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Scott T. Ditman, CPA/PFS

Scott T. Ditman, CPA/PFS
Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.
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Recent Posts

T&E TALK: Nongrantor Trusts Soften The Blow of the SALT Deduction Limit

Posted by Scott T. Ditman, CPA/PFS on Jan 27, 2020 11:50:00 AM

If you reside in a high-tax state, you may want to consider using nongrantor trusts to soften the blow of the $10,000 federal limit on state and local tax (SALT) deductions. The limit can significantly reduce itemized deductions if your state income and property taxes are well over $10,000. A potential strategy for avoiding the limit is to transfer interests in real estate to several nongrantor trusts, each of which enjoys its own $10,000 SALT deduction.

Grantor vs. Nongrantor Trusts

The main difference between a grantor and nongrantor trust is that a grantor trust is treated as your alter ego for tax purposes, while a nongrantor trust is treated as a separate entity. Traditionally, grantor trusts have been the vehicle of choice for estate planning purposes because the trust’s income is passed through to you, as grantor, and reported on your tax return.

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T&E TALK: Nondeductible IRA Contributions Require Careful Tracking

Posted by Scott T. Ditman, CPA/PFS on Jan 20, 2020 9:20:00 AM

If, like many people, your traditional IRA holds a mixture of deductible (after-tax) and nondeductible (pretax) contributions, it’s important to track your contributions carefully to avoid double taxation of distributions. Why? Because the IRS treats distributions as a blend of pretax and after-tax dollars. If you treat distributions as fully taxable, you’ll end up overpaying.

An Example

Dan, age 62, withdraws $40,000 from his traditional IRA on August 1, 2019. At the time, his IRA balance is $200,000, consisting of $50,000 in deductible contributions, $80,000 in nondeductible contributions and $70,000 in investment earnings. On December 31, 2019, the IRA’s balance is $170,000 — $200,000 minus the $40,000 distribution plus additional contributions and earnings after August 1.

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T&E TALK: IRS Confirms Large Gifts Now Won’t Hurt Post-2025 Estates

Posted by Scott T. Ditman, CPA/PFS on Jan 13, 2020 7:00:00 AM

The IRS has issued final regulations that should provide comfort to taxpayers interested in making large gifts under the current gift and estate tax regime. The final regs generally adopt, with some revisions, proposed regs that the IRS released in November 2018.

The Need for Clarification

The Tax Cuts and Jobs Act (TCJA) temporarily doubled the gift and estate tax exemption from $5 million to $10 million for gifts made or estates of decedents dying after Dec. 31, 2017, and before Jan. 1, 2026. The exemption is adjusted annually for inflation ($11.58 million for individuals and $23.16 for married couples for 2020). After 2025, though, the exemption is scheduled to drop back to pre-2018 levels.

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T&E TALK: Three Pitfalls When Naming a Life Insurance Policy Beneficiary

Posted by Scott T. Ditman, CPA/PFS on Jan 6, 2020 7:00:00 AM

Life insurance can be a powerful financial and estate planning tool, but its benefits can be reduced or even eliminated if you designate the wrong beneficiary or fail to change beneficiaries when your circumstances change.

Common pitfalls to avoid include:

  1. Naming your estate as beneficiary. Doing so can subject life insurance proceeds to unnecessary state inheritance taxes (in many states), expose the proceeds to your estate’s creditors and ensure that the proceeds will go through probate, which may delay payment to your loved ones.
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T&E TALK: Consider Making Direct Payments of Tuition and Medical Expenses

Posted by Scott T. Ditman, CPA/PFS on Dec 23, 2019 9:00:00 AM

With the lifetime gift and estate tax exemption at $11.40 million for 2019 ($11.58 million for 2020), you may think you don’t have to worry about gift and estate taxes.

However, there are no guarantees that estate tax law won’t be revised in the future or that your accumulated assets won’t eventually exceed the available exemption (which is scheduled to drop significantly in 2026). Thus, there’s a need to investigate other tax-saving possibilities.

Beyond Annual Exclusion Gifts

Under the annual gift tax exclusion, you can reduce your taxable estate without using up any of your lifetime exemption by giving each recipient gifts valued up to $15,000 a year. For example, if you have three children and seven grandchildren, you can give each one $15,000 tax free, for a total of $150,000 in 2019. If your spouse joins in the gifts, the tax-free total is doubled to $300,000.

