Michigan Estate Planning Blog

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

 

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

 

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

 

New Estate Tax Law - Estate Planning Review Recommended Saginaw, Michigan

Do we now find ourselves living in the calm after the storm? The estate tax laws seem to have finally found a safe harbor after so many years of indecision, short-sighted planning, and even damage control. So are you confident with your estate planning, or are you still somewhat concerned? As you may have heard, the midnight compromise signed into law just before the tax law shifted back ten years into the past, otherwise known as the American Taxpayer Relief Act of 2012 (or ATRA 2012), finally set estate laws and wealth transfer taxes into stone. While “permanent” and “tax law” may seem a bit oxymoronic, the deal struck in stone is at least better than the silly putty in play for a decade. A recent Reuters article titled “New estate tax rules call for new planning tactics” is a clarion call to review your estate planning. Some of the tax changes may have created some unintended consequences you ought to investigate, especially with the more generous federal estate tax exemption amount. Regardless, it is prudent to review your estate plan from time to time. After all, estate planning is a process, not an event.

Reference: Reuters (February 26, 2013) “New estate tax rules call for new planning tactics”

For more information, see www.jerryreiflawyer.com

 

New Estate Tax Law - Estate Planning Review Recommended Saginaw, Michigan

Do we now find ourselves living in the calm after the storm? The estate tax laws seem to have finally found a safe harbor after so many years of indecision, short-sighted planning, and even damage control. So are you confident with your estate planning, or are you still somewhat concerned? As you may have heard, the midnight compromise signed into law just before the tax law shifted back ten years into the past, otherwise known as the American Taxpayer Relief Act of 2012 (or ATRA 2012), finally set estate laws and wealth transfer taxes into stone. While “permanent” and “tax law” may seem a bit oxymoronic, the deal struck in stone is at least better than the silly putty in play for a decade. A recent Reuters article titled “New estate tax rules call for new planning tactics” is a clarion call to review your estate planning. Some of the tax changes may have created some unintended consequences you ought to investigate, especially with the more generous federal estate tax exemption amount. Regardless, it is prudent to review your estate plan from time to time. After all, estate planning is a process, not an event.

Reference: Reuters (February 26, 2013) “New estate tax rules call for new planning tactics”

For more information, see www.jerryreiflawyer.com

 

New Estate Tax Law - Estate Planning Review Recommended Saginaw, Michigan

Do we now find ourselves living in the calm after the storm? The estate tax laws seem to have finally found a safe harbor after so many years of indecision, short-sighted planning, and even damage control. So are you confident with your estate planning, or are you still somewhat concerned? As you may have heard, the midnight compromise signed into law just before the tax law shifted back ten years into the past, otherwise known as the American Taxpayer Relief Act of 2012 (or ATRA 2012), finally set estate laws and wealth transfer taxes into stone. While “permanent” and “tax law” may seem a bit oxymoronic, the deal struck in stone is at least better than the silly putty in play for a decade. A recent Reuters article titled “New estate tax rules call for new planning tactics” is a clarion call to review your estate planning. Some of the tax changes may have created some unintended consequences you ought to investigate, especially with the more generous federal estate tax exemption amount. Regardless, it is prudent to review your estate plan from time to time. After all, estate planning is a process, not an event.

Reference: Reuters (February 26, 2013) “New estate tax rules call for new planning tactics”

For more information, see www.jerryreiflawyer.com

 

New Estate Tax Law - Estate Planning Review Recommended Saginaw, Michigan

Do we now find ourselves living in the calm after the storm? The estate tax laws seem to have finally found a safe harbor after so many years of indecision, short-sighted planning, and even damage control. So are you confident with your estate planning, or are you still somewhat concerned? As you may have heard, the midnight compromise signed into law just before the tax law shifted back ten years into the past, otherwise known as the American Taxpayer Relief Act of 2012 (or ATRA 2012), finally set estate laws and wealth transfer taxes into stone. While “permanent” and “tax law” may seem a bit oxymoronic, the deal struck in stone is at least better than the silly putty in play for a decade. A recent Reuters article titled “New estate tax rules call for new planning tactics” is a clarion call to review your estate planning. Some of the tax changes may have created some unintended consequences you ought to investigate, especially with the more generous federal estate tax exemption amount. Regardless, it is prudent to review your estate plan from time to time. After all, estate planning is a process, not an event.

