Do you own a business that has appreciated in value and you are thinking about making an exit plan? For many Americans who own a business, this is a substantial part of their financial future and it may be the time to realize this value in cash. As the economy gets better, more people are looking to buy businesses than ever.
Those individuals with investment capital are looking for good investments instead of the stock market or in conjunction with their stock market plan. However, bear in mind that you have a shadow partner in selling your business; the government, which is ready to take a cut of your sale proceeds as a tax. While an individual business owner can be at a disadvantage in terms of taxes, the organized philanthropy industry has plenty of ability to protect tax advantages.
Saving federal taxes on the sale of a business without any conflict from the government means it necessary to use a charitable tax planning structure. For those individuals who have excess income charitable trust have income tax and estate planning value. Putting together a private charitable foundation can enable you to pass on large amounts of business interest or property while getting an income tax deduction and avoiding the estate tax. Furthermore, you can effectively keep control of the property that has been donated.
One great example is the Gates Foundation. For investors and business owners who want to receive the tax benefits as well as a continuing income, the alternative planning structures put together by an experienced attorney are necessary.
Required minimum distributions, also referred to as RMDs, are typically due by the end of the year, so most people will put them off until that point. Many people will assume that it is best to take their RMDs later in the year to maximize the tax deferred bill for as long as they can.
However, there are some practical advantages to taking your RMD earlier in the year. First of all, taking RMDs early in the year puts less pressure on your beneficiaries if you were to suddenly pass away before taking the distribution. When an IRA owner who is subject to RMDs passes away before taking the distribution for the year, it has to be taken by the beneficiary. There may not be enough time to get this done appropriately if an IRA owner passes away later on in the year.
Before you schedule what to do with your IRA and your RMDs it is a good idea to review all of the documents and plan beneficiary form now to avoid disputes down the road as well as confusion or conflicts after you pass away. A beneficiary form of you is an update of a simple service but a high value one that should be discussed directly with your estate planning attorney to verify that your other documents are in line.
Many people might assume that they don’t need the benefits of estate planning and will therefore, put off this process entirely. However, more and more people are in need of advanced planning strategies and finding themselves in a crisis situation, such as when a loved one who handled all of the finances passes away or when someone becomes incapacitated suddenly can be overwhelming. Advanced planning considerations are especially true for those families who have children with special needs.
Children with varying types of disabilities, including autism, will likely need a parent’s financial assistance over the course of their entire lives. Finding the appropriate wealth management planner is extremely important. One in forty children between the ages of three and seventeen in the United States will be diagnosed with autism spectrum disorder and autism, according to research from the National Health Interview Survey. This disorder first became included in tracking in the early 2000s by the CDC. The condition is a very complex one but one that requires advanced planning considerations. Research shows that it can cost $17000 or more each year to care for a child who has autism than it does for a child without the disorder.
For those children with severe autism, the expenses increase. When a family member first comes to see a financial advisor, they can be overwhelmed by all of the different options. A financial professional and estate planning attorney can help to alleviate some of the burden by ensuring that appropriate planning channels have been put in place.
Many clients who are suddenly facing the prospect of losing a loved one find themselves in over their head and extremely confused about the next steps they need to take. There may be nothing certain about life except death and taxes, but filing and paying taxes after a loved one has died can seem like a lot to do.
The final return must be done whether it falls to an executor or the heirs. If an individual passes away during the year and he or she received income, then a tax return is needed.
If your spouse passes away during the year, you can file married, file in jointly or married filed separately, whichever of these gives you the preferred tax treatment of your income. Sometimes you must carry out different tax calculations in order to determine this.
Money that is received from IRAs, life insurance annuities or other pensions may have tax implications that need to be handled and appropriate tax planning is essential. Funds are received, taxes become due and it can become a serious problem if no planning was done to cushion the shock of the tax bill.
When dealing with a multitude of issues after losing a loved one, getting financial assistance may seem like just one more step. However, a few minutes with a professional can be a stress reliever and can give you a clear course of action. It is especially important to consider the financial tax return implications when business partners are involved. Even if the partners are spouses, there are numerous considerations that need to be carefully calculated and taxes filed for the business that may include a final business return. Business taxes are extremely complicated and require the insight of a professional.
