If you have decided to use a trust to pass on your assets, this can be an exciting decision that gives you peace of mind about the firmness of your plans. If you don’t ensure that the trust is properly funded, however, it’s unlikely that your trust is going to carry out the plans that you intended.
If you already have assets inside the trust, make sure that you set up reminders to continuously review your materials and always have unfunded or new assets titled into the trust’s name. Don’t ever assume that these changes have been made, since the ownership of verification falls squarely on your shoulders. Keep copies of documents that confirm your changes so that you are always clear on what’s been taken care of already. If values have also changed, ensure that is updated as well.
If an asset that you used to own has now passed onto someone else through a sale or closure, make sure it’s removed from your funding portfolio. This makes it easier on your family members in the future and the trust executor so that they are not searching for assets that are no longer present. To review your funding in your living trusts, get in touch with us through email at firstname.lastname@example.org or over the phone 732-521-9455
If you are married but do not have any children to pass down your assets to, look at estate planning as your opportunity to do something unique and special with your plans. There is nothing wrong with not having children, and it actually gives you a chance to give back in other, meaningful ways.
There may be other people, outside of immediate children, who could benefit from your estate. This can include nieces and nephews, grandchildren, siblings, or even pets. Take some time to consider any special people in your life who might benefit from such a gift. If you have lost a child, you might even consider putting together a scholarship foundation or other organization that can carry on that child’s legacy in your absence.
You may also want at least some of your assets being passed down to charity. Have a conversation with your spouse about the causes you care about the most and how you’d like to see funds distributed. Your giving can really help nonprofits that are in vital need of donations.
Leaving a legacy is one of the biggest benefits to putting your estate plan together, whether you have children or not. If you’re ready to talk over your options, contact us at email@example.com or over the phone 732-521-9455
If you’ve already looked into getting one, you know that Section 529 savings plans are able to accumulate earnings without federal income tax (and in many cases, state income tax). Once the beneficiary of the account reaches the age where he or she is going to college, that individual can take out withdrawals tax-free to pay for college expenses.
For the most part, relatives set up 529 plans, but no family relationship is actually required. Another little-known fact about these is that most of them will accept larger lump sum payments. Making these larger payments into a 529 plan can be beneficial for your estate planning because they are treated by the IRS as “completed gifts”. Likewise, they also fit into the yearly gift tax exclusion ($14,000). If you decided to spread your lump sum over several years, you could benefit from this gift tax exclusion every single year that you’re making a contribution.
This is a great tool for grandparents who want to help support their grandchildren’s future, because you can be making contributions for numerous grandchildren over several years. As an added bonus, 529 accounts can be a bit flexible, like if you need to change account beneficiaries without facing any penalties. Contact our offices today to learn more about estate planning tools and options to minimize taxes and pass on your legacy. Call us at 732-5521-9455.
Many Americans may be unaware of what an irrevocable life insurance trust (“ILIT”) is, let alone the benefits it may provide to them.
Typically, life insurance policy proceeds are not subject to income taxation. However, they are included in the calculation of a person’s gross taxable estate. This is where the ILIT comes in. If a person puts their life insurance policy into an ILIT, the proceeds of the policy are kept out of his or her taxable estate. The proceeds will therefore be available to his or her heirs free of income and estate tax.
Additionally, ILITs are a great way to provide cash to help pay for the taxes that will be levied on your estate. Beneficiaries of your ILIT can use some of the proceeds to pay the taxes owed on your estate. By doing this, your actual estate is kept in tact. This strategy is especially beneficial to those whose estate consists largely of illiquid assets such as a business or real estate. Through setting up an ILIT, you can ensure that your family will not have to sell the illiquid assets in your estate in order to satisfy the estate taxes.
Call us at 732-521-9455 or email at info@LawEsq.net to discuss the right way to own your life insurance.
It was recently discovered that the IRS finally took action on investigations of managers in small insurance companies. This has spiraled into the usage of “promoter audits” of such managers, leading in some cases to subpoenas demanding information about captive insurance companies.
The majority of the subpoenas are interested in details about the risk pools and how claims are paid and premiums are calculated, but they are also asking for marketing materials. These materials may be used to determine whether the captive was being used properly or whether it was simply being used to avoid taxes. There are some situations where captives just don’t work well, but there are other situations in which captives fill an important need.
If you’re using a captive insurance company or if you’re thinking about knowing one, risk management is crucial for structuring and reviewing. Knowing what to expect and knowing where the risks are gives you some insight into whether the captive is the appropriate vehicle for you. You should always talk to experienced tax attorneys when you’re using a captive or other complex strategy to help you manage risk. If you believe that you are being investigated or if you would like to discuss the opportunities of using a captive insurance company, reach out to our offices. Request an appointment through email at firstname.lastname@example.org or over the phone 732-521-9455.
