Gifting Myths

Christmas is over and you might have even gotten all the tinsel out of the house by now, but that doesn’t mean you’re done giving gifts. It’s likely you’re just now turning to the largest “gifts,” as your think about taxes and your estate plan. To that end, an article about the “5 Common Tax Myths About Gift Giving” came out recently in Forbes.

Myth: You have to pay taxes on gifts that you receive. False. You pay gift taxes on the gifts you give, not on what you receive. The reason for the gift tax is to keep people from avoiding the estate tax by simply “giving” it away while they are alive. Accordingly, the person that does the giving accepts the tax liability. (That said, the receiver may then owe other taxes since they now own the assets, but that’s all in the course of ownership).

Myth: You pay a tax on gifts you make that are over $10k. This is not entirely true since there are a number of other factors. For starters, the amount is now closer to $13k worth of gifts in a year. However, gifts to spouses (so long as they are citizens) and approved charities don’t count against that limit. If you do exceed that amount, it will first count against your lifetime exemption of $5 million. Remember to file a gift tax return with your 2011 income tax filing.

Myth: You can give freely by offering them as loans and then forgiving the loans. False, the IRS is out in front of you on that, too. Loans are loans anad gifts are gifts. Should the IRS feel you’re treating a loan as a gift, it will consider it as such.

Myth: Charitable deductions can always be deducted against your taxable income. Not quite. First, charitable deductions can only be claimed if the IRS recognizes the charity as a charity. Second, you can only deduct the effective amount given. So, if you receive anything of value in return, then such value counts against the value of your charitable contribution (e.g., a $100 gift is only a $60 charitable deduction, if you receive a $40 steak dinner in return).

Finally, one other myth is that you need not worry about how your home state treats gifts, independent of the IRS. No, each state has its own quirks regarding deductions and ownership.

For that matter, too, it’s worth noting that these amounts and rules are subject to evolving tax law which is in the cross hairs of 2012 politics and may, therefore, change within a year.

Gifting can be a very important part of your estate plan but it needs to be done correctly. At Idaho Estate Planning we have all the resources you need to benefit you and your loved ones now and into the future. Call us today and schedule a comprehensive estate plan analysis and consultation. Remember, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

LLC Planning For Your Family & Business

When it comes to understanding your estate and planning for it, the key concept is ownership. How do you own your assets? How should you own your assets? How can you easily pass along this ownership to your loved ones?

When it comes to business assets, whether in the context of ordinary day-to-day operations or as a business owner setting up your estate plan, ownership is still the name of the game. One question that arises, then, is whether your assets should be spread across separate or multiple LLCs.

I came across a recent article in CPA Magazine and, according to the author, whether you should start splintering your assets into multiple LLC depends a great deal on what you hope to accomplish. No surprise there.

However, to many it’s simply a question of liability and risk protection, but then there are other goals. Namely, splitting into multiple business entities will allow your company to move the ownership of assets around between family members or employees without necessarily dividing the business.

This can be accomplished with some careful planning, corporate due diligence, and transactions like the sale-leaseback or, more in the vein of estate planning, the gift-leaseback. In that latter play, the business owner either leases or gifts the asset away and then immediately leases it back, thereby spreading ownership but retaining the operations of the company. Of course, not all business assets are well equipped for this practice, but others are perfectly positioned, especially those that deal in large equipment or vehicles.

It’s not quite as simple in practice, and diligence is a necessity, but for many small and family owned businesses this fractured structure will allow a great deal of leeway.

Whether it truly is right for you will take some thought and competent counsel at your side. In the end, it all comes down to your own unique goals, first for your business and second for your family. At Idaho Estate Planning we have the resources and expertise you need to implement the right kind of estate plan for you, your family and your business. When it comes to your family business, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

Planning for IRA Inheritance

Parents who have substantial assets in an IRA should plan ahead for how their children may inherit those assets. The laws governing IRA assets, their transfers, taxation and inheritance, are complex. A single misstep can be unnecessarily costly. A recent article in the Wall Street Journal outlines some of the specific perils, and offers a few salient tips. Above all, this is one aspect of financial and estate planning that truly requires professional advice. A good place to start learning more is in the Journal’s article, “Pitfalls of Inherited IRAs.”

