Overland Park Attorney

Weekly Blog Digest - Overland Pasrk, KS - Estate Planning

Keep a Sharp Eye on Taxes at the State Level

…State estate and inheritance taxes have been in constant flux over the last decade. And it’s not just the list of states that has been changing, but in some states, the level at which the tax kicks in has been changing (both up and down). So it’s important to stay on top of this to avoid a surprise tax bill.

The Latest Edition of DSM May Lead to Rise in Cognitive Diagnosis

The Diagnostic and Statistical Manual of Mental Disorders, published and periodically updated by the American Psychiatric Association, is one of those documents few laypeople ever read, but many of us are affected by.

Fiscal Cliff Deal Leaves Some Estate Planning Tools on the Table

The good news is that the New Year’s day passage of the American Taxpayer Relief Tax Act Of 2012 or ATRA ended 12 years of uncertainty about how much could pass tax free; what the tax will be on transfers above that amount; and even whether there would be an estate tax at all.

What’s still in play are the cute tax tricks that some of the best minds in the field have devised to leverage or pack more into the tax-free amount.

Can You Undo a Large Gift Made in 2012?

Donors who acted solely out of the expectation that the generous exemptions would disappear may be experiencing a healthy dose of donor’s remorse. For them, the question arises, “Can I take it back?”

When an Inheritance is Too Much of a Good Thing

Under the new rules, a taxpayer may shield up to $5.25 million from estate taxes ($10.5 million for couples) … Now that the uncertainty has been lifted, some ultrawealthy families are wondering whether they want to leave heirs that much tax-free money after all.

Fiscal Cliff Deal Leaves Some Estate Planning Tools on the Table - Especially in Overland Park, KS

 The good news is that the New Year’s day passage of the American Taxpayer Relief Tax Act Of 2012 or ATRA ended 12 years of uncertainty about how much could pass tax free; what the tax will be on transfers above that amount; and even whether there would be an estate tax at all.

What’s still in play are the cute tax tricks that some of the best minds in the field have devised to leverage or pack more into the tax-free amount.

Americans can rest easy now that the fiscal cliff debacle is over.  But some professionals have started to realize that there were some very real questions left on the fiscal cliff table as it relates to key “tax tricks.”

While significant estate planning laws are settled, there remain more than a few important estate planning “tools” left hanging in the air. These tools likely will be low-hanging fruit in future discussions.

The American Taxpayer Relief Tax Act Of 2012 (ATRA) finally ended some 12 years of estate planning uncertainty (or so we can only hope). The certainty includes such matters as various tax rates and the exemptions amounts for the estate tax, gift tax, and generation-skipping tax. But ATRA didn’t settle many technical questions raised in the past few years, both on and off the campaign trail.

So, what issues and devices should we watch? A recent Forbes article titled “Congress May Tighten The Belt On Cute Tax Tricks” lists some sore subjects and possible new areas of taxation. These include:

• Grantor Trusts: might just get added back into the Grantor’s estate.
• Dynasty Trusts: might just limit the extent of your dynasty.
• GRATs: “Grantor Retained Annuity Trusts” (GRATs) might become much more demanding and risky.
• Family Limited Partnerships: might become much less valuable as your ability to take discounts is curtailed.

The original article is worth your time, especially if you are concerned that future technical rules may swoop in and sully some well-designed estate planning. However, for those conversant with this subject, they will recognize that this talk is nothing new and these estate planning devices have been repeatedly targeted in the past.

Be sure to consult qualified legal counsel if you have questions about how future changes in the law may impact your estate planning.

Reference: Forbes (January 16, 2013) “Congress May Tighten The Belt On Cute Tax Tricks”

For more information on this issue and related issues, please visit my website.

Deduction Limitations Impact Wealthy Donors - in Overland Park, KS

While most people are fixated on tax rate increases adding to their income tax bill in 2013 and beyond, very few people are aware that the Pease limitation reinstatement can add to their income tax bills by phasing out some key itemized deductions.

