retirement Accounts
The rules governing the taxation of qualified and non-qualified retirement accounts are decidedly complex. Accordingly, decisions by owners and beneficiaries alike to establish new beneficiary designations, to convert to a Roth IRA, or to “stretch” required minimum distributions from an inherited IRA should be made only after consultation with an experienced tax advisor. In the context of planning estates with significant retirement accounts, our clients are advised regarding the income and estate tax consequences of the designation of primary and contingent beneficiaries, and some well-informed clients choose to implement a combination of specially-designed trusts and customized beneficiary designations to provide fiduciary protection for certain heirs.
Estate Planning for Business Owners
The three leading causes of the failure of inherited family-owned businesses result when the deceased owner: (i) fails to establish an adequate estate plan, (ii) fails to arrange for transition of control of the enterprise to the next generation, and (iii) fails to provide the necessary funds for the purchase of business interests and the payment of estate tax liability where it applies. However, strategies and solutions are available to business owners, including traditional estate planning tools, buy-sell agreements, change of entity types, and creative financial arrangements for the family (including retirement plans, consulting agreements, business purchase insurance, and estate tax funding), one or more of which can be used to set the stage for a successful business succession.
Elder LawRead More Read Less
The legal practice area known as “elder law” has grown to meet the legal needs of the burgeoning number of seniors in our society. Elder law attorneys typically have their roots in estate planning and estate administration, but they have built and maintained the specialized knowledge required to address the increasingly complex legal issues facing senior clients and their families. Legal representation provided by our attorneys includes matters ranging from preparing pre-marital and marital agreements, filing petitions for court appointment as conservators and guardians for incapacitated adults, and developing strategies to facilitate eligibility for Medicaid benefits for payment of long-term health care costs.
Guardianship & Conservatorship
A guardian is a person appointed by the court to handle personal matters of the person adjudged to be incapacitated, while a conservator is one appointed to manage their financial affairs. More often than not, the same person will be appointed to both roles. The petition itself must state the personal and financial background of the person alleged to be incapacitated. A recent medical evaluation report is required to support the allegations of incapacity. A report prepared by a guardian ad litem appointed by the court serves as an independent confirmation of the circumstances set forth in the petition. Once appointed, there are reporting requirements imposed by statute upon each fiduciary to provide a measure of supervision and accountability. Our attorneys serve as counsel to petitioner clients, as well as in the role of conservator where requested, and our paralegals assist with fiduciary accountings as with probate estates.
Medicaid Eligibility Planning
Elder law attorneys routinely provide legal advice regarding the preservation of assets in the face of impending long-term health care expenses for a loved one. Attorney involvement can range from an office consultation on the available options under Medicaid asset transfer rules to active representation before an administrative hearing officer or a court to rectify an erroneous denial of Medicaid benefits. Our goal is to explore the applicant’s family and financial circumstances and develop optional strategies for preserving assets and income while establishing or maintaining eligibility for applicable government benefits.
Special Needs Trust Planning
A special needs trust is an asset preservation trust designed to provide for the quality of life of a beneficiary who is or will be receiving government aid, while preserving those trust funds from the typical “spend-down” requirements. Federal and state laws require compliance with very technical rules if such a trust is to achieve the purpose intended, so the planning process requires careful analysis in order to prevent the inadvertent loss of eligibility for benefits. Special needs trusts may be created by a third party (such as a parent or grandparent) or by the disabled person (usually through a legal representative or the courts), and the permissible distribution terms for each will vary significantly.
Pre-Marital & Marital Agreements
Many seniors with existing wealth are entering second or later marriages, and they often seek legal counsel to preserve that wealth for their own heirs without concern for spousal claims which could be made after their death. Before marriage, the Pre-marital Agreement is the most common legal instrument used to address these issues. After the marriage ceremony, the couple may still enter into a Marital Agreement in order to limit spousal rights and claims or to amend an existing agreement to modify those limitations. In order to be effective, the agreement must include specific provisions and full disclosure of each spouse’s resources and each spouse must be represented by separate legal counsel. Our attorneys are well-versed in the rights of surviving spouses and strive to counsel our clients with sensitivity to the delicate balance encountered in these negotiations.
TaxationRead More Read Less
Experienced tax counsel, retained on a timely basis, is critical when federal, state, or local tax authorities allege, or attempt to collect, a disputed tax liability. Taxpayers may (and often do) miss unforgiving procedural deadlines or make admissions before retaining counsel, thus closing off opportunities to defend the client’s position or secure the relief sought. Our attorneys represent clients in tax deficiencies and refund claims involving income taxes, payroll and excise taxes, estate and gift taxes, sales and use taxes, and abatement of related penalties and interest. We also prepare requests for private letter rulings from the IRS on the tax status of a particular client or the tax effects of a proposed transaction.
