Michigan Estate Planning Blog

What are the Federal and Gift Tax Exemptions for 2024?

 

Unless Congress acts, regulations that elevated exemptions will expire at the end of 2025, and the exemption will be cut by about half, says the article “Take Advantage Of Increased Gift And Estate Tax Exclusions in 2024” from mondaq.

Those whom the gift and estate tax may impact should speak with their estate planning attorney about using this historically high exemption. Many estate planning strategies can be used to transfer wealth and take advantage of these exemptions efficiently.

In November 2023, the IRS announced increases for gift and estate tax exemptions in 2024, including an increase in the federal gift, estate, and GST (Generation Skipping Tax) exemption and the annual exclusion from gift tax. These changes became effective on January 1, 2024.

The gift and estate tax exemption has increased to $13,610,000 per individual in 2024. Married couples can transfer up to $27,220,000 since both partners may utilize the exemption. This marks a substantial increase of $690,000 per person ($1,380,000 per married couple) from the prior year.

Generally, gift and estate taxes may be due if a person’s total wealth transfer during their lifetime and at their death exceeds the gift and estate tax exemption.

The GST tax exemption increased to $13,610,000 per person in 2024. This tax may be triggered by transfers to or in trust for family members more than one generation younger than the donor. It might also be triggered by gifts to unrelated individuals who are 37.5 years younger than the donor.

The annual gift tax exclusion increased to $18,000 per donor, per gift recipient, and $36,000 per married couple splitting gifts. The annual gift tax exclusion permits individuals to make gifts to any amount of people tax-free every year without being counted against their lifetime gift and estate tax exemption.

An experienced estate planning attorney will explain the time-sensitive opportunities presented by the increases in 2024 in conjunction with the current (yet temporary) exemptions.

Now is the time to consider funding trusts with assets expected to have high growth potential, using a portion of the gift tax exemption while removing future appreciation from the estate.

Reference: mondaq (Dec. 21, 2023) “Take Advantage Of Increased Gift And Estate Tax Exclusions in 2024”

Gift and Estate Tax Exemption Limits Increase for 2024

 

The year 2024 will bring more reasons to be generous, since the Internal Revenue Service (IRS) has increased the limits for gift and estate tax exemption amounts to their highest amounts ever. It’s good news to start the year with, reports the article “IRS Increases Gift and Estate Tax Exempt Limits—Here’s How Much You Can Give Without Paying” from yahoo! finance.

Those with large estates should always consider gifting during their lifetime to reduce taxes by using the annual gift and lifetime gift and estate tax exemptions. Right now, you may give an unlimited number of people up to $17,000 each in a single year without taxes. However, in 2024, this increases to $18,000 per person. For married couples starting in 2024, a gift of $36,000 can be made to any number of people, tax-free.

More good news: the IRS announced that the lifetime estate and gift tax exemption will increase to $13.61 million in 2024. A gift exceeding the annual limits won’t automatically prompt a gift tax. The difference is taken from the person’s lifetime exemption limit, and no taxes are owed. Your estate planning attorney will create a long-term strategy to use these exemptions to manage your estate tax liabilities.

Let’s say you were feeling generous and bought a friend a car for $20,000 in 2023. You would have exceeded the annual limit of $17,000 but wouldn’t owe any additional taxes. You’d use IRS Form 709 to report the gift and deduct $3,000 from your lifetime exemption of $12.92 million for this year. If you instead make the gift in 2024, you’d subtract $2,000 from your $13.61 million limit.

Gifts between American spouses are virtually unlimited. Couples have $24.84 million in estate tax exemptions, and going over this limit is only taxed upon the surviving spouse's death.

However, a gift to a non-U.S. citizen, regardless of whether or not they are a U.S. resident, falls under different rules and is subject to an annual tax exclusion amount. The annual amount one may give to a spouse who is not a U.S. citizen increases to $185,000 in 2024 from $175,000 in 2023.

Something else to keep in mind—unless Congress acts, the lifetime estate and gift tax exemption is due to return to the pre-2017 Tax Cuts and Jobs Act level of $5.49 million on December 31, 2025. Your wisest move is to speak with your estate planning attorney about a strategic plan for gift-giving and planning to minimize estate tax liability before the change occurs.

Reference: yahoo! finance (Nov. 14, 2023) “IRS Increases Gift and Estate Tax Exempt Limits—Here’s How Much You Can Give Without Paying”

Should You Gift Kids Inheritance Now, or After You’ve Passed?

 

This is a genuine dilemma facing millions of parents and grandparents as they prepare to pass an enormous amount of wealth—$73 trillion—to the next generation. There are pros and cons to both approaches, according to the article, “Give the Kids Their Inheritance Now or Make Them Wait? 3 Things to Keep in Mind,” from Barron’s.

Giving too much too early could put parents in an economic bind in their later years. Therefore, this needs to be considered in light of today’s longer life spans. However, if you can afford to make a generous gift and your children could use the money now for a good purpose, it’s hard to justify making them wait.

How much to give is as critical as when to make the gift. The predominant concern is if you give your children too much, they won’t be motivated to earn their own wealth, or other family members will resent the gift. Estate planning attorneys and financial advisors routinely speak with families about these issues. These conversations always consider the values they want to instill in their children.

In some cases, parental support can help a child while working at an entry-level (i.e., low paying) job in their dream career. Covering the cost of rent for a few years can offer young adults a support net until they achieve financial stability.

This is very different than paying the expenses of a young adult with no career goal whose primary focus is a robust social life.

Anyone can make a yearly gift to any other person of up to $17,000 tax-free, or $34,000 per couple, but there are ways to make gifts without triggering gift taxes. Direct tuition payments to schools are tax-free. Unlike putting money into a 529 account, there is no limit to how much can be paid directly to a college or university. Parents and grandparents could also help with a downpayment on a child’s home without paying gift taxes.

Gifts don’t have to be large to have an impact. Some parents and grandparents give their children or grandchildren a small amount to start saving for retirement. A gift of a few thousand dollars during their 20s can grow into a nice sum over many decades. If the recipient has earned income, you can contribute to their IRA or Roth IRA accounts.

If assets are limited, consider giving personal possessions, such as jewelry or family heirlooms, to younger generations. You’ll get to see them enjoy their gifts, without putting your own financial situation at risk.

Whenever the decision is made to make these gifts, families should talk about their values and intentions around money.

If there are concerns about children losing an incentive to work because of the family’s wealth, a spendthrift trust might pass wealth along while controlling its distribution.

Remember that today’s generous federal estate tax rules are set to expire in 2026. Currently, individuals can gift up to about $13 million ($26 million for couples) tax-free in their estate plans. If the exemptions expire, this amount will be cut by approximately half.

Reference: Barron’s (Nov. 4, 2023) “Give the Kids Their Inheritance Now or Make Them Wait? 3 Things to Keep in Mind”

What Should I Know about Lady Bird Deeds?

 

Enhanced life estate deeds, also called Lady Bird deeds, can be a great tool to transfer ownership of real property at death. This type of deed got its nickname when President Lyndon B. Johnson used one to convey property to his wife, Lady Bird.

Florida Today’s recent article entitled, “Real estate transfers: Is a 'Lady Bird deed' right for me?” explains that Lady Bird deeds are a type of life estate deed designed to automatically transfer property ownership upon the death of the original owner to another individual. However, they don’t require the original owner to give up use, control, or ownership of the property while alive.

The beneficial receiver of the property upon death doesn’t get any immediate rights or ownership interests in the property. Their consent isn’t needed to sell, convey, or change the use of the property while the original owner is alive. The Lady Bird deed is rendered obsolete if the original owner sells or conveys the property in their lifetime. However, if the original owner passes away, the property subject to the Lady Bird deed is automatically conveyed to the beneficial recipient without needing to pass through probate.

With a traditional Life Estate deed, the original owner must give up control when adding a beneficial recipient. This means the original owner is prohibited from selling, conveying, or encumbering the property without explicit consent from the beneficial recipient. The original owner also can’t change or end a traditional Life Estate deed without consent from the beneficial recipient.

Here are the benefits of a Lady Bird deed:

Properties can be conveyed at death without having to pass through probate.

The original owner remains in full control of the property while they’re alive.

Recording a Lady Bird deed doesn’t impact the current owner’s homestead protection and exemptions.

Any property subject to a Lady Bird deed doesn’t violate Medicaid’s five-year look-back period and isn’t subject to gifting taxes or penalties, since the beneficial owner doesn’t immediately possess any ownership rights.

Here are the downsides of a Lady Bird deed:

Doesn’t protect non-homestead properties from any judgment liens issued against the original owner during their lifetime.

A Lady Bird deed can be an effective tool to transfer property outside of probate. However, as in any real estate transaction or estate planning endeavor, it is necessary to have a knowledgeable estate planning attorney to discuss your desired outcome and best course of action for your specific situation.

Reference: Florida Today (June 9, 2023) “Real estate transfers: Is a 'Lady Bird deed' right for me?”

 

Why Do I Need an Estate Planning Attorney?

An experienced estate planning attorney provides numerous benefits because estate planning is a necessary process to help ensure that your assets are distributed as you wish after you pass away. An attorney can help you work through the complex legal and financial issues involved in estate planning and ensure your assets are protected and your family is cared for.

Digital Crime’s recent article, “The Benefits of Having a Will and Estate Planning Lawyer,” says that many folks are hesitant to plan their estates because they find the process overwhelming or don’t know where to begin. An experienced estate planning attorney can help you understand the different estate planning options available to you and counsel you through the process, making it easier and less stressful.

