Pye365

10/29/2024

SLATS:

The current estate tax exemption is scheduled to sunset to pre-2017 levels at the end of 2025, creating uncertainty and challenges in designing estate plans. Spousal lifetime access trusts (SLATs) can capitalize on current federal and state estate exemption levels in case there is a shift in the current tax structure.

A SLAT is an irrevocable trust created by one spouse for the other's benefit by using the gift tax exemption to make a gift to the SLAT, naming the other spouse as the current beneficiary. Children and grandchildren may also be named as trust beneficiaries during the spouse's lifetime and will benefit after the beneficiary spouse's death. This then would allow limited access by the beneficiary spouse to the SLAT assets and offers larger flexibility for other family members.

The estate and gift tax exemption of $13,610,000 per individual allows SLATs to be a useful lifetime tax savings tool when structured correctly. It can apply to various liquid and illiquid assets, allowing them to flow to the next generation outside of the typical estate tax requirements.

10/15/2024

CTA COMPLIANCE ALERT FOR CERTAIN ESTATES

DO YOU HAVE BUSNESSES IN YOUR ESTATE PLAN? IF SO, SEE AN ESTATE LAWYER TO DETERMINE WHETHER IT IS A “REPORTING COMPANY” UNDER THE CTA.

The Corporate Transparency Act (CTA) requires certain U.S. and foreign entities that are defined as reporting companies to report beneficial owners and company applicants to FinCEN (the Department of the Treasury's Financial Crimes Enforcement Network). The CTA applies to corporations, limited liability companies, and other similar entities that are formed or registered to do business in the United States. The CTA came into effect on January 1, 2024. Existing reporting companies must file their first Beneficial Ownership Information (BOI) report within two years of the effective date of registration.

FinCEN will establish and maintain a non-public national registry of beneficial owners and company applicants of reporting companies to prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity.

These federal reporting rules have levied a significant burden on trusts and estates which tend to use a variety of entities for estate planning purposes, and related companies formed prior to and after the effective date of the CTA. Noncompliance with these reporting rules may result in significant civil and criminal penalties.

Therefore, trusts and estates that are potentially impacted by these rules should determine: (1) whether a business arrangement or entity is within the scope of the final rule and considered a reporting company, or otherwise exempt from reporting; (2) who is a beneficial owner and a company applicant; (3) how trusts are treated under the CTA; (4) the information that is required to be reported by a reporting company, beneficial owner, and company applicant; (5) the necessary due diligence that a reporting company must undertake to file a true, correct, and complete report; (6) when a report is initially due, required to be updated, or required to be corrected; (7) the potential ramifications of noncompliance; and (8) how to establish a workstream to prepare for, collect, maintain, and report information required to be reported under the CTA in an estate planning context.

Again, the factors which will determine any exemption from these filing requirements should be reviewed with your Estate Lawyer.

08/29/2024

ESTATE AWARENESS:

Estate planners and trust counsel are increasingly using trust protector provisions in trust documents to preserve the intent of the maker of the trust and resolve disputes between trustees and/or beneficiaries. Trust protector provisions are especially useful in trusts with longer terms.

However, there are variances among states as to the treatment of trust protectors. Therefore, estate planning counsel must be aware of tax and fiduciary risks in drafting the provisions to avoid costly consequences. While no state law specifically defines a trust protector's powers, there are nevertheless restrictions and consequences if the powers are not properly structured. Estate planning counsel must accordingly use caution in drafting trust agreements, identifying the trust protector's powers, and designating the extent to which a trust protector serves as a fiduciary.

Ultimately, trust protectors may oversee the operation of the trust and the actions of the trustees. In some jurisdictions, trust protectors can modify trusts, make elective distributions, change the trust's situs, and even replace a trustee. As always, use caution and proceed with experienced counsel when designing and implementing important trust provisions within your estate plan.

08/19/2024

SLATS-Right for Your Family?