Reference: Reuters (February 26, 2013) “New estate tax rules call for new planning tactics”

For more information, see www.jerryreiflawyer.com

 

Advanced Planning Techniques To Be Targeted? Saginaw, Michigan

With the fiscal cliff standoff behind us, many Americans are content to rest and catch up on their sleep. Some professionals, however, have started to realize that there were some very real questions left on the fiscal cliff table. That’s right – we are approaching a renewed fiscal debate and inevitable revenue-squeezing. While significant estate planning laws are settled, there remain more than a few important estate planning “tools” left hanging in the air. These tools likely will be low-hanging fruit in future discussions. The American Taxpayer Relief Tax Act Of 2012 (ATRA) finally ended some 12 years of estate planning uncertainty (or so we can only hope). The certainty includes such matters as various tax rates and the exemptions amounts for the estate tax, gift tax, and generation-skipping tax. But ATRA didn’t settle many technical questions raised in the past few years, both on and off the campaign trail. So, what issues and devices should we watch? A recent Forbes article titled “Congress May Tighten The Belt On Cute Tax Tricks” lists some sore subjects and possible new areas of taxation. These include: • Grantor Trusts: might just get added back into the Grantor’s estate. • Dynasty Trusts: might just limit the extent of your dynasty. • GRATs: “Grantor Retained Annuity Trusts” (GRATs) might become much more demanding and risky. • Family Limited Partnerships: might become much less valuable as your ability to take discounts is curtailed. The original article is worth your time, especially if you are concerned that future technical rules may swoop in and sully some well-designed estate planning. However, for those conversant with this subject, they will recognize that this talk is nothing new and these estate planning devices have been repeatedly targeted in the past. The takeaway, as always, is to consult qualified legal counsel regarding how future changes in the law may impact your estate planning.

Reference: Forbes (January 16, 2013) “Congress May Tighten The Belt On Cute Tax Tricks”

For more information, see www.jerryreiflawyer.com

The Search for a Long-Term Care Solution Saginaw, Michigan

Well, the “fiscal cliff” has been averted, for now. One law that fell over the cliff, however, is the CLASS Act intended to deal with the issue of long-term care for seniors. As a result, politicians did what they always do – form another “commission.” The CLASS Act and the new commission formed to study the delivery (and financing) of long-term care was the subject of a recent Forbes article titled “Fiscal Cliff Deal Repeals CLASS Act, Creates Long-Term Care Commission.” As summarized in the title of this Forbes article, The American Taxpayer Relief Act or ATRA – does two things in the field of long-term care: first, it officially ends the CLASS Act, and second, it forms a new bipartisan commission to “tackle” the matter. Is it a good trade-off? For starters, the CLASS Act had already been abandoned by the administration and Congress alike. On the other hand, this new commission might not find an alternative new solution. As the Forbes article notes, the commission is a “political commission” rather than a panel of subject matter experts. The commission has been given a window of six months to conduct its business. The crisis of long-term care in America is still a developing one. How we come to deal remains to be seen. That noted, as an individual the time to take responsibility for your long-term care future is today. Be sure to consult competent legal counsel and your long-term care insurance agent to examine your options.

Reference: Forbes (January 1, 2013) “Fiscal Cliff Deal Repeals CLASS Act, Creates Long-Term Care Commission”

For more information, see www.jerryreiflawyer.com

 

Fiscal Cliff Deal Expands Roth 401(k) Conversion Eligibility Saginaw, Michigan

If your employer offers a traditional 401(k) retirement plan, you may want to ask if there are plans to also offer the Roth 401(k), and the option of converting a traditional pre-tax plan to a Roth plan. The new American Taxpayer Relief Act (aka Fiscal Cliff Deal) expands eligibility for these conversions, and, depending upon your circumstances, paying the tax now just might be financially savvy in the long-term. Clearly, Congress is hoping to raise some revenue by allowing these taxable conversions. And while it may seem counter-intuitive to pay the tax now, there are situations in which a 401(k) Roth conversion makes sense. Here’s how it works: the new rules basically let you convert everything in a traditional 401(k), including pre-tax salary deferrals, at any age, into a Roth 401(k). You pay income tax on the amount you convert. Your new Roth account continues to grow tax free and the eventual distributions also are tax free. According to Forbes, “a Roth conversion makes sense if you expect your tax rate to be the same or higher in retirement and won’t need the funds for a decade or more. It’s also an attractive way to leave an income-tax-free inheritance to your kids or grandkids.” As with all tax and retirement planning strategies, there are a few caveats: • Unlike the traditional IRA Roth conversion rules, there is no option to split your tax bill over two years. You will owe the entire tax on whatever amount you convert (remember, Congress is trying to raise some revenue here!). • Also unlike traditional IRA Roth conversions, you cannot un-do your conversion next year if you change your mind. Your 401(k) conversion is permanent. • Both the Roth 401(k) plan and the conversion option must be included in your employer’s plan offering for you to take advantage of this strategy. Forbes has a handy online slide show outlining 10 reasons you might want to convert to a Roth IRA. If any of these fit your situation, be sure to consult with a qualified retirement planning and tax specialist before making a move.

