Michigan Estate Planning Blog

ESTATE PLANNING / LIFETIME GIFTING

 From The Wall Street Journal Online (Jan 29, 2011) “The $5 Million Tax Break”

 Lifetime gifting has always been an important aspect of comprehensive estate planning. As the old saying goes, “If you’re giving while you’re living, then you’re knowing where it’s going.” But the new tax legislation passed in December makes gifting even more attractive for wealthy families.

A recent article in the Wall Street Journal, “The $5 Million Tax Break,” points out why lifetime gifting is suddenly so attractive under the new laws. It’s a good article, worth reading, but here are the high points, in a nut-shell:

For the next two years, the gift-tax exemption jumps to $5 million from $1 million for individuals, and to $10 million (up from $2 million) for couples. What’s more, the tax rate on gifts above those amounts fell to 35 percent, from a scheduled 55 percent.

The gift tax has long been a feature of the tax law, and the gift tax exemption in recent years has remained lower than the estate tax exemption to discourage the wealthy from draining their estates through gifts in order to avoid estate taxes. This new gift tax break, however, may be an important tax planning strategy to consider now, especially for family business owners who want to transfer business interests to the next generation.

Why? If you make your gifts now – or within the next two years – you can take advantage of what could be a short-lived tax break, locking in potentially significant tax savings for your heirs. Savings large enough that they could mean the difference between a business continuation or a business failure. Who knows what Congress will do after 2012? While many hope lawmakers will extend the current regime beyond 2012, other events – such as a debt crisis – could render these breaks temporary.

You can learn more about transfer taxes, including estate taxes, gift taxes and the generation-skipping transfer tax at www.jerryreiflawyer.com. You also will find a handy estate tax calculator to help you estimate your current and future estate tax liability.

 

Link: http://online.wsj.com/article/SB10001424052748704062604576106171136583088.html

ELDER LAW / RETIREMENT PLANNING

From MarketWatch (Jan 31, 2011), “Don’t settle for less than the best in your 401(k) plan”

 What should the best 401(k) plans do for you? And is yours the best it could be?

According to a recent study conducted by MetLife – the Qualified Retirement Plan Barometer – your 401(k) plan is probably falling short, because most plans simply don’t do all that a 401(k) plan ought to do. According to The Wall Street Journal’s MarketWatch, many plan sponsors aren’t offering important plan features that could greatly enhance your retirement savings plan.

What features are lacking? Primarily “help tools” and services. Studies show that plan participants who use the “help” tools and services provided by their employers tend to outperform participants who did not use these tools. In other words, if your employer doesn’t offer online calculators, one-on-one financial counseling, seminars and workshops – ask for them. If your employer does offer those tools, be sure to use them.

If you (or your employer) are looking for objective, qualified educational presentations on retirement and estate planning, please contact our office. We are happy to work with you to schedule workshops, whether on-site or at a convenient off-site location. For more information, contact me at [email protected]

Link: http://www.marketwatch.com/story/dont-settle-for-less-than-the-best-in-your-401k-2011-01-31

 

ELDER LAW / RETIREMENT PLANNING

From MarketWatch (Jan 31, 2011), “Don’t settle for less than the best in your 401(k) plan”

What should the best 401(k) plans do for you? And is yours the best it could be?

According to a recent study conducted by MetLife – the Qualified Retirement Plan Barometer – your 401(k) plan is probably falling short, because most plans simply don’t do all that a 401(k) plan ought to do. According to The Wall Street Journal’s MarketWatch, many plan sponsors aren’t offering important plan features that could greatly enhance your retirement savings plan.

What features are lacking? Primarily “help tools” and services. Studies show that plan participants who use the “help” tools and services provided by their employers tend to outperform participants who did not use these tools. In other words, if your employer doesn’t offer online calculators, one-on-one financial counseling, seminars and workshops – ask for them. If your employer does offer those tools, be sure to use them.

