Berdon Blogs

T&E TALK: For Unmarried Couples, Estate Planning is Indispensable

Posted by Scott T. Ditman, CPA/PFS on Oct 1, 2018 7:00:00 AM

When married couples neglect to prepare an estate plan, state intestacy laws step in to help provide financial security for the surviving spouse. It may not be the plan they would have designed, but at least it offers some measure of financial security. Unmarried couples, however, have no such backup plan. Unless they carefully spell out how they wish to distribute their wealth, a surviving life partner may end up with nothing.

Marital Advantages

Because intestacy laws offer no protection to an unmarried person who wishes to provide for his or her partner, it’s essential for unmarried couples at minimum to employ a will or living trust. But marriage offers several additional estate planning advantages that unmarried couples must plan around, such as:

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Topics: T&E TALK

T&E TALK: Do you have Significant Wealth Concentrated in a Single Stock?

Posted by Scott T. Ditman, CPA/PFS on Sep 24, 2018 7:00:00 AM

Estate planning and investment risk management go hand in hand. After all, an estate plan is effective only if you have some wealth to transfer to the next generation. One of the best ways to reduce your investment risk is to diversify your holdings. But it’s not unusual for affluent people to end up with a significant portion of their wealth concentrated in one or two stocks.

There are many ways this can happen, including the exercise of stock options, participation in equity-based compensation programs, or receipt of stock in a merger or acquisition.

Sell the Stock

To reduce your investment risk, the simplest option is to sell some or most of the stock and reinvest in a more diversified portfolio. This may not be an option, however, if you’re not willing to pay the resulting capital gains taxes, if there are legal restrictions on the amount you can sell and the timing of a sale, or if you simply wish to hold on to the stock.

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Topics: T&E TALK

T&E TALK: Three Reasons to Continue Making Lifetime Gifts

Posted by Scott T. Ditman, CPA/PFS on Sep 17, 2018 7:00:00 AM

Now that the gift and estate tax exemption has reached a record high of $11.18 million (for 2018), it may seem that gifting assets to loved ones is less important than it was in previous years. However, lifetime gifts continue to provide significant benefits, whether your estate is taxable or not.

Let’s examine three reasons why making gifts remains an important part of estate planning:

1. Lifetime Gifts Reduce Estate Taxes. If your estate exceeds the exemption amount — or you believe it will in the future — regular lifetime gifts can substantially reduce your estate tax bill.

The annual gift tax exclusion allows you to give up to $15,000 per recipient ($30,000 if you “split” gifts with your spouse) tax-free without using up any of your gift and estate tax exemption. In addition, direct payments of tuition or medical expenses on behalf of your loved ones are excluded from gift tax.

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Topics: T&E TALK

T&E TALK: DIY Estate Planning at your Own Risk

Posted by Scott T. Ditman, CPA/PFS on Sep 10, 2018 7:00:00 AM

There’s no law that says you can’t prepare your own estate plan. And with an abundance of online services that automate the creation of wills and other documents, it’s easy to do. But unless your estate is small and your plan is exceedingly simple, the pitfalls of do-it-yourself (DIY) estate planning can be many.

Dotting the i’s and Crossing the t’s

A common mistake people make with DIY estate planning is to neglect the formalities associated with the execution of wills and other documents. Rules vary from state to state regarding the number and type of witnesses who must attest to a will and what, specifically, they must attest to.

Also, states have different rules about interested parties (that is, beneficiaries) serving as witnesses to a will or trust. In many states, interested parties are ineligible to serve as witnesses. In others, an interested-party witness triggers an increase in the required number of witnesses (from two to three, for example).

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Topics: T&E TALK

T&E TALK: Address Long-Term Care Costs with LTC Insurance

Posted by Scott T. Ditman, CPA/PFS on Sep 4, 2018 7:00:00 AM

No matter how diligently you prepare, your estate plan can quickly be derailed if you or a loved one requires long-term home health care or an extended stay at a nursing home or assisted living facility.

The annual cost of long-term care (LTC) can reach as high as six figures, and this expense isn’t covered by traditional health insurance policies, Social Security, or Medicare. So it’s important to have a plan to finance these costs, either by setting aside some of your savings or purchasing insurance.

LTC Insurance

An LTC insurance policy supplements your traditional health insurance by covering services that assist you or a loved one with one or more activities of daily living (ADLs). Generally, ADLs include eating, bathing and dressing.

