Alexandria, VA Estate Planning Blog

Saturday, December 24, 2011

Estate Planning Fees Generally

Estate planning fees and costs are determined on a case-by-case basis. Every client starts with the essential documents (listed below). Whether or not the client needs or desires further services depends on numerous factors, including the client’s financial and personal circumstances, health, family dynamics and personal choice.

During the free initial conference, the attorney and the prospective client will review the aformentioned factors in relation to the prospective client’s concerns and desires. The attorney will discuss the available options, there purpose, there practicality to the prospective client and make reccomendations.

We don't nickel and dime our clients. Generally all fees are transactional (not hourly). The prospected client will be presented with an engagement agreement with a quoted flat-rate fixed-fee price for the work suggested during the intial conference.

The quoted fees are all inclusive with the chosen plan. Client's will not receive invoices for phone calls, copying, research, trust funding, document execution, witnesses, ect. We typically request half of the quoted fee up-front with the remaining half due at the document execution ceremony.


Essential Docs

Financial Power of Attroney
Living Will
Healthcare Power of Attorney
HIPPA Authorizations
Memorial Instructions

Typical Additional Documents

Revocable Living Trusts
Testamentary Trusts
Medicaid Trusts
Irrevocable Living Trusts
Business Entities
Marital Agreements


Documents Included w/ additional Trusts

Trust Summary
Assignment of Tangible Personal Property
Certificate of Trust
Funding Checklists
Funding Instructions

Thursday, December 1, 2011

The Nonsensical "Sensible Estate Tax Act of 2011"


Jim McDermott “Sensible Estate Tax Act of 2011” H.R. 3467

In a brilliant expression of populist demagoguery, Senator Bill McDermott introduced a bill that would impose the estate tax on estates that exceed 1 million dollars. The maximum rate of taxation would be 55%. Considering our massive federal and state debts, global economic turmoil and massive global protests railing against the inseparable principals of liberty and the free-market, we are certainly living in scary and uncertain times.

Whenever a politician hides his proposed legislation behind the façade of “sensibility”, the assumption should be that the legislation lacks sensibility. The “Sensible Estate Tax Act”, while being sold as being a tax on the nefarious rich, is actually a tax on middleclass Americans. Its really a revenue raising scheme targeting the federal middle class and designed to increase the political purchasing power of politicians seeking to win over local constituents.

Notwithstanding the difficulties in the current real estate and financial markets, its very easy for an average middleclass northern Virginian married couple to have 1 million dollars in estate assets. The average reader of this article may scoff at the idea that they should be concerned about the estate tax.

But consider the following generic examples:

Elderly Couple

500k       Personal Residence

400k       Husband’s Retirement Benefits

400k       Wife’s Retirement Benefits

300k       Stocks and Bonds

50k         Personal Property

50k         Automobiles/ RVS 

 Total Estate: 1.7 million                

Amount Subject to Estate Tax: 700k


Young Couple

300k       Personal Residence

100k       Husband’s Retirement Benefits

100k       Wife’s Retirement Benefits

50k         Personal Property

50k         Automobiles/ RVS 

800k       Term Life insurance

 Total Estate: 1.4 million                

Amount Subject to Estate Tax: 400k

As illustrated above, it doesn’t take very much for a person to have a million dollars worth of estate assets in our current market. The continuing inflationary nature of our monetary policy, coupled with the fancifully utopian inflationary rate promulgated by our government, greatly increases the likelihood that the purchasing power of a dollar will continue to decrease. Consequently, people will become poorer while there ultimate estate value will increase. With a 1 million dollar estate tax credit, the result can be significant on the upper middleclass.

To learn more, contact our office today for a free consultation.




Luke Lenzi, Esq.     



Tuesday, November 29, 2011

IRS 2012 Inflation Adjustments

IRS Rev. Proc. 2011-52, 2011-45 IRB t2='hr',10/20/2011, IRC Sec(s). 1

The above revenue procedure sets forth inflation adjustments for 2012 under certain circumstances. Included within the procedure is the following:


Unified Credit Against the Estate Tax

For an estate of any decedent dying in calendar year 2012, the basic exclusion amount is $5,120,000 for determining the amount of the unified credit against estate tax under section 2010. 


