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Large and In Charge? Giant Firms atop Market Is Nothing New

July 14, 2020

Filed under: Estate Planning — Raymund Rasco @ 4:24 pm

The world is changing, this crisis has cemented the dominance of a handful of very large technology companies (FAANG – Facebook, Amazon, Apple, Netflix, Google). Why shouldn’t investors just focus on them?

Investors may be surprised to learn that it is not unusual for the market to be concentrated in a handful of stocks, but keep in mind that any expectations about the future operational performance of a firm are already reflected in its current price.

Tech standouts are drawing attention for their perceived sway on stocks, but history undercuts that view.

A top-heavy stock market with the largest 10 stocks accounting for over 20% of market capitalization and a marquee technology firm perched at No. 1? This sounds like a description of the current US stock market, dominated by Apple and the other FAANG stocks,1 but it is actually a reference to 1967, when IBM represented a larger portion of the market than Apple at the end of 2019 (5.8% vs. 4.1%).

As we see in Exhibit 1, it is not particularly unusual for the market to be concentrated in a handful of stocks. The combined market capitalization weight of the 10 largest stocks, just over 20% at the end of last year, has been higher in the past.

A breakdown of the largest US stocks by decade in Exhibit 2 shows some companies have stayed on top for a long time. AT&T was among the largest two for six straight decades beginning in 1930. General Motors and General Electric ranked in the top 10 at the start of multiple decades. IBM and Exxon were also mainstays in the second half of the 20th century. Hence, concentration of the stock market in a few large companies such as the FAANG stocks in recent years is not a new normal; it is old normal.

Moreover, while the definition of “high-tech” is constantly evolving, firms dominating the market have often been on the cutting edge of technology. AT&T offered the first mobile telephone service in 1946. General Motors pioneered such innovations as the electric car starter, airbags, and the automatic transmission. General Electric built upon the original Edison light bulb invention, contributing to further breakthroughs in lighting technology, such as the fluorescent bulb, halogen bulb, and the LED. So technological innovation dominating the stock market is not a new normal; it is an old normal too.

Another trend attributed to a new normal is the extraordinary performance of FAANG stocks over the past decade, leading some to wonder if we should expect these stocks to continue such strong performance going forward. Investors should remember that any expectations about the future operational performance of a firm are already reflected in its current price. While positive developments for the company that exceed current expectations may lead to further appreciation of its stock price, those unexpected changes are not predictable.

To this point, charting the performance of stocks following the year they joined the list of the 10 largest firms shows decidedly less stratospheric results. On average, these stocks outperformed the market by an annualized 0.7% in the subsequent three-year period. Over five- and 10-year periods, these stocks underperformed the market on average.

Past performance is no guarantee of future results.

The only constant is change, and the more things change the more they stay the same. This seems an apt description of the dominant stocks atop the market. While the types of businesses most prominent in the market vary through time, the fact that a small subset of companies’ stocks account for an outsized portion of the stock market is not new. And it remains impossible to systematically predict which large companies will outperform the stock market and which will underperform it. This underscores the importance of having a broadly diversified equity portfolio that provides exposure to a vast array of companies and sectors.

Sources: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

Original article can be found at https://us.dimensional.com/perspectives/large-and-in-charge-giant-firms-atop-the-market-is-nothing-new

When & How do I Find an Elder Care Planning Attorney?

July 13, 2020

Filed under: Estate Planning — Raymund Rasco @ 3:44 pm

Americans are living longer than ever but that doesn’t always mean a longer quality of life. A proper elder care plan should account for not only having the right people in the right roles in order to make the proper financial & health Care decisions, but also guidance and direction with respect to your wishes should you not be able to speak for yourself.

When should one look for an Elder Care Attorney?

There is not an exact time when one should look for an elder care attorney but I see it most commonly when one is considering retirement, most commonly in the late 50s and onward. The need for elder care planning evolves from a properly structured financial plan & estate plan. Another way to regard it is as “Estate Planning with a very specific purpose.” If estate planning is most often is associated with ‘death planning’, then elder care planning is more ‘life & longevity planning.’

How does one choose an Elder Care Attorney?