Many people who generate revocable living trusts don’t truly reap all of the advantages available to them. They might understand the basic benefits associated with putting together a revocable living trust, but you need to ensure that you are heirs are able to enjoy the benefits of this trust down the road.
In a typical living trust, you and your spouse might transfer the title of the majority of your assets to the trust and then serve as co-trustees. This empowers you to maintain control over the assets and manage them as you did before, except you are serving as a trustee rather than the individual owner.
There are numerous different benefits associated with a living trust, the first one is that your assets inside the trust avoid probate and a successor trustee will step in to manage on your behalf after you pass away. If the original one becomes disabled, a living trust can also be very beneficial. The most common mistake made with living trusts has to do with failing to transfer legal title of assets to the trust. This is referred to officially funding the trust and it can be done by sitting down in a meeting with an experienced estate planning attorney.
A power of attorney is a vital estate planning document, but you need to know how to maximize its benefits as well as the limits. In a power of attorney document, you are the principle and name one or more agents, frequently an adult child to act on your behalf. The agent can be empowered to take any action on your behalf or may be restricted to particular activities.
You will need a power of attorney because if something happens to you and you become incapacitated, the agent can pay bills, manage your assets and make decisions for you. The alternative is for your loved ones to have to go through a court procedure in which a judge must determine that you are incompetent and then have someone appointed to act on your behalf. This is referred to as guardianship in most states.
In an ideal situation, you can make things easier for your family members during an otherwise difficult time by allowing the power of attorney to take over smoothly and manage your affairs seamlessly because you are no longer able to do so. You need to ensure that you have selected a person who is confident serving in this role and one who gives you a lot of peace of mind about the process.
Perhaps the best test of how much you care about your survivors and the legacy you’ll leave behind is the organization of your estate. There are two crucial components of your estate to consider. When you work on your estate planning in additional to your physical belongings throughout your life, it makes things easier for you and your loved ones.
The first is your physical estate and for many people, this refers to their personal possessions as well as their home. Many people have had a personal experience with the physical estate of their parents and many have had unfortunate stories about how many belongings they have had to sort through and dispose of. Your physical estate, in addition to lack of proper planning documents, can present problems for your loved ones. You likely don’t want to leave behind a lot of work for your family members because you haven’t combed through your belongings carefully.
Many people accumulate belongings over their lifetimes and rarely will streamline it. These possessions can compound over the decades and many, by default or through deliberation, allow their children to deal with the consequences. Survivors than feel obligated to sort through all of these things because they may be looking for valuable or sentimental items.
It can take days, weeks or even longer for loved ones to sort through these belongings and you can do your family members a favor by considering the steps you can take in advance.
There are several steps that you should always keep in mind when trying to balance retirement, college savings, estate planning and all of your other priorities for your life. If you don’t know what you want, there is no good way to plan for this. This is why you should sit down with your spouse and any other key family members to figure out what is most appropriate for you. Cover what you want to do in retirement, where you want to go and where you want to live.
You can then work backwards to identify the assets that may protect you during this time. The second step to work towards your retirement is to create a savings plan that matches your goals. If you have ten or few years from retirement, you will need to be more calculated about the savings strategy you use to approach your goals. If you have 20 or more years before you intend to retire, you have multiple options for working towards those goals. Make sure that you re-assess your risks at each stage as you get closer to retirement.
Another thing to consider is that you need to get your retirement plan in line with taxes. A crucial part of a comprehensive financial strategy is a tax plan and an often-overlooked aspect of financial planning is estate planning. Without an appropriate estate plan organized, your belongings could end up with the state and this can put your loved ones through a lengthy or even expensive estate planning process. It’s far better to have a lawyer who can assist you with these goals well in advance.
The child actor popular on the show, Diff’rent Strokes, passed away in 2010 in Utah. His less than perfect estate plan provides critical lessons for people of all asset levels to consider.
