May, 2020 | Shah & Associates, P.C. Estate Planning & Elder Law Blog
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Basics of Gifting for the High Net Worth Family

May 28, 2020

Filed under: Estate Planning — Laura Pennington @ 11:25 am

Many high net worth families are already familiar with the benefits of using gifting on an annual basis to help dispose of some of the assets inside their estate and instead transfer them to loved ones while you’re still alive.

Very few individuals in America will owe an estate tax when they pass away. In fact, only 0.2% of Americans will end up needing to pay this. However, for those families that have a vast majority wealth that is tied to a business, it could be devastating for the family that chooses to sell this asset to pay an estate tax.

Annual gifting does not count against the exemption limit and can be a very powerful estate planning tool. In 2020, the annual gifting limit is $15,000 per individual. Married couples can also split their gifts, meaning that they can each give up to $15,000 to as many people as they want.

Grandparents or couples can also frontload 529 accounts for up to five years’ worth of contributions for every child. This means that a significant amount of money could be transferred without triggering estate tax issues.

High net worth families have many unique concerns that need to be handled by an experienced attorney. Having a team of advisors focused on your needs can help you ensure that your plans address all your primary concerns.

For more information about how to set up your estate plan as a high net worth family, schedule a consultation with our experienced estate planning lawyer today.     

Are You Using One of These Excuses to Avoid Your Estate Plan?

May 27, 2020

Filed under: Estate Planning — Laura Pennington @ 1:52 pm

There are many different research studies that explore the number of people in America and other countries who don’t have an estate plan in place. Often it is the wakeup call of experiencing the loss of a loved one that points you to reconsider your lack of an estate plan.

Some studies have even found that the wealthy are no better prepared for a transfer of assets than middle income Americans. In fact, only 10% of Americans who earn between $100,000 and $150,000 a year have an up to date will. There are four primary reasons that most people are likely to skip out on the estate planning process.

None of these should be at the forefront of your mind if you’re thinking about how you can best protect your family. Many people say they simply haven’t gotten around to it but nearly 30% of people say they don’t have enough assets to leave to anyone, and half of people argue that they don’t believe their assets are worth enough to worry about estate planning. Finally, over half of Americans have reported that they believe it’s difficult to find an advisor they trust to create an estate plan.

An estate plan is about so much more than the transfer of your assets. It’s also about giving your loved ones the peace of mind that you have taken into consideration health care concerns and long-term care decisions that could impact them. Schedule a consultation today with an estate planning lawyer.       

Does It Make Sense for Your Children to Receive an Equal Inheritance?

May 26, 2020

Filed under: Estate Planning — Laura Pennington @ 2:40 pm

As a parent, you face an important and yet difficult decision when deciding how you pass on assets to your children. If you have multiple children, the most common question to arise first is what you pass on to each of them and whether or not your assets should be distributed equally.

Parents who decide to leave their children unequal shares can risk fueling conflicts within the family. However, the quests that are made on strictly equal basis might raise challenges and problems from heirs who believe that this has not been done fairly. Since money is one of the most common subjects to fight about, you want to carefully think about the dynamics of your own family while making this decision.

One of the first steps to take is to consider what you would define as fair. For some families this might mean an equal dollar amount or valued amounts of assets that are relatively close. However, other families might want to adjust existing distributions to account for financial help that has already been given to adult children or to leave more behind for those heirs who – unequal distributions can be challenging because the child who receives less than other siblings might view this as a punishment, especially if the reason for inequality was to account for personal wealth or to reflect previous financial help.

Ask your kids what they think and plan to make decisions based on your unique family dynamics. Schedule a consultation today with an experienced estate planning attorney to learn more.       

Protect Your Loved Ones from A Grief Filled Search

May 21, 2020

Filed under: Estate Planning — Laura Pennington @ 5:43 pm

It is important that when you put together your estate planning documents, you think about how easy it will be for your loved ones to find these documents and to be able to take action based on them.