The ideal way to choose an elder care attorney is by speaking with him or her.  Referrals can be extremely helpful, as are testimonials.  Credentials, such as Certified Elder Law Attorney and other such designations are helpful – but those are often an indication of standardized exams, experience, an ongoing continuing legal education & a commitment to the practice. Not to diminish those very important aspects – but elder Care planning is a personal endeavor.  Traditionally, Estate Planning and Elder Care planning was done with a cookie cutter-like approach. But it’s important that the attorney who guides you on this level of planning emphasize customized solutions and listens to you. Although your pattern and your facts might be similar to others, every family has unique and deserves to be treated as such.

What should one expect when dealing with an Elder Car Law Firm?

When working with an elder care attorney, you should expect to be heard, and to have conversations. Much like going to a physician who needs to have x-rays, MRIs, lab work, etc prior to guiding you on your health needs, an Elder Care attorney is going to need baseline information with respect to your finances, health, family situation, goals and concerns, among other aspects.  Be prepared to be open and forthcoming. You wouldn’t hesitate to tell your doctor if you are taking medications that may have contraindications & adverse effects – treat elder Care attorney with the same manner if you desire proper, effective advice.

Anything else I should know?

It’s important to know that Elder Care attorneys typically handle only the legal aspect of planning. However your elder care plan needs to be integrated with your financial plan, investment plan, tax planlong-term care plan, and insurance plan. Not all attorneys are going to be equipped to handle all of these services in-house. At Shah Total Planning I handle them in-house because my clients prefer that integrated, one-stop shop. But if you can’t find somebody who does it all in the house, it’s important to find someone who is willing to communicate with your team of professionals.

Can you put limitations in a Will?

July 10, 2020

Filed under: Estate Planning — Raymund Rasco @ 3:34 pm

When I’m speaking with a client regarding their Estate Planning, and we are discussing their Will specifically, I encouraged them to think of the Will as a recipe:

If I was going to write a recipe for a cake which required one to get the milk, sugar, eggs, etc. from various places, then blend them in a certain way, then put the mix the oven that’s been preheated, and follow the rest of the instructions – will they get a cake at the end if they follow the recipe properly? Yes.

What if I inserted instructions in the recipe that they must hop on one leg while they are mixing the ingredients? Is that going to be enforced? Will that play into the desired outcome of having a cake? Probably not.   One can regard certain provisions is a Will in a similar manner.

VIDEO: What can frying eggs teach you about Wills, Trusts and Asset Protection?

 

If there are specific steps you are seeking for someone to take when carrying out your wishes or conditions to be met – you’re probably better off looking at a trust (bake the cake now, instead of leaving behind a recipe.) It allows you much more flexibility and control.

Remember a Will is a public record document once somebody passes away. The Will doesn’t have any “power” until it goes through probate. At that point the Will would be submitted to the surrogates court and the executor is given the appropriate documentation to carry out the wishes.

VIDEO: What is the difference between a “Will”, a “Living Will”, and a “Living Trust?”

 

That means having a provision such as “everything goes to my spouse as long as they don’t get remarried” would then be part of the public record. That may not be your intention.

But even beyond that – most courts will generally try to find ways to NOT enforce provisions if they are deemed to be against public policy, such as discouraging marriage.

Also, circumstances may make those restrictions inconsistent with your ultimate wishes. What if you had a provision that said a grandchild will only receive an inheritance upon receiving a degree from a four-year college institution, but then that grandchild is diagnosed with a learning disability or another condition which makes it impossible for that condition to be met? Is that consistent with the grandparents planning objective? Possibly not. But to undo that might require Court approval or even a challenge.

I don’t have an exact percentage as to how many Wills get challenged versus how many Trusts get challenge, but I would wager that it’s at least 5:1 if not 10:1 with Wills being challenged much more often.

That’s not to say you shouldn’t have specific incentive provisions or conditions which are consistent with your wishes in your Wills. However, your attorney should guide you as to whether or not there is a potential challenge looming due to either ambiguity in your desires or a difficulty in enforceability.

Challenges can be costly, but attorneys generally make more money when litigating Will disputes than they do simply administering trusts or properly carrying out the intentions in a Will. Therefore, much care should be taken in ensuring that the will is clear, enforceable, with as little complication as possible to carry out your wishes.

