The Best Gift You Can Give Is Investing for Your Heirs


Teaching your grandchildren and children to invest is an investment in their own future. This means you are passing down your own individual legacy and the financial expertise you have built over the course of a life time. This is why many grandparents and parents set up brokerage accounts to give family members an early start on investment opportunities.

Recent changes in U.S. tax laws, however, have changed the dynamics associated with multi-generational investment planning. It is often more important now for older generations to keep their appreciating assets with the primary purpose of helping their family members and beneficiaries avoid paying taxes on any of the gains. investing for your heirs is a powerful estate planning strategy

In the past, estate planning typically emphasized maximizing the annual exemption gifts and finding ways to get discounted values for gifts tax purposes on any assets that were transferred. However, in light of the new tax laws, currently on the books, investing for heirs now makes more sense. The ability to get a stepped-up basis at death has survived numerous versions of tax reforms.

This gives every member of the current oldest generation in the United States the opportunity to pass down assets to their beneficiaries that could avoid up to $11.2 million in potential capital gains. The best way to implement this strategy is to schedule a consultation with an experienced estate planning attorney and to hold the assets in your own name. You would then invest these as though you are holding on to them on behalf of your heirs. This may seem a more aggressive investment strategy than what you are used to, but younger investors will gain advantages because they do not have to worry about the same amount of market volatility that could impact an older generation.

Should You Increase Your Gifts Given to Your Children?


When thinking about passing on assets to future generations, a common question asked by many people is whether or not they should increase the amount that is passed on to their loved ones. With the passage of the tax cuts and Jobs Act, the lifetime exemption for estate taxes doubles to $11.2 million for individuals and $22.4 million for married couples. learn more about gifting with your kids for estate planning purposes

How you choose to pass things on to your loved ones can make things easier for you as well as them.

The lifetime gift tax exemption has also doubled to these same tax amounts. Gifting opportunities in light of these new regulations have to do largely with timing issues and magnitude. The previous increases in these laws have been much more gradual, making it more difficult for people to adapt their gift tax plans now. Consider the impact of a gift to your children on their lives, particularly when you intend to make the gift outright.

It is much easier for many people to pass on an asset or to write a check than to have a serious conversation about the various responsibilities that come with receiving wealth. There may be advanced issues in your unique family situation that should prompt you to contact an attorney about estate planning tools. These could include spendthrift children and addiction issues.

Looking for a new charitable gifting idea? Try Bitcoins

The IRS is never too far behind the trend when it comes to new forms of tax revenue, and with their recent tax stipulations regarding virtual currency, it’s time to consider the charitable giving opportunities with Bitcoins. The IRS specific rules relate to any virtual currency that is used to pay for goods or services or those that are used for investment, so Bitcoins isn’t the only possible form, but it’s certainly the most popular.

Looking for a new charitable gifting idea Try Bitcoins
(Photo Credit:

What’s important from an IRS perspective is that the sale or exchange of Bitcoins and other types of virtual currency could signal a taxable event or tax liability. It’s treated as property under IRS regulations and an owning individual must consider the fair market value in computing their gross income. There are several different ways that you might think about gifting in terms of Bitcoins, so here are some ideas and the possible tax consequences:

  • Outright gifts held long term to a public charity: Considered a fair market value contribution, deductible up to 30 percent of adjusted gross income.
  • Outright gifts if the donor is a creator/miner of Bitcoins: This could be considered ordinary income and not property under “capital gains”. Up to 50 percent of AGI deductible at cost basis.
  • Outright gifts held short term to public charity: Cost-basis contribution, meaning that this is deductible up to 50 percent of AGI.
  • Substantiation with receipt: The donor requires a receipt describing the gift here and it’s treated like all gifts of $250 or more.
  • Substantiation with appraisal: Form 8283 and a qualified appraisal is required here.

To learn more about gifting strategies, reach out to us at or contact us via phone at 732-521-9455 to get started.

‘Gifting’ May Be Penalized By Medicaid

While people can “gift” up to $14,000 each to anyone they want to each year without tax penalty, that tactic is not going to fly if it is being done to “spend down” in order to get Medicaid to pay for nursing home care.

