Estate and Trust Planning | The Lay of the Land Conference

May 25, 2022   |   Brokerage

Michael Mead and Hugh Dailey discuss how landowners can plan ahead to save on taxes and smartly plan their estates.

Recorded live at our annual land conference, the Estate and Trust Planning session features special guests Michael Minton of Dean Mead and Hugh Dailey of MIDFLORIDA Credit Union. These tax and finance experts cover tax policy updates and focus on proactive steps landowners can take to save on taxes and smartly plan their estates. The panel had in depth conversations on estate tax rates and exemptions, how to avoid probate, and the Corporate Transparency Act.

Below is an excerpt from the interview. Listen above for the full podcast.

What are the issues in Florida’s tax and agricultural industry? (Michael Minton) Over the last year, we've heard of everything. You ran through your list of horrors as a tax lawyer and it scared the fool out of all of us. Now that we're beyond that, we're looking at everybody preparing themselves for the next midterm election coming up and then the next presidential election and I think the general consensus is that if it requires bipartisanship then it's probably not going to happen. So I think the focus on the “sunset” provisions of the Tax Cuts and Jobs Act is probably the smart move for us. To think about what are some of the tax planning opportunities we have over the next few years until we have the sunset provisions kick in.

(Hugh Dailey) It's just so important to have a plan. Everybody had expectations of higher taxes last year and we've all been blessed with a run-up in the valuation of our assets as just about everything's been going up in value. The question has been all year, “are we gonna get this tax revision?”. We didn't get it, but you can look at the government spending and regardless of if it's Republicans or Democrats, we're going to have tax increases. Most of the year we spent counseling with our clients, a lot of discussions went something like, “I've got a big offer on my property. Should I take it or should I wait? Are the taxes going up?” What we found is that about half of the people that have contracted real estate, go out looking for 1031 Exchange properties and they can't identify them. Then they're back asking themselves, “should I just pay the tax, hold my money, invest in something else, or wait for the real estate market to come down?” That's a great question and it gets asked every day. I don't have a crystal ball, but we have watched the real estate appreciation in this state and most people agree that it's not sustainable. At some point, it will level out and potentially prices will come down. 

If you don't leave with anything else, have a plan and work on an estate plan. The most important thing is to have one. Most of you know what happens when someone doesn't have an estate plan and it's usually not the way you want it to unfold.

How do you ensure your land is passed the correct way? My best advice is to put together a team of people to help you do that. If you don't have a real good banker or a fiduciary relationship, that's something that I think's important. An attorney that understands tax, a CPA or an accountant, some real estate experts. Once you have all those people together, it's important that you execute a plan, the will, the living will, and a trust if you need one. In all cases, you have to make a plan.

I tell people all the time, if you have an attorney drop a will for you and you don't understand it, have someone translate it for you. We do that all the time for our clients. If you end up really not liking something, you can go back to the same attorney and have it modified. Or, you know, my attorney says I need to do this, but I really don't want to do that. Sometimes, someone has special needs that can't be covered in a very simple will. So you need to make those estate plans and then check them over every three years or if there's some big lifestyle change. Don't be afraid to do it so often, modify them, and get updates.

What should firms be aware of and have grasp on? (Michael Minton) One is this whole concept of using a revocable trust as a means of avoiding ancillary probate. So many of our Florida residents own property somewhere else and if they don't plan properly, there could be an ancillary probate. 

Then there is this Corporate Transparency Act which not many people are aware of. It deals with identifying the ultimate beneficial owner of every business entity except for those that qualify for the exclusion. So it's a pretty big deal that primarily keeps people from hiding their ownership in transferring funds and avoiding criminal activities. But it flies in the face of a lot of what we preserve around here in terms of privacy.

What is the interplay between a will and holding property? If you die and you own property in your own name, it's going to have to go through probate. If you die and you have property in a trust, then the trust acts like your will, allows that property to be transferred, and won't necessarily require a probate. You may still do a probate because you may want to identify creditors that are out there, but you're not doing it to transfer assets because you've already put your assets in a trust. The important thing of doing this type of planning is to make sure that if you go down this path that you actually follow through and title the asset in the name of the trust.

What are your thoughts on annuities? From an income tax perspective and an estate tax perspective, we used to utilize a fair amount of annuities on a transfer of assets situation, but we haven't seen it nearly as much in the last 10 or 20 years. It really is driven more from the insurance industry and what type of products that they're putting out and whether people are willing to make those types of investments. Most of our work has gone more towards utilizing the valuation discounts and utilizing defective grantor trusts. We're not having to rely on the annuity as a mechanism to transfer wealth and have it disappear at the time of death. So we don't really use it as much as we did when I first started practicing.

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