The current estate tax exemption is scheduled to sunset to pre-2017 levels at the end of 2025, creating uncertainty and challenges in designing estate plans. Spousal lifetime access trusts (SLATs) can capitalize on current federal and state estate exemption levels in case there is a shift in the current estate tax situation.

Essentially, a SLAT is an irrevocable trust created by one spouse for the other's benefit by using the gift tax exemption to make a gift to the SLAT, naming the other spouse as the current beneficiary. Children and grandchildren may also be named as trust beneficiaries during the spouse's lifetime but will obviously benefit after the beneficiary spouse's death. This trust allows limited access by the beneficiary spouse to the SLAT assets and thus offers flexibility for the family.

The estate and gift tax exemption of $13,610,000 per individual allows SLATs to be a useful tool when structured correctly. It can apply to various liquid and illiquid assets, allowing them to flow to the next generation, outside of how the typical estate tax implementation was initially designed.

ALWAYS talk to an Estate Lawyer for specific details about whether a SLAT is an appropriate estate tool for you and your family.

08/15/2024

TRUST PROTECTORS-Talk with your Estate Attorney when making your Estate Plan.

Estate planners and trust counsel are increasingly using trust protector provisions in trust documents to preserve the intent of the maker of the trust and resolve disputes between trustees and/or beneficiaries. Generally, trust protector provisions are especially useful in trusts with longer terms.

Trust protectors must oversee the operation of the trust and the actions of the trustees. In some jurisdictions, trust protectors can modify trusts, make elective distributions, change the trust's situs, and replace the trustee. While no state law defines a trust protector's powers, there are restrictions and consequences if the powers are not properly structured. Therefore, estate planning counsel must use caution in drafting trust agreements, identifying the trust protector's powers, and designating the extent to which a trust protector serves as a fiduciary.

08/02/2024

SOCIAL SECURITY: KNOW THE VARIABLES

Determining the best time and best way to take Social Security benefits can make a big difference in the amount you receive over the balance of your lifetime. What is prudent, is understanding how it works and, if appropriate, running calculations prior to making your benefit decision. Here are some things to consider:

Full retirement age is quickly becoming 67. Your full Social Security retirement benefit can be claimed when you reach your target retirement age. This is age 66 for those born between 1943 and 1954. Those born after 1954 have their full retirement age increase by two months per year until full retirement age becomes 67 years old for those born in 1960 or later.

Taking it as early as 62. You may begin taking your Social Security benefit as early as age 62. But if you do so, your full retirement benefit amount will be reduced for each month you are short of your full retirement age. The Social Security Administration estimates up to a 30% reduction in your benefits if you choose to take benefits when you reach age 62.

Delaying the benefit up to age 70. After your full retirement target age, for each year you delay the start of receiving your Social Security retirement benefits (up to age 70), the benefit amount increases by approximately 8%.

Receiving survivor benefits. If a spouse dies, the surviving spouse is eligible to receive a Social Security Survivors benefit. The survivor benefit can be collected by as early as age 60. However, the benefit received is reduced for each month the survivor is short of their own full retirement age. You may not receive both a Survivor Benefit and your own Social Security retirement benefit, but you can switch from Survivor's Benefits to your own retirement benefits and vice versa.

Taxability of benefits. Up to 85% of Social Security Benefits can be taxable. This can happen when you still work or are taking taxable funds out of retirement accounts.

Life expectancy comes into the calculation. Once you start your Social Security benefits, you will receive them until you pass away. Receiving benefits at an earlier date means receiving more payments over your lifetime, but at a lower benefit amount. Delaying the start means fewer, but higher, payments during your lifetime.

Benefit reduction risk. In addition to having your benefits subject to tax, you can also have your benefits reduced. This may occur when you are not at your full retirement age, and you are also receiving wages or business income subject to Social Security tax.

Spousal benefits. Another variable to consider is the availability of receiving spousal benefits instead of receiving your own Social Security retirement benefit.

The best advice is to know how social security works long before retirement and develop a plan before you begin receiving Social Security benefits.