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T&E TALK: Five Estate Planning Questions for Single Parents

Posted by Scott T. Ditman, CPA/PFS on Dec 16, 2019 7:00:00 AM

In many respects, estate planning for single parents of minor children is similar to estate planning for families with two parents.  But when only one parent is involved, certain aspects of an estate plan demand special attention. Here are five questions single parents should ask:

  1. Are my will and other estate planning documents up to date? If you haven’t reviewed your estate plan recently, do so to ensure that it reflects your current circumstances. The last thing you want is for a probate court to decide your children’s future.
  2. Have I selected an appropriate guardian? If the other parent is unavailable to take custody of your children should you become incapacitated or die suddenly, does your estate plan designate a suitable and willing guardian to care for them? Will the guardian need financial assistance to raise your children and provide for their education? If not, you might want to preserve your wealth in a trust until your children are grown.
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T&E TALK: Avoiding or Minimizing Probate – It’s All About Planning

Posted by Scott T. Ditman, CPA/PFS on Dec 2, 2019 7:00:00 AM

The word “probate” may conjure images of lengthy delays waiting for wealth to be transferred and bitter disputes among family members. Plus, probate records are open to the public, so all your “dirty linen” may be aired. The reality is that probate doesn’t have to be so terrible, and often isn’t, but both asset owners and their heirs should know what’s in store.

Defining Probate

In basic terms, probate is the process of settling an estate and passing legal title of ownership of assets to heirs. If the deceased person has a valid will, probate begins when the executor named in the will presents the document in the county courthouse. If there’s no will — the deceased has died “intestate” in legal parlance — the court will appoint someone to administer the estate. Thereafter, this person becomes the estate’s legal representative.

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T&E TALK: Choosing a Guardian For Your Child

Posted by Scott T. Ditman, CPA/PFS on Nov 25, 2019 7:00:00 AM

If you have minor children, arguably the most important estate planning decision you need to make is choosing a guardian for them should the unthinkable occur. If you haven’t yet made this decision, formalize your choice as soon as possible.

When it comes to choosing the best candidate, you probably already have a short list consisting of members of your immediate family. This is an excellent start, but don’t forget about extended family members and trusted friends.

Considerations

There are many issues you’ll need to consider in making your decision. Perhaps the most important issue is whether you and your guardian choice share similar values, such as parenting philosophy, religious and moral beliefs, and educational views.

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T&E TALK: In An Unpredictable Estate Planning Environment, Flexibility is Key

Posted by Scott T. Ditman, CPA/PFS on Nov 18, 2019 7:00:00 AM

The Tax Cuts and Jobs Act (TCJA) made only one change to the federal gift and estate tax regime, but it was a big one. It more than doubled the combined gift and estate tax exemption, as well as the generation-skipping transfer (GST) tax exemption. This change is only temporary, however. Unless Congress takes further action, the exemptions will return to their inflation-adjusted 2017 levels starting in 2026.

What does this mean for your estate plan? If your estate is well within the 2019 exemption amount of $11.40 million ($11.58 million for 2020), the higher exemption won’t have a big impact on your estate planning strategies. But if your estate is in the $6 million to $11 million range, it’s important to build some flexibility into your plan to address potential tax liability after 2025.

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T&E TALK: Net Investment Income Tax Is Alive And Well

Posted by Scott T. Ditman, CPA/PFS on Nov 11, 2019 7:00:00 AM

The Tax Cuts and Jobs Act (TCJA) reduced individual income tax rates, but it left the 3.8% net investment income tax (NIIT) in place. It’s important to address the NIIT in your estate plan, because it can erode your earnings from interest, dividends, capital gains, and other investments, leaving less for your heirs.

How NIIT Works

The NIIT applies to individuals with modified adjusted gross income (MAGI) over $200,000. The threshold is $250,000 for joint filers and qualifying widows or widowers and $125,000 for married taxpayers filing separately. The tax is equal to 3.8% of 1) your net investment income, or 2) the amount by which your MAGI exceeds the threshold, whichever is less.

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