Coleman was only 42 years old when he passed away. Although he had gotten divorced from his wife, Shannon Price, they lived together following their divorce. An advanced medical directive that was honored by the hospital allowed Price to remove life support when Coleman passed away.
Even though the advanced medical directive provided that it was his desire to live as long as possible within generally accepted health care standards, his former wife chose not to honor these desires. The medical directive was signed by Gary Coleman prior to divorcing Price, meaning that Price did not have the authority to make medical decisions unless specified in the divorce decree or another advanced medical directive.
The hospital honored Price’s directions anyways despite the fact that she was not entitled to make such a decision. If you are divorced and do not want an ex-spouse pulling the plug or making other medical decisions on your behalf, you need to update your materials as soon as possible after the divorce is final. Doing so could save your life.
Inheritance is set to increase significantly in the coming years and baby boomers will now be passing on record amounts of wealth to their younger relatives. Protection is an important consideration in all of your estate and financial planning and a trust may be the most appropriate tool to help you with it.
One of the most common reasons to include a trust in your estate plan, in addition to your will, is to protect your assets on death from being spent frivolously by children who may inherit these large sums of money without the appropriate maturity or experience to manage them properly. Trust structures are often created in wills similar to what happens in a will, in which assets are passed to chosen trustees to look after young beneficiaries.
The trustee maintains the responsibility to manage the asset and distribute to the beneficiaries when they believe that the beneficiary has personal circumstances and maturity at a high enough level to cope sensibly with a major inheritance. A discretionary trust or a life insurance trust are some of the key tools used in this process.
You need to ensure that your estate plan incorporates unique considerations about changes in your life. Far too many people create their estate plan once and then promptly forget about it. Updating your documents like your life insurance policies and your wills is a must do if you experience any major changes in your life such as the birth of a child or grandchild, a divorce or even a remarriage.
Few things are as important as estate planning as far too many families find out after the fact when a loved one who failed to put together the necessary documents or to update them after a major change in circumstances, left behind a mess.
In general, if you are having difficulty approaching the mortality aspect of putting together an estate plan, begin to think about it as who you want to make medical decisions, legal documents that will spell out who gets your assets when you pass away, and who can make financial decisions on your behalf. Ideally, your estate plan helps your loved ones make critical decisions at a time when they need it most. Another common and disruptive life change that can turn everything in your world upside down is the loss of a spouse.
You will need to update your contingent beneficiaries on life insurance and other policies after a first spouse passes away. Doing it yourself can be a big mistake when you are approaching the estate planning process with the end goal of protecting your loved ones in mind.
Although more people are recognizing the value of a simple estate plan, asset protection planning is also garnering popularity among people who are accumulating significant assets who wish to protect them.
It may seem intimidating to put together an asset protection plan as the very name seems to indicate that you may have significant wealth to your name, but the worst thing you can do when it comes to asset protection planning and estate planning is nothing. If you become incapacitated or suddenly pass away without an estate plan, you make things much more complicated for your loved ones.
You could also lengthen the process for them to go through court to deal with your various assets and this could be catastrophic for your taxes as well. Being exposed to risks over the course of your life should prompt you to schedule a consultation with an asset protection planning attorney.
Without the appropriate legal documents and strategies in place, there’s no guarantee that the people that you want to handle your estate or your business will be able to do so. Family members frequently don’t know how a deceased person wants to distribute their assets and what he or she wanted in terms of funeral arrangements.
Asset protection planning goes one step further to consider the benefits of protecting your interests now while you’re still alive from creditors and other predators. Schedule a consultation with an asset protection planning attorney to learn more about how the process of estate planning can assist you with establishing assets well into the future.
Those who want to pass on assets spend a lot of time determining who should get what, but this means that sometimes how that person will handle the money is forgotten entirely.
A recent study completed by Accenture anticipates that between one and three trillion dollars will be transferred to heirs through 2050. Many of these people may never have inherited a large amount of money before presenting questions about managing these large windfalls.
Many professionals in the financial field recommend taking some time to avoid any action at the outset because this is more of an emotional process than simply winning the lottery.