Annual Exclusions for Gifts

(1) For calendar year 2012, the first $13,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under section 2503 made during the year. 

(2) For calendar year 2012, the first $139,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of gifts under section 2503 and 2503(i)(2)


Notice of Large Gifts Received from Foriegn Persons

For taxable years beginning 2012, recipients of gifts from certain foriegn persons may be required to report these gifts under section 6039F if the aggregate value of gifts received in a taxable year exceeds $14,723. 


Valuation of Qualified Real Property in Decedent Gross Estate

For the estate of a decedent dying in calendar year 2012, if the executor elects to use the special use valuation method under section 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use 2032A for purposes of the estate tax cannot exceed $1,040,000



Tuesday, November 29, 2011

Electing out of the Estate Tax (FORM 8939)


Form 8939 is an information return used to report information about property acquired from a decedent and to allocate basis increase to certain property acquired from a decedent. The IRS has provided information and updated instructions that may be found by clicking this LINK.

The decision to elect, or not to elect, the modified carryover basis rules instead of the estate tax for a 2010 decedent can be a very complicated determination that may have significant consequences. We strongly advise that a competent estate planning tax attorney.

Call us to schedule a consultation.  


Monday, November 1, 2010

Merrill Lynch Trusteed IRA: An Estate Planner’s Critique


Please note that the following is an opinion only. Like all the information on our website, it isn't legal advice. Admittedly, it is based on a very limited understanding of the Merrill Lynch Trusteed IRA. With that, the following represents an incomplete and intrinsically unreliable generalized analysis of the Estate Planning implications of the Merrill Lynch Trusteed IRA. If you have any questions, contact our firm or your local Merrill Lynch representative.



It appears that the Merrill Lynch Trusteed IRA's most appealing feature is realized when used in conjunction with a separate retirement plan trust and a tailored power of attorney. Together they could provide substantial multi-level fraud protection to limit the risk of caretaker fraud during incapacity. The superior asset protection of a standalone accumulation retirement plan trust can be combined with the professional management of the Merrill Lynch Trusteed IRA. The Merrill Lynch Trusteed IRA's limited asset protection component may serve as a last level of asset defense in case of Trust Piercing. Finally, Merrill Lynch Trust Company's responsibilities may grant the client more flexibility to choose a Trustee based upon their projected ability to satisfy the desired discretionary distributional scheme (as opposed to financial acumen).

Potential Savings:

(A) The conduit distribution option could allow the client to realize basic asset protection without incurring legal fees associated with having an attorney draft a trust with conduit provisions for retirement benefits.

(B) As a self-sustaining retirement account for which the Merrill Lynch Trust Company allegedly assumes responsibility for the RMDs.


(A) The incapacity protection promoted by the TIRA could easily and inexpensively be dramatically strengthened by a properly drafted narrowly-tailored Power-of-Attorney and other asset protection Trust provisions.

(B) It doesn’t appear to be a very effective planning tool for blended families. In fact, its promoted effect depends on the surviving spouse failing to survive to their projected life expectancy. Using the Merrill Lynch Trusteed IRA option for blended families may be similar to driving a large square-peg through a smaller circular-whole. In some circumstances, it may be better to pass other assets to a trust with Blended Family Provisions (that doesn’t permit principal distributions) and allow the spouse to inherit part or all of the Merrill Lynch Trusteed IRA so that the surviving spouse can roll over the plan into their own account (allowing for greater stretch planning options).



Planning note: Retirement benefits may be funded into a living trust without compromising the stretch tax benefit. In fact, doing so can provide great asset protection benefits for your loved ones. If you are interested in living trust planning with retirement benefits, give us a call. 