Estate, Gift and Fiduciary Tax Return Preparation
Executors and trustees must file fiduciary income tax returns (federal and state) each year to report items of income and expense recognized by the estate or trust for which they are responsible. Executors of a decedent’s estate with a gross value exceeding the estate tax exclusion amount in effect must file a federal estate tax return for that entity. In addition, individuals must file a federal gift tax return if they: (1) make gifts to other individuals (other than a spouse) in excess of the annual exclusion from gift tax (currently $13,000 per donee per year); (2) make gifts using valuation discounts; or (3) wish to elect QTIP treatment for lifetime spousal gifts. Our compliance practice attorneys have the knowledge of and experience with the multiple tax requirements, including appraisals and supporting documentation, necessary to provide comprehensive representation in the preparation, compilation and filing of these returns for our clients.
Private Letter Ruling Requests
The IRS issues letter rulings for income tax and gift tax matters, estate tax matters, generation-skipping transfer tax matters, employment tax and excise tax matters, and procedures for reporting, paying and collecting taxes, abating, crediting and refunding over assessments or overpayment of tax, and filing information returns. Obtaining a letter ruling can be critical to the success of a proposed transaction, but the formal process for requesting a private letter ruling is complex and requires specialized tax knowledge to properly frame and present the issues pertinent to your transaction. If you believe you require a private letter ruling, we are here to provide the requisite tax expertise necessary to maximize your opportunity to obtain a positive result.
Federal Tax – Audit, Appeals and Litigation
IRS audits are never welcome events, since they invariably interrupt personal affairs and business operations, but they cannot be ignored. If not handled properly, an examination or audit could adversely affect relationships with spouses, business partners, and shareholders, and will surely have a negative impact on company income and profits. Although many tax disputes are resolved by agreement or administrative settlement, some positions taken by the Service leave no alternative but to seek vindication in court. When litigation is unavoidable, or when it is chosen as a tactical alternative, our clients are represented by litigators who are complete tax lawyers, experienced in transactional tax planning as well as tax litigation.
Tax Consulting for Litigation / Transactions Counsel
The penumbra effect of the experience of our attorneys in tax planning, tax compliance and tax litigation, combined with the several advanced law degrees held, is a cadre of lawyers capable of rendering effective consulting and transactional services to clients, accounting firms and other law firms. Several of our attorneys have served as experts in litigation matters requiring informal case evaluations, as well as formal, technical tax opinion letters for counsel. We have also defended those opinions by testimony in depositions and at trial as qualified expert witnesses. On the transactional side, we serve as consultants to law and accounting firms to provide tax counsel regarding matters as varied as, for example, business succession plan structures, corporate mergers, acquisitions and reorganizations, and tax-efficient structuring of property settlement agreements upon divorce.
Estate & Trust LitigationRead More Read Less
While most estates and trusts are administered without a challenge or dispute, circumstances often rise to a level requiring litigation counsel. Whether it involves the challenge to the validity of a Will, the removal of an executor or trustee, the modification or termination of a trust, or the disputed claim to an elective share of the augmented estate by a surviving spouse, issues which cannot be resolved by negotiation must be decided by judicial process. Our emphasis on the planning and administration of estates and trusts, combined with our collective experience in litigation, renders our attorneys uniquely suited to represent fiduciaries and beneficiaries alike when litigation is the only alternative.
Will Contests / Trust Litigation
Given that estate planning is, by its very nature, a private expression of one’s intentions regarding the disposition of his or her estate, it stands to reason that certain potential heirs will make assumptions and hold expectations which are not met when the testator dies. In some instances, the will may direct a bequest to be made, but the asset passes, not under the will, but to someone named in a separate beneficiary or “payable-on-death” designation. For a multitude of legal and practical reasons, there will always be inheritances that are anticipated but not received. This disappointment can result in disputes among family members, in-laws, and other beneficiaries which escalate into lawsuits to declare the will or trust to be invalid based upon one of several legal grounds.
Representation of Beneficiaries
Executors and trustees must act in compliance with a high fiduciary standard of conduct towards their beneficiaries, and they have specific duties imposed upon them. These duties include the requirements to act impartially with respect to all beneficiaries, to keep estate and trust beneficiaries informed, to avoid all self-dealing, and to act in the best interests of the beneficiaries. Aside from the ultimate remedy and sanction of removal, the beneficiaries may simply require an experienced, legal voice in dealing with certain fiduciaries. It may be that the representation is limited to ensuring that the fiduciary complies with accounting and reporting requirements and makes the proper distributions from the estate or trust. This is especially true of a successor trustee of the typical revocable “living” trust upon the incapacity or death of the grantor, since there is no court supervision of such trusts (short of litigation).