Understanding the complexities of Inheriting IRAs is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.
 

Idaho Estate Planning

Promote Your Page Too

Tweet

Inheritance Planning & Your Legacy

The inheritance you leave isn’t, in itself, your legacy. This is true even if you’re passing on the business you worked your entire life to create. That said, how you leave your inheritance just might become your legacy, so take great care.

The decisions you make regarding what to leave behind and to whom, and how to divide your assets between your family members, are crucial. The Wall Street Journal recently tackled this subject.

Do you split your assets evenly? To you divide them based on merit, or based on need? Do you think about the immediate generation or the grandchildren? What if there is no balance? Many of our clients are more concerned with passing on their ideals and building character in their heirs than in passing on possessions.

These are very real questions that only you can answer. Well… that’s not quite right. In reality, there will be many people in your family with opinions and answers to offer. The challenge is to plan as you see fit, and for the reasons that you value, but in doing so you may also want to make these considerations and reasons clear to your family.

When it comes to communicating your reasons for the how of your estate plan, you may consider capturing your wishes on video. On the other hand, and this is usually more helpful, consider having an open and ongoing dialogue with your family.

The choices you make and the inheritances you leave are very important, but what is often just as important is the meaning that is understood in how you leave them.

When it is all said and done, it’s the family you’re planning for in the first place. Therefore, in order to plan properly, first you need to understand your family. Proper planning ought to include discussing these issues with your family and then making the final decisions. Communication is key. We’ve said it before, proper planning starts with a thorough understanding of your needs, goals, dreams and aspirations. It takes into account your Values not just your Valuables. It starts with a thorough understanding of your family – those who you care about and who will someday receive the benefits of your success – and your family’s dynamics. Let’s work together to implement an estate plan that works for you. Remember, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

Estate Planning for Unmarried Co-Habitants

Heads up, if you are an unmarried co-habitant (same-sex or opposite-sex)! Regardless whether you share a home, children, and assets you can be no more than well-acquainted strangers in the eyes of the legislature, the broker, and the tax-man.

It’s a very real problem to be faced by an increasing amount of the population, given the rise of same-sex marriage and the decline of marriage (or re-marriage) in heterosexual couples. Indeed, from a federal point of view, same-sex marriage isn’t marriage at all.

I happened upon an article I had missed out of the September issue of Financial Advisor Magazine and I thought it was worth sharing on this topic. It gives a general outline of the sorts of issues that unmarried cohabitants face when it comes to estate planning.

In essence, the problem is that there are very basic laws on the books, laws that have organized our family finances for generations, but unmarried persons don’t benefit from them. In fact, until it is too late, they might not realize the extent to which they won’t benefit from them.

Insurance problems abound, as well. And, when it comes to taking care of each other later in life or after death, it likely will be too late to find ways around the problem. Proper planning is always about charting a path for the future, and without certain legal designations you may end up “wandering in the wilderness”. Better to clear the path for the future today.

At Idaho Estate Planning this is not an unchartered territory. We know how to help you and your loved ones reach your goals and accomplish your dreams. Together we’ll make sure you arrive safely at your destination. Remember, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

Estate Planning New Year’s Resolutions

2012 is going to be a big year for planning. Why? Because the end of 2012 also means the end of the foreseeable future regarding a huge swath of estate planning issues.

Everything we know now about the estate tax, the gift tax, and the other wealth transfer taxes is only set in the tax code until the end of 2012… at least until Congress finishes battling it out and makes a decision about what to do going forward.

