Michigan Estate Planning Blog

IRS Sets Value Of Michael Jackson’s Image Saginaw, MI

Don’t judge a book by its cover, but apparently you can judge an estate by the face of its settlor. So says the IRS, which has begun to use “image and likeness” as a factor and real-dollar taxable asset in estate valuation. Unfortunately for the Michael Jackson estate, this valuation approach has brought the “King of Pop” estate back into the fray and the media. You can read all about this tax saga in a recent Bloomberg article titled “Protests Surge as IRS Sets Jackson Image at $430 Million: Taxes.” For most of us, the value of our “image and likeness” is not likely to push our estates into ever higher estate tax exposure. However, Michael Jackson’s image was not only recognizable, but outright valuable it seems. What was a blessing in life has turned out to be a curse after death. Now, the Jackson estate was not caught napping on this one. No, the estate offered up $2,105 in value to the IRS for his “image and likeness.” The IRS was not amused and its calculator came up with a value of $430 million - and then went to collect for penalties at the estate’s failure to anticipate such big numbers. While it is hard to deny that the Jackson image (at any stage of his career) is anything less than a cultural icon, this would seem to be a hard thing to properly own and even properly value. To help put things into perspective, too, remember that the “image and likeness” of the long-deceased Tupac made its return to the stage just a short time ago, causing havoc in estate planning circles even without the ire of the IRS. [If you missed that Forbes article it was titled “What Does Tupac's Hologram Mean For Other Celebrity Estates?”] This image valuation is a major point of contention in the Jackson estate and is instructive for the entire estate planning community. For example, the move is causing a pushback from estate planners and celebrities trying to keep their planning straight (how do you plan for your image?), and the original article explores how the battle lines are drawing. Whether you are a king of pop, likely to lead a music festival post-mortem and in hologram, or have a face that could launch a thousand ships (Helen of Troy), this case offers some insight into the role of value when it comes to IRS math.

Reference: Bloomberg (September 16, 2013) “Protests Surge as IRS Sets Jackson Image at $430 Million: Taxes”

For more information, see www.jerryreiflawyer.com

 

 

Tax Savings for Supporting Your Elderly Parent Saginaw, Michigan

It’s officially tax time, and if you have been caring for an elderly parent you may find that Uncle Sam can help with some of those costs through favorable tax treatment. Depending upon your circumstances, you may be able to claim your parent as a dependent, take a dependency care tax credit, deduct a portion of their medical expenses or get some combination of these tax breaks. Forbes offers guidance on whether you might qualify in a recent article “How To Claim Tax Breaks For Supporting Your Parents." If you think you may qualify, consult an accountant or tax professional to maximize your tax savings. Sadly, caregiving frequently also means managing end-of-life care ... and the attendant expenses. While it may be difficult to focus on financial matters during these stressful times, tax breaks can help extend available resources. Of course, the first step is to determine which expenses qualify and to what extent. Expenses that frequently apply to people with advanced illness include health insurance premiums not paid through work, deductibles, co-pays, medication, alternative care, medical supplies such as bandages, dental care, Medicare B premiums, lodging while traveling for care, and transportation costs. The IRS has a very detailed list of what is and isn’t deductible in Publication 502. You can refer to this publication for details, as well as to another excellent Forbes article, “Save Money On Taxes At The End Of Life -- How And Why It Matters.” Again, be sure to consult your accountant or tax professional if you think you may have qualifying expenses. The tax savings could be significant, and could help ease an otherwise difficult burden.

References: Forbes (January 29, 2013)
“How To Claim Tax Breaks For Supporting Your Parents”

Forbes (February 4, 2013) “Save Money On Taxes At The End Of Life -- How And
Why It Matters”

Fosr more information, see www.jerryreiflawyer.com

 

Tax Savings for Supporting Your Elderly Parent Saginaw, Michigan

It’s officially tax time, and if you have been caring for an elderly parent you may find that Uncle Sam can help with some of those costs through favorable tax treatment. Depending upon your circumstances, you may be able to claim your parent as a dependent, take a dependency care tax credit, deduct a portion of their medical expenses or get some combination of these tax breaks. Forbes offers guidance on whether you might qualify in a recent article “How To Claim Tax Breaks For Supporting Your Parents." If you think you may qualify, consult an accountant or tax professional to maximize your tax savings. Sadly, caregiving frequently also means managing end-of-life care ... and the attendant expenses. While it may be difficult to focus on financial matters during these stressful times, tax breaks can help extend available resources. Of course, the first step is to determine which expenses qualify and to what extent. Expenses that frequently apply to people with advanced illness include health insurance premiums not paid through work, deductibles, co-pays, medication, alternative care, medical supplies such as bandages, dental care, Medicare B premiums, lodging while traveling for care, and transportation costs. The IRS has a very detailed list of what is and isn’t deductible in Publication 502. You can refer to this publication for details, as well as to another excellent Forbes article, “Save Money On Taxes At The End Of Life -- How And Why It Matters.” Again, be sure to consult your accountant or tax professional if you think you may have qualifying expenses. The tax savings could be significant, and could help ease an otherwise difficult burden.

References: Forbes (January 29, 2013)
“How To Claim Tax Breaks For Supporting Your Parents”

Forbes (February 4, 2013) “Save Money On Taxes At The End Of Life -- How And
Why It Matters”

For more information, see www.jerryreiflawyer.com

 

Advanced Planning Techniques To Be Targeted? Saginaw, Michigan

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

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

For more information, see www.jerryreiflawyer.com

Fiscal Cliff Falls on the Charitable “Rich” Saginaw, Michigan

It’s quite fortunate that there were relatively few casualties in the fiscal cliff deal. In fact, some areas of the tax law became better, or at least safer, because the laws are now more predictable. Nonetheless, there were certain casualties and, according to a great many writers, charitable giving and donors themselves were cut a raw deal. The fiscal cliff deal reintroduces the Pease Amendment, so named after former Congressman Donald Pease. Forbes recently wrote about this in an article titled “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks.” Indeed, as you can tell by the title of the article, the Pease Amendment is just one more of those “stealth taxes” working to decrease deductions rather than increase taxation. In this case, for example, this stealth tax chips away at the charitable deductions for high-earners. For taxpayers with adjusted gross incomes (AGI) above $250,000 (or above $300,000 for joint filers), they will see an itemized deduction limitation kick in that is the lesser of (a) 3% of the adjusted gross income above the applicable amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year. Among other itemized deductions, this hits the charitable deduction, deductions for mortgage interest, deductions for various lower level taxes, and so on with some specific exclusions. That can start to really add up in a year when you happen to have an increase in your AGI. So, the tax game has gotten a bit more complex, and charitable giving has fewer tax deduction rewards for some individuals these days.

Reference:

Forbes (January 9, 2013) “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks”

 

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