Another benefit of working with an estate planning lawyer is the ability to tailor your plan to meet your specific needs and goals. It’s not a one-size-fits-all process; an experienced attorney can help you design your plan to reflect your unique circumstances.

An estate planning attorney can also help you minimize taxes and other expenses associated with estate planning. That’s because the tax laws concerning estate planning are complex and challenging to navigate without professional legal help.

An experienced attorney can help you craft your estate plan to minimize tax liability and ensure that your assets are distributed efficiently and cost-effectively.

Also, a will and estate planning lawyer can help you avoid potential legal disputes and challenges to your estate plan. Estate planning documents are legal documents. As such, any errors or omissions can result in legal disputes that can be time-consuming, costly, and emotionally draining for your family. An experienced estate planning attorney will help you avoid these problems by ensuring that your estate plan is properly drafted and executed in accordance with state and federal law.

Finally, an experienced estate planning attorney can help you stay up to date with changes in the law and your circumstances.

Planning your estate can be a complex and daunting process, but working with a will and estate planning lawyer can make it easier, more efficient, and more effective.
Reference: Digital Crime (April 12, 2023) “The Benefits of Having a Will and Estate Planning Lawyer”

When is a Trust a Good Idea?

If you prefer to place specific conditions on your assets after you pass away, you should have a trust in place, says Kiplinger’s recent article, “Why Do I Need a Trust?”

Trusts can be especially important with second marriages, where one spouse wants to leave their assets to their children but not their stepchildren. Here are some other benefits of a trust:

Creditor Protection. If your profession has a high probability of liability, having assets transferred via a trust (once the trust becomes irrevocable) may shelter funds from being attached in a lawsuit. This can be very specific concerning state law and the type of lawsuit, so discuss this with an experienced estate planning attorney before making any decisions.

Passing Funds Outside of the Estate. For large estates that are anticipated to grow, creating trusts during your lifetime and gifting assets can remove the growth from your estate and lower future estate taxes. If your estate is higher than the exemption, and you have more funds than you need to live on, funding an irrevocable trust now is beneficial. Also, remember, revocable (or living) trusts become irrevocable on your passing, so anything in the revocable trust will be out of the beneficiary’s estate.

Providing for Grandchildren. If you want to provide for grandchildren at your death or don’t trust the parents to set inheritance funds aside for their children, creating a trust for the grandchildren is an option. If you leave assets outright to their parents, there’s no guarantee that the funds will get to them.

Protect Against Fraud or Beneficiary Changes. Seniors can be duped into updating their beneficiaries when they’re in the hospital or under hospice care. If the individual can sign a form and their signature matches what is on file at the custodian—and they have no immediate family to catch the update—this can be a problem. If the elderly person is not of sound mind, the attorney will likely be able to notice something is wrong compared to submitting a beneficiary form to a custodian directly.

Special Needs Beneficiaries. If you have incapacitated beneficiaries who require special care due to mental or physical disability, setting up a special needs trust may be a good move. A Special Needs Trust will ensure that assets can be given to this person but not interfere with government benefits or disability payments.

Ask an experienced estate planning attorney if your situation and your intentions warrant a trust. They can help you protect your assets and your wishes.

Reference: Kiplinger (August 31, 2022) “Why Do I Need a Trust?”

What Should I Do Now for a Successful Business Succession?

According to the Conway Center for Family Business, family businesses account for 64% of the U.S. Gross Domestic Product (GDP), yet 57% of those businesses have no formal succession plan.

Twin Cities Business’s recent article, “Don’t Wait for the Future,” notes that many businesses are founded on a high degree of personal trust and loyalty, often a simple handshake agreement.

However, these informal agreements aren’t enough to protect you against disagreements and damaged relationships, which can be costly. A lack of business succession planning can negatively impact business owners, as well as their heirs and employees.

There are two key reasons business owners should think about a business succession structure sooner rather than later. One is taxes. Under the current laws, the estate tax exemption is scheduled to sunset in 2025. This leaves business owners with a small window to take advantage of the planning opportunities around this exemption. Second, the absence of a succession structure may result in business disruption at a very emotional time for owners and employees.

The reason why so many business owners are unprepared is that many of them find it uncomfortable or daunting to discuss succession planning or enacting formal agreements. Others don’t truly see the importance of such discussions. And, in other cases, it can be seen as a sign of disloyalty.

The good news is that partnerships can be strengthened if you address this process the right way, with respect for everyone’s point of view and a willingness to listen. The result will be that you’re totally confident that everyone’s interests are secured. This lets you focus on your business, instead of being distracted by unspoken concerns.

Formal contingency plans help business partners clarify their vision for the future. Many are so busy with personal lives, families, and work that they frequently fail to consider the impact of events outside their control. However, these conversations help us think clearly about what we want in the future and what it will take to get there.

If the process is handled correctly, guided by an experienced attorney, the result should be peace of mind and a higher degree of protection for partners and their families.

Reference: Twin Cities Business (April 10, 2023) “Don’t Wait for the Future”

 

What Three Things Do People Overlook on Estate Planning Benefits?

An estate plan is important for everyone. Without a legally enforceable estate plan, a court may apply state laws and decide how your assets will be distributed and who will raise your minor children. In addition to allowing you to direct the wrap-up of your affairs after you are gone, an estate plan can also help you reduce taxes, expedite settling your estate and reduce conflict in your family.

Yahoo Finance’s recent article, “3 Overlooked Benefits of Estate Planning,” explains that planning your estate entails making arrangements to ensure that your wishes are carried out after your death.

While some think estate planning is only for those with mansions and millions in the bank, this isn’t true. Instead, even those with modest assets can benefit from having a defined estate plan.

Remember that the estate planning process isn’t about how much you have—it’s about making sure what you do have ends up where you want it. It may also decide who will be responsible for raising any minor children who survive you.

Your estate plan can also affect taxes, the time it takes to settle your estate, your end-of-life medical care and the odds that your family will fight over it.

Deciding who gets what is the big question of many estate plans. Your estate consists of the assets, property and personal items you own at your death. This may include real estate, bank accounts, life insurance, stocks and investments, retirement accounts, and personal property like collectibles, vehicles, art and jewelry.

The documents in estate plans include a last will and testament, a living will, financial and medical powers of attorney and documents establishing various trusts.

Start your estate plan today with the help of an experienced estate planning attorney and review it periodically to accommodate marriages, divorces and births. The process often includes reviewing your property and wishes, drafting a will, naming an executor, assigning healthcare and financial proxies and settling other matters, like funeral arrangements.

Reference: Yahoo Finance (April 24, 2023) “3 Overlooked Benefits of Estate Planning”

 

Do I Need an Estate Planning Attorney?

Sound estate planning can help minimize taxes and expenses associated with transferring your assets and property after your death, says Urban Asia’s recent article entitled “Why Is It Important To Hire An Estate Planning Attorney.”

An experienced estate planning attorney can help you with your estate planning goals efficiently, avoiding legal processes that can be time-consuming and costly. Estate planning through an attorney can help you, and your loved ones avoid legal complications or unwanted delays.

What are the benefits of hiring an experienced estate planning attorney?

Legal expertise: They have specialized knowledge of the laws and regulations governing probate and estates. They can advise you on the best plan to suit the utilization of your assets and needs, and make sure that your estate planning complies with all applicable laws.

Tax implications: Estates can have tax implications. An experienced estate planning attorney can advise you on how to structure your estate plan to minimize taxes and maximize the benefits for your beneficiaries.

Customization: They can help customize your estate plan to suit your individual needs and goals.

Protection of beneficiaries: Estate planning attorneys can help protect your heirs’ interests by ensuring that your will and trust are administered correctly. They can help assure that all your assets are protected from creditors and other legal claims.

Charitable giving: An estate planning attorney can advise you on how to make philanthropic gifts, either during your lifetime or at death, through charitable trusts or other charitable giving vehicles.

Incapacity planning: They can help you plan for incapacity by creating a power of attorney or living will to let you specify how your assets and property should be managed, if you are unable to decide for yourself.

Finding the right attorney for estate planning can be a challenging task. Estate planning can be complex, and selecting an attorney with experience and expertise in this discipline is essential.

Therefore, look for an attorney with plenty of experience in estate planning.

Reference: Urban Asia (Jan. 22, 2023) “Why Is It Important To Hire An Estate Planning Attorney”

 

Giving to My Favorite Charity in Estate Plan

 

If you’d like to leave some or all of your money to a charity, Go Banking Rates’ recent article entitled “How To Leave Your Inheritance to an Organization” provides what you need to know about charitable giving as part of your estate plan.
1. Make Sure the Organization Accepts Donations. Unless you have a formal agreement with the charity stating they’ll accept the inheritance, the confirmation isn’t a binding commitment. As a result, you should ask the organization if there’s any form language that they may want you to add to your will or trust as part of a specific bequest. If the charity isn’t currently able to accept this kind of donation, look at what they will accept or if other charities with a similar mission will accept it.
2. Set the Amount You Want the Charity To Receive. Some people want to leave the estate tax exemption — the maximum amount that can pass without tax — to individuals and leave the rest to charity. Because the estate tax exemption is subject to change and the value of your assets will change, the amount the charity will get will probably change from when the planning is completed.
3. Have a Plan B in the Event that the Charity Doesn’t Exist After Your Death. Meet with your estate planning attorney and decide what happens to the bequest if the organization you’re donating to no longer exists. You may plan ahead to pass along the inheritance to another organization and make sure it receives the funds. You could also have the inheritance go back into the general distributions in your will.
4. State How You Want Your Gift to Be Used. If there is a certain way that you’d like the charity to use the inheritance, you can certainly inquire with the organization and learn more. Find out if the charity accepts this type of restriction, how long it may last and what happens if the charity no longer uses it for this purpose.
As you draft charitable planning provisions, make sure you do so alongside an experienced estate planning attorney.
The provisions in your will should be specific about your desires and provide enough flexibility to your personal representative, executor, or trustee to be modified based on the conditions at the time of your death.
Reference: Go Banking Rates (August 26, 2022) “How To Leave Your Inheritance to an Organization”

What’s Involved with Being a Trustee?

