Michigan Estate Planning Blog

529 Education Savings Plans Proliferate Saginaw, Michigan

Planning for the next generation, and for what you will leave them, often varies depending on what you have and what your loved ones will need. In today’s economy, the rising costs of education are leading many families to choose the “gift of education” as a fundamental goal in their wealth transfer planning. As a result, it is no surprise that recent analysis by Morningstar Inc. found a sharp increase in contributions to Section 529 plans in 2012. Reuters reported on these findings in an article titled “Morningstar: 529 college savings plans up in 2012 despite some lags.” The article notes a 529 plan is a tax-advantaged account that encourages savings now toward exorbitant college costs later. That said, not all plans are alike and the study found some were far better than others, and some were even of questionable worth. The final analysis: although 529 education savings plans as a whole underperformed against some mutual funds, 2012 saw a 25% rise in 529 plan assets against a 13.4% gain in the S&P index.

Reference: Reuters (April 22, 2013) “Morningstar: 529 college savings plans up in
2012 despite some lags”

For more inforomation, see www.jerryreiflawyer.com

 

Credit Shelter Trusts – The Tried and True Tool Saginaw, Michigan

There are some estate planning tools that are just basic and vital, regardless of tax law changes. Unfortunately, some of these tools may be ignored by taxpayers (to their peril) when they appear to be eclipsed by changes in the tax laws. For the prudent taxpayers, however, old standbys like the credit shelter trust should not be swept aside. Before the advent of portability as a method to maximize the full estate tax exemption available to married couples, such couples would oftentimes get caught in a marital deduction trap. In other words, the first spouse to die could pass all their wealth to the surviving spouse without triggering estate taxes, but upon the death of the surviving spouse only one spousal exemption (i.e., that of the surviving spouse) would be available to reduce estate taxes on the couples combined estate. Under the right circumstances, this was a recipe for disaster. Enter the credit shelter trust, also known as a bypass trust, which was a way of avoiding that marital deduction trap. Nevertheless, recent changes to the federal estate tax laws now allow a decedent spouse to pass their assets and their estate tax exemption to their surviving spouse. This portability of the estate tax exemption can now give a married couple the power to shelter as much as $10.5 million tax-free. So, no need for those credit shelter trusts? Not so fast! As addressed in a recent post in Elder Law Answers titled simply “Credit Shelter Trusts,” there is still plenty of life left in the this tried-and-true estate tax planning approach. For starters, many states still have their own independent estate taxes at much lower levels than the $5.25 million level exempted per spouse under the federal estate tax exemption. More importantly, portability does not apply to such taxes. In addition, credit shelter trusts not only shelter assets from estate taxes, but they can protect an inheritance from the unsuccessful remarriage of the surviving spouse and general inheritance protection. While there are myriad trust arrangements available to help you achieve your specific estate planning goals, the basic credit shelter trust is a proven tool that should be considered in the estate planning of every married couple.

Reference: Elder Law Answers
(updated: April 18, 2013) “Credit Shelter Trusts”

For more information, see www.jerryreiflawyer.com

Have “The Talk” with Your Children Now Saginaw, Michigan

There are a number of “talks” you have with your kids. We all are familiar with the infamous “the talk” – and a few others that are more easily avoided than had. Add “the inheritance talk” to the short list of intergenerational talks too important to avoid. So, how do you prepare and execute this too-important-to-avoid chat? To be blunt: there is no easy answer. Why? Because so much of the talk depends on what you have to leave, who is going to manage it, who is going to inherit it, and how soon are they going to get it? The Wall Street Journal recently offered a pep-talk for estate planning parents in a recent article aptly titled, “The Inheritance Conversation. Ugh.” One of the key reasons for this essential intergenerational communication is to prepare the inheriting generation for the attending responsibilities. One challenge, of course, is that any “inheritance” carries the risk of robbing a developing person of their work ethic. In short, what makes you, your assets, and your heirs unique? That is what needs to be understood and communicated. The sooner you have the inheritance talk, the better it will be for all concerned.

Reference: The Wall Street
Journal (April 19, 2013) “The Inheritance Conversation. Ugh.”

For more information, see www.jerryreiflawyer.com

 

Watch Out for “State” Estate Taxes Saginaw, Michigan

Budgets are set to battle once more on Capitol Hill in the near future. All considered, estate planners are fairly content with the last battle and the federal estate tax laws that went into effect with the American Taxpayer Relief Act (ATRA) at the beginning of the year. Consequently, most taxpayers have been spared the federal estate tax. But don’t forget about what your state has in store for you. As a recent Kiplinger article warns, the state level transfer taxes have not fallen away like the federal transfer tax. The article, titled “Beware States With Their Own Estate Taxes,” notes that fully 21 states (plus the District of Columbia) currently impose some kind of transfer tax, whether a death tax, an inheritance tax, or both simultaneously. Furthermore, if you pay too much attention to the federal tax, then you might think you are home free in terms of exempt amounts. Unfortunately, state taxes are, generally, set with much lower exemption amounts. The Federal tax has been permanently set at a rather generous range with a $5.25 million exemption amount. On the other hand, New York starts taking a piece of the estate pie at $1 million. If you live in a death tax state, now is the time to be planning to avoid or minimize the impact. For that matter, too, where do you plan your retirement? Crossing into a new state for retirement or late-in-life care is not just about passing the “Welcome” sign on the highway. Accordingly, remember to consider how your move will affect your assets and overall estate plan. Then again, how much do you trust Congress and their idea of a “permanent” estate tax law? Already these new budget battles have given platform to new calls for a change in the “permanent” federal estate tax exemption. In fact, the Obama Budget Proposal would reduce the just-agreed-upon “permanent” exemption from $5.25 million to $3.5 million (The Washington Times here).