Friday, October 29, 2010

Inherited Retirement Funds May Likely Not Be Protected During Bankruptcy

Advisor Letter (Bankruptcy Attorneys & Financial Advisors)

Consider advising some of your clients to consider funding a Standalone Accumulation Retirement Trust (not a Conduit Trust) with their retirement funds.
Such a strategy is especially relevant to any client that intends (either as primary, secondary, or more remote beneficiary) to leave their retirement funds to a person who has declared Bankruptcy, is likely to declare Bankruptcy, is married to a person who is at risk of filing Bankruptcy, or may themselves leave the benefits to someone that is at risk of Bankruptcy.
There are numerous bankruptcy cases that have held that Inherited IRAs are not Bankruptcy exempt if inherited by a non-spouse. Notwithstanding that the Bankruptcy Courts are divided, the argument against protection is very strong.
Planning Note: Regardless, retirement funds are subject to spousal support claims in Virginia
Possible Solution
A Standalone Accumulation Retirement Plan Trust can protect the benefits from bankruptcy, divorcing spouses, creditors, and can be designed not to disqualify the recipient from Medicaid.
Additionally, the trust assets can be dynastic, meaning that they will pass through the generations without generating a Generation Skipping Tax or being included with the beneficiaries Estate (for estate tax purposes).
If you have any clients that the aforementioned is applicable to, feel welcome to contact our office.

Friday, October 29, 2010

Pet Trusts & Pet Planning for Clients

(Advisor Letter Generally)
Your clients likely have pets that they love. Additionally they may have livestock or other animals that generate revenue.
Start asking your current and potential clients about their pets and animals.  Get to know more about the family member that no one else is asking about. Consider advising specific clients to consider a Pet Trust or inserting Pet Provisions into their Power of Attorney. 
Background: You have clients that have a deep affection for their pets. You may even have clients who love their pets like children, or in the alternative, maybe the pets are their only children. There is a tremendous need to have a plan put in place but almost nobody is addressing the need. 
Legal:  Animals are considered tangible personal property under the law. That means that Max and Fido are treated no different than furniture. Unless specifically bequeathed, your client’s pets will generally pass according to the residuary clause of their will or trust. 
Issues to talk about with your clients
• Do they have any pets? The more exotic the pet, the longer the lifespan, the reputation of the breed, the number of pets, and the affection directed toward the pet are factors that way heavily on the decision to plan
• Do they want to plan to protect and provide for their pets?
• Is their plan realistic? If the pet gets cancer, diabetes, hip dysplasia, or another ailment, what examinations and treatment would they expect to be provided?
• Have they considered the real costs of care? Pet food, grooming, routine care, vaccines, basic medications, boarding and kennel fees, sitters, teeth cleaning, and tags can cost thousands each year. Veterinary care is outrageously expensive.
• Is it fair to expect the caretaker to pay all the costs? 
• Are there funds in place to pay for the pet’s care in case of disability?
• Does the person who will provide for the pet’s care have instructions?
Last Will & Testament Shortcomings
Delay: The probate process can be cumbersome and slow, frequently taking many months and burdening the caretaker with expensive upfront costs
Ineffective: If most of your assets don’t require probate, or your will is contested, lost, stolen, destroyed, or unintentionally revoked, then your will’s provisions may never come into effect
Unenforceable: You need a pet trust to bequest money for the care of your pet; otherwise the obligation is honorary, non-binding,
and unenforceable
No Guardianship: You cannot nominate a guardian for your pet
Why Plan
• The U.S. euthanizes 4 million pets each year, and older pets have a reduced chance for adoption.
• Pet care responsibilities don’t disappear upon our disability or death
• Pet care is expensive and the caretaker may be unfairly burdened if funds are unavailable during our incapacity or death
• Don't assume that the person who agreed to watch your pet will both be able or willing
• Peace of mind comes from planning for your Pet (and gives you a chance to have your own affairs put in order)
If you have any questions, please feel welcome to contact me at my office and we can discuss the issues. I welcome any and all questions.

Friday, October 29, 2010

Estate Planning Repeal Compels Estate Plan Review

(Letter given to Potential Clients. This Letter isn't intended to create an attorney-client relationship or to be construed as legal advice)