There’s an old saying that the two best days in a boat owner’s life are the day they buy their boat and the day they sell it.

Forbes’ recent article entitled “How To Be An Effective Trustee” says that a similar notion applies to being a trustee – it’s an honor to be named and then a huge relief when it’s over. That’s because being a trustee is difficult.

Remember that a trust is a fiduciary relationship in which one party (the trustor) gives another party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary). Trusts are created to provide legal protection for the trustor’s assets, to make certain those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes.

Being a trustee requires knowledge about a wide range of topics, including:

The trustee’s fiduciary duties, which include loyalty, impartiality, duty of care, protection of trust property, enforcement of claims and the duty to inform and account to beneficiaries, among others (violation of these duties exposes the trustee to liability).

Understanding the details of the trust, like the specifics of the distribution instructions.
Investments and the ability to engage and monitor investment managers.

Administrative matters, such as record keeping and principal and income accounting.

Estate planning, trusts and the basics of the estate, gift and generation skipping taxes.

Income tax, including how trusts are taxed both by the federal government and the state.

A trustee must also be able to productively communicate and work with the beneficiaries on their financial wellness and distribution needs, which is an area that can be full of conflict.

It’s a daunting list. Talk with an experienced estate planning attorney to discussion your situation in detail.

Reference: Forbes (May 31, 2022) “How To Be An Effective Trustee”

What Can a Trust Do for Me and My Family?

 

A trust is defined as a legal contract that lets an individual or entity (the trustee) hold assets on behalf of another person (the beneficiary). The assets in the trust can be cash, investments, physical assets like real estate, business interests and digital assets. There is no minimum amount of money needed to establish a trust.
US News’ recent article entitled “Trusts Explained” explains that trusts can be structured in a number of ways to instruct the way in which the assets are handled both during and after your lifetime. Trusts can reduce estate taxes and provide many other benefits.
Placing assets in a trust lets you know that they will be managed through your instructions, even if you’re unable to manage them yourself. Trusts also bypass the probate process. This lets your heirs get the trust assets faster than if they were transferred through a will.
The two main types of trusts are revocable (known as “living trusts”) and irrevocable trusts. A revocable trust allows the grantor to change the terms of the trust or dissolve the trust at any time. Revocable trusts avoid probate, but the assets in them are generally still considered part of your estate. That is because you retain control over them during your lifetime.
To totally remove the assets from your estate, you need an irrevocable trust. An irrevocable trust cannot be altered by the grantor after it's been created. Therefore, if you’re the grantor, you can’t change the terms of the trust, such as the beneficiaries, or dissolve the trust after it has been established.
You also lose control over the assets you put into an irrevocable trust.
Trusts give you more say about your assets than a will does. With a trust, you can set more particular terms as to when your beneficiaries receive those assets. Another type of trust is created under a last will and testament and is known as a testamentary trust. Although the last will must be probated to create the testamentary trust, this trust can protect an inheritance from and for your heirs as you design.
Trusts are not a do-it-yourself proposition: ask for the expertise of an experienced estate planning attorney.
Reference: US News (Feb. 7, 2022) “Trusts Explained”

Does My State Have an Inheritance Tax?

 

Real Simple’s recent article entitled “Here's Which States Collect Zero Estate or Inheritance Taxes” explains that inheritance taxes are levies paid by the living beneficiary who gets the inheritance. And both federal and state governments can apply estate taxes, which are levied against the assets that are bequeathed.
Just five states apply an inheritance tax: New Jersey, Nebraska, Iowa, Kentucky and Pennsylvania. There are 12 states that have an estate tax: Washington, Oregon, Minnesota, Illinois, New York, Maine, Vermont, Rhode Island, Massachusetts, Connecticut, Hawaii and the District of Columbia. Maryland collects both. As a result, there are 32 states that don’t collect death-related taxes: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Wyoming.
To better estimate and project the possible outcomes, you should consider an intergenerational planning meeting. There are some families that like the transparency of establishing a trust. This can minimize fighting and avoid probate. Trusts are also taxed differently than individuals. There’s more certainty about who will bear the costs.
There are families that gift assets, while an elderly or chronically ill person is still alive. These gifts can be subject to taxation, but there are exceptions for tuition and medical expenses. Gifts to children may also be excluded.
There’s no one-size-fits-all approach to transferring valuable or sentimental assets. You can list the most important people and causes in your life. If that list has people in other states, it will be even more important to prepare everyone for their role and responsibilities with the help of an experienced estate planning attorney.
If inheritance tax sounds intimidating, start small with updating the beneficiary forms on your bank accounts and employer-led retirement accounts. Organize documents, such as insurance information and house titles and deeds. Make them secure but accessible to those who might need them, if you're unavailable.
Even if you're socially distancing, many estate planning attorneys offer consultations via video conferencing. There's no reason to delay another year to clarify your inheritance and estate plans.
Reference: Real Simple (Nov. 24, 2021) “Here's Which States Collect Zero Estate or Inheritance Taxes”

Where Do You Score on Estate Planning Checklist?

 

Make sure that you review your estate plan at least once every few years to be certain that all the information is accurate and updated. It’s even more necessary if you experienced a significant change, such as marriage, divorce, children, a move, or a new child or grandchild. If laws have changed, or if your wishes have changed and you need to make substantial changes to the documents, you should visit an experienced estate planning attorney.
Kiplinger’s recent article “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?” gives us a few things to keep in mind when updating your estate plan:
Moving to Another State. Note that if you’ve recently moved to a new state, the estate laws vary in different states. Therefore, it’s wise to review your estate plan to make sure it complies with local laws and regulations.
Changes in Probate or Tax Laws. Review your estate plan with an experienced estate planning attorney to see if it’s been impacted by changes to any state or federal laws.
Powers of Attorney. A power of attorney is a document in which you authorize an agent to act on your behalf to make business, personal, legal, or financial decisions, if you become incapacitated. It must be accurate and up to date. You should also review and update your health care power of attorney. Make your wishes clear about do-not-resuscitate (DNR) provisions and tell your health care providers about your decisions. It is also important to affirm any clearly expressed wishes as to your end-of-life treatment options.
A Will. Review the details of your will, including your executor, the allocation of your estate and the potential estate tax burden. If you have minor children, you should also designate guardians for them.
Trusts. If you have a revocable living trust, look at the trustee and successor appointments. You should also check your estate and inheritance tax burden with an estate planning attorney. If you have an irrevocable trust, confirm that the trustee properly carries out the trustee duties like administration, management and annual tax returns.
Gifting Opportunities. The laws concerning gifts can change over time, so you should review any gifts and update them accordingly. You may also want to change specific gifts or recipients.
Regularly updating your estate plan can help you to avoid simple estate planning mistakes. You can also ensure that your estate plan is entirely up to date and in compliance with any state and federal laws.
Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?”

How Do I Avoid Estate Planning Mistakes with a Blended Family?

The Wealth Advisor’s recent article entitled “Remarried With Children? 5 Estate Planning Mistakes to Avoid” says that you can’t guarantee that everyone in the blended family will be happy with the arrangements you’ve made with a second marriage.
Mistake #1: Failing to change beneficiaries. With a beneficiary designation, the money passes directly to your intended beneficiary without probate. Look at all of your financial accounts to be certain that your spouse is designated the beneficiary if that's what you want. Plus, check your life insurance beneficiaries because these payouts also bypass probate.
Mistake #2: Failing to update your last will. Your last will determines much of who gets the assets you and your spouse accumulated during your lifetimes. You probably don't want your ex-spouse to get these. People on their second marriage frequently decide that the surviving spouse gets all the assets; upon the death of the second spouse, the remaining assets will be divided evenly among all of the children. There are ways to make that happen, but it takes very special legal planning.
Mistake #3: Treating all heirs equally. Most spouses aren't financial equals when they marry, and this is particularly so in second marriages. If your new spouse moves into your house, for example, you may want your children to get the proceeds when it’s sold, not your spouse or your spouse's children. There are many reasons why parents don't treat children equally, including when there’s a child who’s disabled or has special needs. A child may also suffer from an addiction and require a trust that provides stipends at regular intervals to the beneficiary and deters creditors from getting money in the trust.
Mistake #4: Failing to give while you’re still alive. If you're planning to leave money to your kids, you might think about giving it to them now. You can give up to $15,000 per person without having to pay the federal gift tax or deal with the IRS. Plus, your spouse may also give the same amount.
Mistake #5: Failing to work with an experienced estate planning attorney. If you're older and on your second marriage, your life is probably complex with ex-spouses and children and stepchildren. Blended families and comingled assets make things complicated, as does a child with special needs or an aging parent. An experienced estate planning attorney can work through all of your issues and make sure you have the best and most comprehensive plan for your circumstances.
Reference: The Wealth Advisor (July 12, 2021) “Remarried With Children? 5 Estate Planning Mistakes to Avoid”

Why Is a Trust Smart Estate Planning for Farmers?

 

A will gives people the basic assurance of where farm and personal assets will go at an owner’s death. However, a trust can give you added detail and instruction, plus flexibility to transition your farm in the manner you intend.