Reference: Kiplinger
(May 2013 issue) “Beware States With Their Own Estate Taxes”

For more information, see www.jerryreiflawyer.com

 

Planning for Your Virtual Estate Assets Saginaw, Michigan

We live our lives today on the internet and in the cloud in ever more pervasive ways. This should not come as a surprise. After all, most of us walk around with the internet in our pocket 24/7 (and soon we may wear it as headgear, for those watching Google glasses with interest). What happens to our virtual life when our physical life is over? What happens to everything on the cloud when you die? From your personal information to Facebook accounts to iTunes collections, so much of it exists online. Until recently, there have been few solutions to the meticulous record keeping to keep everything straight, let alone remembered. Recently, The Wall Street Journal reported in an article titled “Google Lets Users Plan ‘Digital Afterlife’ By Naming Heirs” that Google has become amongst the first and likely the largest company to offer users a proactive digital-estate planning tool - the “Inactive Account Manager.” The important take-a-way is the importance of the planning. What about your other accounts and bits of data snaking across the web? What plans have you made to document your virtual life into the afterlife?

Reference: The Wall Street
Journal (April 11, 2013) “Google Lets Users Plan ‘Digital Afterlife’
By Naming Heirs”

For more information, see www.jerryreiflawyer.com

 

 

Exiting Your Business on Your Own Terms Saginaw, Michigan

Exit planning for your small business isn’t like a light switch – there is no simple on/off switch when it comes to control or ownership. It took time to build the business the right way and so it will also take proper time and planning to leave it on your own terms. Fortunately, you can structure your exit in such a way that you can lay the foundations to flip the switch in the future while retaining management control today. So, how do you structure the business so that you can start succession while still sitting on the throne? A recent Forbes article titled “How To Retain Control, Even As You Exit” provides some practical advice. At the most basic level, you may want to adjust the structure of the business itself. Is it an LLC? If yes, then retain control by making it a “manager-managed” LLC and retain the management position. Is it a corporation? If yes, then there are more options. For instance, you could issue various types of stock, either in different classes (voting vs. non-voting), or even offer restricted stock that becomes vested only upon certain conditions. The corporate structure also offers other powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements. Your approach and the timing of your exit will depend on other factors, not the least of which hinges on your successors. When will they be ready to assume more control? Even more important, when will you be ready to begin relinquishing control? More often than not, you can structure an exit so both control and financial gain slowly adjust to everyone’s benefit, but you have to start with a plan.

Reference: Forbes (April
10, 2013) “How To Retain Control, Even As You Exit”

For more information, see www.jerryreiflawyer.com

 

Related articles

Exiting Your Business on Your Own Terms

Make Proper End-Of-Life Plans Today Saginaw, Michigan

Planning for your end-of-life decisions, let alone coming to terms with the important questions your family will face, can be a difficult process. Fortunately, you can ease the process for all concerned through proper basic legal planning. So, have you executed your medical directive or living will? Was it one you created yourself or downloaded from the internet? If yes, you might want to reconsider that move while you can. Bloomberg recently published an article titled “The Right Way to Craft a Living Will” that discouraged taking the self-help approach to this fundamental component of your estate planning. It is important to know there is a “right way to craft a living will” and it does involve more than simply signing on the dotted line of a pre-printed form. Essentially, there may come a time when you are not “available” to make a medical decision – from resuscitation to feeding tubes to what-have-you. What happens then will depend, in large part, on how clear your instructions are. There are some definite shortcomings that can arise, particularly with those free forms you pick up online. A medical directive or living will is designed to speak for you and be some kind of arbiter. Of course, you can only have so much forethought and the language used in any document can only be so clear. For example, the original article illustrates the complex issues surrounding the word “terminal.” Given the difficultly attending the whole notion of predicting the course of your future health, consider appointing a trusted family member or friend to be your health care agent to make the decisions when you cannot. That way you are not merely trusting a piece of paper and the interpretation of the same. Whatever legal arrangements prove to be the most powerful or expedient, the basic truth is that any plan can be put to paper. However, to be truly effective the contents of the plan on that paper and your specific wishes need to be communicated to the people who will be part of the process. Make sure your loved ones know what your wishes are and that they will work to ensure that they are honored.

Reference: Bloomberg
(April 9, 2013) “The Right Way to Craft a Living Will”

For more information, see www.jerryreiflawyer.com

International Living Can Be Taxing Saginaw, Michigan

Living across national boundaries is an exciting life for an increasingly large portion of the population, not to mention a daily reality for immigrants heading one way or the other. That said, if you are skipping back and forth across a U.S. border, beware of the attending financial hurdles and the ever heightened attention of the IRS. If you are no stranger to frequent border traffic, then likely you are aware of the recent adjustments in IRS practice, not to mention several large developments involving overseas accounts and income. Essentially, the IRS is on a mission – it wants to capture more and more overseas accounts and assets taxable under U.S. law. How? By working in sync with international banking institutions. Ostensibly, the targets are tax-evasion type accounts in Swiss banks. In reality, the dragnet is catching a broader group of individuals and families of all means and intentions. And many of these individuals and families are unaware that they are targets and even fewer are aware the rules of the (tax) road. The problem has been growing with the surge in IRS attention to the matter and The New York Times tackled the issue not too long ago in an article titled “Overseas Finances Can Trip Up Americans Abroad.” Bottom line: if you’re going to be crossing borders regularly, whether for work, for family, or even as part of your retirement, then this is an important reminder about the hurdles those little lines on the map can pose if you aren’t careful. Whether you work, live, or retire abroad, it’s important to be aware of the new international complications.