If you (or your employer) are looking for objective, qualified educational presentations on retirement and estate planning, please contact our office. We are happy to work with you to schedule workshops, whether on-site or at a convenient off-site location. For more information, contact me at [email protected]

Link: http://www.marketwatch.com/story/dont-settle-for-less-than-the-best-in-your-401k-2011-01-31

 

SMALL BUSINESS / TAXES

 From The Wall Street Journal Online (Feb 1, 2011) “Obama Proposes Tax Relief For Small Businesses”

If you are a small business owner or an entrepreneur – or dreaming of becoming one – there may be good news on the horizon for you and your business aspirations this year. President Barack Obama is focusing his 2011 economic recovery efforts on stimulating small businesses, start-ups, and entrepreneurs. According to a recent article in The Wall Street Journal, the President’s new budget proposal includes a package of initiatives aimed at boosting small businesses and entrepreneurship, to include:

• Permanently eliminate capital gains taxes on certain investments in small businesses (making permanent a provision of the small business jobs act passed last September);
• Expansion of the New Markets Tax Credit, which encourages private sector investment in start-ups and small businesses operating in lower-income communities;
• Initiatives at the Small Business Administration, the Energy Department and the Veterans Administration aimed toward supporting startups and small firms;
• The Startup America initiative, a national campaign aimed at promoting entrepreneurship.

While most small business owners and entrepreneurs I know are a fairly independent lot and seldom wait for government assistance, it’s nice to know your contributions to the economy are not un-recognized. And, if there are a few tax breaks along the way, those would be helpful, too.

Link:  http://online.wsj.com/article/SB10001424052748703439504576115703550249350.html

ELDER LAW / RETIREMENT PLANNING

 From Smart Money (Feb 2, 2011) “Decision Time for Roth IRA Converters”

 The rule that made higher-income folks ineligible for Roth IRA conversions expired at the end of 2009. That made 2010 a big year for conversions, because even billionaires could do them. But if you are among the many who took advantage last year, there's more to the story.

If you are among the many who converted a traditional IRA to a Roth in 2010, you have some big decisions to make this year. The Tax Guy, Bill Bischoff at Smart Money recently outlined the most important ones.

When should I report the income from a 2010 conversion? The benefit of a Roth IRA is paying the tax upfront rather than when you withdraw the funds during retirement, thus locking in a known tax rate. Now, though, you still have to choose whether to report that income during 2010, or elect to spread it out evenly in 2011 and 2012 (50/50.) For most, stretching it out will be the best option. Still, for some it might be better to report it all in 2010, for instance if last year was a particularly bad year in terms of income, and you expect the next two years to be much better – bumping you into a higher bracket.

Should I reverse that conversion? Maybe. It will depend upon your individual circumstances, but at any rate you can postpone your decision until October 17^th – extended tax filing deadline  – and you could always simply “re-characterize” your IRA back into a traditional one, avoiding the tax if that is no longer the best option. (For example, if your Roth IRA takes a dive early in the year, since you’d still be paying taxes on the conversion amount that you’ve also lost.)

            Should I opt to extend my 2010 return? The short answer is YES. As long as you file for your extension by April 18, you will have until October 17^th to make final decisions about your 2010 Roth conversion. By October, you’ll have a better handle on whether you should reverse your conversion, declare the income and pay the tax in 2010, or spread it out over 2011 and 2012. Extending also makes it much simpler should you decide to reverse the conversion – you won’t have to file an amended return.

Link: http://www.smartmoney.com/personal-finance/taxes/decision-time-for-2010-roth-converters-1296585189763/

