With an asset protection plan that uses our proven Estate, Tax, Elder Law, Medicaid and Special Needs Planning strategies, Amoruso & Amoruso, LLP gives you peace of mind by ensuring that your loved ones receive the care that they need.
Did you know that the new Tax Bill proposed by the Republicans threatens the financial independence of Seniors and the Disabled? Read how in this Money Magazine article featuring Elder Law and Estate Planning Attorney Michael J. Amoruso!
Many foreign trusts have failed to register under the new trust laws of New Zealand and may have fled the country, according to the Wills, Trusts & Estates Prof Blog in "Trust the Kiwis."
New Zealand has had lax laws and allowed foreigners to have tax-free trusts with little oversight.
However, the Panama Papers, the leaked emails of a law firm in Panama were released and all that changed.
It was revealed that New Zealand was being used by some very wealthy people to hide assets from their own governments. This created some international pressure on New Zealand by other governments, as those other governments do not appreciate avoidance of their taxes.
In response to this pressure, the New Zealand government changed its trust laws. All foreign trusts were required to register, declare who controlled the trusts and specify who the beneficiaries of the trust were.
It was assumed this move would not be a burden for most foreign trusts, since there are many reasons someone might want to have a tax-free trust in New Zealand, other than tax avoidance.
This suggests that using foreign trusts to hide assets is more common than previously thought.
Reference: Wills, Trusts & Estates Prof Blog (June 20, 2017) "Trust the Kiwis."
Minnesota’s income tax statute makes 100% of a trust's assets taxable in that state, if the trust became irrevocable when the settlor was a resident of Minnesota.
This rule applies regardless of where the trust beneficiaries reside or where any trustees reside.
The court looked at trusts that had an out-of-state trustee, beneficiaries who lived in Minnesota and beneficiaries who lived in other states.
It determined that these trusts could not be considered resident trusts of Minnesota and, therefore, the state could not tax intangible assets. Presumably, the same logic could be applied to some other trust situations.
This ruling could lead to refunds for some trusts.
However, it appears likely that Minnesota will appeal to the Supreme Court.
To understand the answer to the question, it is important to understand the main purpose of most living trusts.
Most people who get living trusts do so to avoid having their estate go through probate after they pass away, which is necessary if someone passes away with or without a will.
Probate can be costly and time-consuming, especially when there is a dearth of practical information left behind regarding where the legal documents and assets are.
With a living trust people can use their assets while they are alive and then after they pass away those assets can be distributed to the beneficiaries of the trust without going through probate.
The trustee, not a probate court, is responsible for making sure everything is handled appropriately. It can be faster and cheaper. The most valuable asset for many people is their home, so it only makes sense to include that in the trust rather than having it go through probate.
Of course there are many other reasons to get a trust, such as for estate tax purposes. There are also many different types of trusts that can be used for other purposes.
An estate planning attorney can guide you on the use of a trust and an estate plan that best fits your individual circumstances.
There are programs available that allow you to design your own estate plan, but beware of the problems.
The do-it-yourself estate plan may seem simple but can create some serious problems, according to the Northwest Indiana Business Quarterly article “Dangers of DIY Estate Planning.”
The article discusses many potential pitfalls of creating your own estate plan, but they all essentially boil down to the simple proposition that if you do not have professional expertise in estate planning, then you are likely to make mistakes that could cost you and your family. These mistakes can range from very simple oversights, such as not knowing how many witnesses are needed to make a will effective, to very complex mistakes, such as failing to properly understand how your estate planning choices effect the taxation of your assets after you pass away.
It actually does not matter very much whether the mistake you make is simple or complex because dealing with the mistake will almost always cost your estate more money than you saved by creating your own estate plan.
An estate planning attorney can guide you through the process and reduce the risks of pitfalls and problems.
The article suggests that getting an estate plan in the summer is good because many estate planning attorneys also handle real estate transactions. The summer is generally a slow period for real estate, so attorneys might have more time to focus on your estate plan.
That is all true, but many attorneys only do estate planning and elder law so the advice might not be applicable for the attorney you want to use.
