A treasure chest of information on estate planning, “Wills, Trusts, and Estates Prof Blog” is a member of the Law Professor Blogs Network sponsored by Wolters Kluwer and written by Texas Tech School of Law Professor Gerry Beyer. Via the go-to outlet, Beyer recently highlighted McManus & Associates’ latest educational conference call, “Top 10 Signposts to Guide Planning for Estates under $10MM.” The discussion sheds light on estate planning strategies that should be considered now following recent changes in federal and state law.
In case you missed it, Bloomberg BNA in its Weekly Round-Up has a recap of John McManus’ recent article for the publication’s Weekly State Tax Report that provides an in-depth look at several of the estate and gift tax regimes cropping up across states. The story, “Weekly Round-Up: Will More States Climb Aboard the Gift Tax Bandwagon?” conveys that states are exploring strategies to create new revenue by expanding the footprint of taxation. Pointing to advice from McManus, the importance of staying informed about wealth transfer taxes is emphasized.
Previewing McManus’ 2,500-word expert article, the piece briefly outlines the trend with states’ enactment of gift taxes, including Connecticut and Minnesota. Connecticut was the first state to impose a state gift tax on lifetime gifts made to others in 2005 and, in 2011, the state’s governor signed into law a new budget that “dramatically curtailed the ability to make tax-free gifts by reducing the state’s lifetime gift exemption to $2 million and taxing up to 12 percent on aggregate lifetime gifts exceeding that amount.” Effective as of July 1, 2013, Minnesota passed a law that established its own state gift tax with a gifting exemption that is limited to $1 million, in addition to adopting rules subjecting certain nonresidents to estate taxation.
What should be of concern to readers? From the story:
It is a significant concern that other cash-strapped states may follow the lead of Connecticut and Minnesota, McManus says. Those states that do charge an estate or inheritance tax experience diminishing returns when the property and assets that their residents gift during their lifetimes are not a part of the estate upon death. Many politicians view the imposition of a gift tax as a safer revenue-generating innovation, because most of their constituents would be unaffected by such a levy, McManus said.
Gerry Beyer, Professor of Law at Texas Tech Univ. School of Law, recently shared on his blog financial tactics and maintenance items related to estate planning to apply before 2014. “Wills, Trusts, and Estates Prof Blog” is a member of the Law Professor Blogs Network sponsored by Wolters Kluwer, and the list of tactics and maintenance items originally came from McManus & Associates. Here are the 10 estate planning questions to ask yourself before 2013:
- Should I change my estate plan before laws change in 2014?
- Is your partnership validly maintained?
- If making gifts to loved ones, are you exceeding your exemption amount?
- Are you employing the most current estate planning strategies?
- Are you making the most of income tax deductions?
- Do the fiduciaries named in your estate planning documents still reflect your wishes?
- Are you using the best strategies when making year-end charitable gifts?
- Are your cash donations from an IRA to charity being properly made?
- Should you consider using a GRAT or a QPRT?
- How should you harvest capital gains and time long-term losses?
Don’t miss our next free educational conference call, which will be held this month! Contact us for details at 908-898-0100.
Bloomberg Guest Article from McManus: “State Informed: Staying on Top of Estate and Gift Taxes To Ensure Wealth Transfer Plans Operate as Intended”
For decades, an array of ‘‘death taxes’’ has become
part of the cost of living and dying in the United
States. With demands to balance budgets, minimize
debt, and support public programs, states are exploring
strategies to create new revenue by expanding
the footprint of taxation. To foster an increased flow of
cash to their governments, even states with generally
conservative fiscal policies have recently taken steps
that may indicate a new trend in the taxation of wealth
transfers, both during their taxpayers’ lifetimes and after
Connecticut Takes the Lead
In 2005, Connecticut was the first state to impose a
state gift tax on lifetime gifts made to others. In the
years following the adoption of this statute, the gift tax
exemption (or the amount that a Connecticut resident
could gift during his or her lifetime without paying gift
tax) gradually increased and rose as high as $3.5 million.
