Q3 2012 newsletter

1. T he M enden F reiman
A Report on Legal Issues Affecting
Privately-Held Businesses and Personal Wealth
Volume 1, Issue 1 2012 September 2012
In This Issue:
• Celebrating Fifteen Years of Service
• Attend Our October Workshop CELEBRATING 15 YEARS
• Tax Planning Strategies for 2012
• state Planning Today Must Include Digital
E
Assets and Social Media
When a firm is established with the right
people, principles and values, successful
growth is the natural result of hard work.
The year 2012 is a milestone for our firm Our story began when Larry Freiman
and I first crossed paths profession-
as we celebrate fifteen years of service ally in 1993. He made such a strong
impression on me that, four years
representing closely-held businesses, later, when my solo practice had
grown to the point where I wanted to
and providing estate planning, estate add a partner, I immediately thought
of Larry.
administration and wealth transfer planning. continued page 2

2. 15th Anniversary Celebration continued • have participated in life-changing
We
The Ten Things
transactions, worked with clients and
I wanted a partner with the “right stuff”, their advisors who have become our
someone with the right practice experi-
ence, planning creativity, entrepreneurial
friends, and solved problems that
seemed insurmountable. I Wish I Had
spirit, leadership qualities and practice
values. I found those qualities, and more,
• see great accomplishments when
We
we look back at the ground we have
Asked My Lawyer
in Larry. At the same time, Larry was looking covered over 15 years. Please join us for our next complimentary
for an opportunity to build a firm that paid • see greater things in the future as
We workshop where we will discuss how to
attention to the business itself as well as we look ahead. identify and protect your legal blindspots.
the practice of law and one that tapped As we begin our sixteenth year, and on tuesday, october 23, 2012 -
into his entrepreneurial side. And so, behalf of everyone at MendenFreiman llp, the ravinia club
together in 1997, we launched what would we thank you for the opportunity you Two Ravinia Drive
become MendenFreiman llp. have given us to serve your business,
Suite 100
We have come a long way since it Atlanta, GA 30346
your family and your future. We look
was just Larry, myself, a paralegal and forward to continuing to serve you in
a secretary. As the firm has grown (we
23
october
the years to come.
are 17 strong now), our capabilities have
increased. We have so much to celebrate.
2012
• have fulfilled our vision for providing
We
excellence in all that we do. registration: 11:30 a.m.
• are proud of our people, the quality
We presentation and luncheon:
of the work they do, and our collective George Menden 12:00 – 2:00 p.m.
expertise. Founding Partner Limited Seating. Reserve your place now.
rsvp: Please respond to Candice Wheeler at
770.559.5595 or register online at
RSVP Now for Our October Workshop! www.mendenfreiman.com/estate-planning-workshops.php
Making 2012 Count: the case for new taxes
The U.S. government is spending a lot
Now is an Extraordinary
more money than it is taking in, creating
the largest deficits in our history. The
projection for 2012 is:
Time to Implement Tax U.S. Tax Revenue .............................. $ 2,310,000,000,000
Planning Strategies U.S. Government Spending ............ $ 3,614,000,000,000
New Debt .......................................... $ 1,303,000,000,000
National Debt ................................... $15,114,000,000,000
Recent Federal Budget Cuts .......... $ 385,000,000,000
The next four months are an exceptional deductions and valuation adjustments will
window of opportunity for you to make soon be eliminated or limited. People who These are staggeringly large numbers. It’s
family wealth transfers. The federal gift understand this situation will be well posi- easy to lose sight of their meaning because
and estate tax exemption is $5,120,000 and tioned to take full advantage of this estate there are so many zeros at the end of each
both income tax rates and interest rates are planning opportunity while it lasts. one. But if you drop eight of the zeros and
at the lowest point in a generation. With In this article, we will explore how the consider this to be the budget for a young
federal deficit spending also at record current deficit spending is making the case family or single adult, the numbers take
levels, tax and interest rates seem sure to to increase taxes, what you can expect in on real meaning:
rise. Unless the President, the Senate, and 2013 unless the President, the Senate, and
the House of Representatives all agree the House of Representatives all agree Annual Income ........................................................ $23,100
otherwise, income and estate taxes will otherwise, and how you can use advanced Money Spent............................................................. $36,140
increase dramatically on January 1, 2013. irrevocable trusts now to take advantage New Credit Card Debt ............................................$13,030
There is also the risk that long-used of this opportunity and save income and Outstanding Credit Card Debt ............................ $151,140
planning strategies such as charitable estate taxes. Total Budget Cuts...................................................... $3,850
page 2 T he M enden F reiman A dvisor

