Gifting

Friday, May 20, 2011

Recent Press Coverage of Estate Planning (May 20, 2011)

Kelley Greene and Jessica Silver-Greenberg of the Wall Street Journal report that as baby boomers enter retirement, abuse of documents known as financial powers of attorney is increasing. According to the article, it takes careful planning to bulletproof these legal documents and improve the chances that banks and other financial institutions will honor them. See Power Grab! (May 14, 2011).

Deborah L. Jacobs of Forbes writes that estate planning affects women more profoundly than men, in large part because they usually outlive their spouses and have lower lifetime earnings. Without proper estate planning, women are far more likely to see their living standards compromised in retirement. For these reasons, Jacobs offers a list of estate planning questions every woman should be able to answer. See Estate Planning for Women (And the Men Who Love Them) (May 19, 2011).

Rob Clarfeld of Forbes provides several reasons why do-it-yourself estate planning is a bad idea, pointing out, for example, that legal requirements for a valid will vary from state to state. He notes that people who do their own legal planning may think everything is fine, but after their death their family and loved ones have to deal with the consequences of an inadequate estate plan. See Do It Yourself Estate Planning – A Uniquely Bad Idea! (May 17, 2011).

Paul Sullivan of the New York Times reports that the wealthy are hesitant to take advantage of unusually high gift tax exemptions, in part because they don’t want to give their money away in case they need it later, and in part because they don’t want to take away their children’s incentive to work. Some are building incentive provisions into trusts, such as income-matching distributions, but those have potential downsides too. See Wealthy Hesitate to Take a Break on Estate Taxes (May 13, 2011).

Friday, May 06, 2011

Recent Press Coverage of Estate Planning (May 6, 2011)

Arden Dale of the Wall Street Journal reports that fewer people may owe federal estate taxes because of the high federal exemption level, but an increasing number may be paying state estate taxes. Some states, such as Connecticut, are attempting to lower their estate tax threshold to collect more in estate taxes. See Some States Push for More Estate Taxes (Apr. 29, 2011).

Kelly Greene of the Wall Street Journal writes about ways to use the increased gift tax exemption to pay the education expenses of children and grandchildren. Some grandparents are setting aside money using the current high gift tax exemption to create common trusts for infants and toddlers, whereby grandchildren can in the future access the trust for college costs. See Paying Grandkids’ College Bill (Apr. 30, 2011).

Tuesday, March 08, 2011

NEET Tips

NEET Tips answers questions posed online to the NEET website

What are some last minute estate planning options?

Provided the person is still competent, traditional estate planning can be done on an expedited basis. Some attorneys are willing to turn around an estate plan, including funding of trusts, within a few days, although usually at a premium to the attorney’s standard rates. Other options include using the annual gift exclusion to make cash gifts to any number of people, and if the person is married, gift splitting should be under consideration. Also in the gifting area, payments for a family member or friend’s medical expenses or tuition payments would also be tax free, provided the payments are qualified and made directly to the institution. Gifts to charitable organizations should also be considered.

If the person is not competent, these options are probably not be available unless the person has completed a durable power of attorney for finances that specifically authorizes an agent to make gifts on behalf of the principal. In Vermont, an agent may not make a will on behalf of the principal, but there is no similar prohibition on making a trust, provided the power of attorney specifically authorizes it.

Other options may exist, but would require speaking to an estate planning attorney regarding the specifics of the situation.

Wednesday, March 02, 2011

NEET Tips

NEET Tips answers questions posed online to the NEET website

What are some creative ways to get around the gift tax?

With the reunification of the estate and gift tax rates, an individual may, under current law, give $5 million in lifetime gifts (a married couple may give $10 million) before gift taxes become due. Few people need to exceed that amount, but if you see a need to give more, or you don’t want to reduce your estate tax exemption amount, here are some opportunities in the existing gift tax laws that allow substantial tax-free gift giving to family members, friends and charitable organizations.

First, consider the annual gift tax exclusion amount of $13,000 per person, to any number of people you choose. Couples may give $26,000, and if a couple is making gifts to a child and spouse, the amount doubles to $52,000 per year.

Second, consider the gift tax exclusion for education and medical payments made directly to the provider. You can give an unlimited amount of qualified payments for tuition and medical expenses, including medical insurance.

Third, consider gifts to public charities or private foundations.

Fourth, if married, consider making gifts to your spouse. You might consider this if your property is separately owned, and one spouse’s net worth is below the Vermont or federal estate tax exemption amount, while the other spouse’s exceeds the state or federal exemption amount and thus would be subject to tax if they were the surviving spouse.

