MEDIA/PRESS

T&E TALK: Time May Be Right to Consider Forgiving Intrafamily Loans

Posted by Scott T. Ditman, CPA/PFS on May 18, 2020 7:00:00 AM

If you have outstanding loans to your children, grandchildren, or other family members, consider forgiving those loans to take advantage of the current, record-high $11.58 million gift and estate tax exemption. Bear in mind that in 2026, the exemption amount is scheduled to revert to $5 million ($10 million for married couples), indexed for inflation.

Under the right circumstances, an intrafamily loan can be a powerful estate planning tool because it allows you to transfer wealth to your loved ones free of gift taxes — to the extent the loan proceeds achieve a certain level of returns. But an outright gift is a far more effective way to transfer wealth, provided you don’t need the interest income and have enough unused exemption to shield it from transfer taxes.

Do Intrafamily Loans Save Taxes?

Generally, to ensure the desired tax outcome, an intrafamily loan must have an interest rate that equals or exceeds the applicable federal rate (AFR) at the time the loan is made. The principal and interest are included in the lender’s estate, so the key to transferring wealth tax-free is for the borrower to invest the loan proceeds in a business, real estate or other opportunity whose returns outperform the AFR.

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Topics: T&E TALK

T&E TALK: Rules Have Changed for your IRAs, RMDs and Estate Plan

Posted by Scott T. Ditman, CPA/PFS on May 11, 2020 7:00:00 AM

Many people’s estates typically include IRAs. Be aware that two major laws passed into law recently, the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, have had a direct effect on IRAs.

In a nutshell, the CARES Act waives required minimum distribution (RMD) rules for IRAs (and certain defined contribution plans) for calendar year 2020. If you’re fortunate enough that you don’t need to make withdraws from your IRA, there’s an opportunity to leave more for your heirs in your retirement plan. However, bear in mind that because the SECURE Act generally put an end to “stretch” IRAs, the estate planning benefits of inheriting IRAs are somewhat muted.

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Topics: T&E TALK

T&E TALK: Major Life Shocks, Like COVID-19, Signal a Review of Your Estate Plan

Posted by Scott T. Ditman, CPA/PFS on May 4, 2020 7:00:00 AM

With a life shock as monumental as the COVID-19 pandemic, now is a good time to review your estate planning documents to ensure that they are up to date — especially if you have not reviewed them in a number of years.

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T&E TALK: COVID-19 and Charitable Giving

Posted by Scott T. Ditman, CPA/PFS on Apr 27, 2020 7:00:00 AM

The COVID-19 pandemic and the resulting economic fallout is dealing a crushing blow to charitable organizations. Indeed, during a time when food banks, disaster relief, and other nonprofit services are needed most by the public, their funding is suffering due to cancelled fundraising events and other factors.

If philanthropy is an important part of your legacy, now is a good time to make as many donations as possible. Your gifts reduce your taxable estate, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act has expanded charitable contribution deductions.

CARES Act Incentives

Individual taxpayers can take advantage of a new above-the-line $300 deduction for cash contributions to qualified charities in 2020. “Above-the-line” means the deduction reduces adjusted gross income (AGI) and is available to taxpayers regardless of whether they itemize deductions.

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T&E TALK: Estate Planning and Intellectual Property

Posted by Scott T. Ditman, CPA/PFS on Apr 20, 2020 7:00:00 AM

If you’ve invented something during your lifetime and had it patented, your estate includes intellectual property (IP). The same goes for any copyrighted works. These assets can hold substantial value, and, thus, must be addressed by your estate plan. However, bear in mind that these assets are generally treated differently than other types of property.

Four Categories of IP

IP generally falls into one of four categories: patents, copyrights, trademarks, and trade secrets. Let’s focus on only patents and copyrights, which are protected by federal law in order to promote scientific and creative endeavors by providing inventors and artists with exclusive rights to benefit economically from their work for a certain period.

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T&E TALK: Gift Tax Filing And Payment Deadlines Now July 15

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

You may have heard that the federal income tax filing and payment deadline has been extended from April 15, 2020, to July 15, 2020, to provide relief for taxpayers adversely affected by the coronavirus (COVID-19) pandemic.