Reference: The New York
Times (April 5, 2013) “Overseas Finances Can Trip Up Americans
Abroad”

For more information, see www.jerryreiflawyer.com

 

Exiting Your Business on Your Own Terms Saginaw, Michigan

Exit planning for your small business isn’t like a light switch – there is no simple on/off switch when it comes to control or ownership. It took time to build the business the right way and so it will also take proper time and planning to leave it on your own terms. Fortunately, you can structure your exit in such a way that you can lay the foundations to flip the switch in the future while retaining management control today. So, how do you structure the business so that you can start succession while still sitting on the throne? A recent Forbes article titled “How To Retain Control, Even As You Exit” provides some practical advice. At the most basic level, you may want to adjust the structure of the business itself. Is it an LLC? If yes, then retain control by making it a “manager-managed” LLC and retain the management position. Is it a corporation? If yes, then there are more options. For instance, you could issue various types of stock, either in different classes (voting vs. non-voting), or even offer restricted stock that becomes vested only upon certain conditions. The corporate structure also offers other powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements. Your approach and the timing of your exit will depend on other factors, not the least of which hinges on your successors. When will they be ready to assume more control? Even more important, when will you be ready to begin relinquishing control? More often than not, you can structure an exit so both control and financial gain slowly adjust to everyone’s benefit, but you have to start with a plan.

Reference: Forbes (April
10, 2013) “How To Retain Control, Even As You Exit”

For more information, see www.jerryreiflawyer.com

 

Planning Prenuptial Priorities Properly Saginaw, Michigan

The air is still heavy from another tax season. However, if you lift your ears to the gentle spring breezes, you may hear distant bells announcing this year’s wedding season. With many of these weddings will come financial complications that require attention, well before the vows are exchanged. Marriage is not just “tying the knot,” so to speak. No, marriage by its legal nature includes tying together all of your financial resources and interests. Unfortunately, these days marriage also has a dark side too: divorce. For those couples with important financial resources and interests in the marital mix, they may elect to use a prenuptial agreement as sort of an “insurance” policy in the event the marriage doesn’t work out as planned. Prenuptial agreements are nowhere as exotic as they are portrayed in the popular imagination. They can be, nevertheless, useful and important documents when produced through a spirit of full disclosure, careful deliberation, and independent legal representation. Otherwise, as pointed out in numerous articles these days, no prenuptial agreement is ironclad unless it is done correctly and, essentially, treated like the contractual understanding that it is. Recently, Forbes provides some guidance to evaluate the effectiveness of your prenuptial agreement in an article titled “Five Reasons Your Prenup Might Be Invalid.” In addition, The Wall Street Journal offers some specific guidance to get your prenuptial agreement ship-shape in an article titled “Shoring Up Your Prenup.” Used correctly, a prenuptial agreement, or even a post-nuptial agreement as the case may be, can help a couple frame their financial resources and interests in the context of their life together come what may. That can provide great peace of mind, especially when blending families and the children from those families.

Reference: Forbes (April
2, 2013) “Five Reasons Your Prenup Might Be Invalid”

The Wall Street Journal (March 29, 2013) “Shoring Up Your Prenup”

For more information, see www.jerryreiflawyer.com

 

Make Proper End-Of-Life Plans Today Saginaw, Michigan

Planning for your end-of-life decisions, let alone coming to terms with the important questions your family will face, can be a difficult process. Fortunately, you can ease the process for all concerned through proper basic legal planning. So, have you executed your medical directive or living will? Was it one you created yourself or downloaded from the internet? If yes, you might want to reconsider that move while you can. Bloomberg recently published an article titled “The Right Way to Craft a Living Will” that discouraged taking the self-help approach to this fundamental component of your estate planning. It is important to know there is a “right way to craft a living will” and it does involve more than simply signing on the dotted line of a pre-printed form. Essentially, there may come a time when you are not “available” to make a medical decision – from resuscitation to feeding tubes to what-have-you. What happens then will depend, in large part, on how clear your instructions are. There are some definite shortcomings that can arise, particularly with those free forms you pick up online. A medical directive or living will is designed to speak for you and be some kind of arbiter. Of course, you can only have so much forethought and the language used in any document can only be so clear. For example, the original article illustrates the complex issues surrounding the word “terminal.” Given the difficultly attending the whole notion of predicting the course of your future health, consider appointing a trusted family member or friend to be your health care agent to make the decisions when you cannot. That way you are not merely trusting a piece of paper and the interpretation of the same. Whatever legal arrangements prove to be the most powerful or expedient, the basic truth is that any plan can be put to paper. However, to be truly effective the contents of the plan on that paper and your specific wishes need to be communicated to the people who will be part of the process. Make sure your loved ones know what your wishes are and that they will work to ensure that they are honored.