Long Term Care Costs Can Be Confusing

 From Smart Money (Jan 27, 2011)
For many aging seniors, the best living and care arrangement may be a continuing care residential community. Indeed, some 800,000 people already have made that choice. Continuing care residential facilities offer a wide range of options designed to evolve with your needs. Unfortunately, it is just this wide range of options that can make the process of choosing the best facility for yourself or a loved one all the more confusing, especially when it comes to determining costs.
Smart Money recently ran an article on the Confusing Costs of Continuing Care, outlining some of the more vexing difficulties, and offering tips on how to research a facility before making a choice.
Continuing care facilities can vary widely from one another in terms of costs and options, so much so that “a 10-year stay at one facility might cost well over $1 million; at another, a resident might pay just $300,000. And even within a single facility, the primary costs -- the entry and monthly charges -- can be structured in many different ways, making it hard to compare the value of one to another,” says Steve Maag, the director for assisted living at the Association of Home & Services for the Aging.
When researching a facility, try to determine the full extent of the entry and monthly charges, and what those fees cover. The varying options might mean that even the same monthly fees in several facilities aren’t comparable in terms of service or ultimate costs.
According to the American Institute for Economic Research, the best way to research the true cost of a continuing care facility is to obtain a detailed inventory of the services offered under the monthly fee, a record of fee increases over the past five years and the facility’s policy for fee increases. Then you’ll need to balance the fees for your needs (or those of your loved one) and lifestyle. For example, a higher entrance fee might mean lower monthly fees but fewer amenities or services. Don’t hesitate to consult a qualified attorney or accountant to help determine which facility might be best for you, given your needs and your financial resources.
Learn more about long-term care options by visiting the Long Term Care Center http://www.jerryreiflawyer.com/MichiganEstatePlanning.php on our website. The National Academy of Elder Law Attorneys (NAELA) also sponsors an online senior housing directory called Snap for Seniors, where you can find an abundance of quality information about senior housing options, including continuing care residential communities.

Link: http://www.smartmoney.com/personal-finance/health-care/how-to-calculate-costs-of-a-continuing-care-residence-1296022985031/ 

ELDER LAW / RETIREMENT PLANNING

From MarketWatch (Jan 31, 2011), “Don’t settle for less than the best in your 401(k) plan”
What should the best 401(k) plans do for you? And is yours the best it could be?
According to a recent study conducted by MetLife – the Qualified Retirement Plan Barometer – your 401(k) plan is probably falling short, because most plans simply don’t do all that a 401(k) plan ought to do. According to The Wall Street Journal’s MarketWatch, many plan sponsors aren’t offering important plan features that could greatly enhance your retirement savings plan.
What features are lacking? Primarily “help tools” and services. Studies show that plan participants who use the “help” tools and services provided by their employers tend to outperform participants who did not use these tools. In other words, if your employer doesn’t offer online calculators, one-on-one financial counseling, seminars and workshops – ask for them. If your employer does offer those tools, be sure to use them.
Link: http://www.marketwatch.com/story/dont-settle-for-less-than-the-best-in-your-401k-2011-01-31

SMALL BUSINESS / TAXES

From The Wall Street Journal Online (Feb 1, 2011) “Obama Proposes Tax Relief For Small Businesses”

If you are a small business owner or an entrepreneur – or dreaming of becoming one – there may be good news on the horizon for you and your business aspirations this year. President Barack Obama is focusing his 2011 economic recovery efforts on stimulating small businesses, start-ups, and entrepreneurs. According to a recent article in The Wall Street Journal, the President’s new budget proposal includes a package of initiatives aimed at boosting small businesses and entrepreneurship, to include:
• Permanently eliminate capital gains taxes on certain investments in small businesses (making permanent a provision of the small business jobs act passed last September);
• Expansion of the New Markets Tax Credit, which encourages private sector investment in start-ups and small businesses operating in lower-income communities;
• Initiatives at the Small Business Administration, the Energy Department and the Veterans Administration aimed toward supporting startups and small firms;
• The Startup America initiative, a national campaign aimed at promoting entrepreneurship.
While most small business owners and entrepreneurs I know are a fairly independent lot and seldom wait for government assistance, it’s nice to know your contributions to the economy are not un-recognized. And, if there are a few tax breaks along the way, those would be helpful, too.

Link: http://online.wsj.com/article/SB10001424052748703439504576115703550249350.html

ELDER LAW / LONG-TERM CARE

From Smart Money (Jan 27, 2011) “The Confusing Costs of Continuing Care”