Although some areas of the tax law became better after the fiscal cliff deal, now that the laws are more predictable, other areas took a hit – namely charitable giving and donors themselves.

The Fiscal Cliff Deal reintroduces the Pease Amendment, so named after former Congressman Donald Pease. Forbes recently wrote about this in an article titled “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks.” Indeed, as you can tell by the title of the article, the Pease Amendment is just one more of those “stealth taxes” working to decrease deductions rather than increase taxation. In this case, for example, this stealth tax chips away at the charitable deductions for high-earners.

For taxpayers with adjusted gross incomes (AGI) above $250,000 (or above $300,000 for joint filers), they will see an itemized deduction limitation kick in that is the lesser of (a) 3% of the adjusted gross income above the applicable amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year.

Among other itemized deductions, this hits the charitable deduction, deductions for mortgage interest, deductions for various lower level taxes, and so on with some specific exclusions. That can start to really add up in a year when you happen to have an increase in your AGI.

So, the tax game has gotten a bit more complex, and charitable giving has fewer tax deduction rewards for some individuals these days. Do you think this will impact the amount of charitable giving for 2013? Only time will tell.

Reference:

Forbes (January 9, 2013) “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks”

For more information about this issue, and related Inheritance matters in Overland Park, KS, please visit my website.

Weekly Blog Digest - Overland Park, KS - Estate Planning

 

Portability Provision Extended in Fiscal Cliff Deal

Portability makes it unnecessary for spouses to use bypass trusts solely to preserve the federal exemption amount. As with any new process there is a shakeout period, though.

Safeguarding Your Elders: Is It Time To Take Away the Keys?

What can you do when a strong minded elder should stop driving but refuses to do so?

Retirement Possibility: Make a Run for the Border

Among the top retirement spots in the world this year, you’ll find great variety in the cultural offerings, climates and lifestyles.

Fiscal Cliff Deal Brings New Tax Hikes for Trust Beneficiaries

“It’s hitting where it really shouldn’t,” says Laurie Hall, an estates lawyer and head of the Wealth Management Group at Edwards Wildman in Boston. “These increases weren’t intended to hit people with income below $200,000, and they will.”

A Gift You Cannot Return

The Brooklyn Museum seemed to have garnered a bonanza in 1932 when it received a large bequest from the estate of Col. Michael Friedsam, president of the elegant retail emporium B. Altman. But eight decades later … the museum potentially faces a hefty bill to store the 229 pieces it no longer wants.

 

Fiscal Cliff Deal Brings New Tax Hikes for Trust Beneficiaries - Especially in Overland Park, KS

“It’s hitting where it really shouldn’t,” says Laurie Hall, an estates lawyer and head of the Wealth Management Group at Edwards Wildman in Boston. “These increases weren’t intended to hit people with income below $200,000, and they will.”

Many of us are at ease now that we’ve ridden out the Fiscal Cliff, being that the tax law changes were largely restricted to the uppermost income brackets. In fact, the “average” person may not even see a rise in income taxes. Unfortunately, there is still a chance the “middle class” may see some tax hikes if they are trust beneficiaries.

As reported in a Forbes article titled “Tax Hikes Hit Trusts Hard, Beneficiaries Pull Money Out”, the new tax laws are affecting income to trusts. This new taxation has everything to do with the capital gains tax that recently jumped from 15% to 20%, plus an extra 3.8% for the Medicare surtax under Obamacare. Taken together, this tax increase adds up to a whopping 8.8% on profits held in trusts.

This gets even worse. The trust and the beneficiary pay separate taxes on the income gain in the trust and the income distributed to the beneficiary. This new increase seems to be pushing a number of beneficiaries toward reconsidering the trust itself.

Regardless, it’s important to consider all of the positives when it comes to trusts, especially since so many beneficiaries fall fully into the “middle class.”

If you are a trust beneficiary, be on the lookout for taxes affecting you and your trust. Changes are bound to occur in the future.

