The Estate Planner - September/October 2009
Here’s a brief glance at what you’ll find in the September/October issue…
FAQs about donating real estate
Making charitable donations during life or at death removes assets from one’s estate and thus reduces any potential estate tax liability. But those who would like to make a significant charitable contribution, yet who are “property rich and cash poor,” might feel that they don’t have a good way to do so. But there are ways. This article answers some frequently asked questions about contributions of real estate: What are the tax benefits? Does donating property still make sense in this dismal real estate market? Can one donate a portion of the property? Are there limits on the charitable deduction? And what tax traps may be lurking? A sidebar discusses the benefits of donating conservation easements.
The Roth IRA: Is it time to convert?
Someone who has a significant balance in a traditional IRA may find that it makes sense from an estate planning perspective to convert it to a Roth IRA. For many, the Roth offers a number of specific advantages. However, due to the law’s current (but soon to expire) income limitations and depending on one’s personal situation, a conversion will be most advantageous if made at the right time: either now, in 2010, or in stages over two or more years.
It’s intentionally defective?
How an IDGT can benefit your estate plan
Despite its somewhat odd sounding name, an intentionally defective grantor trust (IDGT) can help one realize significant gift and estate tax savings. Combining the estate tax benefits of an irrevocable trust with the income tax advantages of a grantor trust, an IDGT removes assets from one’s estate, but it’s treated as a grantor trust for income tax purposes. This can substantially increase the amount of wealth that beneficiaries receive without triggering additional gift or estate taxes. And, IDGTs can be an ideal vehicle for selling assets that have appreciated in value and are expected to continue appreciating.
Estate Planning Red Flag
Your child is on the title to your home or other assets
One of the most common, and costly, estate planning mistakes is to own property jointly with one’s child. Many people hold property — such as homes, bank accounts, investments or automobiles — with their children as joint tenants with right of survivorship. Their goal is to avoid probate and to ensure that when they die the property is transferred to their children automatically without the need for a trust or other estate planning vehicle. But there are many problems with this approach. Fortunately, they can be avoided with properly drafted trusts.
The Estate Planner - July/August 2009
Here’s a brief glance at what you’ll find in the July/August issue…
It’s time to make gifts
The struggling economy may allow you to save gift and estate taxes
Estate planning opportunities are a silver lining among today’s dark economic clouds. Depressed asset values and low interest rates may allow you to gift more to your loved ones at a significant gift tax savings, removing substantial wealth from your taxable estate. Some of the most effective gifting strategies involve the use of trusts. Or you might transfer interests in a family business or other closely held company using a family limited partnership (FLP) or a family limited liability company (FLLC). But, as a sidebar explains, Congress is considering new restrictions on FLPs and FLLCs. Also, when gifting property, you will need to consider income taxes as well as gift and estate taxes.
Do-it-yourself estate planning can lead to costly mistakes
If you’re interested in preparing your own estate plan, there’s no shortage of software, how-to books, preprinted forms and online services to assist you. Do-it-yourself (DIY) estate planning may save you a few hundred dollars, or even a few thousand dollars, up front. But except in the simplest cases, the risk of unintended results or costly disputes is too great to justify the initial savings. This article looks at one hypothetical example, and one real-life court case, to show why.
What are these assets worth?
Valuation is critical to your estate plan
If you make substantial noncash gifts or charitable donations, it’s critical to have the property valued by a qualified appraiser to protect you against IRS challenges that could result in some unpleasant tax surprises. This article discusses steps you should take to avoid an IRS challenge that could result in penalties as high as 40% of an asset’s value.
Estate Planning Red Flag
You’re planning required minimum distributions from your retirement accounts
If you’re planning to take required minimum distributions (RMDs) at the end of this year from your IRA, 401(k) or other tax-deferred retirement-savings account, check with your tax and estate planning advisors first. Under a tax law passed late last year, you may be able to skip RMDs this year. This short article discusses the law’s provisions.
The Estate Planner - May/June 2009
Here’s a brief glance at what you’ll find in the May/June issue…
Protecting your assets against fraud and ID theft
Wealth preservation typically focuses on protecting assets against creditors’ claims and lawsuits, but it’s also important to protect wealth from erosion by fraud and identity theft. There’s a common misconception that fraud victims usually are unsophisticated, but there’s no shortage of sophisticated investors who’ve been seduced by the promise of generous returns. And, according to the Federal Trade Commission, 10 million people fall victim to ID theft every year. This article offers safeguards against fraud and ID theft.
