Berdon Blogs

T&E TALK: Is Your Revocable Trust Properly Funded?

Posted by Scott T. Ditman, CPA/PFS on Sep 11, 2017 7:03:00 AM

If your estate plan includes a revocable trust — also known as a “living” trust — it’s critical to ensure that the trust is properly funded. Revocable trusts offer significant benefits, including asset management in the event you become incapacitated and probate avoidance. But these benefits aren’t available if you don’t fund the trust.

The Basics

Read More

Topics: T&E TALK

T&E TALK: Powers of Attorney - To Spring or Not to Spring

Posted by Scott T. Ditman, CPA/PFS on Sep 5, 2017 7:05:00 AM

Estate planning requires more than just focusing on what happens to your assets when you die. It’s equally important to have a plan for making critical financial and medical decisions if you’re unable to make those decisions yourself. That’s where the power of attorney (POA) comes in.

Read More

Topics: T&E TALK

T&E TALK: Don’t Trigger the GST Tax when Transferring Assets to Grandchildren

Posted by Scott T. Ditman, CPA/PFS on Aug 28, 2017 7:03:00 AM

When planning your estate, don’t overlook the generation-skipping transfer (GST) tax. Despite a generous $5.49 million GST tax exemption, complexities surrounding its allocation can create several tax traps for the unwary.

GST Basics

The GST tax is a flat, 40% tax on transfers to “skip persons,” including grandchildren, other family members more than a generation below you, nonfamily members more than 37½ years younger than you and certain trusts (if all of their beneficiaries are skip persons). If your child predeceases his or her children, however, they’re no longer considered skip persons.

Read More

Topics: T&E TALK

T&E TALK: An NCP Trust Enables You to Achieve a Variety of Goals

Posted by Scott T. Ditman, CPA/PFS on Aug 21, 2017 7:05:00 AM

Generally, trusts must have one or more human beneficiaries, but there’s an exception for certain “purpose” trusts. One type of purpose trust that you may be familiar with is the charitable trust. But don’t overlook the noncharitable purpose (NCP) trust as a potential tool for achieving your estate planning goals.

NCP Trust Defined

Historically, trusts were required to have human beneficiaries. Charitable trusts were the exception: The attorney general of the relevant jurisdiction was authorized to enforce the trust in the public interest.

Over the years, however, many U.S. states and a number of foreign jurisdictions have enacted legislation that authorizes NCP trusts. These trusts may be used to achieve a variety of purposes, such as: maintaining family residences, personal property, and gravesites and funding a family business.

Read More

Topics: T&E TALK

T&E TALK: Don’t Overlook Tax Apportionment in Your Estate Plan

Posted by Scott T. Ditman, CPA/PFS on Aug 14, 2017 7:00:00 AM

If you expect your estate to have a significant estate tax liability at your death, be sure to include a well-thought-out tax apportionment clause in your will or revocable trust. An apportionment clause specifies how the estate tax burden will be allocated among your beneficiaries. Omitting this clause, or failing to word it carefully, may result in unintended consequences.

Your  Options

There are many ways to apportion estate taxes. One option is to have all of the taxes paid out of assets passing through your will. Beneficiaries receiving assets outside your will — such as IRAs, retirement plans or life insurance proceeds — won’t bear any of the tax burden.

Read More

Topics: T&E TALK

T&E TALK: The Stretch IRA - A Simple Yet Powerful Estate Planning Tool

Posted by Scott T. Ditman, CPA/PFS on Aug 7, 2017 7:00:00 AM

The IRA’s value as a retirement planning tool is well known: IRA assets compound on a tax-deferred (or, in the case of a Roth IRA, tax-free) basis, which can help build a more substantial nest egg. But if you don’t need an IRA to fund your retirement, you can use it as an estate planning tool to benefit your children or other beneficiaries on a tax-advantaged basis by turning it into a “stretch” IRA.