Forbes (January 2, 2013), “Roth 401(K) Conversions For All Thanks To Fiscal Cliff Deal”

For more information, go to www.jerryreiflawyer.com

 

Fiscal Cliff Deal Opens Door to Last-Minute Charitable Contributions

If you are past age 70-1/2, you probably already know that you must take required minimum distributions (RMDs) from your traditional IRA, and that you must pay income taxes on those distributions (this does not apply to Roth IRAs). What you may not know is, if you are charitably inclined, the American Taxpayer Relief Act (commonly referred to as the Fiscal Cliff Deal) allows you to avoid income taxes by directing those RMDs to a qualified charity with an IRA Charitable Rollover. The rule applies for 2013, and includes a small window of opportunity for 2012 donations as well. We have had this deal before, but Congress let it expire at the end of 2011. So, it’s likely that most people already took their 2012 RMDs, as required by law, before December 31st. If you didn’t, though, Congress has given you until January 31st, 2013 to make a charitable contribution that can satisfy all or part of your RMD for 2012. Confused? You may want to read more about it in the Forbes article, “Fiscal Cliff Deal Allows Giving IRA Assets to Charity.” If this giving strategy sounds appealing to you, bear a few things in mind: • To qualify, your donations must be directed from your IRA to the charity, and cannot be distributed to you first. Ask the account custodian to send the distribution directly to the charity. • Your donations cannot go to donor-advised funds, supporting organizations or private non-operating foundations. Otherwise, the money can go to any organization to which you can make a gift that would qualify as a charitable deduction on your tax return.

Reference: Forbes (January 2, 2013), “Fiscal Cliff Deal Allows Giving IRA Assets To Charity

For more information, go to www.jerryreiflawyer.com

 

Federal Estate and Gift Taxes Finally Settled with Fiscal Cliff Deal Saginaw, Michigan

Unless you’ve been living under a rock, you’re probably aware that Congress last week passed a tax deal avoiding what the media had termed “the fiscal cliff.” You may not be aware, however, of how The American Taxpayer Relief Act impacts your estate, business and retirement planning. This week I’ll focus on those key aspects of the Act, starting with a summary of key provisions affecting federal estate and gift taxes. Perhaps one of the most important aspects of these new provisions is that they are permanent (as “permanent” as anything in Congress can be, anyway). By “permanent,” I mean that there is no scheduled “sunset” or repeal. For the first time in more than a decade, we now have a set of laws around which we can make reasonable estate and gift tax plans. Deborah Jacobs of Forbes wrote a succinct summary in the article, “After The Fiscal Cliff Deal: Estate And Gift Tax Explained.” You may want to click over to read it, but here are the highlights: • The Basic Exclusion Amount is set at $5.12 million per person in 2012, to be adjusted annually for inflation. In plain English, this means that a single person may transfer up to $5.12 million in estate value to their heirs federal estate tax-free. • There is an unlimited marital deduction, which means spouses can pass unlimited estate value from one to another without federal estate taxation. • Your basic exclusion amount also is “portable” to your spouse, which means that a surviving spouse can apply both spouses’ basic exclusion amount to protect up to $10.24 million in estate value from federal estate taxation. As Jacobs notes in her article, however: “Still, portability is not automatic. The executor handling the estate of the spouse who died will need to transfer the unused exclusion to the survivor, who can then use it to make lifetime gifts or pass assets through his or her estate. The prerequisite is filing an estate tax return when the first spouse dies, even if no tax is owed.” • Lifetime gifts are subject to the same $5.12 million basic exclusion amount, as part of your unified credit (one credit of $5.12 million for estate transfer and gifts made during your lifetime). Again, spouses may utilize both their mutual basic exclusion amounts to make lifetime gifts (called gift-splitting). Remember that lifetime gifts will reduce the exclusion amount available to the final estate. • The annual exclusion ($14,000 per person) allows you to make lifetime gifts that don’t count against your estate and gift tax basic exclusion. Married couples can combine their annual exclusion amounts to make gifts of up to $28,000 per person per year. For example, a married couple with two adult children could gift each child $28,000 per year, for a total of $56,000 – without utilizing their lifetime estate and gift tax basic exclusion. Should you review your estate plan in light of these changes? Perhaps, especially if it has been more than two years since you last reviewed your plan with your estate attorney; or if you have experienced significant life changes such as marriage or remarriage, the serious illness of a spouse or other family member, the birth or adoption of a child or grandchild, acquisition of property in another state, or a significant change in your finances such as receiving an inheritance or selling a business. If any of these situations apply to you, or if you have questions about how the new laws might change your estate planning, call the office and ask to schedule an estate plan review consultation.