10 tips for choosing a guardian
The selection of a guardian can have a profound impact on a child, so it’s important to choose carefully. If a person is hesitant to name a guardian for his or her children, a court will name one. Thus, it’s one of the most important estate planning decisions a person can make. This article lists 10 tips to help people make the right decision.
Family split-dollar arrangement can ease gift taxes
One of the most effective techniques for avoiding estate taxes on life insurance proceeds is to set up an irrevocable life insurance trust. If a person pays the premiums on the policy, however, there may be gift tax consequences. A properly structured split-dollar arrangement may solve this problem. This article details the ins and outs of a split-dollar strategy.
Estate planning red flag
You make (or receive) “deathbed” gifts
Making annual exclusion gifts is an effective way to reduce a person’s taxable estate. But if such gifts aren’t “completed” before the person’s death, they could be subject to estate taxes. This short article explains how a gift is “completed.”
The Estate Planner - March/April 2009
Here’s a brief glance at what you’ll find in the March/April issue…
What’s new with FLPs and FLLCs?
Recent court cases offer insight on how these estate planning tools will hold up against IRS scrutiny
Family limited partnerships (FLPs) and family limited liability companies (FLLCs) can be powerful tools for consolidating and managing family wealth while reducing gift and estate taxes. Unfortunately, the potential for significant tax savings makes FLPs and FLLCs targets for the IRS. This article explains how FLPs and FLLCs work and examines how the outcomes of recent court cases affected them.
Estate Planning Red Flag
Your power of attorney isn’t all that powerful
An estate plan likely includes a power of attorney that appoints another person to manage investments, pay bills, file tax returns and otherwise handle property when the person is unable to do so. But not all powers of attorney are created equal. This short article details four things to consider when reviewing a power of attorney document.
Spendthrift trusts aren’t just for spendthrifts
No matter what happens to the estate tax in the future, estate planning will continue to be essential for most families. That’s because tax planning is only a small component of estate planning — and usually not even the most important one at that. An equally important strategy is asset protection. And a spendthrift trust can be an invaluable tool for preserving wealth for heirs. This article explains how to use a spendthrift trust.
Give and receive
Charitable gift annuities can benefit both you and your favorite charity
Because of volatile financial markets, an investment that offers guaranteed fixed income for life has great appeal. A charitable gift annuity (CGA) offers an attractive combination of a secure income stream, an immediate income tax deduction and the opportunity to benefit a favorite charity. This article covers the ins and outs of a CGA.
The Estate Planner - November/December 2008
SHELTER YOUR BUSINESS ASSETS
Preserve more wealth for your heirs with asset-protection strategies
Estate planning and asset protection go hand in hand. Most people concentrate their asset-protection efforts on insulating their personal wealth from frivolous lawsuits or other claims. But if a significant portion of a person’s wealth is invested in a business, it’s equally important to protect its assets from unreasonable or excessive creditor claims. This article explores asset-protection strategies.
CHANGING STATE TAXES CAN AFFECT YOUR ESTATE PLAN
For years, state death taxes had little or no effect on estate planning. That’s because the state death tax credit allowed states to grab a piece of an estate’s federal tax pie with minimal administrative effort or expense. Now, however, the credit has been eliminated, prompting revenue-hungry states to rewrite their tax laws. This article explains how these new laws affect estate plans.
WHAT DOES DOWN MUST COME UP
Estate planning in a low interest rate environment
The financial markets have always been cyclical. When interest rates are low, it’s a sure bet that they’ll rise again, given time. Key federal rates have dropped this year to their lowest level in several years. So now is a good time to consider wealth-transfer strategies that lock in these low rates, such as family loans, grantor retained annuity trusts, charitable lead annuity trusts and sales to grantor trusts. This article details these strategies.
ESTATE PLANNING RED FLAG
Your estate plan doesn’t provide for sufficient liquidity
When planning an estate, providing liquidity to pay taxes and other expenses is every bit as important as developing strategies to minimize estate and gift taxes. There are countless horror stories about families who were forced to sell a family business or other precious assets to raise the necessary funds to pay estate and gift taxes. This short article explains how to build liquidity into an estate.
The Estate Planner - September/October 2008
ABRACADABRA!