Stretching the Benefits

Read More

Topics: T&E TALK

T&E TALK: ABLE Accounts for Loved Ones with Special Needs

Posted by Scott T. Ditman, CPA/PFS on Jul 31, 2017 7:15:00 AM

For families with disabled loved ones who are potentially eligible for means-tested government benefits such as Medicaid or Supplemental Security Income (SSI), estate planning can be a challenge. On the one hand, you want to provide the most comfortable life possible for your family member. On the other hand, you don’t want to jeopardize his or her eligibility for needed government benefits.

For many years, the most effective solution to this problem has been to set up a special needs trust (SNT). But beginning in 2014, the Achieving a Better Life Experience (ABLE) Act created Internal Revenue Code Section 529A, which authorizes the states to offer tax-advantaged savings accounts for the blind and severely disabled, similar to Sec. 529 college savings plans.

Read More

Topics: T&E TALK

T&E TALK: IRS Simplifies Rules for Making the Portability Election

Posted by Scott T. Ditman, CPA/PFS on Jul 24, 2017 7:05:00 AM

Recently, the IRS issued a Revenue Procedure that allows certain estates to make a late portability election without first filing a ruling request. Portability is a tax law provision that permits a surviving spouse to take advantage of the deceased spouse’s unused combined gift and estate tax exemption which is currently $5.49 million.

But portability isn’t automatic: It’s available only if the deceased spouse’s estate makes a portability election on a timely filed estate tax return. This return is due nine months after death, with a six-month extension option, regardless of whether any tax is owed.

What’s New?

Read More

Topics: T&E TALK

T&E TALK: Fraudulent Transfer Laws Can Undo Your Estate Plan

Posted by Scott T. Ditman, CPA/PFS on Jul 17, 2017 7:05:00 AM

A primary goal of your estate plan is to transfer wealth to your family according to your wishes and at the lowest possible tax cost. However, if you have creditors, be aware of fraudulent transfer laws. In a nutshell, if your creditors challenge your gifts, trusts, or other strategies as fraudulent transfers, they can quickly undo your estate plan.

Two Fraud Types

Most states have adopted the Uniform Fraudulent Transfer Act (UFTA). The act allows creditors to challenge transfers involving two types of fraud that you should be mindful of as you weigh your estate planning options:

  1. Actual Fraud. This means making a transfer or incurring an obligation “with actual intent to hinder, delay, or defraud any creditor,” including current creditors and probable future creditors.
Read More

Topics: T&E TALK

T&E TALK: Leaving Specific Assets to Specific Heirs is Risky

Posted by Scott T. Ditman, CPA/PFS on Jul 10, 2017 7:05:00 AM

Planning your estate around specific assets is risky and, in most cases, should be avoided. If you leave specific assets — such as a home, a car, or stock — to specific people, you could end up inadvertently disinheriting someone.

Unintended Consequences

Here’s an example that illustrates the problem: Kim has three children — Sarah, John, and Matthew — and wishes to treat them equally in her estate plan. In her will, she leaves a $500,000 mutual fund to Sarah and her $500,000 home to John. She also names Matthew as beneficiary of a $500,000 life insurance policy.

By the time Kim dies, the mutual fund balance has grown to $750,000. In addition, she has sold the home for $750,000, invested the proceeds in the mutual fund and allowed the life insurance policy to lapse. She didn’t revise or revoke her will. The result?  Sarah receives the mutual fund, with a balance of $1.5 million, and John and Matthew are disinherited.

Safer Alternatives

Read More

Topics: T&E TALK

About Berdon Blogs

Our experts examine the latest trends, economics, business conditions and industry issues to provide timely information you need to maximize your tax advantages and meet your financial goals.

SALT TALK: Hear an insider’s perspective on the business issues, legislative updates in state and local tax, and tax aspects behind today’s headlines.

T&E TALK: Gain insights into how changes in tax laws, shifts in the financial markets, and regulatory concerns will impact assets and affect preserving and transferring wealth.

TAX TALK: Get an all-inclusive perspective on regulatory changes, industry issues, and trends from our team of multidisciplinary tax professionals – many of whom also hold J.D. and LL.M degrees.

Subscribe to Berdon Blogs

Recent Posts