I am sure that you have read that, due to a surprising failure of Congress to act during the past nine years, the federal estate and the generation-skipping transfer taxes are temporarily repealed in 2010. They are scheduled to revive on January 1, 2011. This one-year repeal, however, may not have any impact on certain state estate taxes.
Your various estate planning documents divide your estate into separate shares in order to minimize estate taxes. These divisions are made by formulas that use terms defined by the federal tax laws. The absence of an estate tax and a GST tax may therefore render unclear some of the formula language used in your documents. We believe that these ambiguities should be clarified as soon as practicable, and that other changes may need to be made to your documents to take advantage of certain tax planning opportunities that exist in 2010.
Because of the temporary repeal of these taxes, another important change in the law, which can have effects beyond 2010, is that property received from a decedent's estate will now take a basis for purposes of determining gain on the future sale of the property equal to the decedent's basis. Previously (and again starting next year for decedent's dying after 2010), these assets received an adjusted basis equal to the fair market value of the property on the date of the decedent's death.
This change in the law is quite complex, and each estate has a right to increase the decedent's adjusted basis by up to $1.3 million, which increase can help reduce or eliminate future capital gains taxes payable by the estate or beneficiary. Additionally, where the decedent is survived by a spouse, an additional increase of up to $3 million may be given to property received by such surviving spouse, further reducing future capital gains taxes payable by such spouse. Wills and revocable trusts should include special provisions regarding such allocations.
Please call our office as soon as possible, and we will gladly schedule time to meet with you and review your estate planning documents. In some cases, no changes will be required. In others, we will recommend changes. We cannot know, in advance, whether your documents will require Page 2 of 3
changes to best take advantage of the current state of the estate tax law until we have a chance to review your documents with you.
Even if your documents do require changes, we will attempt to keep them as minimal as possible, in keeping with the limited duration of their usefulness. Nonetheless, we strongly believe that it is important that your estate planning documents should produce the result you would want even if you die in 2010.  

Friday, October 29, 2010

Common Strategies to Keep Life Insurance Out of an Estate

(Letter given to Potential Clients. This Letter isn't intended to create an attorney-client relationship or to be construed as legal advice)

Even though the estate tax has been repealed, the repeal is effective only for 2010. The estate tax is scheduled to return in 2011, and may even return before then if Congress reinstates the tax retroactively.

Under the estate tax rules that are scheduled to apply after 2010, insurance on your life will be included in your taxable estate if either:

(1) Your estate is the beneficiary of the insurance proceeds, or

(2) You possessed certain economic ownership rights ("incidents of ownership") in the policy at your death (or within three years of your death).

Avoiding the first situation is easy: just make sure your estate is not designated as beneficiary of the policy.

The second rule is more complex. Clearly, if you are the owner of the policy, the proceeds are included in your estate regardless of who the beneficiary is. However, simply having someone else possess legal title to the policy will not prevent this result if you keep so-called "incidents of ownership" in the policy. Rights that, if held by you, will cause the proceeds to be taxed in your estate include:

... the right to change beneficiaries,

... the right to assign the policy (or to revoke an assignment),

... the right to pledge the policy as security for a loan,

... the right to borrow against the policy's cash surrender value, and

... the right to surrender or cancel the policy

Keep in mind that merely having any of the above powers will cause the proceeds to be taxed in your estate even if you never exercise the power.

Buy-Sell Agreements

Life insurance obtained to fund a buy-sell agreement for a business interest under a correctly and appropriately structured "cross-purchase" arrangement will not be taxed in your estate (unless the estate is named as beneficiary). For example, say Al and Bob are partners who agree that the partnership interest of the first of them to die will be bought by the surviving partner. To fund these obligations, Al buys a life insurance policy on Bob's life. Al pays all the premiums, retains Page 2 of 3

all incidents of ownership, and names himself beneficiary. Bob does the same regarding Al. When the first partner dies, the insurance proceeds are not taxed in his estate.

Life Insurance Trusts

A life insurance trust is an effective vehicle that can be set up to keep life insurance proceeds from being taxed in the insured's estate. Typically, the policy is transferred to the trust along with assets that can be used to pay future premiums. Alternatively, the trust buys the insurance itself with funds contributed by the insured. As long as the trust agreement gives the insured none of the ownership rights described above, the proceeds should not be included in his estate.

The Three-Year Rule

If you are considering setting up a life insurance trust with a policy you own currently or simply assigning away your ownership rights in such a policy please call me as soon as you reasonably can to affect these moves. Unless you live for at least three years after these steps are taken, the proceeds will be taxed in your estate. For policies in which you never held incidents of ownership, the three-year rule doesn't apply.