Sec. 1031 exchange can make capital gains tax disappear
If a person owns a highly appreciated business or investment property that he or she would like to sell or otherwise dispose of, the person can possibly avoid capital gains tax by exchanging it for new property that he or she plans to hold (or continue exchanging) for life. A Section 1031 exchange allows a person to eliminate the tax — or at least defer it until he or she sells the new property. This article details how a Sec. 1031 exchange works and explains how it may fit into a person’s overall estate planning strategy.
ART DIRECTION
5 estate planning strategies for your art collection
All too often, people overlook their art collection when planning their estates. But paintings, sculptures and other pieces of art can be very valuable, in some cases representing a significant portion of one’s estate. This article describes five tips for addressing art in an estate plan.
DO YOU WISH TO DISINHERIT A SPOUSE OR CHILD?
When a relationship with a spouse or child deteriorates, it may be time to make the difficult decision to disinherit him or her. This article answers three frequently asked questions about disinheriting a family member.
ESTATE PLANNING RED FLAG
You don’t have a gifting plan
If a person’s estate plan doesn’t contain a gifting strategy, he or she is missing out on a relatively simple way to pass substantial amounts of wealth to heirs and reduce his or her estate tax liability. This short article provides an example of how much a gifting strategy can shelter wealth from estate taxes.
The Estate Planner - January/February 2008
Here’s a brief glance at what you’ll find in the January/February issue ...
PONDERING YOUR POLICY
Watch out for a little-known tax trap — the transfer-for-value rule
Life insurance is an essential building block in an estate plan. But it’s important to handle life insurance policies carefully. Beneficiaries typically are exempt from income taxes on death benefit proceeds. But if a policy is transferred for valuable consideration, the risk of triggering income taxes arises because of a little-known, yet lethal, provision of the Internal Revenue Code called the transfer-for-value rule. This article explains the transfer-for-value rule.
6 POSTMORTEM STRATEGIES FOR REVITALIZING AN ESTATE PLAN
Estate planning is an inexact science. No matter how much time is put into a plan, changing tax laws and personal circumstances can hamper its ability to achieve an estate planner’s objectives. Fortunately, there are postmortem strategies a spouse, executor and beneficiaries can use to reduce estate taxes. This article explores six postmortem estate planning strategies.
GRAT EXPECTATIONS
A zeroed-out GRAT can transfer wealth tax-free
A zeroed-out grantor retained annuity trust (GRAT) may be an attractive addition to an estate plan if a person has a large estate and has used up the $1 million lifetime gift tax exemption (or wishes to preserve the exemption for other purposes). This article details how a zeroed-out GRAT works.
ESTATE PLANNING RED FLAG
Your estate plan benefits your grandchildren or other “skip” persons
The federal generation-skipping transfer (GST) tax is one of the harshest in the tax code: It’s a flat tax (currently 45%) — in addition to gift or estate taxes — on transfers to a “skip person.” This short article explains how to minimize or avoid triggering GST tax.
The Estate Planner - November/December 2007
Here’s a brief glance at what you’ll find in the November/December issue ...
A WELL-DEFINED STRATEGY
Use a defined-value clause to limit gift tax exposure
Accurate asset valuations are critical to an effective estate plan. Unfortunately, valuation is an inexact science. A determination by the IRS or a court that certain assets are undervalued can throw a monkey wrench into an estate plan and result in unexpected gift or estate tax liabilities. One way to cap gift tax exposure and add some certainty to an estate plan is to use defined-value gifts. This article explains the ins and outs of this strategy.
TAKE THE LEAD
Minimize or even eliminate estate taxes with a T-CLAT
Even with a comprehensive estate plan, those with large estates may find themselves with a significant tax exposure. Adding a properly designated testamentary charitable lead annuity trust (T-CLAT) to an estate plan can minimize estate taxes on assets placed in the trust or even eliminate them altogether. This article details how a T-CLAT works.
SUPER TRUSTEE TO THE RESCUE
Gain flexibility in your irrevocable trust with a trust protector
Many of the most effective estate planning strategies involve the creation of irrevocable trusts. But some may be hesitant to use an irrevocable trust, what with changing tax laws or other circumstances that may affect the trust’s ability to achieve their objectives. One way to build flexibility into an irrevocable trust is to appoint a trust protector. This article explores the powers of a trust protector.
ESTATE PLANNING RED FLAG
Your required IRA distributions are more than you need
Question: If a person 70½ or older already has sufficient resources to meet his or her current income needs, is there an alternative to taking taxable distributions from his or her IRA? Yes. One option — provided he or she is otherwise charitably inclined — is to make a direct transfer from his or her IRA to a qualified charity. This short article explains a provision of the Pension Protection Act of 2006 that allows a person to make tax-free qualified charitable distributions of up to $100,000 from an IRA to a charity, and to apply those amounts to his or her required minimum distributions for the year.