What you may have missed is that the U.S. Treasury Department also extended the April 15, 2020, federal gift tax filing and payment deadline to July 15, 2020.

Filing Gift Tax Returns

Generally, filing Form 709 — “United States Gift (and Generation-Skipping Transfer) Tax Return” is required if you make gifts to or for someone during the year (with certain exceptions, such as gifts to U.S. citizen spouses) that exceed the annual gift tax exclusion ($15,000 for 2019 and 2020). There’s a separate exclusion for gifts to a noncitizen spouse ($155,000 for 2019 and $157,000 for 2020).

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T&E TALK: Will Your Estate Plan Benefit From a Trust Protector?

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

You may have several different types of trusts in your estate plan. In general, to achieve the greatest tax savings, these trusts must be irrevocable, thus requiring you to give up control over the trust assets.

Even though you appoint a trustee to oversee distribution of the trust’s assets, you can go a step further by appointing a trust protector. This person will serve as an overseer of the trustee’s actions. Taking this step can also provide you peace of mind because the trust protector has the power to alter the trust in light of changing family situations or tax laws.

Powers Available

Essentially, a trust protector is to a trustee what a corporate board of directors is to a CEO. A trustee manages the trust on a day-to-day basis. The protector oversees the trustee and weighs in on critical decisions, such as the sale of closely held business interests or investment transactions involving large dollar amounts.

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T&E TALK: Consider An HSA For Your Savings Regimen And Estate Plan

Posted by Scott T. Ditman, CPA/PFS on Mar 30, 2020 7:00:00 AM

Longer life expectancies and rising health care costs make saving for retirement more important than ever before. A Health Savings Account (HSA) can be a powerful tool for financing health care expenses while supplementing your other retirement savings vehicles. And it offers estate planning benefits to boot.

What’s an HSA?

An HSA is a tax-advantaged savings account funded with pretax dollars. Funds can be withdrawn tax-free to pay for a wide range of qualified medical expenses. (Withdrawals for nonqualified expenses are taxable and, if you’re under 65, subject to penalties.)

To provide these benefits, an HSA must be coupled with a high-deductible health plan (HDHP). For 2020, an HDHP is a plan with a minimum deductible of $1,400 ($2,800 for family coverage) and maximum out-of-pocket expenses of $6,900 ($13,800 for family coverage). In addition, you must not be enrolled in Medicare or covered by any non-HDHP insurance (a spouse’s plan, for example). Once you enroll in Medicare, you can no longer contribute to an HSA, but you can continue to withdraw funds from your account to pay for qualified expenses.

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Topics: T&E TALK

T&E TALK: Are Your Payable-on-Death Accounts Coordinated With Your Estate Plan?

Posted by Scott T. Ditman, CPA/PFS on Mar 23, 2020 7:00:00 AM

Payable-on-death (POD) accounts provide a quick, simple, and inexpensive way to transfer assets outside of probate. They can be used for bank accounts, certificates of deposit or even brokerage accounts. Setting one up is as easy as providing the bank with a signed POD beneficiary designation form. When you die, your beneficiaries just need to present a certified copy of the death certificate and their identification to the bank, and the money or securities are theirs.

Beware of Pitfalls

POD accounts can backfire if they’re not coordinated carefully with the rest of your estate plan. Too often, people designate an account as POD as an afterthought without considering whether it may conflict with their wills, trusts or other estate planning documents.

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Topics: T&E TALK

T&E TALK: Trusts to Consider When Estate Planning for a Blended Family

Posted by Scott T. Ditman, CPA/PFS on Mar 16, 2020 7:00:00 AM

No one said estate planning is easy, and this is especially true if you have a “blended family.” The good news is that there are two trust types — a qualified terminable interest property (QTIP) trust and an irrevocable life insurance trust (ILIT) — that can provide for your children from a previous marriage while also taking care of your current spouse and any children from your current marriage.

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Topics: T&E TALK

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