Reference: Bloomberg
(April 9, 2013) “The Right Way to Craft a Living Will”

For more information, see www.jerryreiflawyer.com

 

IRA Asset Protection Increases Saginaw, Michigan

The more you have, the more you have to lose. That’s a cardinal rule of asset protection planning. If you have accumulated savings in an IRA, then you should be aware of the asset protection legally afforded your IRA. As recently reported by the Slott Report, the IRA bankruptcy exemption has just increased. The article is titled “IRA Bankruptcy Exemption Amount Increases.” Background: the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) cleared the way and exempted the first $1 million of IRA funds (including Roth IRAs) in the event of bankruptcy. Fortunately, this amount is subject to cost of living adjustments. Accordingly, the new number as of April 1, 2013, is $1,245,475. This is great news for most American savers, since the average IRA is less than $1 million. Still, it’s also a figure worth knowing for larger IRAs given the important function they serve in many retirement and/or estate plans. Caveat: what is just as important as the exemption are the limitations to the exemption. The safety of the exemption is only afforded in the case of filed bankruptcy, and might be voided in certain instances even then, but other events like divorce may easily trigger a levy on the IRA. The important lesson to remember is that there are existing IRA protections to be understood, but they need to be considered as part of a comprehensive asset protection strategy. Such a strategy will necessarily involve considerations of state law protections, asset titling and insurance coverage. Be sure to engage competent legal counsel, as proper asset protection planning is not a do-it-yourself project.

Reference: The Slott Report (April 9, 2013) “IRA Bankruptcy Exemption Amount Increases

”For more information see www.jerryreiflawyer.com

Planning for Your Virtual Estate Assets Saginaw, Michigan

We live our lives today on the internet and in the cloud in ever more pervasive ways. This should not come as a surprise. After all, most of us walk around with the internet in our pocket 24/7 (and soon we may wear it as headgear, for those watching Google glasses with interest). What happens to our virtual life when our physical life is over? What happens to everything on the cloud when you die? From your personal information to Facebook accounts to iTunes collections, so much of it exists online. Until recently, there have been few solutions to the meticulous record keeping to keep everything straight, let alone remembered. Recently, The Wall Street Journal reported in an article titled “Google Lets Users Plan ‘Digital Afterlife’ By Naming Heirs” that Google has become amongst the first and likely the largest company to offer users a proactive digital-estate planning tool - the “Inactive Account Manager.” The important take-a-way is the importance of the planning. What about your other accounts and bits of data snaking across the web? What plans have you made to document your virtual life into the afterlife?

Reference: The Wall Street
Journal (April 11, 2013) “Google Lets Users Plan ‘Digital Afterlife’
By Naming Heirs”

For more information, see www.jerryreiflawyer.com

 

Exiting Your Business on Your Own Terms

Exit planning for your small business isn’t like a light switch – there is no simple on/off switch when it comes to control or ownership. It took time to build the business the right way and so it will also take proper time and planning to leave it on your own terms. Fortunately, you can structure your exit in such a way that you can lay the foundations to flip the switch in the future while retaining management control today. So, how do you structure the business so that you can start succession while still sitting on the throne? A recent Forbes article titled “How To Retain Control, Even As You Exit” provides some practical advice. At the most basic level, you may want to adjust the structure of the business itself. Is it an LLC? If yes, then retain control by making it a “manager-managed” LLC and retain the management position. Is it a corporation? If yes, then there are more options. For instance, you could issue various types of stock, either in different classes (voting vs. non-voting), or even offer restricted stock that becomes vested only upon certain conditions. The corporate structure also offers other powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements. Your approach and the timing of your exit will depend on other factors, not the least of which hinges on your successors. When will they be ready to assume more control? Even more important, when will you be ready to begin relinquishing control? More often than not, you can structure an exit so both control and financial gain slowly adjust to everyone’s benefit, but you have to start with a plan.

Reference: Forbes (April
10, 2013) “How To Retain Control, Even As You Exit”

For more information, see www.jerryreiflawyercom

 

 

Make Proper End-Of-Life Plans Today Saginaw, Michigan

Planning for your end-of-life decisions, let alone coming to terms with the important questions your family will face, can be a difficult process. Fortunately, you can ease the process for all concerned through proper basic legal planning. So, have you executed your medical directive or living will? Was it one you created yourself or downloaded from the internet? If yes, you might want to reconsider that move while you can. Bloomberg recently published an article titled “The Right Way to Craft a Living Will” that discouraged taking the self-help approach to this fundamental component of your estate planning. It is important to know there is a “right way to craft a living will” and it does involve more than simply signing on the dotted line of a pre-printed form. Essentially, there may come a time when you are not “available” to make a medical decision – from resuscitation to feeding tubes to what-have-you. What happens then will depend, in large part, on how clear your instructions are. There are some definite shortcomings that can arise, particularly with those free forms you pick up online. A medical directive or living will is designed to speak for you and be some kind of arbiter. Of course, you can only have so much forethought and the language used in any document can only be so clear. For example, the original article illustrates the complex issues surrounding the word “terminal.” Given the difficultly attending the whole notion of predicting the course of your future health, consider appointing a trusted family member or friend to be your health care agent to make the decisions when you cannot. That way you are not merely trusting a piece of paper and the interpretation of the same. Whatever legal arrangements prove to be the most powerful or expedient, the basic truth is that any plan can be put to paper. However, to be truly effective the contents of the plan on that paper and your specific wishes need to be communicated to the people who will be part of the process. Make sure your loved ones know what your wishes are and that they will work to ensure that they are honored.

