Annual Estate Plan Review: A Smart Decision

Having all the documents in line for your current needs is crucial for your short and long term planning, but it’s just as important to be sure that you are following up on those materials at least yearly. Circumstances change, laws change, and it’s simply prudent planning to review and verify the accuracy of what you have put together. Using an annual review program like the Lighthouse Maintenance Plan .


There are also very personal reasons that it’s wise to have your plans reviewed on an annual basis. Changes in your life circumstances may alter your wishes, transfer of assets, or the names of beneficiaries you have listed on your policy. Here are some of the most common reasons that you need to contact an estate planning attorney for some updates:

  • A change in marital status
    • Marriage gives you several opportunities to minimize taxes
    • Divorce usually means the removal of the spouse from fiduciary responsibilities and the beneficiary role (unless you are mandate to maintain them on a policy per your divorce decree)
  • Purchase or Sale of a Company/Business
    • Purchase: Make sure you have plans in place for how the business can be sold or transferred if something happens to you
    • Sale: Determine to what extent your estate is taxable, and have a plan for where the assets from the sale will go (like a trust).
  • Moving to a new state
    • Since each state has different requirements (and some even have state estate taxes), make sure your documents are in line with applicable laws.
  • Birth, Death, or Life Changes for Fiduciaries or Beneficiaries
    • If circumstances have changed, this is a great reason to update all your documents.
  • Significant Changes in Your Personal Finances
    • Has your estate decreased in value? Have you recently inherited money or won the lottery? This is a good time to reach out to specialists to be sure you’re maximizing your assets and minimizing taxes.

Be sure you’re getting the most out of your review program. The Lighthouse Maintenance Plan offered by Shah & Associates includes a yearly review, compliance with any changing requirements or laws, educational materials, telephone consultations, invitations to planning workshops,and 24-hour access to your documents. If you’d like to learn more about how the Lighthouse Maintenance Plan can help you get the most out of your tax and estate planning, contact


Tax Return Requirements for Nonresidents with U.S. Assets

Individual nonresidents in the U.S. may be subjected to estate taxes under U.S. regulations if the individuals owned U.S. assets. There are several different items that might quality as U.S. assets, such as personal property, securities of companies based in the U.S., and real estate situated in the country. There are some regulations when it comes to stock holdings, as well, even if you help the certificates abroad or maintained those certificate registrations under the name of another person. If the stock holdings are U.S. companies, those assets may also be subject to estate taxes.

There are exceptions to these rules, though. If the securities you hold generate portfolio interest, are received from

Credit: Americorps Alums
Credit: Americorps Alums

insurance proceeds, or are bank accounts linked to businesses or trades not in the United States, the assets are exempted. Executors who are servicing the estate of a deceased nonresident with U.S. assets will need to file an estate tax return with the IRS in the event that the fair market value of the U.S. assets is greater than $60,000.  This is know as form 706NA, and it can still be required if the value of the assets is less than $60,000 on the date of death in some situations.

There are ways to plan around this to help avoid any unnecessary taxation. Speaking with an experienced estate and tax attorney can aid in the identification of proper strategies to plan for these kinds of assets. One such tactic, for example, is in owning these assets inside a properly structured trust rather than owning each asset individually.

International investors should be aware of these regulations and opportunities for a planning conversation. To set up a plan that minimizes taxes by structuring the position of assets properly, contact Shah & Associates at 732-521-9455.



On The Same Page: Preparation for Estate Plan Heirs

Failing to plan comprehensively can be a big downfall for a modern estate plan. There’s more involved than just putting your own documents together, though. Communicating with the beneficiaries is another crucial step. It turns out that all too often, plans don’t wind up passing on assets the way creators thought they would. A 2012 study conducted by U.S. trust explored the situations of more than 3,000 wealthy U.S. families, finding that 70 percent were unsuccessful in passing on family assets to the next generation. Three critical reasons were cited for these failures:

  • No universal “purpose” discussed for family possessions
  • Lack of preparation/knowledge by heirs
  • Failure to communicate among family members
Credit: Intuit

Many of the miscommunications that end up with arguments between family members could have been prevented with communication beforehand. Heirs, too, need to do some work ahead of time to ensure they are prepared for the transfer of assets. Heirs should be aware of the estate tax lifetime applicable exclusion amount and whether any state estate taxes will be applied. Gifted assets carry forward with the deceased’s tax basis, but inherited assets will receive a “step up” towards market value at the time of death.