Friday, October 29, 2010

The Estate Tax Implications of Life Insurance Trusts

(Letter given to Potential Clients. This Letter isn't intended to create an attorney-client relationship or to be construed as legal advice) 

Few people realize that, even though they may have a modest estate, their families may owe hundreds of thousands of dollars in estate taxes because they own a life insurance policy with a substantial death benefit. Life Insurance proceeds are generally considered part of your taxable estate and are subject to federal estate tax.

The solution to this problem may be to create an irrevocable life insurance trust that will own the policy and receive the policy proceeds on your death. A properly drafted life insurance trust keeps the insurance proceeds from being taxed in your estate as well as in the estate of your surviving spouse. It also protects the trust beneficiaries from their own "excesses", against their creditors, and in the event of divorce. Moreover, the trust also provides reliable management for the trust assets.

E.G., George has a life insurance policy (L.I.) worth 1 million dollars. In 2011, George passes away with other assets equal to 1 million. The L.I. is included in George’s estate and the government seizes $550,000 (1 mill *55%). If a life insurance trust was used, the L.I. likely would not have been included in George’s estate.


Other Estate Assets $1million

Life Insurance Estate Asset $1 million

Total Estate Assets $2 million

Estate Tax Credit (Non-Taxed Portion) $1million

Assumed Tax Rate 55%

Tax Liability = $550,000

Potential Result if Life Insurance Trust Implemented: TAX SAVINGS $550,000 Page 2 of 3

Note: (Even though the estate tax has been repealed, the repeal is effective only for 2010. The estate tax is scheduled to return in 2011, and may even return before then if Congress reinstates the tax retroactively.)

How Irrevocable Life Insurance Trusts Work

You create an irrevocable life insurance trust to be the owner and beneficiary of one or more life insurance policies on your life. You contribute cash to the trust to be used by the trustee to make premium payments on the life insurance policies. If the trust is properly drafted, the contributions you make to the trust for premium payments will qualify for the annual gift tax exclusion, so you won't have to pay gift tax on the contributions.

The life insurance trust typically provides that, during your lifetime, principal and income, in the trustee's discretion, may be paid or applied to or for the benefit of your spouse and descendants. This allows indirect access to the cash surrender value of the life insurance policies owned by the trust, and permits the trust to be terminated if desired despite its being irrevocable. On your death, the trust continues for the benefit of your spouse during his or her lifetime. Your spouse is given certain beneficial interests in the trust, such as the right to income, limited invasion rights, and eligibility to receive principal. On the death of your spouse, the trust assets are paid outright to, or held in further trust for the benefit of, your descendants.

If you own a life insurance policy with a significant death benefit, an irrevocable life insurance trust may be of substantial benefit to you. If you have questions, feel welcome to contact me at my office.

Wednesday, September 15, 2010

Invoking the Survivorship Option (Joint Tenants w/ right of Survivorship & Tenants by the Entirety)

It is very important that each person review how their assets are titled to ensure they are titled correctly. Assets can be owned jointly (no survivorship), jointly with right of survivorship, as tenants by the entirety (creditor protection & survivorship), or as tenants in common (no survivorship).

The method of titling the assets will dictate how that asset passes upon your death. If you own property as tenants in common or joint tenants, than the property will pass to your heirs, by devise, or to your personal representative.  If you own property jointly with right of survivorship or as tenants by the entireties, than your property will pass to the survivor. Note that tenancy by the entirety (or as tenants by the entireties) is a favored method of ownership reserved for married persons. Tenancy by the entirety provides significant creditor protection to the surviving spouse.  


Virginia abolished the survivorship presumption that existed for any person who owned real or personal property jointly with another (whether married or not). Va. Code 55-20. Thus, unless the proper survivorship language is invoked, and despite the joint tenant language, the property will be owned as tenants in common (no survivorship).


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The Lenzi Law Firm, PLLC assists clients throughout Northern Virginia and Washington D.C. including Fort Washington, Falls Church, Ft. Myer, Vienna, Rosslyn, Springfield, Mount Vernon, Annandale, Fort Belvoir, Fairfax, Dunn Loring, Merrifield, McLean, Oakton, Reston, Burke, Great Falls, Fredericksburg, Stafford and Herndon in Arlington County, Alexandria County, & Fairfax County.

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| Phone: 703.224.8969

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