Art collectors are celebrating a recent decision handed down from a US Appeals Court which could help to minimize taxes. The court agree that shared ownership in a highly-valued blue chip art collection, which can also be noted as a “fractional interest” enabled one family a critical tax break in the settling of an estate.
The Texas family involved had collected Picassos, Jackson Pollock pieces, and art by Paul Cezanne. The family used a grantor-retained income trust where partial ownership of the art was handed down to each one of their three children. The idea is that shared ownership interest limits the opportunity to sell or transfer the works since this would also require agreement from each child.
The court ruling determined that the deficiency lay with the IRS commissioner’s failure to properly use the discount for restricted ownership in this case, although an earlier tax court had argued that the family was only entitled to a 10 percent discount.
If you have a substantial art collection and are concerned about how it will be passed down to beneficiaries, talking to an estate planning expert could be in your best interest. Contact our offices today to learn about trusts or other vehicles that might work best for you. Request an appointment via email at email@example.com or over the phone 732-521-945
There are positive aspects to attempting your estate planning on your own, but there are just as many downsides. Those downsides can cost you big time, whether you have many different kinds of assets and business interests or whether you believe that your estate is simpler.
More complex situations should always be addressed with an experienced estate and tax planning attorney. Appreciated property, families with children who have special needs, family-owned businesses, and blended families are but a few examples of where DIY estate planning can go so wrong.
Photo Credit: militarybyowner.com
More sophisticated planning strategies, like the use of trusts, are outside the realm of possibility for someone completing their estate planning documents. Furthermore, new legislation (and sometimes, increasingly complicated legislation) means it’s vital to contact a professional to ensure you understand the opportunities and liabilities correctly. Laws are always changing, but template forms and DIY strategies are not as up to date on these strategies as an “in the know” estate planning firm will be.
Going DIY could mean that what you set up for plans after your death doesn’t actually hold because the wording, structure, or legal applicability is incorrect. Trust the experience and training of an estate planning firm that has helped individuals and families address needs across the spectrum. Call us at 732-521-9455 or through email at firstname.lastname@example.org to begin.
Joan Rivers was heralded as a stellar performer, but she also left behind a legacy as an incredible businesswoman. Her estate included income, collectibles, and real estate that was estimated in value between $150 million and $250 million. She left behind detailed instructions for her assets after her death, which is rare in a society when many celebrity deaths highlight the weaknesses of their estate plans. Photo Credit: breitbart.com
Looking at her careful planning, there are a few key lessons: be prepared for the unexpected, outline plans for pets, and correctly title the assets. Joan Rivers was also masterful in giving her family a brief overview of the estate plans to help improve clarity and reduce the possibility of arguments. Rivers made use of family trusts to reduce the tax burden for her beneficiaries and titled her assets
appropriately to allow for the smooth transition of business assets. This act alone helped to diminish her capital gains taxes.
Regardless of the size of your estate, proper planning allows you to pass on assets to your heirs in the most efficient manner while minimizing the tax liability. Contact our offices today for a consultation for your business and personal needs through email at email@example.com or contact us via phone at 732-521-9455.
This past June, an important ruling from the Supreme Court found that an inherited IRA is not protected as retirement funds. If a beneficiary of inherited IRA funds files for bankruptcy, the funds they inherited could be subject to creditor claims.
This new finding highlights the value of a trust. If the inherited IRA funds were received by a beneficiary though a trust, this would help to protect those funds so that they could be used in the manner desired by the person setting up
the beneficiaries. One such example is the use of a Standalone Retirement Trust, where inherited funds flow to a third-party trust after the retirement plan owner passes away. While the beneficiary still retains access to the funds, the fact that he or she didn’t create the trust allows quite a bit of protection for the beneficiary.
There are some states where laws on the books do protect inherited retirement accounts from creditors, but it’s always wise to consult with an estate planning attorney to discuss best structures for passing down assets. To learn more about your options, send us an email at firstname.lastname@example.org or contact us via phone at 732-521-9455 to get started.
New rules for your 401(k) could actually end up benefitting you. If you have saved after tax money in your 401(k) retirement account, it can be rolled over to a Roth IRA. While in the Roth IRA, your money will grow on a tax free basis instead of a tax deferred basis. You’ll avoid having to pay pro rata taxes on your distribution, too.
This new change creates an opportunity for planning. Prior to this new rule, advisors had to use complex planning tools to address client concerns. Taxpayers were required to roll over their entire 401(k) and use outside funds at the time to manage the 20% income tax withholding amount. The new rule, however, gives people without the cash on hand to replace dollars that were already withheld through a distribution.