The LeMars Daily Sentinel’s recent article entitled “Trusts can serve as important estate planning tool for farm families” says that a trust is a very useful and flexible tool for estate planning. However, it’s most likely the most underused estate management technique.

A trust is essentially the creation of another entity to hold title to assets and then writing the rules as to what should happen with those assets, while so held.

An experienced estate planning attorney will help you decide if a trust is necessary in your specific family situation. More complicated situations with multiple generations and rights of ownership and management can make a trust a wise choice.

Some of the common mistakes people make with trusts include forgetting to retitle assets into the trust now or by beneficiary designation, so they will become part of the trust at death, and making certain the parties comprehend the types of tax liabilities based on the type of trust that is created. There are two main types of trusts—living and testamentary trusts. A living trust is established by a living person, as opposed to a testamentary trust that is created in a will and goes into effect at the time of death. Living trusts can be revocable or irrevocable. Every trust has different stipulations on what the grantor can and can’t control, as well as different types of tax liability.

With the help of an experienced estate planning attorney, a trust can help keep a family member in farming and let the other family members receive ownership in the farm, land, money, or whatever assets the grantor chooses. Due to the fact that farm operations have so many moving parts and expenses, a trust can help make the transition as easy as possible and can accomplish the goals of the grantor.

You should be transparent with family members and tell each one where they stand concerning the estate. Sharing documents and holding family discussions can also help keep everyone on the same page.

Everyone should have a copy of these documents, including a will, power of attorney, or a trust because everyone in the family should know what is going on.

Reference: LeMars (IA) Daily Sentinel (Dec. 29, 2020) “Trusts can serve as important estate planning tool for farm families”

Why Is a Trust Smart Estate Planning for Farmers?

 

A will gives people the basic assurance of where farm and personal assets will go at an owner’s death. However, a trust can give you added detail and instruction, plus flexibility to transition your farm in the manner you intend.

The LeMars Daily Sentinel’s recent article entitled “Trusts can serve as important estate planning tool for farm families” says that a trust is a very useful and flexible tool for estate planning. However, it’s most likely the most underused estate management technique.

A trust is essentially the creation of another entity to hold title to assets and then writing the rules as to what should happen with those assets, while so held.

An experienced estate planning attorney will help you decide if a trust is necessary in your specific family situation. More complicated situations with multiple generations and rights of ownership and management can make a trust a wise choice.

Some of the common mistakes people make with trusts include forgetting to retitle assets into the trust now or by beneficiary designation, so they will become part of the trust at death, and making certain the parties comprehend the types of tax liabilities based on the type of trust that is created. There are two main types of trusts—living and testamentary trusts. A living trust is established by a living person, as opposed to a testamentary trust that is created in a will and goes into effect at the time of death. Living trusts can be revocable or irrevocable. Every trust has different stipulations on what the grantor can and can’t control, as well as different types of tax liability.

With the help of an experienced estate planning attorney, a trust can help keep a family member in farming and let the other family members receive ownership in the farm, land, money, or whatever assets the grantor chooses. Due to the fact that farm operations have so many moving parts and expenses, a trust can help make the transition as easy as possible and can accomplish the goals of the grantor.

You should be transparent with family members and tell each one where they stand concerning the estate. Sharing documents and holding family discussions can also help keep everyone on the same page.

Everyone should have a copy of these documents, including a will, power of attorney, or a trust because everyone in the family should know what is going on.

Reference: LeMars (IA) Daily Sentinel (Dec. 29, 2020) “Trusts can serve as important estate planning tool for farm families”

What Do I Need to Know about Gift-Giving with the Biden Administration?

 

After the election, many people are wondering what will happen to the federal gift and estate tax exemption. Kiplinger’s recent article entitled “Making a Gift This Year? Some Key Questions to Consider,” explains that the Tax Cuts and Jobs Act dramatically upped the lifetime gift, estate and generation-skipping tax exemption to $11.58 million per individual ($23.16 million per couple). This exemption, however, is set to expire at the end of 2025. Some observers say that Democrats could significantly shorten the time frame, ending it as early as 2021.

Some families may face the possibility of losing an opportunity to transfer wealth out of their estate and save on future estate taxes sooner than anticipated. No matter when the gift is made, here are some important issues to consider.

Can I afford to give? For couples who have a significant taxable estate, gifting assets and removing future appreciation could result in some substantial tax savings for their heirs. However, just because someone has the means to make a large gift, doesn’t necessarily mean it’s the right move. Some are so eager to take advantage of the tax benefits that they underestimate their own cost of living down the road. Look at whether the grantor has enough assets to maintain their desired lifestyle. Then, think about what can be transferred without negatively impacting goals and lifestyle choices.

How Do I Structure a Gift? There are many ways of distributing assets. Remember that any transfer is gift tax-free up to the annual exclusion amount ($15,000 per person per donor for 2020). Any gift over this will count against the donor’s lifetime exemption amount. Once that’s exhausted, the gift will be subject to gift tax.

Outright Cash Gifts. This may be the most uncomplicated way of gifting, but for families with significant wealth, this could have some drawbacks. Some recipients may not be prepared to manage money, and it may demotivate them to live off their inheritance rather than becoming productive on their own.

Trusts. These are frequently used for bigger gifts to provide for beneficiaries, while using some restrictions by the grantor to protect the assets from being squandered. One plan is to distribute the trust assets in stages, when the beneficiary reaches a certain age or achieves a specific goal. Another option is to leave assets in a discretionary lifetime trust, which would maintain the assets in a trust for the beneficiary’s entire lifetime. Drafted properly by an experienced estate planning attorney, this offers a high level of protection from divorcing spouses, lawsuits, bad decisions and outside influences. It also lets grantors create a lasting family legacy for many generations.

Gifts for Education Expenses. You can also make direct payments for education or for medical expenses with no gift tax consequences.

Uniform Trust to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA). These custodial accounts are usually less restrictive than trusts and allow minor beneficiaries access to funds at age a specific age, depending on state law.

Reference: Kiplinger (Oct. 30, 2020) “Making a Gift This Year? Some Key Questions to Consider”

Incorporating Gifting with an Estate Plan

Kiplinger’s recent article entitled “Gifting sounds pretty simple, but there are many ways to do it, and several tax ramifications to be aware of as well” explains that no matter if a gift is made this year or in future years, there are some important questions to consider.
Increased exemption. The Tax Cuts and Jobs Act significantly upped the lifetime gift, estate and generation-skipping tax exemption to $11.58 million per individual ($23.16 million per couple). It’s set to expire at the end of 2025. Thus, there’s the prospect of possibly losing an opportunity to transfer wealth out of your estate and save on future estate taxes earlier than anticipated.
When to Give. A big question is whether a person should give away assets during their lifetime or at their death. Those who opt to gift while they’re alive often do so to reduce their estate and to share in the joy of seeing the effect it makes in the lives of the recipients. Others decide to gift after death for the security of having the assets on hand, if they’re needed. Gifting after death also gives recipients time to prepare for the responsibility that comes along with inheriting wealth.
Unified Federal Estate & Gift Tax Exemption. There are many ways to distribute assets. What works for one family isn’t necessarily the wisest strategy for another. Note that any transfer is gift tax-free up to the annual exclusion amount ($15,000 per person per donor in 2020). Any gift over this amount will count against the donor’s lifetime exemption amount. After that lifetime exemption is used, the gift will be subject to gift tax.
Outright cash gifts. This appears to be the most uncomplicated way of gifting. However, for those with significant wealth, this approach could have some drawbacks. These concern the ability and experience gift recipients have to manage money, outside risks, such as a spouse or high-risk professions, and demotivating recipients to live off their inheritance, instead of becoming productive on their own. Therefore, distributing large amounts of money—particularly at a young age—is generally discouraged.
Trusts. These are used frequently for larger gifts to provide for beneficiaries, while using controls by the grantor. These parameters can include things like distributing trust assets in stages (when the beneficiary reaches a certain age or achieves a specific goal). You can also leave assets in a discretionary lifetime trust, which would maintain the assets in a trust for the beneficiary’s entire lifetime. When set up by an experienced estate planning attorney, this offers a high level of protection from divorcing spouses, lawsuits, poor financial decisions and outside influences. It can also let the grantor create a lasting family legacy for many generations.
Gifts for education or medical expenses. Direct payments for college tuition or for medical expenses have no gift tax consequences. Educational gifts can also be made by funding a 529 educational savings plan. While there are no contribution limits for a 529 plan, gifts over the annual exclusion amount can have gift tax consequences or count against the lifetime exemption. You can also pre-fund an account up to $75,000 and it will receive the same tax treatment, as if it were gifted in $15,000 increments over five years.
Uniform Trust to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA). These custodial accounts are generally less restrictive than trusts and let minor beneficiaries access funds at age a specific age depending on state of residence.
Reference: Kiplinger (Oct. 30, 2020) “Gifting sounds pretty simple, but there are many ways to do it, and several tax ramifications to be aware of as well.”

What Trusts are Available for Estate Planning?