Spousal Elective Share Claims
Virginia law provides certain rights to a surviving spouse upon the death of an individual domiciled in Virginia at the time of death, including the right to claim an elective share of the augmented estate of the decedent spouse. The identification and calculation of the value of assets in the augmented estate is a complex process, particularly where transfers were made by the decedent during his or her lifetime. The most common circumstance leading to such claims is the death of a parent in a second or later marriage, pitting the decedent’s adult children against the step-mother who has received less than one-third of the augmented estate. If the claim made by the surviving spouse for the elective share is litigated, our experience in these matters is that the costly and laborious process of discovery leads to the documentary evidence which either supports or defeats the claim. This, in turn, leads to negotiation and settlement of the elective share claim; however, it does not lead to reconciliation of the family.
Removal of Executors and Trustees
Executors and trustees, whether they are individuals, professionals, trust companies or banks, are held to the highest standard of conduct in the law in the administration of the estate or trust. Accordingly, the breach of fiduciary duties by an executor or trustee, such as failure to manage trust property or to invest according to minimum legal standards, is subject to removal and the imposition of penalties, including forfeiture of fiduciary commissions. Since executors are appointed by the courts, one must resort to the courts to present evidence which justifies removal. In the case of wayward trustees, modern trust instruments contain mechanisms for the orderly removal of a trustee, most involving a vote by the beneficiaries and provisions for successor trustees. If the trust is silent, there are statutory provisions in the new Virginia Uniform Trust Code which give aggrieved beneficiaries an avenue of relief from a failed fiduciary.
Contested Appointments As Guardian / Conservator
The appointment of a guardian or conservator becomes a contested matter when two individuals compete for the nomination, when one person seeks to remove and replace another already appointed, or when one person seeks to “trump” the person named as attorney-in-fact and who is behaving badly now that the principal is incapacitated. It may be that the person alleged to be incapacitated challenges the petition for appointment because they refuse to accept the need for a court-appointed fiduciary. Needless to say, these proceedings can be highly emotional events, since they often raise or resurrect conflicts among family members. The blending of our capabilities in litigation and elder law makes our attorneys uniquely qualified to represent family members with confidence and compassion.
Financial Exploitation (Prevention And Resolution)
Many in our elderly population are vulnerable as targets of financial exploitation. Unfortunately, this sometimes results in the abuse of powers of attorney (some of which are procured by the offender) or the unauthorized access to the often limited resources of the elderly individual. In some instances, the matter is best resolved with a report to an agency such as Adult Protective Services or to law enforcement; however, circumstances often require legal counsel to investigate the extent of the financial abuse and to employ civil procedures to recover the funds. These legal matters fall directly within our practice areas of litigation and elder law, and we welcome the opportunity to protect vulnerable seniors from wrongful financial exploitation and to pursue remedies to resolve the effects wherever possible.
Business EntitiesRead More Read Less
There are various business structures which can be considered in a new business formation. Choosing the correct kind of business entity turns largely on how many individuals are involved, how the business intends to generate revenue, and how it will be financed. Recommendations on the most appropriate entity are given after exploration and careful consideration of the goals of the client. A primary consideration, of course, is the income tax result of any structure to be assembled. We assist clients in the formation of limited liability companies, Subchapter S corporations, Subchapter C corporations, and limited partnerships. Needless to say, the estate planning opportunities are considered as a part of the formation of new enterprises in order to facilitate a smooth transition under the business succession plan.
Formation of Business Entities
Business formation is the term used for the process of incorporation or organization of a business for one or more persons and registering that entity with the Commonwealth of Virginia. This newly formed entity has statutory rights and responsibilities separate from those of its individual owners. As business structures vary greatly, we advise clients as to which structure best suits their family, tax and future planning needs. We conduct the search to ensure availability of the desired entity name, after which the necessary legal documents are drafted and executed. These documents typically include articles of incorporation (Inc.) or organization (LLC), by-laws or operating agreements, stock subscription agreements and stock or membership certificates.
The success of any business requires the careful evaluation of the present and strategic preparation for the future. The primary focus of our business practice area is the formation and structuring of business entities, as well governance and management. We provide legal counsel to our business clients on matters including third-party contracts, shareholder agreements, and executive compensation agreements, as well as debt transactions, partnerships, and restructuring and recapitalization. We understand the importance of anticipating the need for these transactions, and we strive to collaborate with our clients to be in a position to make timely recommendations for action.
