Dear Mr. Premack: The Texas Legislature is in session again. Are there any pending bills that would affect the way I have done my estate planning? What should I be expecting when it comes to changes in the law? – TN
The 85th regular session of the Texas Legislature opened on January 10th and concludes on May 29th. Many bills have been filed, and many more are expected as the next few weeks pass. The legislature addresses a huge variety of issues. Since you have asked about estate planning – which could include Wills, Trusts, Probate, Powers of Attorney, Medical Directive and various taxes – well look at bills or proposals that may affect those areas.
No one likes to do estate planning, but its essential if you want to make sure that your assets go where you want them to go after your death. Each year, changes to gift and estate tax laws and other related provisions can affect your estate planning. Below, well look at the most important provisions that affect estate planning in 2017 with an eye toward guiding you to get your plan in shape.
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No change in the annual exclusion amount for gifts
The federal governments gift tax provisions theoretically apply to even the smallest of gifts. However, to avoid having everyone need to file gift tax returns, the tax laws provide for an annual exclusion that allows gifts up to a certain amount without having to pay tax or file a return. For 2017, that number once again stays at $14,000, the same as it has been for several years.
A couple of features of this annual exclusion are noteworthy. First, you can make $14,000 to as many different people as you want. So if your goal is to deplete your assets as quickly as possible, making annual gifts to children, grandchildren, and other relatives can be a good way to take money out of your taxable estate and effectively make sure that your loved ones get it rather than Uncle Sam.
Also, there are certain types of gifts that can exceed this amount without incurring tax. Most people can make unlimited gifts to their spouse, and money you spend on medical care or education for someone else isnt treated as a taxable gift if you pay the educational or medical institution directly.
Modest increase in the total exclusion amount for gift and estate tax
Even if you make gifts larger than the annual exclusion amount, you still typically wont have to pay tax right away. Thats because the US tax laws unify both the gift tax and the estate tax, providing for a single tax credit that allows people both to make taxable gifts during their lifetime and to transfer estate property to heirs free of tax up to a certain total amount. That amount climbs each year for inflation, and for 2017, the new amount will be $5.49 million. Thats up by $40,000 from what it was in 2016.
Its true that this amount is high enough to prevent most people from having to think about federal estate tax. However, keep in mind that this amount includes not only the value of any assets you own, including real estate and investments, but also the death benefit on life insurance that you owned at your death. As a result, what looks like a smaller estate right now could actually be taxable once you consider all your included assets.
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In an earlierblog, we wrote about the importance of early estate planning. Deciding to plan for your estate is the first step to avoiding costly estate planning errors. However, there are a number of other estate planning mistakes that may end up costing you and your family time and money. Retaining an attorney can help you avoid making these costly errors and give you peace of mind knowing your family will be secure in the future.
A will is the most commonly used estate planning tool. A will allows individuals to plan how their property is to be distributed after they die. However, simply creating a will alone may not be enough to accomplish your estate plans. For example, certain financial assets, such as IRAs or 401(k)s, may require you to complete additional documentation, including beneficiary designation forms, before these assets can be distributed to your children. After taking inventory of all your financial assets, including life insurance, retirement accounts, and bank accounts, your attorney can help you obtain and complete the necessary designation documents.
Another common problem that arises with estate plans is failing to make timely updates to your existing estate plan. Oftentimes, people go through the effort of creating a comprehensive estate plan and then never think about it again. As time passes,people go through a number of life events, including moving, the birth of a child, or even a second marriage. Estate plans may need to be changed to adapt to these significant life changes. They may also need occasional updates in light of ever-changing state or federal laws. Instead of filing away your will in the bottom of a drawer, make sure you keep a copy available so that you can occasionally review your estate plan and keep it up to date with necessary changes.
When making estate plans, individuals should also think about what might happen if they become ill, incapacitated, or disabled. Estate planning should also include discussing an advanced health care directive or durable power of attorney which clearly and concisely outlines your personal decisions on these matters. An advance health care directive, sometimes called a living will, sets forth your healthcare wishes in the event you are unable to communicate. A durable power of attorney gives another person the power to make medical and financial decisions on your behalf if you are unable to do so. In some cases, an individual may want to designate one person to handle their health care decisions, and another to deal with finances.