A trust is a legal agreement that has at least three parties. The same person(a) can be in more than one of these roles at the same time. The terms of the trust usually are embodied in a legal document called a trust agreement. Forbes’s recent article entitled “Here’s What You Need To Know About The Most-Popular Estate Planning Trusts” explains that the first party is the person who creates the trust, known as a trustor, grantor, settlor, or creator.
The trustee is the second party to the agreement. This person has legal title to the property in the trust and manages the property, according to the instructions in the trust and state law. The third party is the beneficiary who benefits from the trust. There can be multiple beneficiaries at the same time, and there also can be different beneficiaries over time.
The trustee is a fiduciary who must manage the trust property only for the interests of the beneficiaries and consistent with the trust agreement and the law. Although a trust is created when the trust agreement is signed and executed, it isn’t really operational until it’s funded by transferring property to it.
A living trust, also called an inter vivos trust, is a trust that’s created during the trustor’s lifetime. A testamentary trust is created in the trustor’s last will and testament. A trust can be revocable, which means that the trustor can revoke it or modify the terms at any time. An irrevocable trust can’t be changed or revoked.
Assets that are owned by a trust avoid the cost, delay and publicity of probate. However, there are no tax benefits to a revocable living trust. The settlors-trustees are taxed as though they still own the assets. The trust assets are also included in their estates under the federal estate tax.
An irrevocable trust typically is created to reduce income and/or estate taxes. This type of trust can also protect assets from creditors. When assets are transferred to an irrevocable trust, the income and gains are taxed to the trust when they are retained by the trust and taxed to the beneficiaries when distributed to them.
Under the federal estate tax and most state estate taxes, assets that are retitled to an irrevocable trust aren’t part of the grantor’s estate. Transfers to the trust are gifts to the beneficiaries. The grantor’s gift tax annual exclusion and lifetime exemption can be used to avoid gift taxes, until gifts exceed the exclusion and exemption limit.
A grantor trust is an income tax term that describes a trust where the grantor is taxed on the income. That’s because he or she retained rights to or benefits of the property. The revocable living trust is an example of a grantor trust.
A trust can be discretionary or nondiscretionary. A trustee of a discretionary trust has the power to make or withhold distributions to beneficiaries as the trustee deems appropriate or in their best interests. In a nondiscretionary trust, the trustee makes distributions according to the directions in the trust agreement.
Another type of trust is a spendthrift trust. This is an irrevocable trust that can be either living or testamentary. The key term restricts limits the beneficiary’s access to the trust principal, and the beneficiary and the beneficiary’s creditors can’t force distributions. The spendthrift provision is used when the settlor is worried that a beneficiary might waste the money or have trouble with creditors. Many states permit spendthrift trusts, but some limit the amount of principal that can be protected, and some do not recognize spendthrift provisions.
Finally, a special needs trust can be used to provide for a person who needs assistance for life. In many cases, it’s a child or sibling of the trust settlor. It can be either living or testamentary. Critical to a special needs trust is it has provisions that make certain the beneficiary can receive financial support from the trust, without being disqualified from federal and state support programs for those with special needs.
For more about trusts and how one may fit into your estate planning, contact an experienced estate planning attorney.
Reference: Forbes (Oct. 26, 2020) “Here’s What You Need To Know About The Most-Popular Estate Planning Trusts”

Gifting During Life

As any estate planner will tell you, giving assets away to your heirs is all about how and when. There are many times to give, and many ways to do it, and every method has its own advantages depending upon the concern. A meaningful planning question now is whether it is still best to maximize your gifting strategy in life now that the lifetime maximum gift tax exemption is $5.34 million. Formerly, the primary concern was the estate tax. The strategy was to gift during life using the annual gift tax exclusion, currently $14,000 per donee per year. After all, gifting lets you incrementally slide under that onerous estate tax ceiling. Now, and with the more favorable estate and gift tax exemptions (both are a unified $5.34 million), many planning their wealth transfers are reassessing their strategies. This sentiment was captured in a recent article in The Slott Report titled “Gifting-During-Life Strategy: Does It Make Sense for YOUR Family?” Why might one elect to use lifetime gifting rather than a bequest at death? One notable concern is that gifting does not offer the “stepped-up basis” of a bequest. Then again, it may be advantageous to use a present gift to shift radical future appreciation down to the next generation. This kind of leverage can be powerful. The original article provides an even-handed analysis of the benefits and detriments of each approach. Like anything in wealth transfer planning, the unique circumstances will dictate the most favorable alternative. It is a complex dilemma worth examining. Does the gifting-during-life strategy work for your family? Do bequests make more sense? And finally, is there an even further solution necessary to accomplishing your goals? Make sure you explore your options with competent estate planning counsel.

Reference: The Slott Report (February 28, 2014) “Gifting-During-Life Strategy: Does It Make Sense for YOUR Family?”

For more information, see www.jerryreiflawyer.com

Lifetime Gift Exclusion – A Wealth Transfer Bonanza Saginaw, Michigan

With the current laws on the books, we truly live in a golden era of gift giving and estate planning. But you need not take my word for it. According to official numbers recently released by the IRS, U.S. taxpayers transferred $122 billion in non-taxable gifts in 2012. To put that number in perspective, it is quadruple the tax-free gift giving of 2011 and 2012 combined. This wealth transfer tsunami was the subject of a recent Bloomberg article titled “Tax-Free Gifts Quadrupled in U.S. After IRS Limit Lifted.” When Congress opens a tax planning window, it also can close that window. That was the concern for taxpayers and their planners in 2010, when the laws went into effect raising the lifetime gift exclusion amount to a lofty $5 million per taxpayer. Generally speaking, the IRS taxes gifts of assets between people unless they happen to be spouses, but only if the gifts exceed the annual gift exclusion. That is the amount anyone can give to any number of people each year. Currently, that annual gift exclusion amount is $14,000. In addition, during your lifetime you also get a separate lifetime gift exclusion amount that applies toward really large gifts. That is your “lifetime gift exclusion.” Note: Any gifts you make in excess of the annual gift exclusion must be reported on a timely IRS Form 709 Gift Tax Return and will reduce the amount of the “estate tax exclusion” available upon your death. The lifetime gift exclusion increased from $1 million to $5 million in 2010. This was intended to be a temporary law and was set to expire at the end of 2012. Except, of course, the law was renewed. Take a look at the Bloomberg article for more on the hard numbers and bit more of the backstory. With the 2012 IRS statistics now in, it is clear that taxpayers decided it was time to move and escape a potentially falling tax ceiling. Fortunately, we have another reprieve and a bit more time, with the numbers still working in our favor. Have you been taking advantage of the current laws and putting your plan into action? Remember: what the IRS gives, the IRS can take away.

Reference: Bloomberg (January 27, 2014) “Tax-Free Gifts Quadrupled in U.S. After IRS Limit Lifted”

For more information, see www.jerryreiflawyer.com

Interesting Indexing – The Estate And Gift Tax Exemption Saginaw, MI

Did you know 2013 is rapidly coming to a close? It is. While there is still much to enjoy, especially in terms of holidays, it is not too early to think about your financial and estate plans for 2014. Surprise! The IRS is already looking forward to 2014, to include the estate and gift tax exemption. So what will estate and gift planning be like in 2014? Fortunately, as noted in a recent Forbes article, the number will be a bit more generous. According to the article, titled “IRS Raises Limit On Tax-Free Lifetime Gifts,” the basic exclusion (or unified exclusion), has been $5.25 million for 2013, but it is set to shimmy up to $5.34 million for 2014. Remember, this is the amount an individual can transfer to their loved ones without fear of taxation, either in life as a gift free from gift tax or in death as a bequest free from estate tax. Unfortunately, the basic/unified exclusion increase does not mean an increase to the annual gift exclusion. That is the amount you can gift per year to an individual without affecting the basic/unified exclusion. Currently you can give $14,000 per person per year, and it will be no different in 2014. Again, with time still remaining on the 2013 clock, there is still time to maximize your gifting before the year ends. That noted, check out a companion article titled “The 2013 Limits On Tax-Free Gifts: What You Need To Know.”

Estate Law, Gift Tax, Estate Tax, 2013, 2014

For more information, see www.jerryreiflawyer.com

 

Not All Wealth Transfers Are “Portable” Great Lakes Bay Region, Saginaw MI

For the most part, we are still scrambling to come to terms with the tax changes enacted at the end of last year with the American Taxpayer Relief Act (ATRA). The ATRA involves more than tax math and even includes some novel notions. One of those notions relevant to estate planning is the concept of “portability.” A recent Q&A in The Wall Street Journal reveals that the “Gift-Tax Exclusion Isn't 'Portable'.” Consequently, there are some important lessons to draw from this. The concept of “portability” first arose in 2011. Essentially, “portability” is a feature of your unified credit. The unified credit is a fancy term for the amount you can exclude from taxation either by way of gifting during your lifetime or through bequests after death. Under current tax law, you get one unified amount ($5.25 million under current law) to use either in life or in death. If unused by one spouse at death, the amount becomes “portable” in that such spouse can pass any unused credit to their surviving spouse in much the same way they pass their assets. This is not the same as your annual gift tax exclusion, which is the amount you or anyone can give during the course of any given year without taxation or effect upon your lifetime gift tax exclusion (aka unified credit). Your annual gift tax exclusion is not “portable.” Once we get used to it, “portability” may be a real time-saver and could simplify many estate plans. In the interim, however, it is strange in its novelty compared to traditionally-accepted estate planning techniques. Even if you are not susceptible to the estate tax at its current level, you might want to investigate how “portability” may impact your own estate planning. Note: the benefits of “portability” are not automatic and require some very specific steps to enjoy it.