Retirement assets should be scrutinized closely since they are very susceptible to tax mistakes and because they don’t get a step up in basis. Make sure all the forms are updated properly and that the heirs are aware of the plan’s rules for taking over/obtaining access to assets.

Communication and planning are crucial for every party to an estate plan. To learn more about successful estate planning in New Jersey, contact our offices for an appointment at


Profit or Hobby: Understanding Tax Consequences of IRS Determination

Section 162 of the U.S. tax code is critical for individuals who work for themselves in a variety of occupations. When a taxpayer can demonstrate that he or she is engaged in a business venture with the objective of earning a profit, or or she can deduct necessary and ordinary expenses associated with carrying out that business. A business owner can even deduct expenses related to the business that are in excess of the total profit earned by the business, but not if their venture is classified by the IRS as a “hobby”.

Credit: LiveWithinYourHarvest
Credit: LiveWithinYourHarvest

When the activity is classified as a hobby, you can only deduct expenses up to the business profit- meaning that there can be no net loss. Since this issue has come up so much recently, it’s worth a review of the nine factors analyzed in Section 183 to determine if something is a hobby.

  • The manner in which the activity is carried out by the taxpayer, including record-keeping
  • The expertise of the taxpayer and his/her advisers
  • The time and effort put forth by the taxpayer carrying out the activity
  • The expectation that assets would appreciate in value
  • The relative success of the taxpayer in carrying out other similar/dissimilar activities
  • The history of losses or income by the taxpayer related to this activity
  • Occasional profit amounts
  • Whether other income sources offset the activity loss
  • Whether the activity lacks factors related to recreation or personal pleasure

A recent case involving an artist demonstrates the complexity of these issues when it comes to taxation; after reporting many years of net losses during her career as an artist, the taxpayer’s business venture as such was challenged by the IRS. After careful review of the factors above, the tax court eventually determined that she was engaged in her art ventures with the intent of making a profit. As you can see by the nine factors listed above, it’s in your best interest to have a strong bookkeeping system and team of tax advisers helping you in the event that the IRS questions the nature of your business. Email us today to learn more:


Power of Attorney 101

Making the decision to put a power of attorney in place is an important and wise one, since powers of attorney are accepted in all states. When valid, a power of attorney can give someone else the opportunity to make decisions and elections on your behalf. Like all estate planning documents, you should have your estate planning attorney review your document to ensure it’s validity in your resident state.


A power of attorney can be sweeping and broad, enabling an agent to act fully on your behalf, or it can be limited to ensure that certain transactions and scenarios are taken care of in the event that something happens to you. If you want to be sure that the closing portion of your home sale goes through, for example, you can structure your power of attorney to only “activate” the agent’s powers in that particular capacity.

Just as your power of attorney can be flexible based on your needs, so too can the timeline for when you agent’s powers become active. Signing the document can make your power of attorney active immediately, but you might decide to include wording that only makes it active after an event that leaves you incapacitated. A sudden car accident or disability  are examples of circumstances where you might want your agent to become active on your behalf.

Your agent can act on your behalf in general or in the capacities you outline in the actual document, but it’s critical that your document is valid and that a copy is maintained by the agent. This is because when they act on your behalf, they will usually need to produce the power of attorney in order to successfully complete tasks or transactions for you.

Some people even use a power of attorney simply as a matter of ease; doing so allows you to equip someone else with the ability to sell and buy assets regularly without you actually needing to show up in person. Used as a future planning tool, it can also be important to protect your interests in the event that something happens to you. To put your power of attorney together, contact us at 732-521-9455.



Living Trusts: The Importance of Proper Funding

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.2014-10-20_1448

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 or over the phone 732-521-9455

Married Without Children? An Estate Plan Can Help You Give Back

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.2014-10-20_1444

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 or over the phone 732-521-9455

Estate Planning Tips: A 529 Savings Plan

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.2014-10-20_1436

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.

Estate Taxes on Life Insurance & Life Insurance Trusts (“ILITs”)

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 to discuss the right way to own your life insurance.

IRS Offshore Promoter Limits Highlight Important of Proper Risk Management

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 or over the phone 732-521-9455.












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Could the Court Ruling on Art Save You Money?

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 or over the phone 732-521-945twert










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What’s the Downside of DIY?

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.

What’s the Downside of DIY?
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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 to begin.