And if you need us, we’re here to help.

Unique Planning Opportunity for Disabled or Chronically Ill Beneficiaries

July 9, 2020

Filed under: Estate Planning — Raymund Rasco @ 3:14 pm

There is great news for clients with certain family members or other beneficiaries – this year brought with it a huge change in the law that benefits beneficiaries who are disabled or chronically ill. The Setting Every Community Up for Retirement Enhancement (SECURE) Act was integrated into the Further Consolidated Appropriations Act of 2020. The SECURE Act has been big new in the special needs planning community, as it carved out special considerations with regard to inheriting retirement accounts for those beneficiaries who are classified as disabled or chronically ill.

Before the change in the law, almost any individual could inherit a retirement account and stretch the distributions from that account over their life expectancy. That would allow the funds to be able to sit in that tax-deferred account and accumulate wealth, with the exception of a required amount that must be distributed each year. However, the SECURE Act drastically decreased which individuals would be eligible to stretch distributions over their life expectancy. Beneficiaries who are now not entitled to a stretch must withdraw the funds within either 5 or 10 years, which doesn’t allow for those funds to keep growing. But under the new rules of the SECURE Act, one category of individuals who are still entitled to the financial benefit of stretching distributions from the account over their life expectancy include beneficiaries of the retirement account who are disabled or chronically ill. So, this is a huge benefit and advantage for those disabled or chronically ill beneficiaries, possibly over other beneficiaries you may have.

In response to the new law changes, a special trust has been created to best provide for these beneficiaries. The purpose of this unique SECURE Supplemental Needs Trust is to provide for the maximum benefit of the law for disabled or chronically ill beneficiaries.

· The trust allows retirement account benefits to receive a maximum stretch under the law. This means that the beneficiary can stretch the distributions from that retirement account over their life expectancy. This allows those funds in the retirement account to keep accumulating and growing.

· The SECURE Supplemental Needs Trust also allows the beneficiary to benefit from the retirement account proceeds while still being eligible for public benefits, such as Medicaid or Supplemental Security Income.

· The trust allows for a care manager or advocate, so that someone can always be looking out for your beneficiary after you have passed.

· The trust provides for asset protection from creditors, divorce, or other bad actors.

· The trust gives you peace of mind knowing that your beneficiary will be taken care of for years to come.

If the following applies to you, then you might benefit from this new law and new SECURE Supplemental Needs Trust:

· You have a loved one or another beneficiary who is disabled or chronically ill.

· You have a retirement account, such as a 401k or IRA.

· You want to make sure that your retirement account receives maximum tax advantages after your death.

The time to plan is now. Regardless of who your beneficiaries are, you need to ensure your estate plan is up-to-date in light of the new SECURE Act. Contact our office to schedule an appointment to see how to best make the new rules work in your favor.

Revisiting Your Estate in the Wake of a Divorce

July 8, 2020

Filed under: Divorce — Laura Pennington @ 12:51 pm

Going through a divorce is difficult and it shakes up your family structure and even your day-to-day life in a big way. There are also so many legal issues that have to be handled to dissolve the marriage and allow you to move on with your own life, such as moving into a new place to live or updating your last name if you had previously taken the last name of your spouse.

 

Some marriages might end quietly, leaving you to think that you have handled all of the most important issues from a legal perspective and are able to move on successfully into your new life. However, you need to think carefully about the importance of planning and updating your estate following the divorce.

Without a spouse through whom you can anchor your estate plan, guardians, executors, trustees and agents under health care proxies and power of attorney must be reconsidered and formally updated in your documentation. These are not the only type of documents that need to be evaluated and carefully handled in the wake of a divorce. This is because separate documentation under beneficiary forms take priority outside of any wishes you make in your estate plan.

For example, beneficiary forms associated with your life insurance policy or retirement plans must be updated to reflect the dissolution of the marriage, otherwise these are legally binding and you most likely have your spouse listed as the recipient of these accounts. Make sure that you review your marriage dissolution documents to determine some of the steps you need to take. Provisions inside these agreements might call for the removal of spouses from one another’s estate planning documents and retirement accounts but it falls to you to make sure that this is carried through.