Reference: The Wall Street Journal (June 22, 2013) “Gift-Tax Exclusion Isn't 'Portable'

For more information, see www.jerryreiflawyer.com

Giving While You Are Living Great Lakes Bay Region MI

Much of estate planning means planning for where and to whom assets are to go after you are gone. On the other hand, some people want to see their plans take effect and their loved ones enjoy their generosity. So how do you begin moving the estate within your own lifetime? A recent article in Forbes titled “Best Ways To Give Your Heirs Money While You're Alive,” explored this subject. The short answer is “giving” while you are living. However, there are certain limitations to giving, largely because of a screen of taxation. You want to duck under the gift tax itself, most likely, which means giving less than the annual exclusion (i.e., currently $14,000 per child). In addition, you may want to consider leveraging your lifetime gift/estate tax exemption to its greatest effect. To make already complicated matters a bit more complicated, don’t forget there also are taxes based on to whom you are giving. For example, there is the generation-skipping transfer tax and, with certain assets, the kiddie tax. To be sure, lifetime wealth transfers can be a great benefit to those on either end – the givers and the receivers. Seek qualified professional counsel in advance to ensure that all is done according to Hoyle.

Reference: Forbes (June 18, 2013) “Best Ways To Give Your Heirs Money While You're Alive”

For more information, see www.jerryreiflawyer.com

 

Annual Gift Exclusion Opportunities Abound Great Lakes Bay Region, MI

Many taxpayers are confused when it comes to the Annual Gift Exclusion. You know, the $14,000 you can gift each year without triggering gift taxes. One of the biggest sources of confusion is the number of such gifts you can make. A recent Q&A in The Wall Street Journal titled [spoiler alert] “A Tax-Free Gift Can Go to Anyone” takes this question head on. So, to whom may you gift assets within the exclusion amount? Answer: anyone. That is right, it makes absolutely no difference whether the objects of your generosity are near or far, family, familiar, or utter strangers. Now, you might not be interested in giving much of anything to complete strangers – charity aside – but the point is that gifting is a malleable tool, and something you may work into a much grander plan. The name of the game is understanding the annual gift tax exclusion and your lifetime gift tax exemption. Every individual can give up to their annual gift tax exclusion to any other individual, and as many of them as they care to, all tax free. To give more than the annual amount, however, will count against your lifetime gift tax exclusion which, in turn, will reduce your estate tax exemption available at death. Like most areas of tax law, the time and money spent consulting with qualified legal counsel now prior to embarking on a gifting strategy will be time and money well spent later on.

Reference: The Wall Street Journal (June 16, 2013) “A Tax-Free Gift Can Go to Anyone”

For  more information, see www.jerryreiflawyer.com

 

 

IRS Getting Greedy Over Old “Gifts”?

So, how long does (or can) the IRS scour your financial history to find taxable gifts? Well, it seems they do (or can) go back some 41 years. Whether you are a billionaire or a regular “Joe,” a recent case is worthy of note. Enter the case of Sumner Redstone and a 1972 inter-family legal proceeding. The IRS has elected to call this “proceeding” a gift with much in past due taxes and penalties. Bloomberg recently reported on this unique fact pattern in an article titled “Billionaire Redstone Challenges IRS on Tax for 1972 Gift.” Normally the IRS is bound by a statute of limitations set to about three years. However, an exception to this rule includes the failure to file a tax return like the allegedly missing gift tax return of Mr. Redstone. Apparently, the difficulty arose over certain shares of National Amusements Inc., and a family legal agreement resulting in a “transfer” of shares. The IRS is now calling that “transfer” a “gift” with $1.1 million in taxes, penalties, and interest due and owing. According to Richard Behrendt, a former estate and gift tax auditor turned director of estate planning, “This is unheard of… I can’t remember ever hearing of anybody going back 41 years to raise an issue. It’s really unprecedented in my experience.” Note: Mr. Redstone may have become a target, given the fact he is the chairman of both Viacom and CBS, not to mention National Amusements and all the related subsidiaries of the three. Reportedly, Mr. Redstone is worth approximately $4.9 billion. Nevertheless, this 41-year-look-back is a strange precedent.

Reference: Bloomberg (May 1, 2013) “Billionaire Redstone Challenges IRS on Tax for 1972 Gift”

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

 

The Beauty and the Beast of the Estate Tax Rules Saginaw, Michigan

We certainly have been through some uncertain times regarding estate taxes over the past several years. From changing exemption amounts, to a one-year repeal, to “band-aid” fixes, the only thing certain about the federal estate tax was its uncertainty. Until now. Congress finally gave us permanent estate tax rules; and by permanent, I mean that except for a built in inflation factor for the estate and gift exclusion, the provisions don’t expire or change with the passage of time. Interestingly, despite its potentially onerous tax bite, the federal estate tax remains largely a voluntary tax. As Forbes points out in a recent column, “Want to Avoid the Estate Tax Cliff? Five Ways to Help,” the new provisions still allow savvy planners to substantially reduce, or even eliminate, federal estate taxes -- even on estates that far surpass the $5.25 million exemption. Forbes goes on to list five powerful strategies for reducing federal estate taxes: Gifting. The new provisions allow you to make tax-free lifetime gifts up to an amount equal to the federal estate tax exemption, currently $5.25 million. Straightforward gifting of assets while you are alive removes them -- and their future growth or appreciation -- from your estate tax-free. Discounting. There are still a myriad of techniques that can be used to discount the value of stock for transfer purposes. These techniques center on lack of control/minority interest and/or lack of marketability, and can create a substantial valuation discount. Loans. Family business owners can take advantage of historically low interest rates for loans used to execute sales of stock. As Forbes points out, “currently, a parent can sell shares of the family-owned business to the child for a fixed long term interest rate as low as 2.52%, and not incur a gift tax because of the loan rate.” Insurance. Properly purchased and owned, life insurance can be used to provide the cash needed to pay any federal estate taxes that may remain after other planning strategies are exhausted. Remember, the cash-call on federal estate taxes is due within nine months of the business owner's death. Charitable Giving. If the family is not interested in the business, but is interested in the wealth it has generated, a charitable gift of a business interest may be a savvy way to dispose of the business while also saving on taxes. As Forbes points out, “there are still a number of tax-smart ways to transfer the business to a nonprofit organization, and fulfill your estate planning goals.” The beauty of the new estate tax rules is their permanence. The beast is their sting -- 40 percent on the first dollar over the exemption amount (currently $5.25 million). Failure to wisely plan for a potential estate tax liability can be disastrous for your family and/or your business.

Reference: Forbes (January 30, 2013) “Want to Avoid the Estate Tax Cliff? Five Ways to Help”

For more information, see 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

 

An Integral Time for Giving Saginaw, Michigan

The 4th quarter of 2012 is well on its way, and typically this is a time when non-profits bring in the most donations. Charities are feeling the full effect of the economic struggles we’ve been hit with in recent years, making this time a make-or-break giving season. Why would this December be an especially trying time for charities? US News and World Report offered their own pithy list not too long ago and it’s worth a pause: “Nonprofits Face Challenging End-of-Year Giving Season.” Simply put, at a time when the services of charities have been needed more than ever (with hurricanes, droughts, and winter storms all taking their tolls during a sluggish economy) charitable giving has, understandably, been less than “generous.” That said, as a recent article published by the Chronicle of Philanthropy indicates, the “Average Gift by the Wealthy Has Declined Since 2009.” If you’re inclined to contribute to a worthy cause before year’s end, you are well-advised to visit with your estate attorney or financial advisor about ways to best leverage your gift both for charitable and tax purposes. There are many strategies available that may make a larger gift more affordable than you think. As we near the end of the 2012, lend your attention to your giving plans and make steps to get the ball rolling …before it drops in Times Square.

References: US News and
World Report (November 12, 2012) “Nonprofits Face Challenging End-of-Year
Giving Season”

The Chronicle of Philanthropy (October 29, 2012) “Average Gift by the Wealthy Has Declined
Since 2009”

For information see www.jerryreiflawyer.com

 

Will Portability Survive the Fiscal Cliff? Saginaw, Michigan

You may be surprised to hear that, on occasion, Congress will agree on something. Confused by the notion? The media likes to paint a different picture, and in many cases they are spot-on that Congress is up-in-arms about the law. Nonetheless, some interesting things come out of those silent agreements. For example, estate planners may be able to keep stock in “portability,” an estate tax provision that is likely to either survive year’s end or be resurrected in 2013. We’re still waiting for an official word, but by all accounts “Estate-Tax 'Portability' [is] Likely to Stay” (The Wall Street Journal). As regular readers know, the concept of portability came out of budget deals two years ago and is one more provision set to expire as part of the so-called “fiscal cliff.” Portability allows married partners, who already enjoy special rights to exchange wealth between themselves tax-free at the passing of the first, to pass on their unified estate/gift tax exemptions too. Without portability, a surviving spouse may be required to pay estate taxes on the couple’s combined estate value, if the first spouse to die did not properly apply their exemption. A marital trust was the usual strategy employed to break this vicious predicament. Under current law, though, the exemption is now portable (so long as the estate tax return is filed on the passing of the first to die); so the surviving spouse can apply both exemptions to the final estate. It’s a powerful strategy. Under current law, this means that a surviving spouse can pass a whopping $10.2 million in estate value to their heirs, estate-tax-free. The end of the year could bring about the expiration of both the generous estate tax exemption and portability itself. Though experts predict that portability is here to stay, no one really knows what Congress will decide.

