Berdon Blogs

T&E TALK: You can Repair a “Broken” Trust with the Proper Tools

Posted by Scott T. Ditman, CPA/PFS on Jun 18, 2018 12:18:38 PM

An irrevocable trust has long been a key component of many estate plans. But what if it no longer serves your purposes? Is it too late to change it? Depending on applicable state law, you may have options to fix a “broken” trust.

How Trusts Break

There are several reasons a trust can break, including:

Changing Circumstances. A trust that works just fine when it’s established may no longer achieve its original goals if your family circumstances change — births, deaths, divorce, etc.

New Tax Laws. Many trusts were created when gift, estate, and generation-skipping transfer (GST) tax exemption amounts were relatively low. Today, however, the exemptions have risen to $11.18 million, so trusts designed to minimize gift, estate, and GST taxes may no longer be necessary.  And with transfer taxes out of the picture, the higher income taxes often associated with these trusts — previously overshadowed by transfer tax concerns — become a more important factor.

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Topics: T&E TALK

T&E TALK: For the Charitable, Consider a Donor-Advised Fund

Posted by Scott T. Ditman, CPA/PFS on Jun 11, 2018 7:00:00 AM

If you make sizable gifts to charitable causes, you can also realize personal rewards, and may be able to claim a deduction on your tax return. However, once you turn over the money or assets, you generally have no further say on how they’re used. You can exercise greater control over your charitable endeavors using a donor-advised fund (DAF). Bear in mind that under the Tax Cuts and Jobs Act, you must itemize to benefit from the charitable contributions deduction.

Setting Up a DAF

As the name implies, your recommendations are integral to a DAF. First, you contribute to a fund typically managed by an independent sponsoring organization or an arm of a reputable financial institution. The minimum contribution generally is $5,000. In exchange for handling the management of the fund, the financial institution or organization usually charges an administrative fee based on a percentage of the deposit.

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Topics: T&E TALK

T&E TALK: Does Your Family Know Where to Find Your Will?

Posted by Scott T. Ditman, CPA/PFS on Jun 4, 2018 9:12:30 AM

In a world that’s increasingly paperless, you’re likely becoming accustomed to conducting many transactions digitally. But when it comes to your last will and testament, only an original, signed document will do.

A Photocopy Isn’t Good Enough

Many people mistakenly believe that a photocopy of a signed will is sufficient. In fact, most states require that a deceased’s original will be filed with the county clerk and, if probate is necessary, presented to the probate court. If your family or executor can’t find your original will, there’s a presumption in most states that you destroyed it with the intent to revoke it. That means the court will generally administer your estate as if you’d died without a will.

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Topics: T&E TALK

T&E TALK: 2nd Marriage Trap — Unintentionally Shortchanging Your Current Spouse

Posted by Scott T. Ditman, CPA/PFS on May 29, 2018 9:31:34 AM

In my previous blog we looked at harnessing the power of a QTIP (qualified terminable interest property) trust for passing wealth to your spouse and children.  However, if you've been married more than once, especially if you have children from different marriages, your estate plan should be even more carefully reviewed to avoid a trap where you could unintentionally shortchange your current spouse.

Consider this scenario:

The Tax Cuts and Jobs Act (TCJA) retained the federal estate, gift, and generation-skipping transfer (GST) taxes but doubled the federal exemption amount to $11,180,000 per taxpayer through December 31, 2025 (indexed for inflation). But, unintended consequences of this temporary doubling of the exemption may be seen in wills containing “formula” based trusts which automatically adjust for the changes in the exemption. 

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Topics: T&E TALK

T&E TALK: Provide for your Spouse and Children with a QTIP Trust

Posted by Scott T. Ditman, CPA/PFS on May 21, 2018 7:00:00 AM

If you want to preserve as much wealth as possible for your children, but you leave property to your spouse outright, there’s no guarantee your objective will be met. This may be a concern if your spouse has poor money management skills or, more importantly, if you are in a second marriage and have children from the first marriage. In both of these situations, a properly designed qualified terminable interest property (QTIP) trust may be the answer.