Before naming a trustee, executor, or giving someone power of attorney, make sure you have considered their ability to carry out your wishes. Giving someone else the power and authority to handle your estate or trust is a lot of responsibility. Talk to these individuals to ensure they understand what may be required. Some people may not have the time to properly carry out your estate plans, or be unwilling to take on that role.
If you have any questions about estate planning, Butterfield Schechter LLP is here to help. We will answer all your questions and make sure your estate plan will provide for your loved ones and avoid costly mistakes.Contactour office today with any questions on how we can help you succeed.
Women control more than half the personal wealth in the United States – more than $14 trillion, according to a recent study by the Bank of Montreal’s Wealth Institute – and that number is expected to rise to more than $20 trillion over the next three years. While estate planning is important for everyone, regardless of the size of their personal wealth, it becomes especially important for women, who live an average of 5 years longer than men.
To help New Mexico women protect their assets, understand their unique money management needs and make plans to fulfill their end of life wishes, New Mexico State University will host its 10th annual Estate Planning Conference for Women,Feb. 1 and Feb. 8at the Las Cruces campus.
The conference is free, but seating is limited and registration is required to attend. Lunch is provided both days, and free parking is available.
“This two-day workshop is really a candid conversation between the participants and the volunteer experts we’ve brought in to guide them,” said Robert Peterson, director of planned giving with the NMSU Foundation, which hosts the event. “They get to know one another, learn from each other and share their experiences and advice as they gain valuable tools to help them confidently work toward their money management and estate planning goals.”
Topics include legal aspects and asset protection; income and transfer taxes; charitable giving; elder law; life insurance; administration of estates and trusts; retirement income planning; and money management.
The event is co-hosted by R. Glenn Davis, an attorney with the conference’s crimson sponsor, ScottHulse PC. Other sponsors include Beasley, Mitchell amp; Co., Edward Jones, Estrada Law, the Glass family, Susan Eisen Fine Jewelry, United Capital Financial Advisers and WestStar Bank.
Smoky Glass Torgerson, an active NMSU alumna and member of the Foundation Board of Directors, said she was moved to sponsor the event on behalf of her family this year because she had such a positive experience when she attended the conference herself in 2013.
“I thought I had some knowledge of estate and financial planning,” Torgerson said. “I quickly became of aware of just how much I did not know, and just how dangerous it was to make estate planning decisions using inaccurate or incomplete information.”
She noted that many times, the family dynamic doesn’t place estate planning in the hands of women, but that can suddenly change, leaving women to seek trustworthy resources to help them make good, informed decisions.
“There is a need to know, and this conference really takes away the fear of the unknown,” Torgerson said. “We need to be active participants in our own estate planning, and this thoughtfully designed conference provides layers of information and experts carefully integrated to provide as much knowledge as possible in this short time period.”
NMSU Foundation President Andrea Tawney said the conference is a way for the university to give back to the community by providing a service that benefits women and their families. Over the conference’s 10-year history, it has brought in 120 volunteer speakers to share their knowledge and helped 380 women take an active role in their financial planning.
“Everyone needs a plan for their estate, regardless of their financial situation, but many women find the whole process intimidating or unnecessary,” Tawney said. “We’re hoping to demystify the planning process and empower more women to think about how to ensure their legacy and take care of their families.”
For more information or to register for the conference, contact Robert Peterson firstname.lastname@example.org Denise Tafoya email@example.com.
Information from NMSU
This webinar is for both the owner and successor generations to learn about estate planning tools and how to develop a plan with the help of estate planning professionals. If a business succession is involved, it is important to ensure the business assets are available in some way for the incoming business successor.
Ratner is an estate planning and elder law attorney at Bacon Wilson. He is a graduate of Babson College and holds his juris doctor from the Pennsylvania State University School of Law as well as a masters degree in business administration from Boston University School of Management (Questrom School of Business).
Participants will have the opportunity to ask questions and discuss the benefits of advanced planning. Light refreshments will be served.
The event is free, but registration is requested on the JFS website or call (413) 737-2601. The event is co-sponsored by the Massachusetts – New Hampshire chapter of the Alzheimers Association.
Other community workshops presented by JFS include Medicare: What You Need to Know, Become Bone Smart: What You Need to Know about Osteoporosis and How to Stay Socially Connected.