 

Is Trust Administration Different from Probate?

July 5, 2020

Filed under: Trusts — Laura Pennington @ 6:17 pm

When planning ahead for the future of your estate, trust administration and probate administration are not one and the same. There are some key differences between administering a trust estate and administering an estate inside probate.

The most important difference, for example, is that trust administration is private. For trust administration to begin, a notice letter should be sent to decedent’s beneficiaries and heirs informing them that the trust is being administered. Probate, however, is supervised by the court.

During probate, any of the documents related to the will become subject to public record. This means that details of the estate could be accessed by any member of the public who requests them. Probate will also apply if there is no will and the same rules of public record apply. In terms of trust administration, however, only the trustee and the heirs are able to see the details of the trust.

Another difference between these two processes is that the expenses are different. With probate, you need to submit a court filing fee and any fee associated with publicizing the estate in the newspaper. Any personal representative fees would also be covered under the overall value of the estate’s assets.

For trust administration, the trustee is still entitled to reasonably pay for his or her services, but there are no court filing fees. Unless there is a contest over the trust itself, there’s unlikely to be too many other costs associated with administration or dispute.

Depending on your individual goals, you might need both a trust and a will.

Do you have questions about using both a trust and a will for your estate planning in New Jersey? Our law office is still here working with clients actively and helping them determine their next steps. Schedule a consultation with our law firm today so that you can learn more about what to do next.

What Is a Psychiatric Advanced Directive?

June 29, 2020

Filed under: Advanced Directives — Laura Pennington @ 12:41 pm

Much like a health care power of attorney or a medical advanced directive, a psychiatric advanced directive is a legal document that is completed to provide instructions regarding the services or treatment that a person wants to have or wants to refuse to have during a mental health crisis.

These choices could significantly influence the type of psychiatric care available to the patient but this becomes very important when a mental health crisis emerges and the patient is no longer able to speak up for themselves.

Anyone who is potentially hospitalized for a mental health condition could become too sick to stay in charge of their treatment and make informed decisions about what they do and don’t want. During these times, doctors and other medical professionals will turn to advanced directives to help get inside about specific wishes that the patient made in advance of this particular health crisis. 

This document can be used to spell out your individual wishes about what type of services, assistance, and treatments you want to have access to when you are sick or those that you do not want used for your treatment if you are no longer able to make decisions in your care. 

This directive provides a clear statement about your instructions and your medical treatment preferences and can also be used to grant legal decision-making authority to another person who serves as your health care agent and advocate until the mental health crisis is over. For more information about how to use advanced directives and other tools and documents to help you plan ahead, schedule a consultation with an estate planning attorney today.     

A Post-65 Estate Planning Primer

June 26, 2020

Filed under: Aging In Place — Laura Pennington @ 1:38 pm

Estate planning is not just for the elderly. It’s not even just for those who see retirement on the horizon. Estate planning makes sense for people of all ages, but it does become especially important the closer you get to age 65.

There are several important things you should be thinking about as you approach and pass the age of 65. This has long been heralded as the primary age for retirement although many people are continuing to work past these years and looking to generate additional assets or simply because they enjoy the experience of working. There are legal risks associated with aging that you should take into account prior to reaching age 65 but this milestone is important for thinking about some of the other dangers that you might face as you continue to age. 

Increasing longevity numbers mean that anyone who has already reached age 65 should be thinking about the possibility of living for several decades longer. From concerns about paying for long term care to protecting your assets, planning to avoid guardianship, and qualifying for Medicaid, you might need an elder law attorney to help you identify all of the potential risks and to craft a strategic plan around protecting yourself from these risks and dangers. Schedule a consultation with an attorney who has extensive experience in the realm of elder law planning.     

New Study Holds Promise for Seniors in Long Term Care

June 25, 2020

Filed under: Nursing Homes — Laura Pennington @ 1:34 pm

A recent research study from Simon Fraser University has important implications for one of the most common injuries that happen inside nursing homes: falls. Slip and fall injuries can be catastrophic for the elderly and are some of the most commonly reported injuries that happen in nursing homes across the country.