However, beginning in 2011, Connecticut’s governor
signed into law a new budget that dramatically curtailed
the ability to make tax-free gifts by reducing the
state’s lifetime gift exemption to $2 million and taxing up to 12 percent on aggregate lifetime gifts exceeding
Furthermore, effective as of July 1, 2013, in addition
to adopting rules subjecting certain non-residents to estate
taxation, Minnesota passed a law that established
its own state gift tax with a gifting exemption that is
limited to $1 million.
It is a significant concern that other cash-strapped
states may follow the lead of Connecticut and Minnesota.
Those states that do charge an estate or inheritance
tax experience diminishing returns when the
property and assets that their residents gift during their
lifetimes are not a part of the estate upon death. Furthermore,
many politicians view the imposition of a gift
tax as a safer revenue-generating innovation, because
most of their constituents would be unaffected by such
More than ever, these developments highlight the existing
challenges, including estate tax, inheritance tax,
generation-skipping tax, and other traps, in transferring
an estate to loved ones, while also signaling the
alarm that, in the near future, it may become even more
difficult to make such a transfer in a tax-efficient manner.
New Gift Tax: Minnesota, a Case Study
Earlier this year, the Minnesota legislature passed a
bill that imposes a 10 percent state gift tax on lifetime
transfers of wealth exceeding $1 million, the state exclusion
The tax is applied to the value of all assets transferred
by a Minnesota resident (and, for a non-resident, gifted real property located in Minnesota), and the donor
would be required to pay the gift tax due. The Minnesota
Department of Revenue has yet to release the
Minnesota gift tax form, but timely filing of this document
will be necessary, together with the gift tax return
at the Federal level (Form 709).
Additionally, Minnesota has placed further constraints
on gifting by rendering all ‘‘deathbed gifts’’
made within three years prior to the donor’s passing
null and void. This would have the effect of clawing assets
gifted within that period of time back into the donor’s
estate and subjecting them to estate tax.
Finally, in this new law, the State of Minnesota
makes an effort to swell its tax base by requiring that
non-residents owning real property in Minnesota pay
estate tax on the value of such property after they pass
away. This tax even applies to real property owned in
a Limited Liability Company or Revocable Living Trust,
which would otherwise be common approaches to
avoiding this exposure.
Non-residents owning real property
in Minnesota pay estate tax.
Relatively speaking, knowing that Minnesota’s legislature
acted on the heels of Connecticut’s reduction in
its own gift exemption, it is not unreasonable to believe
that other states may follow suit in the coming months
and years. As such, it will be important to monitor similar
developments in the governments of other states to
determine whether the climate will ultimately become
less hospitable for gifting and more confiscatory in
terms of estate taxes. Those who reside in a state with
an estate tax on the books may also benefit from acting
sooner rather than later by making gifts and other
wealth transfers to take advantage of the lack of current
restrictions and limitations and before any new law is
Death Taxes: New Jersey, a Case Study
Gift tax, state inheritance and estate tax, Federal estate
tax, and generation-skipping tax complete a group
commonly referred to as ‘‘death taxes.’’ To a lesser extent,
income tax is also considered when planning for a
transfer of wealth.
New Jersey and Maryland are the only two states
that maintain a dual, sometimes overlapping death tax
for residents and non-residents at the time of death. In
New Jersey, estate tax is imposed when gross estate assets
are greater than the exemption amount—currently
$675,000—and assets transfer to ‘‘Class A’’ beneficiaries,
which include parents, grandparents, spouses, civil
union partners, children, step-children, or more remote
descendants of the deceased. The New Jersey estate
tax, which is paid from estate assets before transfer to
estate beneficiaries, is a graduated tax with a rate as
high as 37 percent and as low as 4.8 percent. The rate is highest for the first $50,000 over the exemption amount
and generally averages 10 percent thereafter.