Make sure your loved ones knowference: Bloomberg (April 9, 2013) “The Right Way to Craft a Living Will”

For more information, see www.jerryreiflawyer.com

 

 

Related articles

At Death, Cash is Still King Saginaw, Michigan

The “Permanence” of Portability Saginaw, Michigan

There may be battles aplenty over the budget, and many more to come. At least we have a set of solid laws set in stone under the recently passed American Taxpayer Relief Act of 2012 (ATRA), right? While it appears safe to breathe a bit easier, many people still don’t trust any tax law claimed to be “permanent” by Congress and the White House. When it comes to making estate plans, certainty is an essential. Any uncertainty can wreak havoc on even the most carefully crafted plans. One popular “permanent” part of estate planning under ATRA is “portability.” Is it here to stay and can we trust it? “Portability,” as you may well know, is the new ability of a spouse to pass their unused unified gift tax lifetime exemption and/or estate tax exemption on to their surviving spouse. It grew out of budget deals and then was made “permanent” under ATRA, also known as the bridge over the Fiscal Cliff. As a questioner over in a recent Wall Street Journal Q&A (“Is Estate-Tax Portability Permanent?”) pointed out, estate tax “portability” is a great option but an act of Congress could just as easily undo it. What then? The general consensus is that portability is probably here to stay and for a multitude of reasons. Assuming that remains true, the key to portability is to separate myth from reality. The first myth: portability is not automatic? The first reality: it can be rather complex, especially in terms of unintended consequences. For example, what happens when the surviving spouse remarries? For the time being, perhaps you can breathe easier as to portability. The larger question, however, is what do you and your spouse hope to achieve through your estate plan from both tax and non-tax perspectives?

Reference: The Wall Street
Journal (March 31, 2013) “Is Estate-Tax Portability Permanent?”

For more information, see www.jerryreiflawyer.com

 

Do You Really Have Enough Life Insurance? Saginaw, Michigan

It’s not too hard to properly insure a car or a valuable piece of art, because the value of the object can be determined, even in a shifting market. What about insuring your life for those who depend on you for financial support? How do you insure your life and how do you even begin thinking about life insurance? For starters, it is essential to note that life insurance can be a complex subject, especially when it comes to the right “kind” and the right “amount” of insurance. So what questions do you ask? Sometimes the important questions don’t come up when you click through those online life insurance calculators, and unfortunately, less so with some insurance brokers. Forbes recently addressed this important issue in an article titled “What A Life Insurance Calculator Can't Tell You.” Generally speaking, insurance exists so you can pay a “premium” now that you can afford to protect against the risk of a catastrophic event later that you cannot afford. When it comes to life insurance, of course, the risk is to your family and loved ones if you were no longer there to care for them. Life insurance is a potent tool in this regard, but it is far from the only tool to protect for your loved ones in the event of your death. The original article provides an excellent analysis of common “needs” that life insurance can protect. In the end, however, nothing can replace the advice and counsel of an experienced and qualified life insurance professional.

Reference: Forbes (March
28, 2013) “What A Life Insurance Calculator Can't Tell
You”

For more information, see www.jerryreiflawyer.com

 

Asset Protection – Substance Over Form Saginaw, Michigan

Asset protection, for better or worse, is not a game of silver bullets or invincible armor. Unfortunately, this fact of life will never stop certain salesmen from marketing asset protection that way and certain debtors from buying into it. A tale of gullibility, faked complexity, and predictable endings can be found in a recent Forbes article titled “Bill 'Bulletproof A$$et Protection' Reed's Complex Plan Pierced By Nominee And Alter Ego Theories.” The case of U.S. v. Cohen, C.D.Ill. Case No. 08-3282 (Mar. 8, 2013), chronicles an asset protection plan so frightfully poor it could only be described as the “Bulletproof A$$et Protection.” Just the label used to market this “asset protection” scheme should give pause to the prudent. Asset protection is all about understanding the legal nature of your assets and the potential risks that may threaten your future use and enjoyment of those assets. Certainly state and federal laws offer varying degrees of protection, as do time-tested legal strategies. It’s as much art as science, but not magic. This is not a do-it-yourself program. Seek qualified legal counsel for assistance.

Reference: Forbes (March
31, 2013) “Bill 'Bulletproof A$$et Protection' Reed's
Complex Plan Pierced By Nominee And Alter Ego Theories”

For more information, see www.jerryreiflawyer.com

 

IRA Asset Protection Increases

The more you have, the more you have to lose. That’s a cardinal rule of asset protection planning. If you have accumulated savings in an IRA, then you should be aware of the asset protection legally afforded your IRA. As recently reported by the Slott Report, the IRA bankruptcy exemption has just increased. The article is titled “IRA Bankruptcy Exemption Amount Increases.” Background: the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) cleared the way and exempted the first $1 million of IRA funds (including Roth IRAs) in the event of bankruptcy. Fortunately, this amount is subject to cost of living adjustments. Accordingly, the new number as of April 1, 2013, is $1,245,475. This is great news for most American savers, since the average IRA is less than $1 million. Still, it’s also a figure worth knowing for larger IRAs given the important function they serve in many retirement and/or estate plans. Caveat: what is just as important as the exemption are the limitations to the exemption. The safety of the exemption is only afforded in the case of filed bankruptcy, and might be voided in certain instances even then, but other events like divorce may easily trigger a levy on the IRA. The important lesson to remember is that there are existing IRA protections to be understood, but they need to be considered as part of a comprehensive asset protection strategy. Such a strategy will necessarily involve considerations of state law protections, asset titling and insurance coverage. Be sure to engage competent legal counsel, as proper asset protection planning is not a do-it-yourself project.