Falls in fact cause more than 95% of hip fractures in older adults and recovery can be very challenging or impossible. This most recent study was published in the Journal of Bone and Mineral Research and involved researchers looking at more than 2,300 falls experienced by over 600 residents. Only 30 of those total falls led to hip fracture. While that number seems relatively low, the average resident in a long-term care facility falls up to three times per year and the cumulative impact of those injuries can be significant. 

If you are researching nursing homes and long-term care options for an elderly loved one, make sure that you have considered plans for incapacity and the medical care wishes of the resident. Putting these statements into existing estate planning documents can ensure that your loved one has the necessary care he or she needs when they need it most.   

Choosing a nursing home is a difficult prospect, but it’s also one that should prompt you and your loved ones to talk through care options and decide what you really need to do when protecting your loved one. Speaking with an experienced lawyer can help you and your family members get on the same page about next steps. Contact our office today to get support working through these challenges.     

What 0.6% Interest Rates Mean for Your Estate Planning

June 24, 2020

Filed under: Estate Planning — Laura Pennington @ 1:27 pm

 When interest rates adjust, you need to have in the back of your mind that it might be time to sit down and look at your retirement accounts and also your estate plans. As circumstances in the market and broader world are updated and adapt, you need to ensure your plan is in line with being updated, too.

Interest rates have hit historic lows across June and July 2020, meaning that there is some opportunity to discuss with your financial and estate planning professionals how to address this. 

One of the most important things to keep in mind is a grantor retained annuity trust which is an excellent way to ensure that most or all of the income from a property that is quickly appreciating and has high yields can be transferred to a child or another person with minimal impacts from estate or gift tax. 

When the retention period on a GRAT ends, assets inside the trust go to the named beneficiary known as the remainder. Any income or appreciation on the assets in excess of that retained annuity will pass on to your remainder beneficiaries tax free. GRATs can be especially complicated to put together but can accomplish a great deal of your estate planning and overall financial planning goals. 

To sit down and discuss whether or not a GRAT is appropriate for your situation, schedule a consultation with an estate planning attorney who can help you look at the inventory of all of your assets, your current estate planning strategies and tactics and how these can be updated or improved to reflect all of your needs.       

Our office is here to help you when changes in the market call for a change in your estate plan. Set up a time to speak with our estate planning lawyer today.

Update Your Planning If a Divorce Is on the Horizon

June 23, 2020

Filed under: Blended Families — Laura Pennington @ 1:20 pm

Have you recently filed for divorce or are you in the midst of the proceedings to legally end your marriage? It’s easy to feel like there are plenty of details to think about, but chief among them should be what happens to your existing estate plans. During the divorce is a good time to evaluate any joint accounts, policies, or paperwork that gives your soon-to-be former spouse any level of decision-making power over your future. 

Most people forget in the process of handling all of the paperwork and the life changes that come with a divorce, to update their estate plans accordingly. In fact, it could be weeks or months before you update this necessary paperwork and if something were to happen in between, there’s a good chance that your former spouse is still listed as the person eligible to receive assets or to make decisions on your behalf if you become unable to do so. 

There’s no doubt that this should be a top of mind priority as you approach getting closer to your divorce date. Many attorneys have reported that their office has been busier than usual with contacting questions about updating estate planning documents or getting estate planning done for the first time at all. 

These documents are not static and should remain living and breathing documents that should change just as often as your life does. Health care directives, powers of attorney and beneficiary forms are just a few examples of the documents that should be updated after you get divorced. To ensure that all necessary paperwork is updated with your new life, schedule a consultation with an estate planning attorney to walk through a checklist of what you can anticipate.       

Our law offices are still open and working with clients to ensure that all of your needs are addressed. If you need to set up a time to draft new wills, powers of attorney, or other documents, we’re here to help. 

Have You Discovered Gaps in Your Financial Plans?

June 22, 2020

Filed under: Finances — Laura Pennington @ 1:21 pm

If you’ve done any financial planning at all, it’s common to feel like it’s a bit overwhelming to keep track of all the things you need to do or feel like you should be doing. But don’t let that keep you from taking these important steps to protect your interests and even your family in the future. Now is the perfect time to take a deeper look at how you can incorporate holistic estate planning and financial plan into your future.