When assets having a cumulative value greater than
$25,000 pass to ‘‘Class C’’ beneficiaries, including siblings
and children-in-law, a New Jersey inheritance tax
is imposed. The ceiling plummets to $500 for all others,
known as ‘‘Class D’’ beneficiaries (for example,
nieces and nephews, cousins, or friends of the deceased
who receive assets after death). The New Jersey inheritance
tax, which is paid by each beneficiary who
falls in either of these classes, carries with it a rate that
ranges from 11 percent to 16 percent.
The interplay of these two New Jersey taxing regimes
can be illustrated by way of example using an estate
with gross assets of $ 1 million. Assume 90 percent
of the estate ($ 900,000) has been bequeathed to a Class
A beneficiary—decedent’s son, and 10 percent
($100,000) has been bequeathed to the decedent’s
brother, a Class C beneficiary. The inheritance tax is determined
first, and is imposed on the $100,000 bequeathed
to the Class C beneficiary, after subtracting
the $25,000 exemption amount. The remaining $75,000
is subject to an 11 percent inheritance tax of $8,250,
which is paid by the Class C beneficiary.
With gross assets of the estate equalling $1 million,
estate tax is imposed on that part of the $ 1 million estate
that exceeds the $675,000 exemption amount. The
exemption amount is in effect taken into account as
part of the allowable unified credit linked to the estate’s
federal estate tax return. The New Jersey estate tax imposed
on the remaining amount computes to $24,950,
after a dollar-for-dollar credit is given for the inheritance
tax. In this example, the estate tax accounts for
2.5 percent of the entire estate.
For New Jersey residents, all real property in state,
as well as tangible and intangible assets located in or
out of state, are included in the calculation of taxable
estate assets. Like in Minnesota, non-residents are
taxed on real property located in New Jersey, but with
the distinction that if such real property is owned by a
Limited Liability Company prior to death, it is recharacterized
as intangible personal property and tax is
The nuance and variation in the taxation structure
also carries through to permissible exemptions and deductions.
For example, annuities and life insurance proceeds
with a designated beneficiary are not taxable for
inheritance tax purposes, but are included in the estate
for the purpose of calculating estate tax. Funeral expenses,
administration expenses, and debts of a decedent
may be used as deductions to reduce both estate
and inheritance tax, but real estate and property maintenance
costs may not be used as deductions in most instances. It is important to note that New Jersey estate tax is
due within nine months of the decedent’s date of death
and must be accompanied by a Federal Form 706 Estate
Tax Return (unless an alternate New Jersey form is submitted),
while inheritance tax is due within eight
months of the decedent’s date of death. For each structure
of taxation, a six-month extension to file the return
is available, but there is no extension with respect to the
payment of the tax, and penalties and interest are accrued
on any late or underpayment of taxes.
The decedent’s lifetime gifts also receive different
treatment for New Jersey estate and inheritance tax
purposes. The full amount of lifetime gifts made within
three years of death are considered in contemplation of
death and are pulled back into gross estate assets for
the purpose of calculating inheritance tax. Conversely,
all lifetime gifts are included on the estate tax return
submitted to New Jersey, no matter when they were
made and for whatever purpose.
The complex nature of death taxation in the Garden
State is exemplary of the estate planning difficulties
confronting taxpayers throughout the New York Metropolitan
area and elsewhere in the United States. New
York and Connecticut both impose estate taxes, and
they limit their estate tax exemptions to $1 million and
$2 million, respectively. Pennsylvania requires an inheritance
tax on assets received by any person other
than a spouse. Unfavorable statutes of this nature in the
tri-state area have very much contributed to the flight of
residents to the 30 states, such as Florida, that lack a
death tax regime.
The Importance of Domicile
Proving domicile in a state to which one has moved
is oftentimes a difficult process in and of itself, particularly
for those who wish to maintain a foothold in the
state from which they are transferring their residences.