Reference: The Slott Report (April 9, 2013) “IRA Bankruptcy Exemption Amount Increases”

For more information, see www.jerryreiflawyer.com

 

 

Planning Prenuptial Priorities Properly Saginaw, Michigan

The air is still heavy from another tax season. However, if you lift your ears to the gentle spring breezes, you may hear distant bells announcing this year’s wedding season. With many of these weddings will come financial complications that require attention, well before the vows are exchanged. Marriage is not just “tying the knot,” so to speak. No, marriage by its legal nature includes tying together all of your financial resources and interests. Unfortunately, these days marriage also has a dark side too: divorce. For those couples with important financial resources and interests in the marital mix, they may elect to use a prenuptial agreement as sort of an “insurance” policy in the event the marriage doesn’t work out as planned. Prenuptial agreements are nowhere as exotic as they are portrayed in the popular imagination. They can be, nevertheless, useful and important documents when produced through a spirit of full disclosure, careful deliberation, and independent legal representation. Otherwise, as pointed out in numerous articles these days, no prenuptial agreement is ironclad unless it is done correctly and, essentially, treated like the contractual understanding that it is. Recently, Forbes provides some guidance to evaluate the effectiveness of your prenuptial agreement in an article titled “Five Reasons Your Prenup Might Be Invalid.” In addition, The Wall Street Journal offers some specific guidance to get your prenuptial agreement ship-shape in an article titled “Shoring Up Your Prenup.” Used correctly, a prenuptial agreement, or even a post-nuptial agreement as the case may be, can help a couple frame their financial resources and interests in the context of their life together come what may. That can provide great peace of mind, especially when blending families and the children from those families.

Reference: Forbes (April
2, 2013) “Five Reasons Your Prenup Might Be Invalid”

The Wall Street Journal (March 29, 2013) “Shoring Up Your Prenup”

For more information, see www.jerryreiflawyer.com

 

IRS Estate Audits Increase Saginaw, Michigan

Whether it’s Caller I.D. or the return address on an envelope in your mailbox, no one likes to hear from the IRS. Audits are never good news. And it’s not just income taxes that are subject to them. Estate tax return audits can be especially bad news. First, the estate tax return itself must be filed within nine months following the death of the loved one who owned the assets subject to the return. Second, to make matters worse, the IRS seems to be upping pressure on estate tax returns more than any other. With tax season dying out for most of us (if you haven’t filed for an extension), the last thing you might want to hear about are audits of any kind. Nevertheless, the fiscally-minded writers at AccountingWeb want to warn taxpayers about this apparent IRS interest in estate tax returns in an article titled “IRS 2011 Audit Rates Show Estate Tax Returns under the Microscope.” Bottom line: take this as fresh evidence to cross your “t’s” and dot your “i’s” when it comes to your own estate planning.

Reference: Accounting Web
(March 27, 2013) “IRS 2011 Audit Rates Show Estate Tax Returns
under the Microscope”

For more information, see www.jerryreiflawyer.com

 

The “Permanence” of Portability Saginaw, Michigan

There may be battles aplenty over the budget, and many more to come. At least we have a set of solid laws set in stone under the recently passed American Taxpayer Relief Act of 2012 (ATRA), right? While it appears safe to breathe a bit easier, many people still don’t trust any tax law claimed to be “permanent” by Congress and the White House. When it comes to making estate plans, certainty is an essential. Any uncertainty can wreak havoc on even the most carefully crafted plans. One popular “permanent” part of estate planning under ATRA is “portability.” Is it here to stay and can we trust it? “Portability,” as you may well know, is the new ability of a spouse to pass their unused unified gift tax lifetime exemption and/or estate tax exemption on to their surviving spouse. It grew out of budget deals and then was made “permanent” under ATRA, also known as the bridge over the Fiscal Cliff. As a questioner over in a recent Wall Street Journal Q&A (“Is Estate-Tax Portability Permanent?”) pointed out, estate tax “portability” is a great option but an act of Congress could just as easily undo it. What then? The general consensus is that portability is probably here to stay and for a multitude of reasons. Assuming that remains true, the key to portability is to separate myth from reality. The first myth: portability is not automatic? The first reality: it can be rather complex, especially in terms of unintended consequences. For example, what happens when the surviving spouse remarries? For the time being, perhaps you can breathe easier as to portability. The larger question, however, is what do you and your spouse hope to achieve through your estate plan from both tax and non-tax perspectives?

Reference: The Wall Street
Journal (March 31, 2013) “Is Estate-Tax Portability Permanent?”

For more information, see www.jerryreiflawyer.com

 

IRAs Targeted in Obama Budget Saginaw, Michigan

Three budget plans are winding their way around the capitol, to include President Obama’s. While the details are thin and the pundits are still weighing in, self-employed professionals need to take heed. They are tax targets when it comes to their retirement savings. For retirement savers and those making powerful use of an IRA, here’s at least one tidbit the rumor mill has been circulating well before the budget’s release. If enacted, “wealthy” individuals would be pinched with a $3 million cap on their IRA holdings. Several sources have reported on this, to include Time Magazine in an article titled “Obama’s Budget Would Cap Tax-Advantaged Savings.” Although $3 million may sound like a lot, it may end up affecting more savers who otherwise might not be considered traditional tax targets: self-employed individuals like doctors, lawyers, and entrepreneurs. The self-employed all have unique abilities (and needs) to contribute large amounts to their IRAs. So, who is the intended target of this kind of a cap? One name keeps surfacing: Mitt Romney. Remember that fabled $100+ million IRA, as pointed out by the Boston Globe in an article titled “Obama budget would pinch IRAs of wealthy with $3m cap.” The analyses of the proposal are still being churned out, and there are some important details to be hammered out as well. At present, this cap is no more than a proposal and part of a budget plan none-too-well-liked by either side. Nevertheless, this kind of cap and its prying look at tax-advantaged plans is worth watching.