In the end, proper planning these days is about taking advantage of what we know about 2012, and hedging our bets about the future thereafter. So what do we know? Smart Money recently provided a brief run-down here:

The estate tax is still set at a $5 million exemption with a 35% rate thereafter but, barring action, it will revert back to a $1 million exemption and a 55% rate! To be precise, the estate tax is actually indexed for inflation and that means it is effectively set at $5.12 million for 2012

The exemption amount for the gift tax is the same as it is for the lifetime gift-tax exemption at the inflation indexed $5.12 million, and in like fashion will snap back in 2013 without any action. This means that it may be the last year ever to take advantage of that unprecedented gifting amount.

Finally, a new and very progressive provision will still be in place for 2012: “portability.” Portability means that a spouse may pass along their unused estate/gift tax exemption to their surviving spouse. That makes the effective total a married couple can pass on without tax a whopping $10 million, or $10.24 once indexed for inflation.

These at least are the basic facts. It may well be that we will see a situation not unlike what occurred in 2010, when the Bush-era laws expired at congressional inaction. Remember that? Taxpayers tried to hold out until 2010 and then tried to hold onto 2010 laws (or lack thereof) until the first moments of 2011.

Will we be holding onto these laws currently in play through 2012 and their generous exemptions, or is 2013 going to be even more advantageous… or treacherous for taxpayers?

No matter what happens in 2012 you can be assured that those who have planned for the future will be better prepared to meet it. Make it your New Year’s Resolution to put a plan in effect for you and your loved ones. Call us today, not tomorrow, not next month, today! We will help you put your goals and dreams into action. Remember, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

Study Shows Inherited Wealth Is Squandered

A new and unfortunate statistic confirms what we all intuitively suspected. According to research out of The Williams Group, 70% of all wealth transfers fail.

As reported by Forbes here, the failure is not that the money doesn’t get passed down; it is that the family inheritance quickly dissolves in a flash of poor planning, bickering, and waste.

How can that be?

The research found that the successful 30% had all actively engaged in transition planning, in addition to simple inheritance planning. In a very real sense, all proper estate planning is about both planning for the inheritance and planning for the inheritors. After all, the inheritors are why you want to pass on your assets in the first place. Naturally, then, transition planning is all about bringing the inheritors into the fold and allowing them to learn how to run it.

If you have a family business, then this is of the utmost importance. Why? Because for it to remain a “family business” the family has to know about the business, how to run it, and how to think about it. To be successful, hands-on training is required.

But then again, aside from a family business asset, there is still a great deal of work to be done to help inheritors properly understand wealth and investments. Likewise, hands-on training in the family wealth, perhaps beginning in philanthropy, can make all the difference.

In the end, to overcome the odds against the successful transfer of your family wealth, you need to form a plan, understand it, and to put it into action. Proper planning starts with a thorough understanding of your needs, goals, dreams and aspirations. It takes into account your Values not just your Valuables. It starts with a thorough understanding of your family – those who you care about and who will someday receive the benefits of your success – and your family’s dynamics. At Idaho Estate Planning we know how to help you implement and carry out a successful plan. Remember, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

Inheriting an IRA – Make Sure It’s Done Right

Surviving spouses have a number of pressing issues to consider after the death of a spouse. It always has been that way. Now, however, their lot is even more difficult as more is at stake, to include mistakes regarding IRA gotchas.

Unfortunately, not giving due attention to an inherited IRA can be a very costly mistake.

The problem is the IRA rollover penalty. The Wall Street Journal
rates it as one of the biggest mistakes a surviving spouse can make. The standard advice is to roll over a decedent’s IRA into your own IRA. However, especially in light of current events, this might be a rule of thumb to avoid until you’ve weighed your own options.

IRAs are tricky and getting increasingly trickier. Not to mention the reality that an ever increasing amount of personal wealth is being held and passed down in the form of IRA investments at this time of incredible market volatility. If you are at or over age 59, then an IRA rollover may not be a bad idea (since you’ll have access to the IRA funds shortly).