Centers for Medicare and Medicaid Services (Me...
Centers for Medicare and Medicaid Services (Medicaid administrator) logo (Photo credit: Wikipedia)

If a person is “gifting” money to family or friends in order to spend down to reach the resource limit for Medicaid nursing home coverage, it better be done five years ahead of time, according to an article in the New York Daily News.

Gifts made within five years of applying are likely to disqualify the gift giver from obtaining coverage for a period of time based on how much was given. The larger the gifts, the longer the wait.

Medicaid will presume the gifts were made to get around the criteria for coverage.

The penalty period is likely to be in place even if the gifts were put into a trust.

Because Medicaid planning and the use of trusts is complex, the article suggests consulting with a qualified estate planning or elder law attorney.

Enhanced by Zemanta

It’s Good Enough for Walmart: Tax Avoidance with a GRAT

Billionaire Sheldon Adelson is not alone in his disdain for estate taxes. As one of the world’s richest men, Adelson has the ability to hire top attorneys and advisors to employ financial and estate planning tools that ensure his estate pays little or no taxes. One of these tax avoidance tools is the Walton grantor retained annuity trust (“GRAT”). A recent article discusses the use of this popular trust.

Walmart exteriorcropped
(Photo credit: Wikipedia)

Named after Walmart heir Audrey Walton, the Walton GRAT is a popular tool used by the wealthy to avoid estate taxes. Essentially, a Walton GRAT works by rapidly transferring large quantities of stock into a trust fund that requires that the initial investment be returned after two years. If the stock gains value while in the Walton GRAT, the additional value will be left over in the trust. The trust can then transfer the remaining value to a third party without incurring gift tax liability.

Recognizing this loophole, the government sued Audrey Walton for using a similar scheme in 1993. The court ruled in Walton’s favor, thereby legitimizing and nicknaming the Walton GRAT. Since then, many wealthy individuals – such as Facebook chief executive Mark Zuckerberg and Goldman Sachs chief executive Lloyd Blankfein – have benefited from their own use of the Walton GRAT.

Enhanced by Zemanta

Review Your Financial and Estate Planning Goals for 2014

A recent article quoted financial planner Michael Joyce as saying, “There’s nothing magic about reviewing goals […], but it is a good time to refocus people on their financial goals.” Joyce’s statement could not be moretrue. It is good practice to periodically review financial and estate planning goals, and the end of the year or the beginning of a new year is a great time to check this off of the to do list.

English: Picture I made for my goals article
(Photo credit: Wikipedia)

Individuals should begin their review by checking the beneficiary designations on their retirement accounts, life insurance policies, 401(k) plans, and any other account with a beneficiary designation. It is important to not only ensure that a beneficiary has been named, but also that the named beneficiary is still appropriate.

Additionally, review the provisions in your will and trust documents. Consider whether any provisions need to be changed, added, or omitted. This is especially important if you have experienced a marriage, divorce, or the birth or death of a loved one since you first signed your will.

Individuals should also consider any tax law changes that will impact their assets. Tax laws are in constant flux, so a periodic review of applicable laws is the best way to plan to reduce anticipated taxes. This review should also include a review of gift tax limits, which may encourage an individual to increase year-end gift-giving in order to achieve a greater tax benefit.

Enhanced by Zemanta

Considering Gifting Your Home? Read This Before You Give Away The Castle.

Many parents want to believe that their children would never kick them out of their own home. However, the sad reality is that this has been the subject of more than one lawsuit. As a recent article explains, if you are considering gifting your home to your child or children, it is important to consider that possibility and other consequences.

First, the gift of a home is often a taxable gift. If a parent signs a deed gifting the house to their children, he or she should file a gift tax return as well. If this gift tax return is not filed, the parent may lose the ability to claim an exemption from the gift tax and may owe taxes on the transaction.

Additionally, gifting a house to children allows them to sell the house out from under the parent. The children can attempt to send the parent to a nursing home or simply evict the parent altogether.

