Overland Park Attorney

Avoid These Common Estate Planning Mistakes

The most common estate planning mistake may surprise you. "The mistake actually isn't part of the will and trust," said Dan Prebish, head of life services events at Wells Fargo Advisors, based in St. Louis. "It actually has to do with beneficiary designation." Prebish said people sometimes fail to designate who will gain control of various assets upon one's death. "It's not uncommon to find that someone still had their ex-spouse named," as the one to receive control of the asset, he added.

According to thestreet.com's article, "How to Avoid the Most Common Estate Planning Mistake," addressing and fixing one of the most common estate planning mistakes is relatively simple.

When you change the beneficiary on a retirement account, the update can be as easy as filling out a form. But it's the communication with your heirs that's key, especially since estate planning isn't the most enjoyable topic to discuss.

Surprises are what cause hurt feelings and even litigation. As a result, you need to figure out a way to explain the estate planning changes to your children or heirs. The starting point to any successful estate plan is a will, which is a legal document that details which heirs are to receive which assets or properties you own.

Online programs can be helpful, but user error is typically how things go wrong when drafting wills without the help of an attorney.

Another factor is taxes. A person who has a total estate of less than $5.45 million in 2016 won't pay any federal estate tax, but above that, it's a 40% flat rate (the threshold for the federal estate tax was raised a bit for 2016 from $5.43 million in 2015.).

All the same, federal estate taxes generally won't be a concern for most Americans because one would need an estate worth over $5.45 million in order for the federal estate tax to apply.

Each of us has a lifetime exemption up to that threshold. However, you should keep in mind that individual states have different thresholds. For example, some states have thresholds that are only in the six figures, which may affect more people.

Talk to a qualified estate planning attorney to draft your comprehensive estate plan. Don't be tempted to go to the Internet and try it yourself.

If you want to learn more about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

Reference: thestreet.com (October 31, 2015) "How to Avoid the Most Common Estate Planning Mistake"

 

 

Giving Up a Million Dollar Inheritance?

If you stand to inherit millions of dollars, the first thought to cross your mind is most likely not going to be that you should give it up. That will not cross most people's minds at all. However, in some cases, giving up the inheritance is the wisest course of action.

If you are the beneficiary of a wealthy person's IRA, you might be the heir to millions of dollars. Most people would be foolish to give up any claim to that IRA, legally known as "disclaiming" it.

But what if you are already wealthy?

If you are already in a high income tax bracket, when you inherit an IRA you will have to take a required minimum disbursement every year and pay income tax on it at your tax rate.

On the other hand, what if another family member, such as a child, could inherit the IRA instead and pay a lower tax rate? In that case, it would make financial sense for you to disclaim the IRA.

This consideration was explained by Kiplinger's Retirement Report in a recent article titled "Surprising Reasons You Might Want to Give Up a Multi-Million-Dollar Inheritance."

The article mentions a few other reasons you might consider disclaiming an IRA, such as for estate tax purposes or out of a sense of charity.  The key is to disclaim an inheritance correctly, if that is the decision you make.

For example, you will need to do so in writing within a small window of time. Also, you cannot take any benefit from the IRA, or any other inheritance you might want to disclaim, before you disclaim it.

As the article also mentions, you should talk to an estate planning attorney about disclaiming an inheritance. He or she can help ensure that you are doing the right thing in disclaiming and, if yes, that you are doing so properly.

If you want to learn more about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

Reference: Kiplinger's Retirement Report (August, 2015) "Surprising Reasons You Might Want to Give Up a Multi-Million-Dollar Inheritance."

 

Saving Estate Tax Filing Fees Not Always the Best Idea

The overwhelming majority of estates are not large enough to require payment of the federal estate tax and are therefore not required to file the estate tax forms. For most of them, it is wise not to waste money on any professional preparation fees for filing the forms. However, there is an important exception.

When a spouse passes away, the entire estate can be passed to the surviving spouse tax-free. If the deceased spouse's estate is worth more than $5.43 million, then an estate tax form must be filed, even though no tax will have to be paid. However, if the estate is worth less than that amount, then no estate tax form is required to be filed. Most people will therefore decline to file the form, because they do not wish to pay any fees associated with doing so. As the Albuquerque Journal points out in "Relaxed estate tax law requires warning," some surviving spouses should file the estate tax form even when the estate is less than $5.43 million.

The issue is that a surviving spouse can elect to take the deceased spouse's estate tax exemption as well as their own. Thus, the surviving spouse's estate will be able to protect twice the amount of assets. This is only possible if the estate tax form is filed and the election made on the form. What this means is that if there is a reasonable chance that the surviving spouse's eventual estate will be worth more than $5.43 million, the estate tax forms should be filed for the deceased spouse's estate. If they are not, then the surviving spouse's estate may have to pay unnecessary taxes.