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Topics: T&E TALK

T&E TALK: Choose a Trust Protector if you are not Confident in your Trustee

Posted by Scott T. Ditman, CPA/PFS on Aug 27, 2018 7:00:00 AM

Irrevocable trusts can allow for the smooth, tax-advantaged transfer of wealth to family members. But there is a drawback: When you set up an irrevocable trust, you must relinquish control of the assets placed in it. What you can control is who will eventually oversee distribution of the assets after your death. That is, you can appoint the trustee. But if you aren’t completely confident that the trustee will carry out your wishes, you might want to appoint a trust protector, too.

Trust Protector Duties

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.

There is virtually no limit to the powers you can confer on a trust protector. For example, you can enable a trust protector to replace a trustee, to appoint a successor trustee or a successor trust protector, and to approve or veto investment or beneficiary distribution decisions. He or she can also resolve disputes between trustees and beneficiaries.

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Topics: T&E TALK

T&E TALK: Provide for the Disabled with a Special Needs Trust

Posted by Scott T. Ditman, CPA/PFS on Aug 20, 2018 7:00:00 AM

If you have a child or other family member with a disabling condition that requires long-term care or prevents (or will prevent) the individual from supporting him- or herself, consider establishing a special needs trust (SNT). Also known as a supplemental needs trust, an SNT allows you to enhance a family member’s quality of life without jeopardizing eligibility for government benefits, such as Medicaid or Supplemental Security Income (SSI).

An SNT Primer

An SNT is an irrevocable trust designed to supplement, rather than replace, government assistance. Generally, the trust is funded by someone other than the beneficiary, though in certain instances a beneficiary’s assets may be used to fund the trust.

To preserve eligibility for government benefits, the beneficiary can’t have access to the funds, and the trust must be prohibited from providing for the beneficiary’s “support.” That means it can’t be used to pay for medical care, food, clothing, shelter or anything else covered by Medicaid or SSI, such as the basic medical care provided by those programs.

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Topics: T&E TALK

T&E TALK: Have you made your Burial Wishes Clear?

Posted by Scott T. Ditman, CPA/PFS on Aug 13, 2018 7:00:00 AM

It may be difficult to contemplate, but funeral arrangements are a critical component of your estate plan. Failing to clearly communicate your wishes for the disposition of your remains can lead to tension, disputes, and even litigation among your family members during what is already a difficult time.

Issues to Address

The methods for expressing these wishes vary from state to state, and may include a provision in your will, language in a health care proxy or power of attorney, or a separate form specifically designed for this purpose.

Whichever method you use, it should, at a minimum, state:

  • Whether you prefer burial or cremation,
  • Where you wish to be buried or have your ashes interred or scattered (and any other special instructions), and
  • The person you’d like to be responsible for making these arrangements. Some people also request a specific funeral home.
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Topics: T&E TALK

T&E TALK: A Charitable Gift Annuity can Provide Multiple Benefits

Posted by Scott T. Ditman, CPA/PFS on Aug 6, 2018 7:00:00 AM

If you are charitably inclined, consider the benefits of a charitable gift annuity. It can combine the advantages of an immediate income tax deduction and a lifetime income stream. Moreover, it allows you to support a favorite charity and reduce the size of your future taxable estate.

What is a Charitable Gift Annuity?

A charitable gift annuity is an arrangement in which you make a gift of cash or other property to a charity in exchange for a guaranteed income annuity for life. This is similar to buying an annuity in the commercial marketplace, except that you potentially can claim an immediate charitable deduction for the excess of the value of the property over the value of the annuity.

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Topics: T&E TALK

T&E TALK: Does Your Estate Planning Account for Digital Assets?

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

Even though you can’t physically touch digital assets, they’re just as important to include in your estate plan as your material assets. Digital assets may include online bank and brokerage accounts, digital photo galleries, and even email and social media accounts.

If you die without addressing these assets in your estate plan, your loved ones or other representatives may not be able to access them without going to court — or, worse yet, may not even know they exist.

Virtual Documents in Lieu of Hard Copies

Traditionally, when a loved one dies, family members go through his or her home to look for personal and business documents, including tax returns, bank and brokerage account statements, stock certificates, contracts, insurance policies, loan agreements, and so on. They may also collect photo albums, safe deposit box keys, correspondence and other valuable items.

Today, however, many of these items may not exist in “hard copy” form. Unless your estate plan addresses these digital assets, how will your family know where to find them or how to gain access?

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Topics: T&E TALK

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