Meticulous records must be kept to demonstrate that
the requisite number of days is spent in the new jurisdiction
to claim residency there. This is particularly vital
because New York, New Jersey, and Connecticut are
increasingly auditing the files of ‘‘snowbirds’’ who
change their residency. The argument is that those
people really never left by virtue of the fact that they
continue to spend a substantial amount of time in their
former home states. As such, there is a laundry list of
items that expatriates are advised to complete, such as
changing their voter registration, driver’s license, and
address of record to their new state; maintaining landline
telephone records, receipts, and other statements
that prove their physical location in their new state; and
purchasing and owning a home, rather than renting, in
their new state of domicile.
Probate and estate tax issues linger when taxpayers
continue to own property in their previous state of residency.
Moving to a new state will not necessarily completely
eradicate estate exposure from the previous
state if an individual continues to own real property
there. Additionally, direct ownership of real property in a state other than the state of domicile will necessitate
an ancillary probate proceeding in that jurisdiction.
Probate is one of the initial stages during the administration
of the estate, and going through probate in multiple
states dramatically increases the time, expense,
and frustration of this process. Typically, the best approach
to remedy these issues is to transfer the real
property to a Revocable Living Trust, which avoids probate
proceedings, or a Limited Liability Company,
which is treated as intangible personal property and,
therefore, avoids both probate and estate tax in the
state where the property is located.
With respect to other forms of intangible personal
property, such as securities or bank accounts, the general
rule established by case law is that these types of
assets follow the person and that—for the purposes of
estate taxation—the domicile of the owner has jurisdiction
via a provision with a fancy name: ‘‘Mobila sequunter
personam.’’ That said, it is also well-settled that
a state legislature may impose local tax on items of personal
property that are significantly distant from that of
the owner’s permanent residence. In rare cases when a
physical stock certificate is owned, the physical location
of the document determines the jurisdiction that governs
for tax purposes. Such securities can be owned by
a revocable living trust, and the situs of the trust will be
the tax regime that rules taxation of the portfolio. The consequences of failing to comprehensively prepare
for the threat of death taxes underscore the value
of consulting with expert advisors to ensure awareness
of prospective taxation and other post-mortem pitfalls,
and to ensure success in implementing strategies that
will importantly aid in reducing or eliminating these
Generation-Skipping Transfer (GST) Tax
While 20 states and the District of Columbia subject
residents to estate and inheritance taxes (and while
there is also a federal estate tax), GST tax at the Federal
level is an issue that gets much less attention because
its provisions are considered to be among the
most complicated in the Internal Revenue Code. GST
tax is generally levied on the value of property received
by descendants more than one generation down the line
(such as grandchildren), which exceed the GST tax exemption
(currently $5.25 million and rising to $5.34 million in 2014). For individuals and families who have undertaken
material estate planning with trusts in the past
(and for those who will do so in the future), this becomes
a thorny matter as a result of the automatic allocation
rules that went into effect in 2001 that apply to
any trust that is deemed to be a ‘‘skip trust’’.
For example, a popular estate planning technique is
an Irrevocable Life Insurance Trust (ILIT) to which a
life insurance policy is transferred in order to avoid estate
tax on the proceeds of the policy at death. Generally,
these types of trusts are appealing because no gifting
exemption is used and no filing with the IRS is required.
The risk, however, is that depending upon the
provisions of the ILIT, the IRS may classify it as a skip
trust, which would then create unintended consequences
that impact other aspects of the estate plan.
Any amounts contributed to the ILIT would automatically
exhaust a portion of the donor’s GST tax exemption
that the donor may have otherwise wanted to preserve
for future lifetime or death wealth transfers to
grandchildren and more remote descendants.
The result is that the unnecessary GST taxes, which
could have been minimized or eliminated entirely, may
be imposed at the time that the grandchildren inherit
their share. The best practice, therefore, is to file gift tax
returns whenever an ILIT or irrevocable trust is funded
in order to clarify whether the automatic allocation
rules apply depending on the structure, provisions, and
long-term planning goals for the trust.