The pandemic has encouraged many people to take a deeper look at their financial plans and uncover potential problems. Some people might not have even looked at their financial and estate plans over the past ten years because there have not been significant changes in account value. However, since the impact of the pandemic, many account values decreased tremendously. 

The pandemic has brought forward a focus on end of life planning but other reviews of your estate plan can assist you with discovering ways that you need to alter your existing planning. For example, executives should be looking at opportunities to convert their traditional IRAs to Roths as long as they are considering the taxes that a client might have to pay for the conversion. 

A consultation with your estate planning lawyer can be especially valuable right now given the challenges that have been presented by the pandemic and the opportunity to align and update your estate planning materials to ensure that they have your best interests and your intentions for your family members in mind.       

Looking at the big picture financially, it’s good to have someone else review your existing retirement, asset protection, and estate plan. Another person’s insight can help you see some of the gaps where you need to step up your planning efforts. No matter where you’re at now, our lawyers can help you put together a plan that helps protect you into the future. 

Tips for Preventing Sibling Arguments Over Your Estate Plan

June 19, 2020

Filed under: Probate — Laura Pennington @ 1:42 pm

The last thing you want is for your loved ones to end up in court battling over the terms of your estate. In addition to piling on unnecessary stress and conflict during this period, issues like this can reduce the overall value of your estate, too.

You’ve thought carefully about your estate plan and what you hope to achieve with it and the assets you leave behind. You also have to think carefully about the message that you’ll be sending to your children when your estate plan is activated. 

Leaving behind unequal inheritances might make sense for your family but it can also pave the path for potential arguments and conflicts among the siblings who have received differing amounts. If you haven’t had the conversations about your decision to go this route, you need to think about your unique family dynamics. 

Leaving unequal inheritances isn’t the only way to find yourself facing these challenges. In fact, some children who have contributed more or might see themselves as having more substantial financial needs could be frustrated by a strictly equal distribution of assets. One of the first steps that you can take is to define what fair looks like for your family that might not be the same as what it looks like for everyone else, but the more carefully that you can think about this for your individual purposes the easier it will be to approach estate planning with care.      

What’s the Appeal of Using a Trust?

June 18, 2020

Filed under: Asset Protection — Laura Pennington @ 1:48 pm

A YouGov study found that over three quarters of Americans recognize that estate planning is essential but only 40% of people within the country do have a plan in place. A trust is one of the easiest ways to add some more control and protection into your estate plan, but it’s often overlooked because people perceive them to be too difficult or only aligned with different estate planning needs and goals.

One of the most common strategies to protect your interests and ensure that you have thought about estate planning at the high level is the use of a trust. Trusts are an excellent resource to use for wealth preservation due to potentially favorable treatment for your heirs, a greater layer of privacy and control. 

The perceived complexity that a trust is very difficult to create and put together is one of the most common reasons that people don’t use this tool. While it is true that some trusts can be very complicated, it is the variety of different kinds of trusts available for use that make it more likely for someone to skip over this estate planning strategy altogether. 

A consultation with an attorney can provide a great deal of clarity around whether or not trusts do make sense for your situation and how to decide what assets should be placed inside the trust. A trust might not make sense for everybody’s individual estate planning needs but it’s a good idea to talk with a professional about whether or not this makes sense for you and your family.       

Have You Considered Your Chances of Disability?

June 17, 2020

Filed under: Incapacity Planning — Laura Pennington @ 12:55 pm

Many people think of those who live with disabilities as people in older years or those who have been diagnosed with a disability at birth or very young in their life. The truth is that a disability can happen to anyone at any time as a result of an illness or an accident.

If you end up suffering in an unexpected accident or coming down with an illness that renders you unable to work, this will impact your life and the life of your family members in multiple ways. To guard against making such a situation even more difficult, it’s important to take precautions to protect your interests ahead of time with an incapacity plan. Enabling the right people to act quickly in the manner you intend for someone else to help you can make a world of difference when there are already so many things to consider about how you adapt to your new life.

Many younger people in America expect that disabilities only affect others, but thousands of young people are seriously injured due to traumatic events every single year. Many critical medical conditions can also mean that a person suffers from disability very suddenly, such as a mental illness or cancer. These can affect people regardless of their age.