The Estate Planner - September/October 2007
Here’s a brief glance at what you’ll find in the September/October issue...
SOME STRINGS ATTACHED
Maintaining control over your charitable contributions without losing your deduction
Imposing restrictions or conditions on charitable contributions can help ensure that the recipients use the money as intended. But it’s important to plan these contributions carefully so the charitable deduction isn’t lost. This article explains how to maintain control over a charitable contribution without losing the deduction.
STRETCHING YOUR LEGACY
Dynasty trusts benefit many generations to come
It’s said that all good things must come to an end, but a dynasty trust may be an exception. This type of trust allows substantial amounts of wealth to grow free of federal gift, estate and generation-skipping transfer (GST) taxes for many generations — even forever. This article details dynasty trusts.
DON'T UNDERESTIMATE THE POWER OF CRUMMEY TRUSTS
Named after the taxpayer who first used the strategy successfully, a Crummey trust isn’t a specific type of trust. Rather, it refers to withdrawal powers granted to beneficiaries of various trust types to qualify contributions for the annual gift tax exclusion. This article explores the benefits of a Crummey trust.
ESTATE PLANNING RED FLAG
You don’t have an advance medical directive
A critical part of estate planning is to make arrangements for health care decisions in the event of incapacitation. An advance medical directive allows a person to express his or her preferences for medical treatment in the event he or she becomes incapacitated prior to the time such treatment is needed. This short article explains why it’s important to have both a health care power of attorney and a living will.
The Estate Planner - July/August 2007
Here's a brief glance at what you'll find in the July/August issue...
EXECUTOR DECISIONS
7 FAQs about being a personal representative
If asked to be an executor — or personal representative — of a loved one’s estate, it’s important to understand what’s involved before saying “yes.” Because acting as an executor can be complicated, it’s best to seek professional advice. This article answers seven frequently asked questions about being an executor.
GIVING AWAY YOUR BUSINESS WITHOUT GIVING AWAY THE STORE
As a family business owner, it’s essential to have a succession plan. Succession planning involves a variety of complex issues, such as identifying and grooming a successor, determining how to treat family members who aren’t involved in the business, and ensuring sufficient liquidity to pay taxes and other expenses. This article examines a business owner’s options when creating a succession plan.
INTRAFAMILY LOANS
It’s personal and it’s business
The reasons to lend money to family members can be personal, but the transaction must be treated in a businesslike manner; otherwise, unintended gift and income tax consequences may result. This article details the tax implications of lending money to family.
ESTATE PLANNING RED FLAG
You haven’t left final instructions for your family
When a person dies or becomes incapacitated, his or her family members may not know where to look for important estate planning documents. Don’t make an already trying time more difficult for loved ones. This short article discusses how to smooth the process by keeping a list of important contacts, documents, assets and liabilities.
The Estate Planner - September/ October 2006
Here’s a brief glance at what you’ll find in the September/October issue…
Sizing up a FIT
Tailor a family incentive trust to meet your needs
Surveys show that affluent baby boomers are less concerned about sharing money with the younger generation than with sharing values, a sense of responsibility, a strong work ethic and a commitment to education. To achieve this goal, an increasing number of people are using family incentive trusts (FITs). This article explains how to structure a FIT.
What to do with the collectibles?
Addressing personal property in an estate plan
It’s not unusual for collectibles — such as art, jewelry, antiques, automobiles, coins and stamps — to make up a significant portion of one’s wealth. There are several estate planning options to consider, including making testamentary gifts, donating to charity and offering fractional gifts. This article discusses each strategy and offers information on determining the worth of collectibles.
An air of uncertainty
The Roth 401(k) may be good for your estate plan, but will it last?
Beginning this year, businesses can establish a Roth 401(k) plan or add a Roth contribution option to an existing 401(k) plan. But the Roth 401(k) plan provisions expire at the end of 2010 unless Congress acts to extend them. This article details the ins and outs of Roth 401(k) plans.
Estate planning red flag
Most of your wealth will pass through beneficiary designations
No matter how long a person agonizes over who gets what in his or her living trust, the person’s wishes may not be carried out if the bulk of his or her estate will be transferred through beneficiary designations. This short article explains how to avoid this result.
The Estate Planner - November/December 2005
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