Getting an estate plan when you do your taxes is also considered to be a good time of year since you will already have many of your financial documents easily accessible.
The best answer, however, is still the first.
If you are thinking about getting an estate plan, do not worry about what time of year is best to get one.
An estate planning attorney can guide you whenever you choose to create one.
The IRA requires that a final tax return be filed after a person dies and there can be complications.
When a person dies the IRS will collect any tax due from the first of the year to the date of death and that requires an income tax return be filed. US News & World Report recently explained how to do that in "How to File Final Taxes for a Deceased Loved One."
The article mentions three important things to keep in mind:
Authority – Not just anyone can file the final tax return. It needs to be done by an authorized representative who has been given the authority by a probate court. Normally, this will be the executor, administrator or personal representative.
Professional Help – Filing someone else's taxes is more difficult than filing your own. You might know everything about how your finances are arranged, but do not assume you know the same about someone else's finances. Seek out assistance from a tax professional.
Paperwork – Filing a person's final tax return takes a lot of paperwork. You will need a death certificate as well as documentation of the person's finances.
An estate planning attorney can guide you through the process of locating the necessary documentation and obtaining the authority to file the return.
Should you suddenly become uber-wealthy, you'll want to purchase a pricey art collection, which is 2.6 percent of the biggest estates. For those with only $10 million to $20 million in assets, a small collection, valued at about 0.6 percent of your estate, is almost de rigueur. There are extreme differences in the superrich and the very very rich, one of which is that uber wealthy families own far more art. The IRS gave a good look when it released estate tax data of what the wealthiest Americans owned when they passed, and where their assets went. Who doesn't love to see what's in someone else's wallets?
Before we get to the fascinating details reported in The Wall Street Journal's "When the Superrich Die, Here's What's in Their Wallets," we need to cover a few basics. The information reported in the data sample comes from returns filed in 2014; in other words, from estates of people who died in 2013. And it should be noted that the estate tax applied to estates of individuals over $5.25 million and a top rate of 40%.
The most important thing to remember about the estate tax is that it really doesn't apply to most folks, just to a few of the very rich. Congress increased the exemption and indexed it to inflation, ensuring that almost all of the 2.6 million people a year who die in the U.S. need not worry about estate tax. That leaves just the very wealthiest in the country.
Fewer than 12,000 estate tax returns were filed in 2014—more than 50% of those didn't yield any tax for the federal government.
The data showed that the uber-wealthy don't provide much information about the ways they shift assets out of their ownership or the planning maneuvers that can decrease the size of estates prior to death. Those who died with more than $50 million (the top tier) were heavily invested in stock and closely held businesses.
Those who were rich enough to file an estate tax return–but not at the very top–relied much more heavily on retirement accounts like 401k's and real estate. The types of assets change as people get wealthier. The merely rich have houses, cash, farms and retirement accounts. The very rich have bonds and real estate. But the very, very rich own art and stocks of businesses which they often want to pass to future generations.
The richest people pass on smaller shares of their estates to their heirs and it's not merely due to the fact that more of their wealth is subject to taxation. They tend to have bigger debts and make bigger charitable contributions. Charities collected $18.4 billion from bequests from the returns filed in 2014, with 58% of that coming from just 1.4% of estate tax returns.
Whether you're "uber-rich" or just getting by, you can truly benefit from a discussion with a qualified estate planning attorney.
Taxes and inheritance issues go together like Halloween and trick or treating. Tax planning is a critical part of estate planning, and families who wish to transfer assets from one generation to the next need to prepare for both aspects, as settling an estate can easily become quite complicated. Many estate plans include the use of irrevocable trusts. There are some basics that heirs need to know if they are beneficiaries of these trusts.
How an irrevocable trust is set up has a significant impact on the tax liability, according to an article in The Motley Fool, "Tax Consequences of an Inheritance From an Irrevocable Trust." There are some instances where irrevocable trusts are subject to estate taxes. It is important to understand how irrevocable trusts work and the different types of irrevocable trusts.
