When LLC Members Pass Away: What Are Executor Rights?
September 18, 2014
A recent case highlights some of the questions surrounding the situation mentioned in the title. According to the default rule in New York, the death of a member doesn’t trigger a dissolution of the LLC unless the survivors vote to take action on dissolving.
There are a few important outcomes of this new default rule, known as 701b in the New York LLC law. First, executors only have limited powers in their ability to exercise member rights or to become members themselves. Second, family members who inherit a deceased member’s interests are not admitted for official membership unless those other members consent to this. Third, without such consent, the inheriting family member retains only economic interest, not management or voting powers. Finally, these individuals can be considered non-members and do not have any decision making authority when it comes to judicial dissolutions or mergers and consolidations.
One example of this rule in action is the Budis case. An executor-husband of his late wife had his case dismissed against other LLC members for lack of standing. The operating agreement stated that the death of a member was seen as a voluntary withdrawal, and the estate thus became an interest holder but not a member per se. The solution is to include something in the operating agreement stating that a family member or executor inheriting the deceased’s LLC interest should be treated as a member of the LLC with all rights and powers afforded to other LLC members. To learn more about protecting your interests in an LLC, contact us today firstname.lastname@example.org or via phone at 732-521-9455
When to Use a Family LLC
September 17, 2014
Most people have heard about LLCS, but you might not be aware of the best situations to use them when it comes to your family. Essentially, a family LLC is an estate planning tool for holding assets or transferring them to succeeding generations.
The people most likely to use a family LLC are those individuals who want to keep family assets together and intact, managed only by a limited number of people. As an LLC manager, you’re in control while you’re alive, but you can also exercise control in selecting who will manage the LLC after you pass away.
If your family has rental real estate, it’s a good option to use a family LLC. You can manage it during your lifetime, and then at your death a portion of the LLC managing that real estate goes to your children. This limits the opportunity for children to argue after you have passed away about who is entitled to what.
Another benefit of a family LLC is that you can gift it during your lifetime. Without having to worry about other members signing off on your decisions, you can sell, lease, or buy assets while you are still alive. This gives you control while you are still present with opportunities for your heirs to manage the LLC after you are gone.
Interested in learning more about Family LLCs or other family entities? Send us an email at email@example.com or contact us via phone at 732-521-9455.
Self-Employment Tax and K-1 Income: What You Need to Know
September 16, 2014
What happens if you receive a K-1 from an LLC and there are self-employment earnings listed on line 14? Are you responsible for reporting those as subject to the self-employment tax? The self-employment tax is an additional payment of 15.3% to account for Medicare and Social Security. We’re taking a page from the Tax Times blog today to talk about this issue. For the most part, a taxpayer’s portion of ordinary income from partnerships (including LLC’s) reported on a K-1 is indeed subject to the self-employment tax. There are, of course, exceptions. This requires the assistance of an experienced team of accountants and tax attorneys, since the solution for you likely depends on your individual circumstances, the state of formation for the LLC and whether the LLC is taxed as a pass-through entity. In any case, it could be worth your while to discuss this issue with a trained professional to learn whether you are liable for the self-employment tax or not. To learn more about complicated tax issues and reporting of self-employment income, contact our offices at 732-521-9455 or through email at firstname.lastname@example.org.
Don’t Make This Mistake With Digital Assets
August 29, 2014
As virtual currencies like Bitcoins become more popular, even the IRS has recognized the possible value in these assets. As the owner of any kind of digital asset, you should also be aware of how to properly include these in your estate plan. Along with this goes avoiding one of the most common mistakes made with digital assets: failing to tell your beneficiaries about them.
Other kinds of assets, like stocks, bonds, real estate, and retirement plans have been part of the estate planning arena for so long that planning attorneys and trustee administrators are well versed in how to deal with them, even when beneficiaries are not entirely clear of their existence or worth. They also tend to be easier to hunt down if necessary, but the virtual world can be complex and heavily password protected.
With digital assets, it’s different. Unless somebody knows you’ve got these assets, it’s very likely that none of your heirs will ever gain access to them. It’s most likely that this wasn’t what you intended. So make it clear: if you’ve got someone in mind that you would like to take over your digital assets, tell them about it. Better yet, communicate it to your estate planning attorney as well to limit any confusion and to ensure that you have covered all your bases. For a comprehensive estate planning consultation, contact us today by email email@example.com or via phone at 732-521-9455.
Real Estate Owners, Doctors & Gun Collectors: How to Plan for Special Assets
August 28, 2014
In many cases, and especially for business owners, there are assets in an estate plan that require special consideration. For example, a company that requires certain expertise or specific licenses will need their own planning, like a special trustee to administer those assets.
An individual or business owner that has a gun collection, for example, would be placed into a trust that is monitored by another individual with a gun license. Likewise, a doctor might choose a trustee who is also a doctor to control the medical practice’s ownership corporation in the event of incapacity.
Another example involves real estate, where there is a home that the owner would like to keep in the family. There are several reasons why it makes sense to establish a house trust to explain how the house could eventually be sold, and how it can be shared and used by everyone in the short term. Heirlooms and pets represent further causes for special planning.
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Trusts are a highly beneficial tool for a wide variety of individuals and businesses because of the many advantages they offer. An individual has more control over the passing down of assets and there are also be tax benefits, too. To learn how to plan for your special circumstances with a trust, email firstname.lastname@example.org or call 732-521-9455.
Will You Be Impacted by the New Jersey Death Transfer Tax?