If you want to learn more about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

Reference: Albuquerque Journal (July 13, 2015) "Relaxed estate tax law requires warning."

 

 

Minnesota to Cut Estate Tax?

The estate tax is not only a hot button issue in national politics, it also plays an important role in the politics of many states. One such state is Minnesota where it appears that the estate tax might be cut earlier than previously expected.

Currently Minnesota's estate tax exemption is $1.4 million and is scheduled to be increased to $2 million in 2018. Under a series of proposed tax cuts, state Republican lawmakers are expected to pass legislation that would raise the estate tax exemption to $2 million immediately and gradually raise it to $5 million by 2018.

While Democrats oppose this legislation it appears that it has the votes to pass.

The Waseca County News has more on this story in a recent article titled "Minnesota lawmakers poised to limit reach of estate tax."

While the particulars of Minnesota's estate tax are probably only interesting to people who live in Minnesota, this can serve as a useful reminder to everyone that many states have their own estate taxes apart from the federal tax.

When planning your estate it is important to plan for the state's version of the estate tax, if your state has one.

However, if you move to another state, it is equally important that you look into whether your new state has its own version of estate or inheritance tax laws.

Contact an experienced estate planning attorney in your new state and make sure your current estate plan is new state compliant.

If you want to learn more about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

 Reference: Waseca County News (April 23, 2015) "Minnesota lawmakers poised to limit reach of estate tax."

 

 

The President's Budget and Your Estate Plan

If you have an estate plan, it is very important that you monitor the progress of President Obama's latest budget. It could have major implications for your plan.

Now that President Obama has released the full details of his latest budget proposals and experts have had time to review them, details are emerging about some of the big changes that could be in store for wealthy families' estate plans if the budget proposals pass.

Forbes has a complete rundown of the proposed changes in an article titled "Obama Budget Would Upend Estate Plans."

While you will want to read the original article, here are some of the highlights:

• Reducing the estate tax exemption to 2009 levels and increasing the top tax rate.
• Reducing the lifetime gift exemption.
• Placing restrictions on grantor retained annuity trusts.
• Eliminating the step-up basis on capital gains for heirs.

President Obama has also proposed a whole host of other tax changes designed to force wealthy individuals to pay more in taxes. While not all of the President's proposals will pass Congress, many of them might.

Consequently, it is very important that you pay attention to what these tax hikes might mean for your taxes and your estate plan. If the laws change, you may need to change your estate plan as soon as you possibly can.

Be sure to consult an experienced estate planning attorney sooner rather than later.

If you want to learn more about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

 Reference: Forbes (February 5, 2015) "Obama Budget Would Upend Estate Plans."

 

 

Tom Brady Versus the Gift Tax

It seems like famous athletes are winning something all time. These men and women are often already extremely wealthy, yet they often win prizes for their achievements beyond their salaries. Rest assured there are tax consequences for them.

Did you watch this year's Super Bowl? It had one of the most thrilling and surprising endings ever.

Seattle had the ball with a few seconds left and needed only to run the ball a couple of yards to enter the end zone, win the game and make history. Despite having one of the best running backs in football, Seattle chose to pass in a much criticized play.

The result of the play was an interception by a “Cinderella story” defensive back and a victory for the New England Patriots.

Patriots quarterback, Tom Brady, was awarded the MVP trophy for the game. Along with the honor, Brady won a new truck. It turns out, however, that Brady will have to pay income and gift tax on truck.

This tale is told in a recent Forbes article titled "IRS Is Coming After Tom Brady's Super Bowl MVP Truck".

The truck is considered a taxable prize, thus Brady has to pay income tax on it. Fair enough.

Yet Brady has also stated that he is going to give the truck to teammate Malcom Butler who made the interception to seal the victory.

The problem?

Because the truck is worth more than the yearly individual gift tax exemption (i.e., $14,000), Brady will have to also pay the gift tax on the truck if he follows through with his announced intentions. Butler, however, will not have to pay tax on the truck as there are no gift tax consequences for the recipients of gifts.

Fortunately, Brady will be able to lessen the gift tax bite if he and his supermodel wife engage in “gift splitting” to permit her individual gift tax exemption to be applied against the value of the gift.

Before making any sizeable gifts, be sure to consult with an experienced estate planning attorney.

If you want to learn more about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

 Reference: Forbes (February 4, 2015) "IRS Is Coming After Tom Brady's Super Bowl MVP Truck"

 

Cutting the Massachusetts Estate Tax

When thinking about estate taxes, most people consider the federal estate tax. However, state estate taxes play an equal role in many estate plans. For that reason, it is important to make note when a state is considering changing its estate tax.

 

State estate taxes have been known to give the unwary headaches. Many non-professionals plan for the federal estate tax, but fail to account for the estate tax in their own states. This often leaves an unintended and unnecessary bill that must be paid by the estate.