The GST tax and the proper deployment of the GST
tax exemption are no longer issues that can be brushed
aside or ignored. In 2011 and 2012 following the dramatic
escalation of the federal lifetime gifting exemption,
the affluent made an unprecedented number of
gifts to irrevocable trusts – tens of thousands of individuals
and married couples made gifts ranging in value
from hundreds of thousands of dollars to $10 million,
with the expectation that such trusts would carry forward
through several generations. This significant issue
is not only relevant to gifts made into trusts in the past
two years, but it also warrants further examination of
any trust established after 2001 to best ensure that the
wealth transfer plan operates as intended.
Stay State Informed
Choosing where to live is about more than good food
and the weather. It can have a huge impact on the
money on hand today and the amount of wealth that
can be transferred to heirs tomorrow. Different states
have significantly different tax regimes, so moving
across the country or just across the state line could
also mean that one’s estate planning approach needs to
be revised. All in all, the best strategy for preserving the
greatest amount of assets is to stay informed.
Yesterday, McManus & Associates held a client conference call reviewing several immediate strategies that clients should consider employing before year-end. With the proposed tax reforms listed in President Obama’s budget, certain planning strategies are in the crosshairs and may not be around for long. Although legislation next year could be made retroactive to January 1, 2014, if you act before the end of 2013 such changes will not affect your planning. Get inside the castle walls now.
During the half-hour call, the firm shares effective strategies and highlights maintenance items required to ensure one’s family wealth remains protected. Below are the 10 questions that will be answered by listening to the recording.
- Laws could change with new revenue debates. Have you made lifetime gifts in trust? Created a grantor trust?
- Have you made sure to operate your family LLC/Limited partnership as a legitimate business? What should you do before year-end?
- What should you give away? Are you planning to make annual exclusion gifts, gift appreciated securities etc? Have you prepared Crummey notices?
- Should you create lifetime trusts for your children? Have you given your trustees a limited power of appointment?
- What can you prepay? What should you prepay? Home, deductibles, medical expenses, major year-end purchases?
- Have you crossed any major milestones this year? Do you have children who turned 18 this year? Do the fiduciaries and guardians named in your documents still reflect your current wishes? Are your powers of attorney up to date?
- Have you made contributions to your family foundation and/or donated to charity?
- Are you over 70 ½? How to use Required Minimum Distribution to your advantage.
- Create GRATs or QPRTs. Given the current interest rates what should you consider?
- How should you consider harvesting capital gains, timing long-term losses?
Give us a call at 908-898-0100. We can help you identify which strategies you should implement now before the calendar rolls over to 2014.
McManus & Associates today hosted the June installment of its Educational Focus Series. Over the course of the firm’s 25 years in the field of Estate Planning, we’ve seen all manner of challenges to estate plans. From will contests to litigation, we are always aware of areas where even the slightest degree of risk might reside. Constantly working to protect against this, we are in a perpetual state of research and development to create the most comprehensive, state of the art plans that protect against even the most remote possible risks.
- Will manipulated by third party and abuse of durable power of attorney. Undue influence by family members resulting in last minute changes to a will.
- Marshaling and valuing for tax purposes, international assets.
- Where has Generation Skipping Tax Exemption been utilized? You may be unaware of the significance of automatic allocation rates.
- Distributions to charities and notifying the attorney general/government agencies.
- Fiduciary’s responsibility to preserve and maintain the estate. (Stock fall in value, sale of home, house broken into, and unclaimed property.
- Significant gifts made during life that affect intended outcome of the estate plan.
- Failure to use a firm familiar with the sophistication of the planning documents to administer the estate. Failure to correctly interpret the documents.
- Personal property disputes after death of a loved one. Fighting in families over whether to sell or keep items to memorialize loved ones. Beneficiaries challenge distributions to surviving spouse from trust.