The formation of a business entity requires the nomination of a Registered Agent for the entity so that the Virginia State Corporation Commission, as well as other agencies and citizens, will have an official contact person. The Registered Agent receives official documents, reports and notices, including the Annual Report and Registration Fee notice, which enables us to maintain the entity in good standing. The Registered Agent also receives service of process for lawsuits and other legal matters, which facilitates the confidential handling of immediate notice to corporate officers to avoid default judgment.
When asked to serve as Registered Agent, we provide additional services, such as the preparation of minutes of annual meetings of shareholders and directors, or records of actions by written consent in lieu of annual meetings. It is often the case that we are the custodian of the original corporate minute book, holding stock certificates and stock ledger, related business documentation, and the corporate seal, providing confidentiality for company affairs.
Shareholder “Buy-Sell” Agreements
A successful business owner recognizes the importance to plan for the future of their business. Whether a sole proprietorship, or large corporation, it is essential to plan for succession, sale or death. A buy-sell agreement is a contract which discusses the disposition of owner’s interest. A skillfully drafted buy-sell agreement will achieve avoidance of litigation regarding sale price, new or unwanted partners. These agreements ensure a smooth transition of ownership, benefiting the organization’s clients, and surviving family. There are a number of strategies which can be used to create this agreement and our attorneys have experience in working with clients to protect their business interest.
Charitable OrganizationsRead More Read Less
It has been our distinct pleasure to work with individuals and organizations alike, at all levels of philanthropic activity, as clients of the Firm. We provide legal and tax counsel to clients in drafting private trust documents to facilitate charitable giving as an element of their estate plans, and we provide legal, corporate and tax counsel to new and established non-profit organizations.
Formation of Tax-Exempt Entities
Needless to say, the effective formation of a public, non-profit entity calls for specialized knowledge and experience in multiple, inter-related areas of law. Our attorneys have assisted more than one exasperated client with the legal documentation required to establish the appropriate entity and the burdensome tax forms required to apply for recognition as a tax-exempt organization, and we routinely advise established non-profits with issues presented in their ongoing operations. We have also assisted high net worth families with the achievement of their goal to establish a private foundation for their charitable, religious and/or educational purposes.
Compliance For Tax-Exempt Entities
Once the IRS grants tax-exempt status to a public charity, numerous tax and legal issues arise in the normal course of operations. The charity’s tax-exempt status affects all aspects of the organization, including the manner in which it solicits contributions, conducts its activities, pays its employees, and invests its funds. The organization must file special income tax returns and may also be required to pay tax on income arising from unrelated business activities. Congress and the IRS have also collaborated to impose punitive taxes and fines designed to discourage certain entities from engaging in conduct frowned upon by them, such as self-dealing between the charity and its officers and directors. These thorny, and costly, issues can be prevented with the timely involvement of experienced counsel.
Our legal and tax work on behalf of private foundation clients includes advising and assisting individuals who wish to establish a foundation about the complexity of the tax code and regulations governing these entities. In the case of private foundations suffering from poor planning and administration, we have assisted foundation clients with restructuring the entity’s affairs in order to avoid the loss of critical assets while also avoiding excise taxes. There are myriad issues unique to the creation and operation of private foundations, both large and small, and our attorneys have experience in working with clients to protect their tax-exempt status and maintain the goals of the foundation.
Charitable Gift Planning
Many of our estate planning clients seek advice as to the optimal vehicle for devoting a substantial portion of their accumulated wealth to charitable causes which they have supported during life. Depending upon the needs of the individual client, the nature of the charitable undertaking, the present or post-mortem completion, and the tax implications, a charitable gift may be structured in a variety of ways (although the structure itself, once chosen, must be strictly observed). We are often retained to prepare several scenarios for clients in order to illustrate, for example, the differing effects of direct cash gifts as compared to gifts to a charitable remainder trust on one’s current and future income tax liabilities. Charitable trusts are often used as a conduit beneficiary for retirement plan assets or as a vehicle to defer income tax on the conversion of non-productive real property. Whether charitable gifts happen during life or upon death (or both), planned giving is the most efficient way to make them happen.
Estate & Trust AdministrationRead More Read Less
The attorneys of Rack & Moccia provide experienced legal counsel to our clients serving in many fiduciary roles, including those of executor, administrator and trustee. Along with our experienced paralegals, we provide experienced guidance on the legal and tax issues presented, as well as fiduciary accounting services, so that our clients may meet their obligations to the estate or trust which has been entrusted to them. We also serve in those same fiduciary roles when appointed by clients, beneficiaries, resigning trustees or the courts.