Time Magazine (April 10, 2013) “Obama’s Budget Would Cap Tax-Advantaged
Savings”

The Boston
Globe (April 10, 2013) “Obama budget would pinch IRAs of wealthy
with $3m cap”

For more information, see www.jerryreiflawyer.com

 

Do You Really Have Enough Life Insurance? Saginaw, Michigan

It’s not too hard to properly insure a car or a valuable piece of art, because the value of the object can be determined, even in a shifting market. What about insuring your life for those who depend on you for financial support? How do you insure your life and how do you even begin thinking about life insurance? For starters, it is essential to note that life insurance can be a complex subject, especially when it comes to the right “kind” and the right “amount” of insurance. So what questions do you ask? Sometimes the important questions don’t come up when you click through those online life insurance calculators, and unfortunately, less so with some insurance brokers. Forbes recently addressed this important issue in an article titled “What A Life Insurance Calculator Can't Tell You.” Generally speaking, insurance exists so you can pay a “premium” now that you can afford to protect against the risk of a catastrophic event later that you cannot afford. When it comes to life insurance, of course, the risk is to your family and loved ones if you were no longer there to care for them. Life insurance is a potent tool in this regard, but it is far from the only tool to protect for your loved ones in the event of your death. The original article provides an excellent analysis of common “needs” that life insurance can protect. In the end, however, nothing can replace the advice and counsel of an experienced and qualified life insurance professional.

Reference: Forbes (March
28, 2013) “What A Life Insurance Calculator Can't Tell
You”

for more information, see www.jerryreiflawyer.com

 

“Fair Or Equal” Inheritance – It’s in the Eye of the Beholder Saginaw, Michigan

If you are planning your estate, or have already inked your planning, how will your loved ones react to their inheritance? Are you providing a “fair” or an “equal” inheritance? While it is your estate, it may be helpful to communicate your wishes and rationale now to avoid misunderstandings (or worse) later on. The Washington Post recently explored this subject in an article titled “Dividing up money can cause divisions in families.” The article tracks the case of a certain individual who can’t help feeling resentment over the estate plan his parents have created. He believes the basis for the estate plan is his chosen “lifestyle.” He is gay and his married sister is not. He has no children and she does. The parents of these adult children have chosen to leave an inheritance “directly” to their grandchildren, instead of “through” their daughter. The grandchildren are set to each inherit one-sixth of the estate, with the children splitting the remaining two-thirds. The author of the article concludes thusly regarding the inheritance planning of these parents: “And yet, this is their prerogative. It’s their money.” What about your own family and heirs – will they understand? What can you do to make yourself understood? Then again, if instead you are the one inheriting, have you thought it through from everyone’s perspective? Properly thinking through your estate planning objectives and then committing it to proper legal instruments can be an arduous task. That is why too few otherwise responsible adults actually follow through on their intentions. One of the most common estate plans is one that lies unsigned in a desk drawer. When all is said and done, it is your estate and you may distribute it as you wish. Period. Nevertheless, long-term family harmony often hinges on communicating your wishes while you are alive and able to explain them. Surprise is only a good thing when it comes to birthdays and military maneuvers.

For more information, see www.jerryreiflawyer.com

 

 

When HIPAA Happens Saginaw, Michigan

No one likes hospitals, except when you need one. Unfortunately, families caring for their elderly loved ones are finding hospitals and other care facilities full of legal red tape that is increasingly difficult to navigate. Sometimes the red tape is simply hospital policy gone too far. Regardless, navigating the maze requires doing your homework ahead of time. For example, what do you know about HIPAA? HIPAA is the “Health Insurance Portability and Accountability Act of 1997.” The title of a recent article in the New Old Age Blog of The New York Times summarizes the issue well: “A Privacy Law Often Misinterpreted.” One purpose of the law is to ensure the privacy of medical data. Nevertheless, this doesn’t mean the hospital is intended to protect the privacy of the patient from their loved ones, especially when that loved one is present during an examination! In fact, HIPAA does not prevent health care providers from sharing relevant information regarding a patient with their family members, unless the patient objects. The original article is a worthy and enlightening read, whether you are a patient, a family member or even a medical professional. Apparently, there is a lot of misinformation leading to misinterpretation when it comes to HIPAA. Bottom line: make sure you have up-to-date Advance Health Directives that specifically provide your designated agents with current and future access to all of your medical information, verbal and written, with specific authority to execute HIPAA releases on your behalf.

