Estate Planning Articles

  Estate and Gift Tax

In 2017, the estate tax exemption will be $5.49 million up from $5.45 million for 2016.  That’s another $40,000 that can be passed on tax-free. The top federal tax rate is 40%. The very high amounts between spouses, makes the creation of by pass trust arguably less essential than it once was. Yet generous estate tax laws not withstanding, everyone needs to mind basic estate-planning matters, including properly drafted beneficiary designations, guardianship for minor children, and powers of attorney for financial and health care matters.

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  Tips for the Self-Employed

IRA Options — Moonlight and Save More

In addition to your day job, if you create a part-time self-employed position for yourself, you can also create additional retirement saving options. One option is a SEP-IRA which allows you to contribute up to 25% of your earnings up to $52,000 — regardless if you are covered by your day job’s retirement plan. Another option is the Simple IRA, which isn’t based on a percentage of income but allows you to contribute up to $15,000 of earnings if you’re 50 or older ($12,500 if younger). Remember to set-up a Simple IRA before October 1 of the tax year, whereas a SEP plan lets you put it off until the following year’s tax filing deadline, usually April 15th.

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  Small Business Owners – Your Spousal Advantage

A terrific end-of-year tax planning strategy for small business owners is as simple as hiring a new employee! However, let’s hire a trustworthy and reliable person — your spouse.

Hiring a spouse as an official employee can garner tangible tax benefits:

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  How can I avoid the “use-it or lose-it” problem with longterm care insurance premiums?

Traditional longterm care insurance premiums are lost if the coverage is not used. Of course, this is good and bad. Fortunately, the individual didn’t need longterm care services. Unfortunately, for the heirs, spouse or beneficiaries of the estate, the annual costs of premiums paid, are forfeited to the insurance company.

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  Is your life insurance policy in jeopardy of lapsing or running out?

It is important to periodically review your life insurance policy. Especially important if your policy is older then 10 years or if the specifics of your coverage aren’t as clear to you as they were when you purchased the policy. Typical reasons for a professional review evolve around changes in your life:

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  What’s the difference? Joint Tenants with Rights of Survivorship versus Tenants in Common.

The chief difference between Joint Tenants and Tenants in Common is the right of the survivor. Under Joint Tenants, if joint tenant dies, the property automatically belongs to the other owner, avoiding probate. If three people own the account and one dies, the two surviving owners each become the owners of an undivided one-half interest. But if the owners are Tenants in Common, the other owners have no rights to the deceased’s ownership (unless spelled out within the deceased’s will).

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  Transfer-on-Death (TOD) Accounts Bypass Probate

An investment account registered as a TOD “Transfer-on-Death” with a designated beneficiary or beneficiaries will bypass probate at death in nearly every state except Texas and Louisiana. The owner of the account still maintains control of the account with this registration and your beneficiaries will not have access to the securities while you are alive. After your death the beneficiaries can register the account in their name(s) by sending an application and a copy of the death certificate the transfer agent or the securities firm. A fairly straightforward process.

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  Who will get my IRA assets?

In order to avoid huge headaches for your heirs, it is important that you pay attention to whom you name as your IRA beneficiary. It is important to sync what is on your beneficiary designation form with information that is spelled out in your estate documents. What is on a beneficiary designation trumps what is in your will. Be careful to make tax efficient use of your IRA assets and not to make minor children or your estate beneficiary of an IRA.

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  Roth IRAs for Estate Planning

multigen-familyRoth IRAs have become a great estate planning tool. Previously, conversion from a regular IRA or 401(k) was simply prohibited for taxpayers with incomes in excess of $100,000. Under new legislation passed by Congress, everyone can convert a regular IRA to a Roth IRA.

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  Naming a Trust

Why would an IRA account owner want to name a trust or non-person as their beneficiary? One type of frequently used trust is call a “see-through” trust. It creates a mechanism for the deceased to control account withdrawals, post-death. In addition a see-through trust allows the underlying beneficiary to stretch distributions over their life expectancy. Prior to naming a trust as a beneficiary an investor needs to be aware of the complex rules that govern trusts. You also must name your trust as a beneficiary on the IRA beneficiary designation form or other form acceptable to the IRA custodian.

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