Nevertheless, a great many spouses will receive an IRA before that age and it’s not usable wealth to cover all sorts of new expenses, unless you pay the 10% to make early withdrawals. Instead, the IRA could simply be inherited and remain in the name of the decedent. On the downside, this approach would require taking regular and taxable withdrawals on the account right now.

In general, a great deal of thought should go into how to best “inherit” an IRA. The Wall Street Journal article goes on to mention a few other survivor mistakes, along with some interesting statistics about IRA rollovers.

Understanding Inheriting IRAs is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

DIY Wills Have Many Pitfalls

A DIY attitude can get you a lot of places, after all, its part and parcel to the entrepreneurial spirit. Of course, anyone who’s jury-rigged a project also knows that a DIY attitude doesn’t always translate into a successful end result. In the end, you either learn from your mistakes for the next project or else hire a professional to do it right the first time. What about your Last Will and Testament? What are the dangers of a “DIY Last Will”?

Forbes recently ran an article on the possible pitfalls of a DIY will and the reasons to consider a professional. It can’t be denied that it is easier now than ever before to prepare your own Last Will and other estate planning documents. Welcome to the computer age. However, unlike other projects where you can learn a lesson for next time or, conversely, give in and hire the pro if things don’t turn out right, you won’t have a chance to “fix” your Last Will if it proves unsatisfactory.

By the time your Last Will becomes truly important you’re no longer around to tweak, to re-align, or to call in the experts. For one thing, the assumptions you might have today (e.g., that a younger relative or child will outlive you, that an asset you own today will still be around tomorrow, and that all the details will fall into neatly into place, etc.) could end up falling short, as would your plans. Likewise, you might be fully confident regarding the meaning and intent of your “language,” but others may interpret a different meaning or even argue that you didn’t specify well enough (i.e., “legalese” can be a difficult thing to DIY).

In the end, having a professional around to defend your choices and your intent in the face of unforeseen changes can help ensure that even the improvised bits of your estate plan will work out in the end.

While you most certainly can write your own will, there are too many potential problems that can arise. If your financial situation has any complexity to it at all, the chances for errors grow even more. For example, if your situation involves blended families, ex-spouses, or any number of other special conditions, the chances that your wishes will not be carried out increase. Beyond that the scariest outcome of all is there is always a backup will already in place should yours be found invalid. That will has been drafted by the state – A last will and testament drafted by Uncle Sam – Now that’s a scary estate plan!

Let Idaho Estate Planning help you craft a will that not only reflects your wishes but is drafted correctly insuring those wishes are carried out. Remember, good planning is no accident.

Idaho Estate Planning

Promote Your Page Too

Tweet

Medicare and Medicaid Dodge the Budget Bullet (For Now)

Have you heard the news? It seems the grand experiment failed. The Congressional supercommittee, charged with doing what the Congress at large could not do, has run out of time. And, by running out of time, failed in its mission to come up with budget cuts.

What does that mean for Medicare and Medicaid beneficiaries?

As Reuters reports, in the event the supercommittee should fail, as it has, then automatic and sweeping cuts go into effect. For Medicare, that means a two percent cut across the board, or about $123 billion over the next decade. However, it might have been $500 billion to $700 billion in cuts, if various supercommittee arguments had prevailed.

Nevertheless, as it stands, there definitely will be a little pain, but not quite as much for individual beneficiaries. No, likely it will hit hospitals and doctors the hardest. Why? In the aggregate, that’s where the money tends to end up.

Of course, we’re not yet out of the woods. Just as it became clear last summer that we’d have to wait until the winter for some kind of budget solution from Congress, it now seems that we’ll have to wait for the upcoming election season. In turn, expect things to intensify even further and for budget discussions to become all the more drastic.

Trying to keep up to date on Medicaid, Medicare or any other issues faced by America’s Elderly can be a daunting task. At Idaho Estate Planning, we understand these challenges. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident!

Idaho Estate Planning

Promote Your Page Too

Tweet