Finally, gifting a home can have serious implications as far as Medicaid is concerned. Medicaid is a need-based program that employs a look-back provision of five years. Therefore, if a home is gifted within the five year period before a parent applies for Medicaid, the value of the home is considered in the parent’s assets. Therefore, depending on the value of the home, the gift could make the parent ineligible for Medicaid benefits.

Often, the ideal scenario involves a system whereby the value of the home is gifted, but the parent is permitted to live in the home for as long as they like or for a certain period of time.  Parents should consider using a combination of life estates and proper trusts to achieve these goals.

How’s This for GRAT-itude? – Basics of the GRAT

As a recent article explains, a Grantor Retained Annuity Trust (“GRAT”) is a great estate-planning tool for high-net-worth individuals.  This type of irrevocable trust permits you to make a lifetime gift of assets to an irrevocable trust in exchange for a fixed payment stream for a specified term of years.

Often, individuals making large transfers to their beneficiaries choose to utilize GRATs because of associated tax benefits.

A key aspect of GRAT transfers is that they minimize or even eliminate estate and gift tax liability on the transferred assets. Moreover, the creator of a GRAT may receive fixed annual payments for the life of the trust. Through receiving this annuity, the creator is paid back his or her principal, as well as interest. After the trust term has concluded, the remainder of the trust passes to the trust beneficiaries.

When setting up a GRAT, it is important to carefully select a trust term. If the trust term ends while the creator is still alive, the remaining assets will be included as part of his or her gross estate for purposes of determining estate tax liability. Those who anticipate outliving the trust term of their GRAT should consider employing a life insurance strategy to offset any additional tax liabilities.

Those who wish to set up a GRAT should act quickly because the Obama administration may soon eliminate the tax benefits that a GRAT strategy would reap as proposed in the President’s latest Green book proposals.

For Better or Worse: Estate Planning for Same-Sex Spouses

As a recent article explains, the United States Supreme Court’s recent ruling on same-sex marriage will radically alter estate planning for same-sex married couples.

taking their first steps as a legally married ...
(Photo credit: ehoyer)

Prior to the decision, thousands of federal laws available to married couples were not available to same-sex married couples due to the Federal Defense of Marriage Act (“DOMA”), which defined marriage as between a man and a woman. By striking down DOMA, the United States Supreme Court suddenly made thousands of federal estate planning tools available to same-sex married couples.

One of these tools is portability. Portability allows a surviving spouse to utilize the unused portion of his or her deceased spouse’s estate tax exclusion. Portability was made permanent in the new 2012 tax law. In order to use the unused portion of your spouse’s estate tax exemption, the surviving spouse needs to have the executor of the deceased spouse’s estate transfer the unused exclusion, as this is not automatic.

Another estate planning maneuver that will now be available to same-sex married couples is gift-splitting. Every year, federal law allows each individual to gift $14,000 per year, per recipient, to as many recipients as they wish. Any amount gifted over the yearly gift-tax exclusion counts against a person’s lifetime gift tax exclusion. Married spouses, however, can combine their gift amount in order to jointly gift $28,000 to a single recipient.

Enhanced by Zemanta

The Difference Between an LLP and LLC

In order to transfer assets to the next generation, some people may choose to use an LLP or LLC. Both of these are legal business arrangements that can be implemented into any estate plan.  A recent article discussed the differences between the two.

An LLP, or limited liability partnership, is a general partnership. In this type of partnership, ownership of the business is split between the partners. Profits from the business are distributed based upon the percentage ownership of each owner. An LLC, or limited liability company, is a partnership wherein owners are issued shares of stock. Profits from the business are split between the owners based on their share of the stock.

The use of an LLC or LLP may be beneficial for those Americans who have estates valued above the federal estate tax exemption, are seeking asset protection, or both. This is because these devices lower the value of the entire estate by dividing ownership of the business between yourself and your children. Moreover, if you gift a portion of your LLC or LLP to a child, that gift can be discounted by 20 percent or more for purposes of the federal gift tax exemption. By giving such gifts, you increase the value of your allowed $14,000 gift by 20 percent.