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T&E TALK: Avoid Pitfalls When Splitting Gifts with your Spouse

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

The annual gift tax exclusion allows you to transfer up to $15,000 per beneficiary gift-tax-free for 2020, without tapping your lifetime gift and estate tax exemption. And you can double the exclusion to $30,000 per beneficiary if you elect to split the gifts with your spouse.

It’s important to understand the rules surrounding gift-splitting to avoid unintended — and potentially costly — consequences.

Understanding the Pitfalls

Common mistakes made when splitting gifts include:

Failing to make the election. To elect to split gifts, the donor must file a gift tax return and the nondonor must consent by checking a box on the return and signing it or, if a gift exceeds $30,000, filing his or her own gift tax return. Once you make the election, you must split all gifts to third parties for the year.

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T&E TALK: Estate Planning if you have Adopted Children or Unadopted Stepchildren

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

If you have adopted children or unadopted stepchildren, estate planning is critical to ensure that your property is distributed in the way you desire.

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T&E TALK: A CRT Can Benefit You and Your Favorite Charity

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

Are you a multitasker? If so, you may appreciate an estate planning technique that can convert assets into a stream of lifetime income, provide a current tax deduction and leave the remainder to your favorite charity — all in one fell swoop. It’s the aptly named charitable remainder trust (CRT).

A CRT in Action

You can set up one of two CRT types: a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT) and fund it with assets you own. The trust then pays out income to the designated beneficiary or beneficiaries — for example, the trust creator or a spouse — for life or a term of 20 years or less. Alternatively, if certain requirements are met, you can choose to have income paid to your children, other family members or an entity.

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Topics: T&E TALK

T&E TALK: Business Succession and Estate Planning: It can be Complicated

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

Transferring a family business to the next generation requires a delicate balancing act. Estate and succession planning strategies aren’t always compatible, and family members often have conflicting interests. By starting early and planning carefully, however, it’s possible to resolve these conflicts and transfer the business in a tax-efficient manner.

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T&E TALK: Concealing a Trust Could Run Afoul of State Law

Posted by Scott T. Ditman, CPA/PFS on Jun 29, 2020 7:00:00 AM

You may have good intentions in keeping a trust a secret from its beneficiaries. Perhaps you have concerns that, if your children or other beneficiaries know about the trust, they might set aside educational or career pursuits. Be aware, however, that the law in many states forbids this practice by requiring a trust’s trustee to disclose a certain amount of information about the trust to the beneficiaries.

Enforcing the Uniform Trust Code

The Uniform Trust Code (UTC), which now 34 states (and the District of Columbia) have adopted, requires a trustee to provide trust details to any qualified beneficiary who makes a request. The UTC also requires the trustee to notify all qualified beneficiaries of their rights to information about the trust.

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Topics: T&E TALK

T&E TALK: Should You “Park” Your Vehicle in a Living Trust?

Posted by Scott T. Ditman, CPA/PFS on Jun 22, 2020 7:00:00 AM

Using a revocable trust — sometimes referred to as a “living trust” — is a common estate planning strategy to manage one’s assets during life and to avoid probate at death. For the trust to be effective, you must “fund” it, meaning transferring ownership of your assets to the trust.

Perhaps you have collectible automobiles or other valuable vehicle types. Should you consider transferring them to your revocable trust? If you still owe money on an auto loan, the lender may not allow you to transfer the title to the trust. But even if you own the vehicle outright (whether you paid cash for it or a loan has been paid off), there are risks in making such a transfer.

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T&E TALK: Estate Planning When Time is Short

Posted by Scott T. Ditman, CPA/PFS on Jun 15, 2020 7:00:00 AM

The COVID-19 pandemic has caused some people to contemplate their own mortality or that of a family member. For those whose life expectancies are short — because of COVID-19 or for any other reasons — estate planning can be difficult. But while money matters may be the last thing you want to think about when time is limited, a little planning can offer you and those you love some financial peace of mind.

Action Steps to Take

Here are some (but by no means all) of the steps you should take if you have a short life expectancy. These steps are also helpful if a loved one has been told that time is limited.

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Topics: T&E TALK

T&E TALK: A Spousal Lifetime Access Trust (SLAT) Can be your Financial Backup Plan

Posted by Scott T. Ditman, CPA/PFS on Jun 8, 2020 7:00:00 AM

Some of the most effective estate planning strategies involve setting up irrevocable trusts. For a trust to be deemed irrevocable, you, the grantor, lose all incidents of ownership of the trust’s assets. In other words, you’re effectively removing those assets from your taxable estate.

But what if you’re uncomfortable placing your assets beyond your control? What happens if your financial fortunes take a turn for the worse after you’ve irrevocably transferred a sizable portion of your wealth? This may be an especially pertinent question in light of the current economic downturn resulting from the COVID-19 pandemic.

If you’re married, and feel as though your marriage is strong, a spousal lifetime access trust (SLAT) allows you to obtain the benefits of an irrevocable trust while creating a financial backup plan.

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T&E TALK: Powers of Appointment Builds Flexibility into Your Estate Plan

Posted by Scott T. Ditman, CPA/PFS on Jun 1, 2020 7:00:00 AM

There are several tools you can use to build flexibility into your estate plan. Flexibility is especially important now because of an uncertain estate planning environment.

The federal gift and estate tax exemption currently is an inflation-adjusted $11.58 million (the highest it’s ever been) but it’s scheduled to drop to its pre-2018 level of $5 million (indexed for inflation) on January 1, 2026. This window of opportunity could close sooner, however, depending on the results of this fall’s election. One of the most versatile tools available to add flexibility to your estate plan is the power of appointment.

How Does it Work?

A power of appointment is simply a provision in your estate plan that permits another person — a beneficiary, family member or trusted advisor, for example — to determine how, when and to whom certain assets in your estate or trust will be distributed. The person who receives a power of appointment is called the “holder.”

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Topics: T&E TALK

T&E TALK: The Dangers of Drafting Your Will Using Online Tools

Posted by Scott T. Ditman, CPA/PFS on May 26, 2020 7:00:00 AM

The COVID-19 pandemic has refocused people’s thoughts on the health and safety of their families. In addition to taking the necessary steps today to protect your loved ones, it’s equally important to consider their financial security in the future.

If you don’t have a will, drafting one should be your first step in developing a comprehensive estate plan. Because of stay-at-home orders in many states, it may be tempting to turn to online do-it-yourself (DIY) tools that promise to help you create a will (and other estate planning documents). Even though this may be a relatively cheap option, using these online tools is risky except in the simplest cases.

A will that isn’t executed properly under state law isn’t legally binding. Therefore, your assets may be divided according to state intestacy laws, regardless of your intentions. And, if you have young children, a court may appoint their legal guardian.

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Topics: T&E TALK

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