JFS provides a variety of programs, including behavioral health services and Jewish Life Enrichment, as well as those serving older adults and new Americans.
Nobody wants to think about the fact that they’ll die one day, but a responsible guy considers how his family and friends will suffer after he’s gone. You want them to properly mourn your passing, not spend the entire time trying to figure out your chaotic finances. When you plan for your death, you’re performing a loving act for your family as well as one that lets you retain control even after death. You don’t need to have an estate to do your estate planning. You don’t even need to have tons of assets for wills and estate planning. You don’t have to wait until you’re getting older than you are. In fact, you should start thinking about getting estate planning in order as early as in your 30s.
Consider a prenuptial agreement. When it’s time to settle an estate, a prenuptial agreement can help avoid disputes among members of a blended family. If you and your new spouse have agreed to keep your assets separate so that each of you can pass an inheritance to your own children, you need to spell out that separation in your “prenup,” your will, your living trust and any other relevant estate-planning arrangements.
Will a Trump presidency impact your estate? While not covered in depth during this election cycle, the fate of the estate tax, or “death” tax was contemplated in both candidates’ economic platform. Each candidate presented vastly different views on how to handle the death tax. Now that we know which economic platform is to be set in motion, we’ll look at how estate plans in Kansas City may be impacted by the Trump Presidency.
Elimination of the Death Tax
Donald Trump initially proposed eliminating the estate tax (or death tax as his team refers to it) in its entirety. While this may sound appealing on principle, the reality is that with the estate tax exemption currently set at $5.45 million per individual (or $10.9 million per couple), most estates are not subject to estate taxes. According to IRS records, just under 5,000 estates even paid estate taxes in 2015. When compared to the likely overall mortality rate of over 2.5 million, we can see the minimal impact of the estate tax repeal to the overall population. The change may have significant benefit to high net worth estates, though.
One wrinkle does exist as to whether the state of Kansas will follow suit. The state of Kansas currently is “tied” to the Federal threshold for determining whether an estate is subject to taxation on the state level. If the estate is under the federal threshold, then no tax is likely to be due. If Kansas continues this practice then the death tax, as we know it, may die for Kansans. Maybe not a bad thing.
Creation of a Capital Gains Tax
While Donald Trump’s tax plan calls for the repeal of the death tax, it instead creates a capital gains tax on any assets in the estate. Depending upon how his plan actually goes into effect, it may mean the elimination of the step-up in basis that normally occurs at death. Today, the step-up in basis allows the value of an appreciated asset to be calculated using the value at death instead of the value of purchase. Here is an example of how the step-up works.
Let’s say that your rich aunt purchased 5,000 shares of Cerner stock back in December of 1996 when the stock was trading around $2.00 per share and Cerner is trading at around $50 today. Using $50 as the sale price (and ignoring any stock splits) here is how the capital gains tax plays out both with the step-up in basis rule and without:
As the example shows, the imposition of the capital gains tax may have significant impact on appreciated assets. To offset this impact, the Trump plan appears to call for an exemption of the first $10 million dollars in asset value. If this is the case, then the estate tax scenario for the bulk of the population may not change. Even if there is no exemption, his representatives have indicated that Trump intends to provide an exemption for small family businesses and farms.
Impact of the Trump Tax Plan
While the elimination of the death tax will make certain aspects of estate planning easier, other aspects will become more complex. For instance, the Trump plan will require heirs to track the basis of received assets in order to report the capital gain if and when such assets are sold. This may be difficult if the asset was purchased a long ago and held over an extended period of time. Estate plans will need to look more closely at the nature of the asset and whether action should be taken during your lifetime to mitigate potential capital gains tax. Also, you may want to look at your retirement account balances to determine if opportunities exist to take advantage of certain tax benefits that may exist, especially for qualified Roth accounts.
We are still early in the process and time will tell as to what the changes actually look like. Most people are taking a wait and see approach while being ready to act once changes begin to take place after Jan. 20.
This Sponsored Column is written by Todd Rasmussen of Estate Planning KC. Rasmussen is an attorney and certified public accountant with offices in Overland Park. His firm, Estate Planning Kansas City, helps clients with their estate planning and business needs. This article is intended for informational purposes only and is not intended to render legal advice. The choice of a lawyer is an important decision and should not be made solely on the basis of this article.