3. Both are train wrecks waiting to happen.
Spending is more than 150% of income,
yet budget cuts planned are less than 17%
of income. Talk about “Another day older
and deeper in debt”!
For the federal government, it seems
that either deeper budget cuts will have to
be made or income…in the form of taxes
…will have to increase. The federal gov-
ernment can also print more money, which
will eventually lead to inflation.
taxes…now and in four months
In 2012, the federal estate, gift, and genera-
tion-skipping transfer tax (GSTT) exemp- exemption to $1,000,000; 35% rate to income and estate taxes including the
tions are all $5,120,000 and the tax rate on 55% rate). 2503(c) Minor’s Trust, Gifting Trust,
any excess is 35%. Unless the President, the •
The most favorable estate/gift tax we Family Bank Trust, Health and Education
Senate, and the House of Representatives have ever had will be gone ($5,120,000 Exclusion Trust (HEET), Intentionally
all agree otherwise, on January 1, the estate exemption to $1,000,000; 35% rate to Defective Grantor Trust (IDGT), Inheritor’s
and gift exemptions will drop to $1,000,000 55% maximum rate, plus a 5% surcharge Trust, Life Insurance Trust, and Split-
and the GSTT exemption will drop to on estates/cumulative gifts between Interest Charitable Trusts as well as other
$1,390,000 plus an adjustment for 2012 $10,000,000 and $17,184,000). irrevocable trusts that you can establish
inflation and the tax rate on any excess will •
Interest rates, now at lows not seen in now that have purposes other than saving
start at 45% and increase to a 55% maxi- our lifetimes (2% overall, 1.4% AFR for income and estate taxes. These include
mum rate, plus a 5% surcharge on estates/ intra-family gifts), will almost surely Special Needs Trusts and Retirement
cumulative gifts between $10,000,000 and increase. Trusts (Stand Alone).
$17,184,000. In addition, the estate and gift •
Charitable deductions, now fully To learn more about these and other
tax “portability” provision will expire. deductible, may be limited to those in a trust options including a variety of
Unless the President, the Senate, and 28% income tax bracket. Grantor Trusts and wealth transfer
the House of Representatives all agree •
Long-term capital gain rates will in- strategies, visit the MendenFreiman
otherwise, taxes on income, dividends, and crease from 15% to 20%. website at www.mendenfreiman.com/
long-term capital gains will also increase •
Dividend rates will increase from 15% to estate-planning-resources.php and
on January 1. In addition, a new 3.8% ordinary income rates, which can be as download the complete article.
healthcare surcharge will go into effect for high as 43.6%.
married taxpayers with adjusted gross Valuation adjustments for family control
• conclusion
income (AGI) of $250,000 or more ($200,000 limited partnerships and limited Our very favorable planning time—with
or more for single taxpayers). Here’s a liability companies may be legislated favorable interest rates, estate/gift taxes
chart to show the income tax rate change: or regulated away. exemptions and rates, full charitable
deductions, low capital gains and divi-
Ordinary Income dend rates, and available strategies — is
Long-Term Gains Short-Term Gains very likely to end on December 31, 2012.