In fact, for 20-year olds in the United States, there is a 1 in 4 chance of becoming disabled prior to reaching retirement age. Therefore, it can be especially dangerous to ignore the opportunities with estate planning and incapacity planning in advance. You should not wait until something happens to you or a loved one to make the decision that you want to have, your care well thought out and appropriately addressed in advance. Schedule a consultation today with an incapacity planning lawyer to learn more.

 

Don’t Forget a Tax Strategy for Your Stock Options

June 9, 2020

Filed under: Asset Protection — Laura Pennington @ 1:41 pm

Executive compensation packages have increasingly included stock options in the last several years. This means that from an estate planning perspective, you must think carefully about how and when these might affect you. Do you know how to maximize, for example, your stock options with a tax strategy?stock-option-estate-planning

Option based executive pay fell out of favor in the last 20 years but there are signs that it might have made a comeback as the stock market continued to grow. One major reason for this is that C corporations have become more attractive because of a 21% tax rate. Understanding stock options is critical for your overall financial picture and for estate planning purposes.

Stock options are a form of incentive compensation that are given to retain or reward valued employees. Typically up to 25% of that stock grant will last every year as a method for keeping employees at the company for a minimum period of time. Executives must have a comprehensive strategy that takes into account many different elements, including their personal balance sheet, their perception of risk, the company’s overall outlook and the stage that person is at in their life and career.

Speaking with experienced financial professionals and estate planning attorneys is strongly recommended if you have received stock options. The two primary types of stock options are nonqualified stock options and incentive stock options. The vesting of a compensatory stock option and a grant usually have no financial or tax implications. However, you’ll need to discuss the specifics of this strategy with your estate planning lawyer.       

The Value of Estate Planning for Baby Boomers

May 14, 2020

Filed under: Estate Planning — Laura Pennington @ 2:39 pm

A total of 22% of today’s population includes the baby boomer generation. Many of them are quickly reaching retirement age raising important questions about the value of estate planning.

Estate planning is so much more than passing along possessions and assets to millennial children. It is also about protecting their lifestyles and taking a long-range view towards the need for possible Medicaid support or other long-term care planning. The youngest baby boomers are turning 56 in 2020 and many of them have wealth that is expected to grow in the coming decades. 

Plenty of these baby boomers might not consider themselves wealthy outright but having a home, a second property, a car or money set inside a savings account means that you can still benefit from the strategies provided by an estate planning attorney.

This is because estate planning is more expansive than determining what happens to your possessions when you’re no longer around. It takes into account your individual decisions and preferences around long term care and health care. Schedule a consultation today with a knowledgeable estate planning attorney to discuss how this can fit into your plan as a baby boomer.     

Our law office is still open but helping our clients over the phone and virtually. Don’t hesitate to reach out to determine how we can help you connect your estate plan, your elder law plan, and your retirement plan. 

Charitable Gifting During the Pandemic, Tips to Use & Tricks to Avoid

Filed under: Estate Planning — Raymund Rasco @ 2:10 pm

No one could have foreseen or wished for this Pandemic, or the impact that it has had on our planet. Yet one of the silver linings of all the current events has been the compassion and willingness that humanity has exhibited in helping one another. The amount of kindness, charitable gifting & volunteer work has been tremendous, and it is quite different than it was prior to the Pandemic.

Specifically, under the CARES act passed earlier this year, there are several changes to the way gifting is done to charitable organizations.

To start, there is now a $300 deduction available for Charitable Gifts to qualified organizations, even if you’re not itemizing your tax deductions. That is a change from the current law. It’s not clear whether this will continue beyond 2020, but it has certainly made it easier to obtain a tax benefit as a result of the gift.

Also, there is a suspension for tax year 2020 of the rule that requires you to limit your charitable deduction to 60% of your adjusted gross income – no matter how much you’ve gifted. There seems to be no limit in 2020.