This is not just a windfall because it is what is being given by someone who is no longer around. Moving too quickly can also lead to poor decisions and spending opportunities, like taking advice that could be regretted down the road or spending later. Plan on how you may deal with stress from relatives and friends about their recommendations regarding how you invest or spend the money.
It is very common for families in the position of a sudden windfall to argue over the outcome and how the money should be spent, so you should have a plan in place for addressing these issues with cooperation and care.
Given the new updates in tax laws that have occurred recently, many people are looking into different strategies that could help benefit them and their loved ones in the future. One common recommendation from accounts and other financial professionals is to consider paying off your home equity loan.
Since you will no longer be able to deduct the interest payment on your home equity loan or line of credit, if you use the money for any purpose other than improving or buying the dwelling, this means that it is costing you more to keep this money directly on your balance sheet. This loan should only be viewed in consideration of the other debts that you currently owe and not the just the tax implications of it overall. Furthermore, paying off your home and fully owning the asset could make things easier in the event that you intend to pass this asset on to your loved ones.
Your beneficiaries may have less hurdles to jump through when the home was fully owned by you at the time that you pass away. You can then consider other estate planning methods for the remainder of your assets. Scheduling a time to speak with someone who has practiced in this field for years is extremely beneficial for a person who is contemplating the estate planning process.
The previous tax laws were in place for so long that you might have neglected updating your estate plan because you felt there was no need. Now that there are new considerations on the table, however, it may be time to take a second look.
As a result of a new tax law, a study has shown that six out of ten wealthy adults anticipate updating their financial plans. Now that the gifting an estate exemption is up to approximately $11 million per person, this represents double the old law and entrepreneurs may even be considering grabbing a 20% deduction against qualified business income.
The American Institute of Certified Public Accountants recently completed a study that showed that 63% of wealthy individuals were likely to update their strategies. Those individuals were people who had at least $250,000 in investible assets or more than $200,000 in household income. This could lead to a decade’s long planning process and should always be reviewed by an experienced estate planning attorney. Entrepreneurs who use pass through entities may be able to qualify for a 20% deduction against qualified business income, but this is only applicable to people who have a maximum of $315,000 in taxable income for those married and filing jointly or $157,500 if you are single. In any case, setting aside time to talk with an experienced estate planning lawyer is strongly recommended to give you a better overview of what’s involved and how your individual case can be considered carefully.
When assets pass to others through a will, this means that your estate goes through the probate process. Probate can be very time consuming and expensive for your loved ones and since the details vary from one state to another, it’s important to be clear about the exact procedures that may apply if your estate ends up going through probate.
Although many states have worked towards more streamlined and less expensive probate procedures, the costs and delays of the old probate process are likely to stay in place. This means that probate can be very disruptive to the management of your assets and add additional frustration for your loved ones.
This is particularly true when you own assets in more than one state, since your estate may have to go through probate in each of those individual states. Avoiding probate is a common goal for people who are putting together their estate plan because probate is a very public process. Anyone can review the probate court records to figure out how much your probate estate was worth, how you divided it and what you owned and owed.
Certain assets automatically avoid probate of law, including annuities, retirement accounts, and jointly owned property but other remaining property should be structured within a trust or other estate planning tool to ensure that it does not become a matter of public record.
All of your estate planning materials should be drafted by an experienced estate planning attorney and reviewed on a regular basis.
Financial planning, estate planning and long-term care planning should always be conducted together to ensure that you’ve taken a long-range view and are able to appoint people to step in quickly to make decisions on your behalf if necessary. Even if you reviewed your estate planning years ago, your advanced health care directive, your will and your trust should be reviewed periodically. Advanced health care directives can be especially important if you were suddenly diagnosed with a serious medical condition such as cancer.
A person who has been diagnosed with cancer will find their life completely turned upside down if they have not taken proper planning. Savings can be eliminated quickly, priorities change and jobs can be jeopardized. Furthermore, if you have not named a person to step in and make decisions on your behalf as it relates to your medical care, you could be exposed to a broad range of other problems. Setting up a consultation with an experienced estate planning attorney who is mindful of all of the complicated issues affecting people in modern times can help you.