How QTIPs Work

A QTIP trust provides your spouse with income for life while preserving the trust principal for your children. By appointing a qualified trustee, you can have greater confidence that the assets will be invested and managed wisely. And the trust documents will ensure that, upon your spouse’s death, the trust assets will be distributed to your children according to your wishes.

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Topics: T&E TALK

T&E TALK: Blended Family? Here are Four Estate Planning Techniques

Posted by Scott T. Ditman, CPA/PFS on May 7, 2018 7:00:00 AM

Today, it’s not unusual for a family to include children from prior marriages. These “blended” families can create estate planning complications that may lead to challenges in the courts after your death.

Fortunately, you can reduce the chances of family squabbles by using techniques designed to preserve wealth for your heirs in the manner you want, with a minimum of estate tax erosion, if any. Here are four examples:

  1. Will. Your will generally determines who gets what, when, where, and how. It may be combined with “inter vivos trusts” established during your lifetime or be used to create testamentary trusts, or both. While you can include a few tweaks for your blended family through a codicil to the will, if the intended changes are substantive — such as removing an ex-spouse and adding a new spouse — you should meet with your estate planning attorney to have a new will prepared.
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Topics: T&E TALK

T&E TALK: Estate Planning Strategies for Non-U.S. Citizens

Posted by Scott T. Ditman, CPA/PFS on Apr 30, 2018 7:01:00 AM

Non-U.S. citizens face some estate planning challenges when it comes to taxes. If you’re a U.S. resident, but not a citizen, the IRS treats you similarly to a U.S. citizen, with a few exceptions. But, if you’re a nonresident alien, the tax treatment of your estate will be significantly different.

Understanding Residency

IRS regulations define a U.S. resident for federal estate tax purposes as someone who had his or her domicile in the United States at the time of death. One acquires a domicile in a place by living there, even briefly, with a present intention of making that place a permanent home.

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Topics: T&E TALK

T&E TALK: A Total Return Unitrust (TRU) May Help Maintain Family Harmony

Posted by Scott T. Ditman, CPA/PFS on Apr 23, 2018 7:00:00 AM

A traditional trust can sometimes create a conflict between the lifetime and remainder beneficiaries. For example, investment strategies that provide growth that benefits remainder beneficiaries can leave lifetime beneficiaries with little or no annual payouts. This makes it more difficult for your estate plan to achieve your objectives and places your trustee in a difficult position. A total return unitrust (TRU) may offer a solution.

A TRU frees the trustee to employ investment strategies that maximize growth (total return) for the remainder beneficiaries without depriving lifetime beneficiaries of income. Rather than pay out its income to the lifetime beneficiary, a TRU pays out a fixed percentage (typically between 3% and 5%) of the trust’s value, recalculated annually, regardless of the trust’s earnings.

Considerations when Creating a TRU

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Topics: T&E TALK

T&E TALK: Missed the 60-day IRA Rollover Deadline? Apply for a Waiver

Posted by Scott T. Ditman, CPA/PFS on Apr 16, 2018 7:01:00 AM

IRAs and employer-sponsored plans such as 401(k)s are powerful retirement savings tools, but they also provide valuable estate planning benefits. If you hold a traditional IRA for life, for example, your children or other heirs can stretch out distributions over their lifetimes, maximizing the IRA’s tax-deferred growth and preserving more wealth for the family. If, however, you receive a distribution from an employer plan (such as when you change jobs or retire) and you don’t roll over the funds into an IRA or new plan within 60 days, you can lose these benefits.

What are the Tax Consequences?

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Topics: T&E TALK

T&E TALK: Securities Laws Can Impact Your Estate Planning

Posted by Scott T. Ditman, CPA/PFS on Apr 9, 2018 7:00:00 AM

For a variety of estate planning and asset management purposes, many high net worth families hold their assets in trusts, family investment vehicles, or charitable foundations. If assets held in this manner include interests in hedge funds, private equity funds, or other “unregistered” securities, it is important to ensure that the entity is qualified to hold such investments.

Certain exemptions under the federal securities law require that investors in private funds and other unregistered securities qualify as “accredited investors” or “qualified purchasers.”

What is an Accredited Investor?

Accredited investors include financial institutions and other entities that meet certain requirements, as well as certain officers, directors, and other insiders of the entity offering the securities. They also include individuals with either:

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Topics: T&E TALK

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