Reference: Forbes (January 9, 2013) “Tax Hikes Hit Trusts Hard, Beneficiaries Pull Money Out”

For more information on this issue and related issues in Overland Park, KS, please visit my website.

Portability Provision Extended in Fiscal Cliff Deal / Overland Park, KS

Portability makes it unnecessary for spouses to use bypass trusts solely to preserve the federal exemption amount. As with any new process there is a shakeout period, though.

The good news has resounded and there is much to celebrate with the passing of ATRA 2012 (or the Fiscal Cliff deal). One particularly positive element of ATRA 2012 is the continuation of certain estate and gift tax laws.

A recent Forbes article titled “A Married Couple's Guide To Estate Planning,” explores some important considerations when it comes to fundamental estate planning.

As so many of us hoped it would, the fiscal cliff-bridging budget extended the provision known as “portability.” As you may know, portability is the ability to pack up the unused tax exemption of the first spouse – that is, their gift/estate tax exemption – and pass it on to the surviving spouse. The surviving spouse doesn’t have to worry quite as much about triggering the estate tax when they pass. Why? Because they now have everything they own plus everything their spouse left them, and all of it can be sheltered from estate taxes by the estate tax exemptions of both spouses.

The original article has more to say regarding how to secure this portability. For that matter, portability is also a limited achievement and a limited kind of protection between married persons.

There is more to “portability” and proper estate planning than meets the eye, so be sure to consult with your estate planning attorney on this matter.

Reference: Forbes (January 9, 2013) “A Married Couple's Guide To Estate Planning”[updated to ATRA 2012]

For more information about this and related Estate Planning issues, in Overland Park, KS, please visit my website.

Weekly Blog Digest - Overland Park, KS - Estate Planning

The Totals Are Trickling In for 2012 Charitable Giving

America’s billionaires gave less in 2012 than in 2011, a new Chronicle tally shows.

The Toils of Joint Tenancy

Elderly parents regularly set up bank accounts — checking, savings, certificates of deposit — in joint tenancy with a child ...Running around in the background here is a belief that the terms of a will are going to take priority over a joint tenancy designation in a bank account. That, however, is not correct.

Fiscal Cliff Deal’s Effect on Long-Term Care

At first glance, the budget agreement includes an important trade-off -- the creation of a national long term care commission ...Yet, there are elements in the measure creating this panel that are very troublesome.

The Resurrected IRA Charitable Rollover: Limited Window for 2012 Transfers

When it comes to taxes, never say die. As part of the "fiscal cliff" deal, Congress has resurrected a popular tax-law provision, known as the "IRA charitable rollover," that had expired at the end of 2011.

A Trustee’s Interpretation of a Trust: Prevention or Promotion?

I suspect that trustees are most often comfortable with a prevention-focused mindset.

Here’s my take: Our ability to recognize and deliberately change our mindset just might be a game-changer.



The Resurrected IRA Charitable Rollover: Limited Window for 2012 Transfers / Overland Park, KS

When it comes to taxes, never say die. As part of the "fiscal cliff" deal, Congress has resurrected a popular tax-law provision, known as the "IRA charitable rollover," that had expired at the end of 2011.

New Year’s resolutions are chock-full of attempts at healthy lifestyle changes.  And while you may not be thinking about Tax Law when you resolve to make 2013 a better year, there is at least one healthy ingredient back in the mix:  the IRA Charitable Rollover.

This may not be a new revelation, but it bears repeating. It is just that good. The reinstitution of the IRA Charitable Rollover will benefit many qualifying taxpayers and their favorite charities alike. An article in The Wall Street Journal titled “IRA Charitable Rollover Is Back” provided an excellent, brief summary of the practical points you should know.

Until the end of 2011, you could “rollover” the required minimum distribution (RMD) from your IRA directly into the charity of your choice. Consequently, you avoided income taxation on that amount. But what about tax year 2012? Until the American Taxpayer Relief Act (ATRA) was passed on January 1, 2013, and subsequently signed into law the next day, this opportunity for 2012 did not exist. It had expired.