The last thing that you want is for your loved ones to have to go through a grief-stricken search for the most important paperwork to help start your estate and prepare your memorial or funeral process.

One of the most tedious and yet critical tasks of administering an estate or a trust is finding the estate planning documents and asset information. All too often spouses and children don’t know where to start and have to spin their wheels looking for the information they need.

Thankfully, you can do your due diligence with estate planning and help them to avoid this process by making it simple for them. Don’t make them wait a month for account statements to show up in the mail or dig underneath your mattress to find documents or keys to your safety deposit box.

Make sure that your personal and financial data is properly organized and having a list of all of your assets and liabilities can be an important first step in this process. Schedule a consultation today with an estate planning attorney who has extensive experience in helping you today and your loved ones in the future.       

Now Is the Perfect Time Crisis Proof Your Business

May 19, 2020

Filed under: Estate Planning — Laura Pennington @ 12:08 pm

Do you have a business succession plan in place? If you don’t, 2020 is the year to get one organized. Covid-19 has brought awareness of the possibility to needing to step out of the business due to illness, incapacity or death. 

Business owners who are in the midst of a transition do not need the added pressure of trying to figure out all of the details of a succession plan after the business is already up for sale or after they need a sudden exit. 

There are several questions you can ask yourself about whether or not your company is currently crisis proof. This includes asking; is your business stable, profitable, sustainable, and viable. 

The new questions today in light of the pandemic and the new issues that have emerged, include:

•           After the pandemic is over, will my business be sustainable?

•           Have I done enough work to position myself as an online company or bringing as many of my processes online as possible?

•           Can we generate enough consistent cash flow to stay operational and how do we project finances into the future, knowing this disruption?

•           How did my business struggle or thrive during times of disruption?

Think carefully about business continuity and do your contingency planning. This includes thinking about CEO incapacitation, critical staff, and what happens if employees get sick. Schedule a consultation with a business succession planning lawyer today to learn more and retool your existing business succession plan. 

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.

What Is A Long-Term Care Plan?

May 6, 2020

Filed under: Estate Planning — Laura Pennington @ 1:06 pm

Research shows that two out of every three Americans will need some form of assistance with activities of daily living. These activities of daily living are defined as dressing, bathing, walking, and toileting.

These activities of daily living could be impeded for an extended period of time or for a short term. Long-term care is often associated with nursing homes, but this is not the only way where the individuals can get support with care. In fact, the truth is that many people who need additional assistance get that care from home.

A long-term care plan is your big picture understanding of what you intend to happen in your retirement years and beyond in the event that you need long term care assistance. It is a common misconception that Medicare, the federal program that administers health care benefits for senior citizens, will step in to pay for long term care services on your behalf.

Medicare does not cover the vast majority of long-term care expenses and for those who do not have a long-term care insurance policy to support them, it falls to them to self-fund for their care. This can be especially overwhelming and confusing for those families that are approaching the long-term care crisis for the very first time. An elder law attorney or estate planning attorney can assist you with crafting a long-term care plan with your individual needs in mind.       

Is Now the Right Time to Pull Cash from Your IRA? Beware the Tax Implications

May 5, 2020

Filed under: Estate Planning — Laura Pennington @ 10:34 am

It might feel as though everything is up in the air with your financial planning situation lately. Since this has impacts on your day to day life and your overall financial picture, it’s important to think about how any changes you make now in light of the pandemic could influence your estate planning picture.

Our estate planning law firm is here to help you evaluate your current strategies or define your next steps for adjusting your strategy. The IRS has been issuing guidance about issues ranging from the Paycheck Protection Program to the ability to pull money from your IRA, but it’s up to you to be informed about how you respond and what you do next.

As of May 2020, you can remove up to $100,000 from your IRA so long as you pay it back within three years and take no tax hit for that transaction. However, you might be looking at some tax issues in the interim. The IRS has chosen to call these transactions coronavirus-related distributions. But as with all aspects of the new programs available to individuals and business owners, proceed with caution.