Reference: Forbes (January 2, 2013) “After The Fiscal Cliff Deal: Estate And Gift Tax Explained.

Federal Estate and Gift Taxes Finally Settled with Fiscal Cliff Deal Saginaw, Michigan

Unless you’ve been living under a rock, you’re probably aware that Congress last week passed a tax deal avoiding what the media had termed “the fiscal cliff.” You may not be aware, however, of how The American Taxpayer Relief Act impacts your estate, business and retirement planning. This week I’ll focus on those key aspects of the Act, starting with a summary of key provisions affecting federal estate and gift taxes. Perhaps one of the most important aspects of these new provisions is that they are permanent (as “permanent” as anything in Congress can be, anyway). By “permanent,” I mean that there is no scheduled “sunset” or repeal. For the first time in more than a decade, we now have a set of laws around which we can make reasonable estate and gift tax plans. Deborah Jacobs of Forbes wrote a succinct summary in the article, “After The Fiscal Cliff Deal: Estate And Gift Tax Explained.” You may want to click over to read it, but here are the highlights: • The Basic Exclusion Amount is set at $5.12 million per person in 2012, to be adjusted annually for inflation. In plain English, this means that a single person may transfer up to $5.12 million in estate value to their heirs federal estate tax-free. • There is an unlimited marital deduction, which means spouses can pass unlimited estate value from one to another without federal estate taxation. • Your basic exclusion amount also is “portable” to your spouse, which means that a surviving spouse can apply both spouses’ basic exclusion amount to protect up to $10.24 million in estate value from federal estate taxation. As Jacobs notes in her article, however: “Still, portability is not automatic. The executor handling the estate of the spouse who died will need to transfer the unused exclusion to the survivor, who can then use it to make lifetime gifts or pass assets through his or her estate. The prerequisite is filing an estate tax return when the first spouse dies, even if no tax is owed.” • Lifetime gifts are subject to the same $5.12 million basic exclusion amount, as part of your unified credit (one credit of $5.12 million for estate transfer and gifts made during your lifetime). Again, spouses may utilize both their mutual basic exclusion amounts to make lifetime gifts (called gift-splitting). Remember that lifetime gifts will reduce the exclusion amount available to the final estate. • The annual exclusion ($14,000 per person) allows you to make lifetime gifts that don’t count against your estate and gift tax basic exclusion. Married couples can combine their annual exclusion amounts to make gifts of up to $28,000 per person per year. For example, a married couple with two adult children could gift each child $28,000 per year, for a total of $56,000 – without utilizing their lifetime estate and gift tax basic exclusion. Should you review your estate plan in light of these changes? Perhaps, especially if it has been more than two years since you last reviewed your plan with your estate attorney; or if you have experienced significant life changes such as marriage or remarriage, the serious illness of a spouse or other family member, the birth or adoption of a child or grandchild, acquisition of property in another state, or a significant change in your finances such as receiving an inheritance or selling a business. If any of these situations apply to you, or if you have questions about how the new laws might change your estate planning, call the office and ask to schedule an estate plan review consultation.

Reference: Forbes (January 2, 2013) “After The Fiscal Cliff Deal: Estate And Gift Tax Explained.”

For more information, go to www.jerryreiflawyer.com

 

The Search for a Long-Term Care Solution Saginaw Michigan

Well, the “fiscal cliff” has been averted, for now. One law that fell over the cliff, however, is the CLASS Act intended to deal with the issue of long-term care for seniors. As a result, politicians did what they always do – form another “commission.” The CLASS Act and the new commission formed to study the delivery (and financing) of long-term care was the subject of a recent Forbes article titled “Fiscal Cliff Deal Repeals CLASS Act, Creates Long-Term Care Commission.” As summarized in the title of this Forbes article, The American Taxpayer Relief Act or ATRA – does two things in the field of long-term care: first, it officially ends the CLASS Act, and second, it forms a new bipartisan commission to “tackle” the matter. Is it a good trade-off? For starters, the CLASS Act had already been abandoned by the administration and Congress alike. On the other hand, this new commission might not find an alternative new solution. As the Forbes article notes, the commission is a “political commission” rather than a panel of subject matter experts. The commission has been given a window of six months to conduct its business. The crisis of long-term care in America is still a developing one. How we come to deal remains to be seen. That noted, as an individual the time to take responsibility for your long-term care future is today. Be sure to consult competent legal counsel and your long-term care insurance agent to examine your options.

Reference: Forbes (January 1, 2013) “Fiscal Cliff Deal Repeals CLASS Act, Creates Long-Term Care Commission”

For more information, go to www.jerryreiflawyer.com

 

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