Creative Estate Planning for Clients No Longer Subject to the Federal Estate Tax

When Congress passed the American Taxpayer Relief Act (ATRA), roughly 99.8 percent of U.S. taxpayers became shielded from the federal estate tax (aka the "death tax"). So what does this mean for estate planning? Post-ATRA estate planning appears dramatically different than in years past. For the first time in U.S. history there is a “permanent”, inflation-adjusted and portable exemption amount that essentially excludes the extremely wealthy, from gift, estate and generation-skipping transfer (GST) tax. This is extremely important since, for the past decade, there was a great deal of uncertainty in estate planning. Prior to ATRA, there had been a phased-in repeal of the gift, estate and GST taxes, a “sunset” of that same repeal, then a temporary two-year reinstatement of the taxes, but with a $5 million exemption and a 35% top rate. After the two-year temporary reinstatement, the exemption was set to drop all the way down to $1...

29 August

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Digital Assets in Your Estate: Are You Prepared?

Posted by Bobby Feisee

in Bobby's Blog

[caption width="210" align="alignleft"] Image Courtesy of Petervan's Blog[/caption]Do you have a plan for who will manage your Facebook account, Twitter account, Ebay business, Spotify account, etc.? If you answered no, it’s okay; not many people do. The issue of what happens with “digital assets” and accounts after a loved one passes away is growing in importance with estate planners. It makes sense considering our lives are becoming more and more digitized. A recent study showed that many people value their digital assets at an average of nearly $55,000. Beyond the potential monetary value of your digital assets in your estate, there are other important issues such as privacy, security and legacy planning. It’s a sad, but true fact, that laws tend to lag behind technology, so current statutes and case law are not very helpful in addressing this issue and/or providing guidance for how to properly incorporate digital assets into...

23 August

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DOMA Decision and the Impact on Estate Planning

Posted by Bobby Feisee

in Current Events

In a groundbreaking U.S. Supreme Court decision, United States v. Windsor, the Supreme Court decided that Section 3 of the Defense of Marriage Act (i.e. DOMA) was unconstitutional. To read a summary of the decision, check out this page. Section 3 defined “marriage” to be between a man and a woman for Federal benefits. The result of Windsor is that same-sex married couples will now be treated as spouses for purposes of numerous Federal statutes. With regards to estate planning benefits, the following benefits will now be afforded to same-sex couples. (i.) Deferring income taxes where a spouse inherits a deceased spouse’s IRA or other qualified retirement plan. (ii.) Transferring wealth, either during life or at death, from one spouse to the other spouse without incurring a transfer tax. (iii.) Deferring estate taxes when a spouse passes away. The Windsor decision does not legalize same-sex marriage and it doesn’t hold that same-sex couples...

22 May

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Estate Planning Tip: Utilizing a Roth IRA to Stretch Out Tax Benefits

Posted by Bobby Feisee

in Bobby's Blog

A Roth IRA offers distinctive retirement-savings benefits since under current law, investments in this type of account can grow tax-deferred and withdrawals are tax-free. It also gives you the ability to avoid early distribution penalties on some withdrawals. If you have a significant balance in your IRA and don’t plan to tap that balance during your lifetime, you may want to consider converting your IRA to a Roth IRA since it can benefit your estate. How? Well, the contributions made to a Roth IRA have the potential to grow larger than it otherwise might under traditional distribution rules, which means you’re leaving more for your loved ones. Another major benefit is that your beneficiaries can make income-tax-free withdrawals during their lifetimes. There are some benefits to this IRA strategy, but it is not fail safe. A potential drawback to a Roth IRA is that the ability to contribute to this type...

17 May

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Importance of Having a Durable Power of Attorney

Posted by Bobby Feisee

in Bobby's Blog

This article deals with the scenario of a loved one who becomes incapacitated and therefore needs someone to execute appropriate planning of their estate. The fact is, in the absence of an estate plan, only a properly drafted General Durable Power of Attorney will afford a level of flexibility necessary to make critical decisions about an incapacitated person’s estate. In this article, I’ll talk about how the Power of Attorney plays an important role in the planning and protection process. What does a Durable Power of Attorney do? Well, this is a legal document that an individual prepares while they are mentally able to read and understand the document. The document cannot be drafted after you’ve become incapacitated. Once you become incapacitated, the document states who will be appointed an Agent (which is either individual or multiple individuals) to act on the incapacitated individual’s behalf. Think of this agent as...

14 May

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Simultaneous Death Provisions: The Law in the “DMV”

Posted by Bobby Feisee

in Bobby's Blog

In many estate plans, it is quite common for a husband to leave everything to his wife and kids. And, vice versa, a wife routinely decides to leave everything to her husband and kids. But what happens if both the husband and wife die simultaneously? Under the common law, if there was any evidence that one of the deceased individuals survived the other, even by a few seconds, then the estates would be distributed in that order. This led to many bitter inheritance battles in court. So, to address this problem, the Uniform Simultaneous Death Act was passed and applies to the “DMV” (i.e. District of Columbia, Maryland, and Virginia). The Act establishes that if two people die within 120 hours of one another, and there’s no will that expressly addresses this situation, each person is considered to have predeceased the other. This means an individual’s estate will pass down to...