Probate Estate Administration
Our attorneys and paralegals are involved every day with assistance to clients in the administration of probate estates, as well as certain other non-probate assets. We advise executors and administrators regarding the performance of their basic fiduciary responsibilities, as well as the more complex matters, including spousal share claims, real property sales, and challenges to the validity of the will. Our paralegals serve in supporting roles to assist clients serving in these roles with the preparation and filing of fiduciary accountings, maintenance of records acquired in the administration of the estate, and handling responsibilities to the beneficiaries of the estate.
There are many types of trusts for achieving particular goals. Some trusts have basic purposes, such as education for grandchildren, while others are designed for more complex purposes, including estate and gift tax planning and preservation of the family legacy. Trustees who have been appointed to administer those trusts seek our legal counsel to advise them regarding their fiduciary powers and duties, to interpret trust provisions, and to guide them in the protection of the trust estate for the current and future beneficiaries. In addition, our paralegals serve in significant supporting roles to assist trustee clients with the preparation of fiduciary accountings, the acquisition and compilation of trust administration records, the making of timely distributions to beneficiaries, and the coordination with financial representatives to ensure efficiency in transactions involving the investments in trust.
Fiduciary Accountings and Tax Compliance
In addition to the customary legal assistance rendered to our fiduciary clients, we also provide experienced counsel regarding fiduciary tax compliance matters as a seamless component of our practice. Thus, the preparation of fiduciary accountings provides the general background and specific data for each asset in an estate or trust, enabling us to provide efficient, comprehensive services, including the preparation of fiduciary income tax returns, if so requested by the fiduciary client. Given the number and significance of fiduciary tax issues which tend to arise in the administration of estates and trusts, clients often comment on the peace of mind that comes with this comprehensive approach to fiduciary compliance.
Representation of Fiduciaries
The attorneys of Rack & Moccia, P.C. provide legal and tax counsel every day to our clients serving as executors, trustees, conservators, guardians, and attorneys-in-fact. These fiduciaries consult with our attorneys for advice regarding their powers and responsibilities, for guidance through the intricacies inherent in their administrative tasks, and for prevention of liability by ensuring full compliance with their statutory duties and obligations under the pertinent statutes, the governing court order or the estate planning document in question. In the settlement of estates and administration of trusts, our well-trained paralegals play significant support roles to clients in meeting their fiduciary obligations.
Attorneys as Executor and Trustee
In the course of planning and drafting wills and trusts for clients, we are often asked to accept a nomination to be appointed as executor and trustee where they prefer to have independent fiduciary management of their estate and trust assets. This fiduciary role requires the performance of a number of services, such as collecting, securing and insuring estate and trust assets, preparing the requisite fiduciary inventories and accountings, paying debts and expenses for the decedent and the entity, and distributing assets to them as directed in the governing instrument and in accordance with federal and state laws. We also implement a program of prudent financial planning for the entity with respect to investments, taxes, and distributions to the beneficiaries. Our attorneys also prepare fiduciary income tax returns and estate tax returns, where necessary.
Life Insurance Trust Administration
The role of the trustee of an irrevocable life insurance trust is an unusually challenging one, as the trust is designed to own and manage one type of asset: a policy of insurance on the life of the grantor. Thus, the trustee must comply with the typical duties in the administration of an irrevocable trust, but must also monitor the status of the policy, ensure timely payment of premiums, and communicate with the insured grantor and the beneficiaries regarding their respective roles and rights under the trust. Upon the death of the grantor, the trustee will collect and administer the policy proceeds as directed in the trust instrument until final distribution. Due to these fiduciary requirements, as well as the substantial liability for losses, clients choose to name one of our attorneys to serve as trustee for their irrevocable life insurance trust, rather than a family member.
Asset ProtectionRead More Read Less
The chief objective of asset protection and wealth preservation planning is to deter asset attachment by claimants and to maintain family privacy. Since the incentive to bring suit is generally motivated by financial gain, minimization or elimination of such incentive may enhance the client’s negotiating position for a favorable settlement. We also coordinate estate planning objectives with asset protection and wealth preservation techniques while maintaining control over the asset while providing for the heirs. The strategies often involve the creation of trusts and business entities, as well as the effective titling of certain assets and careful use of the beneficiary designation.
There are multiple techniques available for the protection of virtually all forms of assets: homes, investments, businesses, vehicles, and more. However, the Firm does not implement asset protection in an attempt to “hide” assets and, therefore, our representation is not suitable for families intending to defraud creditors or authorities, or to evade legitimate responsibilities. Note that these techniques generally are ineffectual when claims pre-date the inception of asset protection planning.