Reference: The Wall Street
Journal (November 4, 2012) “Estate-Tax 'Portability' Likely to Stay”

For more information, see www.jerryreiflawyer.com

 

Expected Increase in Annual Gift Exclusion Saginaw, Michigan

In a time of political change and laws that may be shifting, the word is out on the annual gift tax exclusion. It has been projected to rise for the first time since 2009. The Wall Street Journal broke the good news as early as it could, in a Q&A entitled “Expect Gift Limit to Rise Next Year.” First, a caveat: it’s not the present lifetime exclusion of $5.12 million you can expect to see increase, as the jury is still very much out on that one. Rather, it’s the annual gift tax exemption presently set at $13,000. Currently, you can exclude $13,000 per person per year, before ever reducing your lifetime exemption amount. Good news: that amount is set to adjust up to $14,000. We await official numbers, but they should arrive later in the year. If and when the annual gift exclusion increases, this will bring a welcome bump in your wealth transfer opportunities. If nothing else, the attention given to this uptick in the annual gift exclusion also may offer a wake-up call to the power of annual giving. Just think of what you can do for each of your loved ones with an annual gift of $14,000.

Reference: The Wall Street
Journal (September 29, 2012) “Expect Gift Limit to Rise Next Year”

For more information, see www.jerryreiflawyer.com

 

The Alarm Will Sound on the Estate Tax Clock Saginaw, Michigan

If you have been following national politics and the impending fiscal (tax) cliff, now is the time to make your move! There are important estate planning opportunities expiring on December 31, 2012. Don’t hold your breath that the White House and Congress will come to the rescue in the nick of time. As a recent MarketWatch article sums it up, there’s “No playing chicken with estate tax deadline.” The present estate planning laws offer an unprecedented and generous gift tax exclusion. That is worth thinking about, too. The exclusion amount of the estate tax is tied to the gift tax amount and is therefore just as generous (but not many taxpayers are keen to qualify for that before year’s end). Gifts, on the other hand, are easy to make. This especially is true as the holiday season is nearly upon us. With the current exclusion set to $5.12 million, you can give that much in your lifetime over and above the annual exclusion amount of some $13,000. Better yet, you can give this entire amount before December 31 if you so choose to secure the full exclusion amount. Why? Because the exclusion is automatically set to drop to $1 million unless the White House and Congress take action. The article cautions if you wait too long to begin the process, you may miss out on the wealth transfer jackpot as it can be too difficult to complete these transfers in a matter of weeks. So make your move before the Estate Tax alarm sounds!

Reference: MarketWatch
(October 2, 2012) “No playing chicken with estate tax deadline”

For more information, see www.jerryreiflawyer.com

 

Related articles

Don't Delay! Time Is Expiring for Tax Planning Options Saginaw, Michigan

An Integral Time for Giving Saginaw Michigan

The 4th quarter of 2012 is well on its way, and typically this is a time when non-profits bring in the most donations. Charities are feeling the full effect of the economic struggles we’ve been hit with in recent years, making this time a make-or-break giving season. Why would this December be an especially trying time for charities? US News and World Report offered their own pithy list not too long ago and it’s worth a pause: “Nonprofits Face Challenging End-of-Year Giving Season.” Simply put, at a time when the services of charities have been needed more than ever (with hurricanes, droughts, and winter storms all taking their tolls during a sluggish economy) charitable giving has, understandably, been less than “generous.” That said, as a recent article published by the Chronicle of Philanthropy indicates, the “Average Gift by the Wealthy Has Declined Since 2009.” If you’re inclined to contribute to a worthy cause before year’s end, you are well-advised to visit with your estate attorney or financial advisor about ways to best leverage your gift both for charitable and tax purposes. There are many strategies available that may make a larger gift more affordable than you think. As we near the end of the 2012, lend your attention to your giving plans and make steps to get the ball rolling …before it drops in Times Square.

References: US News and
World Report (November 12, 2012) “Nonprofits Face Challenging End-of-Year
Giving Season”

The Chronicle of Philanthropy (October 29, 2012) “Average Gift by the Wealthy Has Declined
Since 2009”

For more information see www.jerryreiflawyer.com

 

Giving Gifts While Maintaining Your Financial Goals Saginaw Michigan

As you may know, current law allows you gift a large sum of $5 million (more than $10 million for married couples) without triggering any gift taxes. Since the law is set to expire at the end of 2012, many are left guessing as to what will happen next year and gearing up for a very “gifted” 4th Quarter. But as you make plans to take advantage of the gift tax savings, have you carefully considered your own financial needs and goals? From a tax planning standpoint, there may never be a better time for you to make a large gift. But, you know that life is about more than tax planning. The real question you need to answer, if you are inclined to make substantial gifts, is whether – and how much – you can afford to give. Wealth Strategies Journal recently published an article, “How Much Can You Gift,” to help you through the decision process. Some things to consider: • Your personal goals, especially for retirement. Will they still be adequate after your generous gift? • Your age and health. Do you have many more income-producing years ahead, or is it possible you may need more money to provide for yourself and your spouse, especially if there are health issues to consider. Consult the cited article for more gifting considerations. For example, you should not gift away – in any form – assets that are essential for your own financial needs. You can gift away assets to your children (or trusts for them) that you will never need. And don’t forget about estate planning tools that can help you make gifts that you may need, with “just in case” access if you do. Seek appropriate legal counsel for more information.

Reference: Wealth Strategies
Journal (November 8, 2012) “How Much Can You Gift”

For more information, see www.jerryreiflawyer.com

 

Will Portability Survive the Fiscal Cliff? Saginaw Michigan

You may be surprised to hear that, on occasion, Congress will agree on something. Confused by the notion? The media likes to paint a different picture, and in many cases they are spot-on that Congress is up-in-arms about the law. Nonetheless, some interesting things come out of those silent agreements. For example, estate planners may be able to keep stock in “portability,” an estate tax provision that is likely to either survive year’s end or be resurrected in 2013. We’re still waiting for an official word, but by all accounts “Estate-Tax 'Portability' [is] Likely to Stay” (The Wall Street Journal). As regular readers know, the concept of portability came out of budget deals two years ago and is one more provision set to expire as part of the so-called “fiscal cliff.” Portability allows married partners, who already enjoy special rights to exchange wealth between themselves tax-free at the passing of the first, to pass on their unified estate/gift tax exemptions too. Without portability, a surviving spouse may be required to pay estate taxes on the couple’s combined estate value, if the first spouse to die did not properly apply their exemption. A marital trust was the usual strategy employed to break this vicious predicament. Under current law, though, the exemption is now portable (so long as the estate tax return is filed on the passing of the first to die); so the surviving spouse can apply both exemptions to the final estate. It’s a powerful strategy. Under current law, this means that a surviving spouse can pass a whopping $10.2 million in estate value to their heirs, estate-tax-free. The end of the year could bring about the expiration of both the generous estate tax exemption and portability itself. Though experts predict that portability is here to stay, no one really knows what Congress will decide.

Reference: The Wall Street Journal (November 4, 2012) “Estate-Tax 'Portability' Likely to Stay

For more information, see www.jerryreiflawyer.com

 

Expected Increase in Annual Gift Exclusion Saginaw Michigan

In a time of political change and laws that may be shifting, the word is out on the annual gift tax exclusion. It has been projected to rise for the first time since 2009. The Wall Street Journal broke the good news as early as it could, in a Q&A entitled “Expect Gift Limit to Rise Next Year.” First, a caveat: it’s not the present lifetime exclusion of $5.12 million you can expect to see increase, as the jury is still very much out on that one. Rather, it’s the annual gift tax exemption presently set at $13,000. Currently, you can exclude $13,000 per person per year, before ever reducing your lifetime exemption amount. Good news: that amount is set to adjust up to $14,000. We await official numbers, but they should arrive later in the year. If and when the annual gift exclusion increases, this will bring a welcome bump in your wealth transfer opportunities. If nothing else, the attention given to this uptick in the annual gift exclusion also may offer a wake-up call to the power of annual giving. Just think of what you can do for each of your loved ones with an annual gift of $14,000.

For more information, go to my website www.jerryreiflawyer.com

Reference: The Wall Street
Journal (September 29, 2012) “Expect Gift Limit to Rise Next Year”

The Alarm Will Sound on the Estate Tax Clock Saginaw Michigan

If you have been following national politics and the impending fiscal (tax) cliff, now is the time to make your move! There are important estate planning opportunities expiring on December 31, 2012. Don’t hold your breath that the White House and Congress will come to the rescue in the nick of time. As a recent MarketWatch article sums it up, there’s “No playing chicken with estate tax deadline.” The present estate planning laws offer an unprecedented and generous gift tax exclusion. That is worth thinking about, too. The exclusion amount of the estate tax is tied to the gift tax amount and is therefore just as generous (but not many taxpayers are keen to qualify for that before year’s end). Gifts, on the other hand, are easy to make. This especially is true as the holiday season is nearly upon us. With the current exclusion set to $5.12 million, you can give that much in your lifetime over and above the annual exclusion amount of some $13,000. Better yet, you can give this entire amount before December 31 if you so choose to secure the full exclusion amount. Why? Because the exclusion is automatically set to drop to $1 million unless the White House and Congress take action. The article cautions if you wait too long to begin the process, you may miss out on the wealth transfer jackpot as it can be too difficult to complete these transfers in a matter of weeks. So make your move before the Estate Tax alarm sounds!

For more information, go to my website www.reiflawyer.com

Reference: MarketWatch
(October 2, 2012) “No playing chicken with estate tax deadline”

Warning: Don’t Delay Your Wealth Transfers

With election time right around the corner, it’s easy to lose focus on your goals for 2012 as you vet out your favorite candidate. The end of 2012 is nearing faster than you may think, and you don’t want to forget about your wealth planning opportunities before they change in 2013. The estate laws of 2012 are generous and ripe for implementation. However, what will take effect on January 1, 2013 is anybody’s guess. One thing is clear: anything can happen in a divided and contentious lame-duck Congress. There’s simply nothing worse for wealth transfer planning than an unforeseeable future, but that’s exactly what we face. The auspices of 2012 and the unknowns of 2013 have been featured once more in Forbes. In a recent article titled “Should You Give Your Wealth To Your Grandkids Before December 31?,” this quandary is explored. Unfortunately, the question posed in the title of the article is not given easy answers. In the end, the how, when, whom and even how much issues must be addressed on a case by case basis. You know your own needs and assets. Fortunately, competent counsel can help you make navigate these issues. There is a lot to gain with the current 2012 wealth transfer laws, so act now when it comes to your gifting or trust plans. Your options may become extremely limited once the ball drops in Times Square.