Gifting for Retirees has taken on a different angle as well.  Because of the suspension of the rule that requires retirees to take Required Minimum Distributions from their Qualified retirement accounts, retirees might be less incentivized to utilize the Qualified Charitable Deduction tool which allows them to gift directly to a charity from retirement accounts such as and IRA and 401k (thereby reducing potential tax liability.)  Although that rule is still an acceptable method of gifting, and should still be considered when gifting above the $300 amount.

Unfortunately situations like this also bring out the worst in some people. That also means that scammers and those with less altruistic intentions can take advantage of generosity. Two tools which can be used to investigate whether or not a charity is in fact a legitimate charity and determine whether or not is properly formed for tax purposes are (a) the IRS website and (b) the Charity Navigator website. Specifically under the IRS website you can do a search to see whether it is a tax exempt organization.

It’s important to set the expectation at the onset whether or not you are expecting to receive a tax benefit as a result of your charitable gift. It’s not always the case that the donor is seeking tax benefits.  However, if a tax benefit (deduction) is sought, best to confirm that it is a 501 (c) (3) organization & obtain proper documentation of the gift.

Checking on some smaller charities & grassroots organizations/movements is much more difficult – it’s important to know how you came across the charity – a personal connection? Social media? Or did they solicit you from out of the blue.  Don’t be afraid to ask probing questions of the organizers.

Gofundme.com  pages have had a tremendous impact on helping with causes, although they’re usually not for tax-exempt charities. You should know that there is minimal supervision & policing of what exactly is done with the money after it’s been collected. Again, here a personal connection to the cause and to the persons in charge of the cause is helpful to determine legitimacy.

Neel and Pink recently hosted a Webinar on Facebook and on Youtube with such grassroots organizations, you can find the replay here: https://m.facebook.com/story.php?story_fbid=10221506184629053&id=13845705

Taking Control (5/12/20): How We Are Taking Care of Each Other

Property Tax Relief is Coming for New Jersey Homeowners

May 12, 2020

Filed under: Estate Planning — Laura Pennington @ 9:13 am

An executive order from Governor Phil Murphy now means that municipalities can update their property tax payment deadline from May 1st to June 1st. According to research completed by The Tax Foundation, The Garden State is actually home to the highest mean effective property tax in the entire country at 2.21%.

This gives homeowners in New Jersey a little bit of breathing room in their taxes. Now is a really good time to evaluate your current tax obligations across the board. 

Do you have appropriate tax planning strategies in place to protect your estate as well as taking into consideration the possibility of needing long term care in the future? Schedule a consultation with an experienced New Jersey estate planning lawyer if you have more questions about the best way to protect your interests. 

Do you have planning in place for what will happen to your property if something happens to you? Do you own other real property either in New Jersey or in a different state? You need to plan for this as part of your asset transfer strategy. 

Tax strategy planning can go a long way in helping you to avoid problems and potential disputes down the line. When your estate enters the probate process, the work you’ve already done in terms of planning will help your family members during this difficult time and ensure a smooth transfer of your property using the tools you’ve already outlined. 

Schedule a consultation with a lawyer who is very familiar with state and federal taxes and how they fit into the bigger picture of your estate plan.       

Protect Your Company Longevity with Business Succession Planning

May 11, 2020

Filed under: Estate Planning — Laura Pennington @ 1:27 pm

An important part of owning a successful business isn’t just documenting what you do now that makes you effective but also outlining a plan for what happens when you decide it’s time to move on or are forced to move on for circumstances outside your control.

Do you already have a successor lined up who can make the difficult decisions that you have made in the past? The next in line person to take over your role and take the business into the future should be someone who has a big passion for the work, the expertise needed to leverage business longevity and the willingness and ability to work with other employees.

Far too many small and medium sized businesses fail due to a lack of succession planning. In fact, the exit planning institute reports that 78% of businesses have no transition team in place and nearly 83% have no written transition plan. The employees staying in the business and the entire company at risk.

The right succession plan will be created now before you have any intention of leaving. It helps to protect a thriving enterprise and covers the need to transfer control to a successor and the possibility of the owner’s sudden departure. Finding the right successor is a process that should begin now.

Talk to our business succession planning lawyer today to learn more about how to begin the process. Your succession plan is there to help your employees, your leadership team, and the company not just survive your departure, but to continue growing and building on the firm foundation of success you already set up.

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