For many aging seniors, the best living and care arrangement may be a continuing care residential community. Indeed, some 800,000 people already have made that choice. Continuing care residential facilities offer a wide range of options designed to evolve with your needs. Unfortunately, it is just this wide range of options that can make the process of choosing the best facility for yourself or a loved one all the more confusing, especially when it comes to determining costs.
Smart Money recently ran an article on the Confusing Costs of Continuing Care, outlining some of the more vexing difficulties, and offering tips on how to research a facility before making a choice.
Continuing care facilities can vary widely from one another in terms of costs and options, so much so that “a 10-year stay at one facility might cost well over $1 million; at another, a resident might pay just $300,000. And even within a single facility, the primary costs -- the entry and monthly charges -- can be structured in many different ways, making it hard to compare the value of one to another,” says Steve Maag, the director for assisted living at the Association of Home & Services for the Aging.
When researching a facility, try to determine the full extent of the entry and monthly charges, and what those fees cover. The varying options might mean that even the same monthly fees in several facilities aren’t comparable in terms of service or ultimate costs.
According to the American Institute for Economic Research, the best way to research the true cost of a continuing care facility is to obtain a detailed inventory of the services offered under the monthly fee, a record of fee increases over the past five years and the facility’s policy for fee increases. Then you’ll need to balance the fees for your needs (or those of your loved one) and lifestyle. For example, a higher entrance fee might mean lower monthly fees but fewer amenities or services. Don’t hesitate to consult a qualified attorney or accountant to help determine which facility might be best for you, given your needs and your financial resources.
The National Academy of Elder Law Attorneys (NAELA) also sponsors an online senior housing directory called Snap for Seniors, where you can find an abundance of quality information about senior housing options, including continuing care residential communities.


Link: http://www.smartmoney.com/personal-finance/health-care/how-to-calculate-costs-of-a-continuing-care-residence-1296022985031/

Lifetime Giving More Attractive Now

Lifetime gifting has always been an important aspect of comprehensive estate planning. As the old saying goes, “If you’re giving while you’re living, then you’re knowing where it’s going.” But the new tax legislation passed in December makes gifting even more attractive for wealthy families.

A recent article in the Wall Street Journal, “The $5 Million Tax Break,” points out why lifetime gifting is suddenly so attractive under the new laws. It’s a good article, worth reading, but here are the high points, in a nut-shell:

For the next two years, the gift-tax exemption jumps to $5 million from $1 million for individuals, and to $10 million (up from $2 million) for couples. What’s more, the tax rate on gifts above those amounts fell to 35 percent, from a scheduled 55 percent.

The gift tax has long been a feature of the tax law, and the gift tax exemption in recent years has remained lower than the estate tax exemption to discourage the wealthy from draining their estates through gifts in order to avoid estate taxes. This new gift tax break, however, may be an important tax planning strategy to consider now, especially for family business owners who want to transfer business interests to the next generation.

Why? If you make your gifts now – or within the next two years – you can take advantage of what could be a short-lived tax break, locking in potentially significant tax savings for your heirs. Savings large enough that they could mean the difference between a business continuation or a business failure. Who knows what Congress will do after 2012? While many hope lawmakers will extend the current regime beyond 2012, other events – such as a debt crisis – could render these breaks temporary.

You can learn more about transfer taxes, including estate taxes, gift taxes and the generation-skipping transfer tax at the http://www.jerryreiflawyer.com/MichiganEstateTax.php our website. You also will find a handy estate tax calculator to help you estimate your current and future estate tax liability.

 

A New Focus on Small Business?

If you are a small business owner or an entrepreneur – or dreaming of becoming one – there may be good news on the horizon for you and your business aspirations this year. President Barack Obama is focusing his 2011 economic recovery efforts on stimulating small businesses, start-ups, and entrepreneurs. According to a recent article in The Wall Street Journal, the President’s new budget proposal includes a package of initiatives aimed at boosting small businesses and entrepreneurship, to include:

• Permanently eliminate capital gains taxes on certain investments in small businesses (making permanent a provision of the small business jobs act passed last September);
• Expansion of the New Markets Tax Credit, which encourages private sector investment in start-ups and small businesses operating in lower-income communities;
• Initiatives at the Small Business Administration, the Energy Department and the Veterans Administration aimed toward supporting startups and small firms;
• The Startup America initiative, a national campaign aimed at promoting entrepreneurship.