Each withdrawal and then repayment back into the IRA is treated like a rollover transaction classified as “free.” The good news about this is that there are no limits on what you can use the money you withdraw for, however, you might need to file amended tax returns in order to get the federal-income-tax-free treatment.

If your IRA was also an important component of your retirement and estate plan, you’ll want to think carefully about what makes the most sense in terms of how you proceed and whether pulling money from your IRA is the right choice for you right now. If you need assistance in recalibrating your estate plan or strategies right now, set up a meeting with our office to discuss options- we’re still working and here to help virtually.

Long-Term Investors, Don’t Let a Recession Faze You

May 4, 2020

Filed under: Estate Planning — Raymund Rasco @ 9:49 pm

With activity in many industries sharply curtailed in an effort to reduce the chances of spreading the coronavirus, some economists say a recession is inevitable, if one hasn’t already begun.1 From a markets perspective, we have already experienced a drop in stocks, as prices have likely incorporated the growing chance of recession. Investors may be tempted to abandon equities and go to cash because of perceptions of recessions and their impact. But across the two years that follow a recession’s onset, equities have a history of positive performance.

Data covering the past century’s 15 US recessions show that investors tended to be rewarded for sticking with stocks. Exhibit 1 shows that in 11 of the 15 instances, or 73% of the time, returns on stocks were positive two years after a recession began. The annualized market return for the two years following a recession’s start averaged 7.8%.

Recessions understandably trigger worries over how markets might perform. But history can be a comfort for investors wondering whether now may be the time to move out of stocks.

GLOSSARY
Fama/French Total US Market Research Index: The value-weighed US market index is constructed every month, using all issues listed on the NYSE, AMEX, or Nasdaq with available outstanding shares and valid prices for that month and the month before. Exclusions: American Depositary Receipts. Sources: CRSP for value-weighted US market return. Rebalancing: Monthly. Dividends: Reinvested in the paying company until the portfolio is rebalanced.

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Nelson D. Schwartz, “Coronavirus Recession Looms, Its Course ‘Unrecognizable,’” New YorkTimes, March 21, 2020; Peter Coy, “The U.S. May Already Be in a Recession,” Bloomberg Businessweek, March 6, 2020.

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

Kinds of Powers to Give to an Attorney in Fact

Filed under: Estate Planning — Laura Pennington @ 12:44 pm

When you appoint another person to make decisions for you that are legally binding, you need to use a power of attorney to establish this authority. The person you empower is referred to as an attorney-in-fact. There are many different kinds of powers that can be given to this person, and the most common ways to use such a document include giving them authority for your medical decisions or your financial choices.

However, you can decide with your lawyer what makes the most sense in terms of giving powers to your attorney-in-fact. Tailoring the POA to work for you means thinking about whether or not you have other things you’d like to be able to pass on to this agent.

You can specifically name the kinds of things you’d like this agent to be able to do, such as:

  • Paying for a child’s medical expenses or college tuition
  • Hiring a repairman to fix something on your property
  • Handling government benefits or filing for taxes
  • Exchanging, purchasing, or selling certain goods
  • Giving to charities with your assets
  • Handling the management of your existing insurance policies
  • Accepting benefits and changing retirement plans

You can make your power of attorney document as specific or as broad as you choose. The important thing is that you have a lawyer review this document and walk you through the benefits or potential challenges of the way you’ve laid it out. This will give you clarity and the chance to update or adjust things as needed.

Not everyone can be an attorney-in-fact. This person must be classified in your state as an adult, should not be someone who is filing for or waiting approval for a bankruptcy discharge, and not the owner or employee of a nursing home where the principal (the person creating the document) is a current resident. It’s a good idea to select someone who is comfortable serving in this important role and someone who you trust with your affairs.

Have more questions about the process of creating and implementing a power of attorney? Speak with a lawyer today about your options.