Did you know that one of the most effective estate-tax-saving techniques is also one of the simplest and most convenient? By making maximum use of the annual gift tax exclusion, you can pass substantial amounts of assets to the younger generations without any gift tax.
In fact, by giving the maximum gifts in December 2021 and again in January 2022, you can reduce your estate by six figures if you’re being generous to multiple beneficiaries. (more…)
We regularly use the term “estate” when discussing planning and estate tax issues. However, we are speaking about a taxable estate in these circumstances. A “probate estate” is very different from a taxable estate, and is legally administered by state law. (more…)
The temporary reprieve is over. Due to the COVID-19 pandemic, Congress suspended the rules for required minimum distributions (RMDs) in 2020, including inherited accounts. But the rules have been restored for the 2021 tax year. Essentially, participants in qualified plans and IRAs who’ve reached their required beginning date must take 2021 distributions or potentially pay a hefty penalty.
The deadline for RMDs is December 31, 2021 (later for those that reach the required age in 2021), but you should get your ducks in a row before then. (more…)
A family with a disabled child faces difficult planning challenges. For many years, the most effective estate and financial planning tool for parents of a disabled child was a special needs trust (SNT). This trust type provides resources for the care of disabled children while preserving their eligibility for means-tested government benefits, such as Medicaid and Supplemental Security Income (SSI).
Another option available to families is the ABLE account. The Achieving a Better Life Experience (ABLE) Act was signed into law in 2014. It created Internal Revenue Code Section 529A, authorizing states to offer tax-advantaged savings accounts for the blind and severely disabled. (more…)
Life insurance is often an integral part of an estate plan. By acquiring life insurance coverage, you can provide liquidity when your family might need it the most, particularly if you’re relatively young. The policy’s proceeds can be used to help pay your mortgage, college tuition for your children, or various other expenses.
Of course, you also must account for taxes. Generally, you can avoid dire federal estate tax consequences, based in part by using your gift and estate tax exemption. However, the exemption is scheduled to decrease after 2025, creating more complications. For many families, creating an irrevocable life insurance trust (ILIT) to hold your life insurance policy is a common solution. (more…)
Are you inclined to help a charity for a period of time without ultimately giving up the property? Consider the benefits of a charitable lead trust (CLT). This type of trust is essentially the opposite of the charitable remainder trust (CRT), a better-known alternative (see Is a CRT A Better Option? below). With a CLT, the property reverts to family members — not the charity.
At the same time, the CLT provides a stream of annual income to the charity for a term of years. So everyone wins. (more…)
An art collection is a special asset to account for in an estate plan.
It goes without saying that your art collection, including paintings, sculptures, and other pieces of art, can represent a significant portion of your estate. Thus, it’s critical to account for these assets in your estate plan.
While you can apply many traditional estate planning strategies to an art collection, this asset type can present unique challenges. Of course, you’ll want to preserve the value of your collection and avoid unnecessary taxes but knowing how your collection will be managed and displayed after your death may also be of importance. (more…)
If you’re like most people, you’ve probably encouraged your elderly relatives to list of all their assets and contact information, including passwords to online accounts. This will enable you or other family members to access vital information at times when you must act on their behalf. (more…)
While, ultimately, you create an estate plan to meet technical objectives, such as minimizing gift and estate taxes and protecting your assets from creditors’ claims, you should also consider “softer,” yet equally critical, goals. Because you’ve spent a lifetime building your wealth, it’s important to educate your children or other loved ones on how to manage wealth responsibly. In addition, you may want to promote shared family values and encourage charitable giving. Using a “family advancement sustainability trust” (FAST) is one option to achieve these goals. (more…)