06/18/2024

IT'S ALL PART OF A SOUND ESTATE PLAN....

You don't need to wait until you're gone to provide resources to your family and heirs. Estate planning can involve giving now. One way to give now is to make gifts of your assets while you're still alive. For 2024, you can give up to $18,000 annually to anyone without incurring a gift tax. If you and your spouse team up, that's $36,000.

And rather than leaving $100,000 for a grandchild's college education, you can make contributions to a 529 college savings plan, which can lower your tax bill. Keep in mind that if the child's parents set up the plan, they qualify for the tax treatment. Only the creators of the account (whether the grandparents or any other party) get the tax break. Note that each child can be the beneficiary of more than one account.

You can also front-load up to five years of 529 contributions—$90,000 in 2024 per child, per individual contributor or $180,000 for couples filing jointly—without hitting IRS gift-tax rules. Please details with an Estate Lawyer and, if necessary, with a Tax Specialist as well.

04/01/2024

Common Sense Article Tips To Keep In Mind:

A number of tax audits result from preventable mistakes. Here are the five most common audit red flags—and what to do to avoid them.

02/20/2024

Family Limited Partnerships in Estate Planning

The use of a family limited partnership (FLP) in estate planning can shelter assets and reduce overall gift and estate taxes, thus providing significant asset protection and income tax savings features.

The general structure of an FLP involves a grantor transferring assets into a partnership, with the grantor serving as a general partner. The general partner then grants limited partnership shares to family members or other potential heirs/beneficiaries.

Estate planners can therefore use FLPs to achieve income tax savings by arbitraging differing income tax rates among limited partner family members. By granting income shares to family members who may be in a lower income tax bracket, the general partner can reduce overall income taxes.

02/16/2024

There is large tax break that allows you to exclude up to $250,000 ($500,000 married) in capital gains on the sale of your personal residence. But making the assumption that this gain exclusion will always keep you safe from tax can be a big mistake. Here is what you need to know:

The basics

To qualify for the capital gains tax exclusion when you sell your home, you need to pass three hurdles:

1. It's your main home. It can be a traditional home, a condo, a houseboat, or mobile home. Main home also means the place of primary residence when you own two or more homes.
2. You pass the ownership test. You must own your home during two of the past five years.
3. You pass the residency test. You must live in the home for two of the past five years.

There are some additional quirks to know about, including:

* You can pass the ownership test and the residence test at different times.
* You may only use the home gain exclusion once every two years.
* You and your spouse can be treated jointly OR separately depending on the circumstances.

02/09/2024

The SECURE Act and SECURE 2.0 contain several provisions that significantly change the planning and administration of estates and trusts.

Essentially, the SECURE Act includes substantial changes to how IRAs and qualified plans impact estate planning for retirement benefits. For example, it raised the age for required minimum distributions from age 70½ to age 72, which also applies to qualified plans, and eliminates the age limit for contributions to IRAs.

The Act also eliminates the "stretch" distributions from IRAs and qualified plans with limited exceptions. Under the new law therefore, beneficiaries must withdraw assets from an inherited account within 10 years of the owner's death, thus requiring careful planning to avoid unintended tax liability. Withdrawals cannot be stretched to an extended time of a beneficiary’s choosing.

If an IRA or retirement plan participant doesn't want to leave benefits outright to a beneficiary so named, the participant must designate a trust as the beneficiary. However, for a trust to qualify as a designated beneficiary, it needs to be a "see-through trust" that is either a "conduit trust" or an "accumulation trust."
Remember, under the SECURE Act, there is an acceleration of distributions to beneficiaries and a potential increase in taxes.

Therefore, visit with an Estate Planning attorney to “secure” the desired goals you want for your family.

01/25/2024

U.S. ECONOMY BOOMS WITH 3.3% GROWTH IN FINAL QUARTER OF 2023

The strong data shows the U.S. economy was solid in 2023 even as aggressive interest rate hikes by the Federal Reserve. This occurred alongside the continued consistent trend of decreasing inflation.