Because an irrevocable trust is typically a separate legal entity, it's not part of the estate of the person who created it. Its creation is usually a taxable gift that requires a gift tax return, which can have implications for eventual estate tax liability. Nonetheless, heirs receive the benefit of avoiding estate tax on the trust asset's appreciation in value.
One caveat is life insurance trusts. If the person creating the trust retained incidents of ownership in the policy (retaining power to change beneficiaries, canceling or transferring the policy, putting the policy up as collateral for a loan, or borrowing money against the policy's value), it will be included in the person's estate—regardless of the irrevocable trust's ownership. If this is the case, estate taxes may be due, and your inheritance could decrease.
The impact of income taxes also depends on the terms of the irrevocable trust. If the trust terminates at the person's death and the trust distributes assets to the heirs, your tax basis in those assets will be that of the trust. Make sure you have detailed information from the trustee before making plans to sell those inherited assets.
But if the trust continues beyond the death of the person who created it, then some complex trust tax rules apply. There may be regular distributions that the trust makes to you which will be treated as taxable income. You'll receive a year-end informational return that shows how much income is taxable and if it's ordinary income, capital gains, or other specialized types of income.
Every trust is different, so get sound advice from a qualified estate planning attorney. He or she will guide you through the tax issues and make sure you're in good shape.
With the holiday season on the horizon, the end of year financial season has arrived. It's time to deal with money issues relating to income tax planning, charitable giving and scams and the annual check up on family finances. There is not too much in the way of tax drama in the final weeks of the year, with no major legislation being passed, but a few popular tax provisions are still undecided. Congress needs to act soon to extend these favorites, which include a higher education tuition and fees deduction, a mortgage debt forgiveness exclusion and a classroom expense deduction for teachers
Several popular tax provisions are awaiting Congressional extension if they are to survive past the end of the year. Among them is one that will likely impact a consumer's decision to make any big ticket purchases before the year's end, according to TheArizona Republic. This is an option to take a deduction of state and local sales taxes in place of state and local income taxes.
The article, "Time for seasonal planning for taxes, charities, more," notes that one of the extenders in limbo is the option for people age 70½ and older to donate an IRA distribution to charity, rather than include it first as taxable income. This could be an issue for those seniors trying to decide how much of their required minimum distributions to take before the end of the year. A large 50% tax penalty applies on the amount of required minimum distributions that isn't taken.
The capital-gains rules are pretty much the same this year, but some will see some big losses for the first time in a while due to the late-summer swoon in the stock market. Investors are always prudent to look at paper gains and losses in taxable accounts, with an eye on realizing losses before end of the year. If your losses exceed gains, up to $3,000 of the excess can be used to offset ordinary income. Additional losses can be carried forward to future years.
Otherwise, taxpayers generally would be better off deferring taxable income to next year, if they can, while accelerating deductions so they can be taken in 2015. However, that strategy doesn't necessarily play out if you think you'll have much larger deductible expenses next year. In that case, it might be wise to group deductions into either this year or next, if you believe you're not going to qualify to itemize both years. For instance, charitable donations are one type of deductible expense with timing that's easy to control.
Make certain that your gifts count by conducting some research on the groups. Look for non-profits with missions with which you agree and search for their impact, such as the number of meals served, low-income homes built, or animals rescued. Non-profits that are run efficiently are better choices, where most of the money raised is earmarked for programs and not overhead, like executive salaries.
Make sure that the charity is for real. Many seniors are susceptible to giving away their money for reasons such as fear, loneliness, or cognitive problems. Fraudsters prey on these folks.
Be aware of several telltale signs that there might be a problem. Some are obvious, like large, unexplained loans taken out by a senior, or if you see that certain personal belongings are missing. Also, watch for large credit-card charges, gifts to a caretaker, routine bills not being paid, and changes to the person's will or other estate-planning documents.
A sudden increase in spending and atypical, big withdrawals are red flags. Another tip-off is a senior looking to buy risky assets that are out of character with his or her stated investment objectives.
It can be a good idea for elderly folks to sign emergency contact forms—before its needed—that authorizes a trusted adviser to speak with adult children or other relatives in case of emergencies or if they feel there's a problem. Otherwise, account-privacy laws can stifle this type of communication.