Reference: Forbes (August 2, 2012) “Should You Give Your Wealth To Your Grandkids Before December 31?”

The Clock is Ticking on a Gift Tax Exemption Bonanza

A few poignant reminders never hurt anybody, especially when the issues are this pressing. Case in point: There are fewer than six months remaining to make use of the $5.12 million gift tax exemption. If you have not noticed, communication between Congress and the White House is rather contentious. After all, it is an election year and the stakes are high regarding the future of our country. Who will control the levers of power in 2013? That question will not be answered until November 6. In the meantime, the future of the gift tax (and the estate tax) hangs in the balance. Against the backdrop of this uncertainty, one known is that the $5.12 million gift tax exemption is available through December 31, 2012. That amount (or $10.24 million, if married) is yours to give – in liquid assets, unappreciated stock, real estate, or what have you – but only until the end of the year. The New York Times recently addressed this issue in a recent article titled “To Give or Not to Give, Up to $5.12 Million.” In the end, you may find yourself in this very real tax predicament. You could be stuck between the known and the unknown, 2012 and 2013 gifting exemptions, or, a rock and a hard place.

Reference: The New York Times (June 22, 2012) “To Give or Not to Give, Up to $5.12 Million”

Appraisals and Gift Taxes

If you are gifting to family this year and want to survive IRS challenges, then contact a professional appraiser promptly for the real worth of those assets! With the $5.12 million lifetime gift exclusion set to expire on December 31, 2012, many families will be looking to make significant wealth transfers this year, especially of family business interests. Accordingly, if your plans involve giving things rather than money, then the IRS will want to know the “value” of the gift itself. That’s why a professional appraisal is essential. A recent article by Reuters, titled Appraisers are your gatekeepers to gift tax deadline, shed more light on why this step is so important for gifting. Don’t let the increasing demand for appraisal services leave you short of getting your gifts assessed! If you want to take advantage of the generous gift tax laws, then there’s no time to waste.

Reference: Reuters (August 8, 2012) “Appraisers are your gatekeepers to gift tax deadline”

Gift Tax Exclusion

Giving gifts to loved ones is a great thing for many of us. Knowing the basics of the gift-tax exclusion is important when making these plans for the coming year. For some welcome straight answers on gifts and gift taxes, The Wall Street Journal recently examined the “Basics of the Gift-Tax Exclusion.” While the original article doesn’t offer exhaustive advice, it provides practical pointers you can use. For example, you can give away a total of $13,000 to your recipients. But remember, anything related to tax planning can have hidden complexities. After you’ve reviewed the fundamentals of the gift-tax exclusion, a gifting program can be one of the most simple wealth transfer strategies in your estate planning.

Reference: The Wall Street Journal (August 4, 2012) “Basics of the Gift-Tax Exclusion.”

Appraisals and Gift Taxes

If you are gifting to family this year and want to survive IRS challenges, then contact a professional appraiser promptly for the real worth of those assets! With the $5.12 million lifetime gift exclusion set to expire on December 31, 2012, many families will be looking to make significant wealth transfers this year, especially of family business interests. Accordingly, if your plans involve giving things rather than money, then the IRS will want to know the “value” of the gift itself. That’s why a professional appraisal is essential. A recent article by Reuters, titled Appraisers are your gatekeepers to gift tax deadline, shed more light on why this step is so important for gifting. Don’t let the increasing demand for appraisal services leave you short of getting your gifts assessed! If you want to take advantage of the generous gift tax laws, then there’s no time to waste.

Reference: Reuters (August 8, 2012) “Appraisers are your gatekeepers to gift tax deadline”

Are Family Loans (Taxable) “Gifts” in Disguise?

Sometimes ensuring that a loved one has the assets they need – for a project or just for general use – will mean that you’ll be treading a fine line between making a “gift” and making a “loan.” The problem is that these are very different concepts, especially as far as the IRS is concerned. In brief, if you’re going to make a family loan, make it a real one or else consider an outright gift to be taxed by the IRS accordingly. The fine line between a loan and a gift is not a new one. This topic was explored in a recent article in SmartMoney titled “Making a Tax-Smart Family Loan.” Essentially, you need to remember that “loans” are what you make when when you aren’t interested in losing money and are probably trying to gain. To be a loan, the transferred amount must come with a standard interest rate. In fact, to be considered a “loan” the interest rate must be at least equal to the “applicable Federal Rate,” as determined monthly by the IRS. If you don’t charge the objective rate of interest, then you’ve essentially given that much away. Not surprisingly, that’s exactly how the IRS chooses to view the situation and, in return, it will hold you accountable for the interest not charged. As a result, this imputed interest can eat into your gift tax exemption amounts, whether annual or lifetime. Essentially, no loan to a family member should be considered a strictly off-the-books and casual affair. If you find yourself caught between making a gift or a loan, then you must choose one or the other and properly frame the transfer as such.

Reference: SmartMoney (June 13, 2012) “Making a Tax-Smart Family Loan”

Are Family Loans (Taxable) “Gifts” in Disguise?

Sometimes ensuring that a loved one has the assets they need – for a project or just for general use – will mean that you’ll be treading a fine line between making a “gift” and making a “loan.” The problem is that these are very different concepts, especially as far as the IRS is concerned. In brief, if you’re going to make a family loan, make it a real one or else consider an outright gift to be taxed by the IRS accordingly. The fine line between a loan and a gift is not a new one. This topic was explored in a recent article in SmartMoney titled “Making a Tax-Smart Family Loan.” Essentially, you need to remember that “loans” are what you make when when you aren’t interested in losing money and are probably trying to gain. To be a loan, the transferred amount must come with a standard interest rate. In fact, to be considered a “loan” the interest rate must be at least equal to the “applicable Federal Rate,” as determined monthly by the IRS. If you don’t charge the objective rate of interest, then you’ve essentially given that much away. Not surprisingly, that’s exactly how the IRS chooses to view the situation and, in return, it will hold you accountable for the interest not charged. As a result, this imputed interest can eat into your gift tax exemption amounts, whether annual or lifetime. Essentially, no loan to a family member should be considered a strictly off-the-books and casual affair. If you find yourself caught between making a gift or a loan, then you must choose one or the other and properly frame the transfer as such.

Reference: SmartMoney (June 13, 2012) “Making a Tax-Smart Family Loan”

Are Family Loans (Taxable) “Gifts” in Disguise?

Sometimes ensuring that a loved one has the assets they need – for a project or just for general use – will mean that you’ll be treading a fine line between making a “gift” and making a “loan.” The problem is that these are very different concepts, especially as far as the IRS is concerned. In brief, if you’re going to make a family loan, make it a real one or else consider an outright gift to be taxed by the IRS accordingly. The fine line between a loan and a gift is not a new one. This topic was explored in a recent article in SmartMoney titled “Making a Tax-Smart Family Loan.” Essentially, you need to remember that “loans” are what you make when when you aren’t interested in losing money and are probably trying to gain. To be a loan, the transferred amount must come with a standard interest rate. In fact, to be considered a “loan” the interest rate must be at least equal to the “applicable Federal Rate,” as determined monthly by the IRS. If you don’t charge the objective rate of interest, then you’ve essentially given that much away. Not surprisingly, that’s exactly how the IRS chooses to view the situation and, in return, it will hold you accountable for the interest not charged. As a result, this imputed interest can eat into your gift tax exemption amounts, whether annual or lifetime. Essentially, no loan to a family member should be considered a strictly off-the-books and casual affair. If you find yourself caught between making a gift or a loan, then you must choose one or the other and properly frame the transfer as such.

Reference: SmartMoney (June 13, 2012) “Making a Tax-Smart Family Loan”

Are Family Loans (Taxable) “Gifts” in Disguise?

Sometimes ensuring that a loved one has the assets they need – for a project or just for general use – will mean that you’ll be treading a fine line between making a “gift” and making a “loan.” The problem is that these are very different concepts, especially as far as the IRS is concerned. In brief, if you’re going to make a family loan, make it a real one or else consider an outright gift to be taxed by the IRS accordingly. The fine line between a loan and a gift is not a new one. This topic was explored in a recent article in SmartMoney titled “Making a Tax-Smart Family Loan.” Essentially, you need to remember that “loans” are what you make when when you aren’t interested in losing money and are probably trying to gain. To be a loan, the transferred amount must come with a standard interest rate. In fact, to be considered a “loan” the interest rate must be at least equal to the “applicable Federal Rate,” as determined monthly by the IRS. If you don’t charge the objective rate of interest, then you’ve essentially given that much away. Not surprisingly, that’s exactly how the IRS chooses to view the situation and, in return, it will hold you accountable for the interest not charged. As a result, this imputed interest can eat into your gift tax exemption amounts, whether annual or lifetime. Essentially, no loan to a family member should be considered a strictly off-the-books and casual affair. If you find yourself caught between making a gift or a loan, then you must choose one or the other and properly frame the transfer as such.

Reference: SmartMoney (June 13, 2012) “Making a Tax-Smart Family Loan”