While most small business owners and entrepreneurs I know are a fairly independent lot and seldom wait for government assistance, it’s nice to know your contributions to the economy are not un-recognized. And, if there are a few tax breaks along the way, those would be helpful, too

Roth IRA Roulette

The rule that made higher-income folks ineligible for Roth IRA conversions expired at the end of 2009. That made 2010 a big year for conversions, because even billionaires could do them. But if you are among the many who took advantage last year, there's more to the story. -- Smart Money

If you are among the many who converted a traditional IRA to a Roth in 2010, you have some big decisions to make this year. The Tax Guy, Bill Bischoff at Smart Money recently outlined the most important ones.

When should I report the income from a 2010 conversion? The benefit of a Roth IRA is paying the tax upfront rather than when you withdraw the funds during retirement, thus locking in a known tax rate. Now, though, you still have to choose whether to report that income during 2010, or elect to spread it out evenly in 2011 and 2012 (50/50.) For most, stretching it out will be the best option. Still, for some it might be better to report it all in 2010, for instance if last year was a particularly bad year in terms of income, and you expect the next two years to be much better – bumping you into a higher bracket.

Should I reverse that conversion? Maybe. It will depend upon your individual circumstances, but at any rate you can postpone your decision until October 17^th – extended tax filing deadline  – and you could always simply “re-characterize” your IRA back into a traditional one, avoiding the tax if that is no longer the best option. (For example, if your Roth IRA takes a dive early in the year, since you’d still be paying taxes on the conversion amount that you’ve also lost.)

            Should I opt to extend my 2010 return? The short answer is YES. As long as you file for your extension by April 18, you will have until October 17^th to make final decisions about your 2010 Roth conversion. By October, you’ll have a better handle on whether you should reverse your conversion, declare the income and pay the tax in 2010, or spread it out over 2011 and 2012. Extending also makes it much simpler should you decide to reverse the conversion – you won’t have to file an amended return.

 

Continuing Care Confusion

For many aging seniors, the best living and care arrangement may be a continuing care residential community. Indeed, some 800,000 people already have made that choice. Continuing care residential facilities offer a wide range of options designed to evolve with your needs. Unfortunately, it is just this wide range of options that can make the process of choosing the best facility for yourself or a loved one all the more confusing, especially when it comes to determining costs.

Smart Money recently ran an article on the Confusing Costs of Continuing Care, outlining some of the more vexing difficulties, and offering tips on how to research a facility before making a choice.

Continuing care facilities can vary widely from one another in terms of costs and options, so much so that “a 10-year stay at one facility might cost well over $1 million; at another, a resident might pay just $300,000. And even within a single facility, the primary costs -- the entry and monthly charges -- can be structured in many different ways, making it hard to compare the value of one to another,” says Steve Maag, the director for assisted living at the Association of Home & Services for the Aging.

When researching a facility, try to determine the full extent of the entry and monthly charges, and what those fees cover. The varying options might mean that even the same monthly fees in several facilities aren’t comparable in terms of service or ultimate costs.

According to the American Institute for Economic Research, the best way to research the true cost of a continuing care facility is to obtain a detailed inventory of the services offered under the monthly fee, a record of fee increases over the past five years and the facility’s policy for fee increases. Then you’ll need to balance the fees for your needs (or those of your loved one) and lifestyle. For example, a higher entrance fee might mean lower monthly fees but fewer amenities or services. Don’t hesitate to consult a qualified attorney or accountant to help determine which facility might be best for you, given your needs and your financial resources.

Learn more about long-term care options by visiting the Long-Term Care Practice Center on our website. The National Academy of Elder Law Attorneys (NAELA) also sponsors an online senior housing directory called Snap for Seniors, where you can find an abundance of quality information about senior housing options, including continuing care residential communities.

Project SALUTE

Project SALUTE is a special program that provides pro bono attorney services to assist low-income Veterans in obtaining the federal disability and pension benefits they deserve.

I have received my Certificate of Completion for the Project SALUTE Basic Training in Veteran's Federal Benefits Law for Pro Bono Attorneys from the Univeresity of Detroit Mercy School of Law in October, 2009.

If you are a Veteran or know of a Veteran who may qualify for this service, contact me, or the University of Detroit Mercy School of Law at 313-596-0235.