- Failure to title assets correctly. Joint accounts versus convenience accounts. Revocable Living Trusts not properly funded result in probate issues.
- Are there sufficient liquid assets available to continue to operate family business, preserve the family retreat and pay estate taxes?
We would be happy to answer your questions. Give us a call at 908.898.0100.
The New York Times today published an article with the headline “Growing Up With A Trust,” written by well-known “Wealth Matters” columnist Paul Sullivan. The story appeared online and in print, as well, on page F9 of the publication’s New York edition.
McManus & Associates worked hand-in-hand with Sullivan on this story, both in facilitating a conversation with one of our clients who shared insight on an anonymous basis and in providing expertise on preparing heirs for inheritance. From the article:
Steve, whose wealth was earned in financial services rather than inherited, is still working out a plan with his wife for telling their three sons about their inheritances. He asked that his name be withheld because he did not want his neighbors in the New York area to know about his money.
In his 40s and retired for more than a decade, he appears to be a model client for any trust and estate planner: he has already put more than $10 million in various trusts. “He’s a thoughtful, meaningful guy, and he has more time than our normal client,” said John O. McManus, his lawyer at McManus & Associates.
He is proud of the provisions written into the trusts for his children, which will keep them from having full access to the money until they are 35. Yet, though he has not done so, talking to his sons about his wealth is also important, even though all three are not yet 10.
Top AV-rated Attorney John O. McManus was happy to weigh in on this important topic, because the firm is committed to helping its clients transfer not only assets, but also family values. As discussed in the piece, conversations with beneficiaries about wealth are part of an ongoing process, not just a one-time event. Through the creation of a Family Mission Statement, McManus & Associates can help you initiate these critical discussions and best prepare your heirs for a productive life filled with success that positively impacts society.
McManus & Associates is ready to talk you through this challenging, yet important process. Give our office a call at (908) 898-0100 to get started.
Top-rated estate planning attorney and founding principal of McManus & Associates John O. McManus last month chatted with Paula Aven Gladych, writer for BenefitsPro, about why even people who aren’t in the top 1 percent of earnings need to undertake estate planning. Individuals who earn between $250,000 and $1 million won’t have to worry about paying federal estate taxes, since the exemption is $5.25 million, but “they still have to worry about state exemptions, which are all over the map.” As pointed out in Gladych’s article, “Even middle-income earners should have an estate plan.”
From the piece, which is based on McManus’s interview with Gladych:
“People are not going to give a large amount of their assets away during their lifetime. If a client has $1.5 million during their lifetime, they may need every dollar of that to live from. If they become terminal, a quality financial advisor and attorney will say, ‘let’s move money off the balance sheet now.’ The fact is, by moving it you’ll avoid the imposition of state tax when you pass away. The problem in the past is people are not doing it because they only give away $750,000 to $1 million on the federal level,” McManus said. “The concern is that states will smarten up and impose a gift limitation equal to the death tax limitation.”
Why should middle-income earners consider putting money away in a trust? Read the rest of the story to find out.
More recently, Paula Aven Gladych interviewed McManus again for a piece, titled “Legacy, estate planning as important as retirement.” As captured by Gladych, “planning for the future isn’t just about retirement accounts or what you want to do with all of your free time. According to financial experts, people also need to plan for what comes after their retirement—end-of-life planning.”
McManus’s advice is captured in the story as follows:
Individuals need to make sure their documents are current. They need to review them every so often to make sure that what people think they will receive when they die is what they will actually receive, said John McManus, founding principal at McManus & Associates, an estates and trusts law firm in New York.
That means reviewing documents and walking through their provisions, deciding how they want to dispose of their assets and naming representatives who will make sure their assets are distributed as they intended.
There is a catch 22, however. Many people don’t realize that beneficiary designations on life insurance policies and retirement accounts trump whatever is written in a final will and testament.