2012 2013 2012 2013
The person who understands the various
irrevocable trusts explained here and the
Top Federal Tax 15% 20.0% 35% 39.8% urgency to implement their plans during
Healthcare Surcharge 0% 3.8% 0% 3.8% the balance of 2012 is in a unique position
Total 15% 23.8% 35% 43.6% to save substantial estate and income taxes.
To comply with the U.S. Treasury regulations,
we must inform you that (i) any U.S. federal
Unless the President, the Senate, and Planning Tip: Complete your planning
tax advice contained in this newsletter was not
the House of Representatives all agree before the end of 2012 to take advantage
intended or written to be used, and cannot be
otherwise, your favorable tax planning of this unique planning window. used, by any person for the purpose of avoiding
window will close in January: U.S. federal tax penalties that may be imposed
irrevocable trusts can help on such person and (ii) each taxpayer should
•
The most favorable estate/gift tax we There are a wide variety of irrevocable seek advice from their tax advisor based on the
have ever had will be gone ($5,120,000 trusts that you can use now to help save taxpayer’s particular circumstances.
V olume 1, I ssue 1 page 3

4. Estate Planning Today
Must Include Digital
Assets and Social Media
It wasn’t very long ago that we had only and social media know-how) to step in for
paper for financial and tax records. We you, provide that person with access, and
could simply point to a file cabinet or provide some direction for what you want
drawer and tell someone, “Everything is to happen to these assets.
in there when the time comes.” But now Listing your digital assets by category
we have computers and the Internet, and (hardware, software, social media/online
so much of our lives is online. Unless we presence, online accounts) will help make
include our digital assets and social media the task less daunting. Next to each one,
in our estate planning, our family or add user names, passwords, PIN numbers
administrator may not be able to find and the site’s domain name. Keep this
critical documents. list in a safe place and tell your successor
For example, if you scan documents or where it is. (Do not store it unprotected
receive financial statements electronically, on your computer; if it is stolen, the thief
someone else may not even know these would have all of your passwords. If
exist. If you use a program like Quicken or you store it on your computer, password
Quickbooks and tax preparation soft- protect the file and give that information
ware, those records are on your computer. to your successor.) Closing down accounts that are no longer
Facebook pages, blogs, email accounts and Think about what you want to happen needed will help to protect your family from
photos stored digitally on a computer or to these assets. For example, if you have a identity theft after you are gone. The person
an online account would certainly have website or blog and you want it to continue, you name as your successor will need a
special meaning to your family. you need to leave instructions for keeping death certificate to do this. Consider naming
Much of this information is password it up or having someone take it over and this person as a co-trustee or co-executor
protected. Unless we make arrangements continue it. If a site is currently producing with responsibilities limited to this area to
in advance, family members or administra- or could produce income (e-books, pho- give them legal authority to act for you.
tors may not be able to access these and tography, videos, blogs), make sure your Yes, this will take some time and
the information could be lost forever. successor knows this. If there are things on thought. But, just like “other” estate
Estate planning for digital assets and your computer or hard drive that you want planning, the more we can do now to put
social media accounts is similar to estate to pass on (scanned family photos, ancestry things in order, the easier it will be for our
planning for other assets. You need to research, a book you have been writing), families later.
make a list of what you have and where it put them in a “Do Not Delete” folder and
is located, name someone (with computer include it on your inventory list. MendenFreiman llp 2012
Dedicated to the growth, protection and transfer of businesses and estates,
MendenFreimanLLP has been providing a practical and cost-sensitive approach
to estate tax and business legal problem-solving for fifteen years. Known for
its compassion and creative solutions, the firm has an exceptional track record
MCMXXII
of successful results when dealing with some of life’s most difficult challenges.
H M A NA
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GeorgiaTrend
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Services include Estate Planning, Wills and Trusts, Estate Administration
LEGAL ELITE
and Business Formation, Representation and Transactions.
Two Ravinia Drive, Suite 1200, Atlanta, GA 30346 www.mendenfreiman.com
Phone: (770) 379-1450 | Fax: (770) 379-1455