 Other times, a professional estate plan is done, but the person who received the estate plan moves to another state with a different estate tax law and fails to have the estate plan remade to account for the new state's estate tax.

 If you live in Massachusetts or might someday move there, there may be good news on the horizon about the estate tax. State Representative Shawn Dooley has submitted a proposal to reduce the state's estate tax.

 The story was reported by the Sun Chronicle in "Attleboro area state rep proposes cut in Mass. estate tax."

 The proposal would achieve its goal by doubling the current estate tax exemption. While Rep. Dooley acknowledges that the state would lose revenue from the estate tax, he believes that cutting the estate tax would encourage more elderly people to stay in Massachusetts and thereby increase the state's revenue from other taxes.

 Even if you do not live in Massachusetts, let this serve as a wakeup call. States do have estate taxes that you need to account for in your estate plan.

 For information about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

 Reference: Sun Chronicle (January 13, 2015) "Attleboro area state rep proposes cut in Mass. estate tax"

 

 

Repealing the Estate Tax

The estate tax is always controversial. Some people believe strongly in it while others see it as unfair. A new bill in Congress seeks to repeal it completely.

 

It is no secret that the Republican controlled congress and President Obama are likely to have several high-profile battles in the next two years. That is inevitable whenever there is a split government in Washington.

 One issue that might cross the President's desk is repealing the estate tax as Representative Thornberry of Texas has introduced the Death Tax Repeal Act which seeks to repeal the estate, gift and generation-skipping taxes.

 Everything Lubbockin "Thornberry Introduces The Death Tax Repeal Act" reports that the bill already has 36 co-sponsors.

 Of course it is too early to predict whether this bill will pass the House of Representatives, let alone make it to President Obama's desk for his signature or a veto. However, it is never too early to let your opinions be known on this bill.

 Whether you are in favor of it or opposed, now would be a good time to let your congressman or congresswoman known what you think about this important and controversial issue.

For More information about Estate Planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

Reference: Everything Lubbock (January 10, 2015) "Thornberry Introduces The Death Tax Repeal Act"

 

 

Estate Tax in China

Over 100 nations currently have an estate or inheritance tax of some form. China is not one of them, but that might change soon as the government is considering a decade old proposal that would institute an inheritance tax.

 

In recent decades the Chinese economy has expanded greatly. As is often the case in countries that experience rapid economic expansion, most of the new wealth is concentrated in a small percentage of the population.

 Whether that is a good thing or not is debatable. Governments often react to it by imposing an estate tax, which also serves as an important source of revenue.

 Now that China is an economic power it too is considering an estate tax, as reported by Want China Timesin an article titled "Beijing said to be close to imposing inheritance tax in 2016."

 In the United States the fairness of the estate tax is a hotly contested issue. What cannot be contested, however, is that the US estate tax is much fairer than the Chinese proposal.

 

The estate tax in China would kick in when an estate is worth a mere $129,000. The heirs would also need to pay the entire tax amount in cash within 3 months or any property to be inherited would be auctioned off.

 If instituted, this proposal has the potential to cause wealthy people to flee China. Consequently, this development is something to monitor for its potential impact on the world economy, as well as China's reaction to any fleeing citizens.

 For more information about Estate Planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

 Reference: Want China Times (December 29, 2014) "Beijing said to be close to imposing inheritance tax in 2016"

 

 

States Have Estate Taxes Too

While many people worry about the federal estate tax, state estate taxes often effect far more families and individuals. Fortunately, some states are starting to decrease the impact of their estate taxes.

The federal estate tax is a big issue in every federal election cycle. People disagree greatly over what the estate tax exemption limit should be, what the estate tax rate should be and whether there should even be an estate tax at all.

Quite often accusations of class warfare are thrown around by candidates and their supporters. However, as the current federal estate tax exemption is $5 million (adjusted to $5.34 million for inflation in 2014) the reality is that it effects a very small percentage of American families.

Many states have estate tax exemptions far lower than the federal exemption. As a consequence, these state taxes effect more people.

Until 2005, a federal credit was given for any state estate tax paid, but that is no longer the case. That means that some families are paying estate taxes to both the federal and state governments on the same money.

A recent article in Kiplinger,titled "States Are Lowering Their Estate Taxes to Lure Retirees," reports that four states will lower their estate taxes in 2015 in an effort to bring wealthy families into their states.

When planning your estate it is important to remember the consequences of any estate taxes in your state. This is particularly key if you move to another state for retirement.

Do your homework and consult an experienced estate planning attorney in the new state to discuss any state estate taxes and get a fresh review of your estate planning documents while you are at it.

For more information about Estate Planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

Reference: Kiplinger (October 31, 2014) "States Are Lowering Their Estate Taxes to Lure Retirees"