Reference: The
New York Times – The New Old Age Blog (March 27, 2013) “A Privacy Law Often Misinterpreted”

For more informaton, see www.jerryreiflawyer.com

 

Asset Protection – Substance Over Form Saginaw, Michigan

Asset protection, for better or worse, is not a game of silver bullets or invincible armor. Unfortunately, this fact of life will never stop certain salesmen from marketing asset protection that way and certain debtors from buying into it. A tale of gullibility, faked complexity, and predictable endings can be found in a recent Forbes article titled “Bill 'Bulletproof A$$et Protection' Reed's Complex Plan Pierced By Nominee And Alter Ego Theories.” The case of U.S. v. Cohen, C.D.Ill. Case No. 08-3282 (Mar. 8, 2013), chronicles an asset protection plan so frightfully poor it could only be described as the “Bulletproof A$$et Protection.” Just the label used to market this “asset protection” scheme should give pause to the prudent. Asset protection is all about understanding the legal nature of your assets and the potential risks that may threaten your future use and enjoyment of those assets. Certainly state and federal laws offer varying degrees of protection, as do time-tested legal strategies. It’s as much art as science, but not magic. This is not a do-it-yourself program. Seek qualified legal counsel for assistance.

Reference: Forbes (March
31, 2013) “Bill 'Bulletproof A$$et Protection' Reed's
Complex Plan Pierced By Nominee And Alter Ego Theories”

For more information, see www.jerryreiflawyer.com

 

 

Do You Really Have Enough Life Insurance? Saginaw, Michigan

It’s not too hard to properly insure a car or a valuable piece of art, because the value of the object can be determined, even in a shifting market. What about insuring your life for those who depend on you for financial support? How do you insure your life and how do you even begin thinking about life insurance? For starters, it is essential to note that life insurance can be a complex subject, especially when it comes to the right “kind” and the right “amount” of insurance. So what questions do you ask? Sometimes the important questions don’t come up when you click through those online life insurance calculators, and unfortunately, less so with some insurance brokers. Forbes recently addressed this important issue in an article titled “What A Life Insurance Calculator Can't Tell You.” Generally speaking, insurance exists so you can pay a “premium” now that you can afford to protect against the risk of a catastrophic event later that you cannot afford. When it comes to life insurance, of course, the risk is to your family and loved ones if you were no longer there to care for them. Life insurance is a potent tool in this regard, but it is far from the only tool to protect for your loved ones in the event of your death. The original article provides an excellent analysis of common “needs” that life insurance can protect. In the end, however, nothing can replace the advice and counsel of an experienced and qualified life insurance professional.

Reference: Forbes (March 28, 2013) “What A Life Insurance Calculator Can't Tell

For more information, see www.jerryreiflawyer.com

 

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Expensive of Affordable?

“Fair Or Equal” Inheritance – It’s in the Eye of the Beholder Saginaw, Michigan

If you are planning your estate, or have already inked your planning, how will your loved ones react to their inheritance? Are you providing a “fair” or an “equal” inheritance? While it is your estate, it may be helpful to communicate your wishes and rationale now to avoid misunderstandings (or worse) later on. The Washington Post recently explored this subject in an article titled “Dividing up money can cause divisions in families.” The article tracks the case of a certain individual who can’t help feeling resentment over the estate plan his parents have created. He believes the basis for the estate plan is his chosen “lifestyle.” He is gay and his married sister is not. He has no children and she does. The parents of these adult children have chosen to leave an inheritance “directly” to their grandchildren, instead of “through” their daughter. The grandchildren are set to each inherit one-sixth of the estate, with the children splitting the remaining two-thirds. The author of the article concludes thusly regarding the inheritance planning of these parents: “And yet, this is their prerogative. It’s their money.” What about your own family and heirs – will they understand? What can you do to make yourself understood? Then again, if instead you are the one inheriting, have you thought it through from everyone’s perspective? Properly thinking through your estate planning objectives and then committing it to proper legal instruments can be an arduous task. That is why too few otherwise responsible adults actually follow through on their intentions. One of the most common estate plans is one that lies unsigned in a desk drawer. When all is said and done, it is your estate and you may distribute it as you wish. Period. Nevertheless, long-term family harmony often hinges on communicating your wishes while you are alive and able to explain them. Surprise is only a good thing when it comes to birthdays and military maneuvers.

Reference: The Washington
Post (March 29, 2013) “Dividing up money can cause divisions in
families”

For more information, see www.jerryreiflawyer.com

 

At Death, Cash is Still King Saginaw, Michigan

When you breathe your last breath, which would your heirs (likely) need – a million dollars in cash or a million dollars in illiquid art? The family of Merton D. Simpson can clarify any uncertainty you may have, especially when it comes to having enough cash to bury you. In short, “illiquid assets” can present a great challenge to proper planning for you, your family, and your estate. While there are countless examples, a very recent and public one is the case of the aforementioned Merton D. Simpson. As reported by The New York Times in an article titled “Art Worth Millions, Yet No Cash for Burial,” careful planning is required to meet “liquid” cash needs virtually every estate encounters. Whether paying last health care expenses or other debts, you at least want to have enough cash for your funeral. Mr. Simpson’s entire estate was worth millions in a vast collection of African and modern art, not to mention art in his own name as an artist of no little esteem. Tragically, in the end there was no money for the funeral. In addition, what happens if and when the taxes come due? That’s when expensive collections of illiquid assets are sold at auction, oftentimes for pennies on the dollar. Now there’s more to the story of Mr. Simpson and many more lessons to be gleaned regarding proper financial and estate planning, as well as a bit of family intrigue. The takeaway: if one dies with an estate of priceless, illiquid assets – then one’s estate may find itself deep in the desert with a purse full of gold, but not a drop of cool water to drink.

Reference: The New York
Times (March 26, 2013) “Art Worth Millions, Yet No Cash for Burial”

For more information, see www.jerryreiflawyer.com