In order to capitalize on this new rule, it’s important to understand that the distributions must be scheduled at the same time or they will be treated as separate, causing the mix of pre-tax and post-tax dollars. While the official rules begin on January 1, 2015, taxpayers can make use of them now since the rules were issued on September 18, 2014. In the past the IRS has allowed taxpayer relief based on a “reasonable interpretation” standard.
To learn more about the best strategies for your 401(k) and other retirement accounts, contact our offices for a personalized consultation. Request an appointment via email at email@example.com or over the phone 732-521-9455.
Some believe that trusts take too much work in order to get the most out of them. Assets have to be moved into the trust, usually using a formal designation of ownership from one or more people into the trust. If assets are not precisely retitled, surviving family members might have to go through probate anyways. Avoiding probate is one common reason to use a trust. The bottom line is that trusts don’t have to be that complicated if you structure them properly under the guidance of an experienced attorney.
Only Rich People Need Them
Even if you’re of limited means, there could be benefits to using a trust. Avoiding probate by paying the upfront costs to hire an estate planning attorney to draft your trust could be well worth the payoff in the long run. Trusts can make it much easier for your beneficiaries to receive the assets you’d like them to have.
You Don’t Need a Trust Until Death
A trust developed during your life can outline your plans for handling your affairs if you were to become incapacitated. There are big long term advantages to setting up a trust that works for you while you are still alive.
Interesting in putting together a trust? Call us at 732-521-9455 or through email at firstname.lastname@example.org to begin.
One of the biggest buzzword phrases in estate planning today is “digital asset”. But what does that mean, and how should you plan for it? Does everyone have digital assets? What happens if you fail to plan? These are all great questions, and this brief article will provide you with some details about how to approach this new concern.
You’ll want to identify your digital assets before you set up plans for them. These might include:
Domain names/hosting rights
Credit card accounts
Financial and banking account
Online loyalty accounts
As you can see, you very well could have quite a few digital assets. When outlining your list, include the account number, usernames, and passwords. You can store this on a hard media source or through the use of an online program. There will be numerous passwords, especially when it comes to accessing a device, the operating system, opening documents, etc. This way your account information is kept secure.
To manage these accounts, you need a digital fiduciary. It’s easiest if this is the same person who is serving as your will executor, trustee, or agent through a power of attorney. That individual would manage identifying the digital assets, copying or deleting information, and distributing the asset to the intended person.
Without a digital asset plan, your digital information could be forever lost. Even family photos that you have saved on a hard drive could be difficult to access without specific instructions. To learn more about comprehensive planning for all your assets, contact us at 732-521-9455 or through email at email@example.com to begin.
Ensuring that your will is properly written and structured is critical for the will’s terms to be carried out in the manner you wish. Failing to properly distinguish probate from non-probate assets is a big mistake that could lead to your dispositive provisions being named ineffective.
Probate property can be defined as items that are directly owned by you without a legally recognized designated beneficiary. Jewelry, family heirlooms, artwork, or bank accounts without a designated beneficiary to be paid on death are examples of probate property.
On the other hand, non-probate property is those assets which include a legally recognized beneficiary to be paid on your death. Property held in joint tenancy or bank accounts with a designated beneficiary are examples.
Why does this matter? Non-probate assets will not pass through the terms of the will. This means that if you outline wishes in your will for one person to receive all the assets, but your non-probate assets state another beneficiary, the terms of your will “surrender” to those beneficiary designations. This could have the unintended consequence of your planning falling through.
To learn more about the differences with assets, and how you can properly outline your wishes or create trusts to detail how these items are passed on, contact our offices today for a consultation. Call us at 732-521-9455 or through email at firstname.lastname@example.org to begin.
The close of another summer is a great time to think about your future plans for any family-owned vacation homes. It can be really hard to sell a property where it requires approval from all children, and it’s often difficult to make these “equally split” arrangements work.
Start by thinking about your goal for the home: do you want it sustained for future generations, do you want it to become the property of just one or two children, or do you not have anyone to establish as the asset recipient at all? These are important questions that will help guide the future of your vacation home.
Trusts can be a great way to manage the future of vacation homes. They can be used to help pay for expenses or create a usage schedule, which is especially helpful when there could be multiple owners. To figure out the proper amount to put aside for expenses, you can create a list of what’s needed on an annual basis, including property taxes, insurance, routine maintenance, and repairs. This can help to eliminate arguments later on.
In the trust, it’s also important to outline the rules under which the house can be sold. This should be done even if there are no immediate plans to sell the house. Talk with an estate planning attorney to determine the best way to structure your vacation home future plans and possible trust. Reach out to us at email@example.com or over the phone at 732-521-9455.
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
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.
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.
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 email@example.com.
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 firstname.lastname@example.org or via phone at 732-521-9455.
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.
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 email@example.com or call 732-521-9455.