Many parents place one of their children on their accounts as a joint account holder so they can help pay bills. What most people don’t realize is that when the parent passes away, no matter what is listed in the will, the person who is listed on the joint account will inherit that money. This can cause many problems among other beneficiaries who believe they are entitled to their share of that money, McManus said.
Each state has its own exemption when it comes to estate taxes. Some states, like New York, will allow individuals to pass down the first $1 million to heirs tax free. Anything above that $1 million will be taxed. McManus counsels his clients to gift that money while they are still alive to avoid hefty taxation later.
Check out more important estate planning tips in the story here.
Investment News has created a helpful, interesting slideshow that anyone attempting to escape cold northern winters (or really anyone who spends a good deal of time in a state that is no longer their primary residence) should check out to avoid issues of residency and, therefore, being taxed in more than one state. Investment News bases the nine tips on guidance from McManus & Associates founding principal John O. McManus. From the slideshow intro:
There’s nothing like a cold, northern winter or a chilly tax environment to inspire American retirees to head south. But if you plan to pack your bags for good, it may be easier to shed your overcoat than your status as resident of your former home state, warns John McManus, the founding principal of the New York area trust and estate planning firm McManus & Associates. He offered the following tips on how to enjoy hot weather without ending up in hot water with tax collectors in your previous domicile.
The feature shares important but sometimes overlooked suggestions like change your gym membership right after you move and use cash when visiting your previous state of residence, if possible. To learn about more steps you can take to shed the double layers and the double tax payments, click through the full slideshow “A flightplan for snowbirds” here.
Penned by John O. McManus, founding principal of McManus & Associates, the article “The Road Ahead for Estate Planning” is today featured by LifeHealthPro. LifeHealthPro is a go-to resource for advisors, insurance wholesalers, CPAs and estate planning attorneys.
In the piece, John discusses the several surprising outcomes regarding estate planning that emerged as part of the fiscal cliff deal and outlines the new tax rates and exemption amounts. He also recommends several “tactics to try.” From the article:
Here are a few of the trust and non-trust estate planning strategies that married and single persons should explore in 2013:
- Foundations: With increased taxes, gifts to charity have a greater tax-deductible value. Gifts to foundations allow full deduction in the year of the gift, whereas transfers out of foundation can be as small as 5 percent on an annual basis, allowing assets in the foundation to continue to grow.
- Charitable trust: These enable one to make gifts to charity and receive immediate deductions. One can continue to receive income from the charitable gift for a period of time. Gifts can also be made where the charity gets a distribution each year and the loved ones receive the remainder.
- Family mission planning: The family mission and preparing heirs for inheritances are critical to ensuring a successful transfer of wealth and family values, to helping minimize conflict and maximize harmony and to supporting charitable endeavors.
- Life insurance trusts: Funding a trust with a life insurance policy is a smart way to get a windfall of cash when someone passes away to pay off estate taxes. It’s also an avenue for getting a big asset off of one’s balance sheet, keeping a large amount of cash safe and protected. Make sure the trust is named as the beneficiary and policy owner (e.g., John Doe Irrevocable Trust). If a house is put into a trust and the house is insured, make sure to get the insurance policy changed to reflect the ownership by the trust. The trust should be the primary insured on the policy, and the individual can be the secondary.
And cautioning readers to be mindful of what’s ahead that could impact estate planning, he shares this observation:
Several valuable opportunities emerged as part of the fiscal cliff negotiations that pleasantly surprised the estate planning community. We are not completely out of the woods, however, with the debt ceiling debates just around the corner. When it comes to safeguarding wealth and family values, it’s important now to look ahead without losing sight of what’s in the rearview mirror.
Read the whole thing at http://www.lifehealthpro.com/2013/02/22/the-road-ahead-for-estate-planning. Also keep an eye out for John’s piece in Monday’s Life Insurance Insider e-newsletter. Next week will be a special estate planning edition.