Now that ATRA is law, however, if you are age 70 ½ or older you can once more kill two birds with one stone and rollover funds from your IRA directly to a charity for 2012. That’s right, there is a limited window open to go back to 2012 (figuratively speaking) and make a qualifying charitable rollover from your IRA.

For taxpayers who took their RMDs late in December while awaiting resolution of the “fiscal cliff” fiasco, don’t fret! You may still re-characterize that withdrawal into a rollover if you do so before January 31^st.

Reference: The Wall Street Journal (January 6, 2012) “IRA Charitable Rollover Is Back”

For more information on this, especially how it relates to Overland Park, KS, please visit my website.

Fiscal Cliff Deal’s Effect on Long-Term Care / Overland Park, KS

At first glance, the budget agreement includes an important trade-off -- the creation of a national long term care commission ...Yet, there are elements in the measure creating this panel that are very troublesome.

Congress has averted the “fiscal cliff” for now, but there was one law that fell over the cliff anyways. The Community Living Assistance Services and Supports (CLASS) Act, which was intended to deal with the issue of long-term care for seniors, has been repealed. What did politicians do to address this issue? Not surprisingly, a “commission” was formed.

The CLASS Act and the new commission formed to study the delivery (and financing) of long-term care was the subject of a recent Forbes article titled “Fiscal Cliff Deal Repeals CLASS Act, Creates Long-Term Care Commission.” As summarized in the title of this Forbes article, The American Taxpayer Relief Act or ATRA – does two things in the field of long-term care: first, it officially ends the CLASS Act, and second, it forms a new bipartisan commission to “tackle” the matter.

Is it a good trade-off? For starters, the CLASS Act had already been abandoned by the administration and Congress alike. On the other hand, this new commission might not find an alternative new solution. As the Forbes article notes, the commission is a “political commission” rather than a panel of subject matter experts. The commission has been given a window of six months to conduct its business.

The crisis of long-term care in America is still an important issue, and it’s hard to tell what the future holds for this matter. Now is the time for individuals to take responsibility for their long-term care, so be sure to consult competent legal counsel and your long-term care insurance agent to examine your options.

Reference: Forbes (January 1, 2013) “Fiscal Cliff Deal Repeals CLASS Act, Creates Long-Term Care Commission”

For more information on this issue and how it affects Overland Park, KS, please visit my website.

The Totals Are Trickling In for 2012 Charitable Giving / Overland Park, KS

America’s billionaires gave less in 2012 than in 2011, a new Chronicle tally shows.

A new year of giving has begun, but many are curious about the sum from wealthy donors for 2012. The numbers are starting to come in -- how did last year compare to 2011? Unfortunately, and according to a summary post by the Chronicle of Philanthropy entitled “America’s Wealthiest Donors Slow Their Giving,” 2012 was not a good year for charities or a big year for donors.

In fairness, 2012 will first and foremost go down as a year of great indecisiveness, whether it was the presidential election or the deal that brought us over the fiscal cliff. But political indecisiveness gives rise to a tricky environment for charitable intentions. That said, the largest gifts by American philanthropists totaled a whopping $5.1 billion, except when you account for the fact that Warren Buffet gave away $3 billion of that total. By comparison, the largest gifts by American philanthropists totaled $2.6 billion in 2011. Without Buffet’s gifts, the 2012 total would have been $2 billion, falling under 2011’s totals.

Now, this kind of assessment isn’t an entirely fair estimate of the direction of the charitable energies of all donors. In fact, the list only accounts for the top ten public donors, thereby ignoring the many small donors who you may recognize as those not being featured on the cover of Forbes. Nevertheless, it seems to be indicative of an overall mood.

So, if 2012 was all indecision and waiting, what can we expect in terms of philanthropy for 2013 now that we’ve got some answers and direction on the tax front?

Reference: The Chronicle of Philanthropy (January 1, 2013) “America’s Wealthiest Donors Slow Their Giving”

For more information on Charitable Giving and related issues, in Overland Park, KS, please visit my website.