August 27, 2014
When it comes to high-dollar decisions about estate planning, many people wrongfully believe they are not included because the federal tax exemption of $5.34 million is so high. While this is true, in New Jersey, you should be aware of the transfer tax because far more people are included under that umbrella.
In New Jersey, an estate larger than $675,000 at the time of your death can trigger the New Jersey Transfer Estate Tax. If you think you’re close, but not sure: cars, cash, bonds, life insurance, retirement accounts, real estate, bonds, stocks, and personal items are all included. A fair number of New Jersey residents hit that threshold with just their retirement plan and real estate. Depending on who will be the Beneficiary, there may be a separate inheritance tax of up to 18%. (See out prior blog post: http://lawesq.net/blog/2014/05/the-n-y-state-of-mind-changes-to-new- york-gift-tax-and-estate-laws/)
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There are a few things worth bringing up if you’re concerned about this tax. First of all, it is possible to plan around it. Using DING or NING trusts, which involve establishing trusts out of state, can be a great tool for addressing state tax concerns. Gifting and special plans for your retirement accounts can also address concerns for the future.
Setting things up in advance through a trust can also make it easier on your loved ones if you have passed away. There are many cases in which a simple will just won’t suffice. To talk specifics for your assets and plans, call us today 732-521-9455.
Especially For Those In N.J. & C.A.: Personal Tax Inversions to Avoid State Income Taxes
August 26, 2014
Take a look at the articles out there on either side of the issue and you’re likely to find compelling arguments for and against the use of corporate tax inversions. Some believe that tax inversions are not patriotic, but others see the issue as maximizing gains while “playing the rules” of the tax code game. Did you know that there’s a personal tax inversion you might be able to use to save hundreds of thousands (or more) on your state income taxes? It’s not right for everyone, but in the right situation can be a valuable tool.
In this situation, you can reap the benefits of having your assets located in a different jurisdiction, preferably one with no state income tax at all. A personal tax inversion, however, might be even simpler, because it doesn’t require you to transfer assets outside the country- just to another state. This can be done through a non-grantor trust. You are in some sense not really seen as the owner of the trust for tax purposes. Ensure that you work with an attorney who understands what, if any, gift tax implications there are of making such a move. The attorney drafting your paperwork should explain this to you and make you aware of whether you will be subject to gift taxes in exchange for giving up the burden of being hit with state income taxes. To learn more about non-grantor trusts, give us a call today at 732-521-9455 to get started.
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Robin Williams’ Trusts Call for Conversation About Trust Privacy
August 25, 2014
The loss of Robin Williams last week certainly sent ripples across the country, but it also highlights an important topic for your estate plans: privacy. Within a matter of hours after news outlets started reporting his death, details about the trusts documents he had established for his three children started emerging as well. The prime sources for these details? Gossip websites and tabloid. One site even published a 35-page document detailing Williams’ irrevocable trusts established for his children.
Shortly after these documents, one of which dated back to 1989, hit the media, Williams’ publicist responded that neither of them were accurate with regards to the former actor’s current estate plan. What’s most disturbing, however, is that trusts are most often used instead of wills because of the veil of privacy they offer.
So how did Williams’ documents, albeit outdated, end up in the public eye? The trustee of both the trusts had requested a co-trustee successor be appointed back in 2008, when the originally designated individual passed away. All of the public sharing of the trust document could easily have been avoided simply using trust protectors, like an accountant, trusted friend, or attorney who retains the power to appoint or remove trustees. To learn more about ensuring that your trusts are protected privately, contact our offices at email@example.com or via phone at 732-521-9455 to get started.
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Back To School Tips: Important Documents for Parents of New College Students
August 22, 2014
There’s no doubt that your mind is already pretty preoccupied with many different lists of supplies, last-minute shopping, and packing with your new college student. But it’s critical that you think about whether getting your adult child’s signature on two key estate planning documents is a good step. These two documents are a health care proxy and durable power of attorney.
So why, in the midst of everything else, should you be concerned with estate planning? In the majority of states, parent will not have the authority to determine health care decisions for children once those children have turned 18. This is true even if the parents are paying tuition or claiming those individuals as dependents on their tax returns. If the child were involved in an accident, for example, or became disabled, a parent might have to get court approval in order to act on behalf of his or her child.
Having both of the above-mentioned documents in place before your child goes off to college can give you a sense of peace and confidence that you will be able to act on behalf of your child in a worst-case scenario. Consider adding these crucial documents to your safebox at home today. In the event of an emergency, you can focus on caring for your child. Contact us today at 732-521-9455 or firstname.lastname@example.org.
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Newlywed Estate Planning
August 6, 2014
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While there is a great deal to celebrate getting ready for your wedding, don’t neglect this excellent opportunity to delve into your estate planning as well. Unfortunately, as you may already know, accidents can happen at any time. Of course we all hope that nothing impacts your new family and celebrations, but it is critical that you discuss your plans with your new spouse and outline your plans early. Remember that it will be much easier to update them later on once you have decided on the proper documents, but that you should never neglect putting your plan together entirely.
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You can begin with small steps, like changing your account beneficiaries. This is one of the easiest things to do in your overall estate plan, but there are big ramifications if you’re adding on your new spouse. Do it early. Make sure you update your life insurance, IRA, and 401k accounts, including any others that may have beneficiaries listed in the event that something happens to you.
Your next step should be to look over any wills that both of you have and to ensure that each individual has a solid will reflecting his or her current wishes. Powers of attorney and medical directives are also crucial for new spouses who may be updating their information from the past to reflect their new marriage. For more ideas about transitioning your estate planning to married life, contact us through email at email@example.com or contact us via phone at 732-521-9455 to get started.