For more information on making gifts, see the NEET articles:

Giving Gifts

Creative Ways to Pay for Education

Friday, February 18, 2011

Press Coverage of Estate Planning this Week (February 18, 2011)

Carla Fried of the New York Times reviews how the new estate tax laws affect lifetime gifts. Because federal gift taxes are now closely aligned with federal estate taxes, many parents will find that it makes sense to give gifts during their lifetime rather than provide an inheritance after their death. This is particularly relevant  during the next two years when the gift exemption is relatively high. See Estate and Gift Rules: Some Clarity for Now (Feb. 12, 2011).

Ashlea Ebeling of Forbes writes about states that have a separate estate or inheritance tax aside from the federal estate tax. The situation is constantly in flux, with states adopting or amending their estate tax laws every year. If you are planning on taking estate taxes into consideration when planning on where to retire, the advice is “prepare for the worst, and hope for the best.” See More States Want to Tax Your Estate (Feb. 15, 2011).

Christine Benz of Morningstar advises on steps to take regarding your IRAs in the context of estate planning. Recommendations include getting professional advice when naming beneficiaries, considering a charity as a beneficiary, and contemplating a conversion from a traditional IRA to a Roth IRA if you don’t expect to need the money during your lifetime. See Dos and Don’ts for Leaving IRA Assets to Your Loved Ones (Feb. 17, 2011).

Friday, January 28, 2011

Press Coverage of Estate Planning this Week (January 28, 2011)

Deborah L. Jacobs of Forbes reviews new tax breaks, portability provisions and when trusts make sense under the new estate planning laws passed in December. See Married, With Assets (Jan. 27, 2011).

Joseph A. Giannone of Reuters points out that the rich have a rare opportunity to pass along millions of dollars to their children because of the re-uniting of the gift tax with the estate tax exemption level. But the current law expires at the end of 2012, so the opportunity may not last long. See U.S. Rich Get 2-Year Window on Gifts to Heirs (Jan. 27, 2011).

Ashlea Eberling of Forbes discusses how to go about writing your first estate plan, covering basic wills, advance directives, naming a guardian, beneficiary designations, and considerations for business owners. See How to Write Your First Estate Plan (Jan. 26, 2011).

Monday, January 24, 2011

NEET Tips

NEET Tips answers questions posed online to the NEET website

What is Gift Splitting?

When a married person makes a gift to a person other than his or her spouse, both spouses may elect to treat the gift as though it had been made one-half by each of them. This allows a donor to make a gift of double the annual exclusion amount ($13,000 in 2011), if their spouse consents.

There are some rules. First, both spouses must be a citizen or resident of the United States. Second, the couple must be married at the time of the gift and the consenting spouse may not remarry during the remainder of the calendar year. Third, an election to split a gift applies to all gifts during the calendar year when the gift was made. In other words, spouses may not pick and choose which gifts made during the year will be treated as split gifts and which will not. The spouse’s consent to splitting gifts is made on a gift tax return that is due by April 15 of the year following the year in which the gift was made.

Friday, October 22, 2010

Press Coverage of Estate Planning this Week (October 22, 2010)

Deborah L. Jacobs of the New York Times discusses the benefits of passing your residence to your children while you are still alive. Additionally, because gift taxes might be an issue, she recommends four strategies for minimizing or avoiding gift taxes on the transfer, including giving partial interests, using a grantor trust, creating a qualified personal residence trust (QPRT), and putting real estate into an LLC or other legal entity. See Leave the Children the House, Without a Hefty Tax Bill (Oct. 20, 2010).

Anne Tergesen of the Wall Street Journal writes about grantor retained annuity trusts (GRAT) and why low interest rates and depressed real estate values make this estate planning tool particularly timely. Congress has recently discussed tightening restrictions on GRATs, providing further incentive to consider a GRAT before new laws make them less appealing. See Hurry Up and Fund That Trust (Oct. 16, 2010).

Friday, October 15, 2010

Press Coverage of Estate Planning this Week (October 15, 2010)

Arden Dale of the Wall Street Journal points out that heirs and estate planners do not always know what is in a decedent’s estate, which can lead to disappointment and additional administration costs. The lack of a full accounting can be caused by the decedent not providing all asset information to the attorney, lack of updated information when assets are acquired or sold, and failure to communicate among attorneys and financial advisors, among other reasons. See Estate Planning: It’s an Art, Not a Science (Oct. 12, 2010).

Ashlea Eberling of Forbes notes that some wealthy elderly people are trying to capitalize on 2010 being a good year to make gifts, given the relatively low 35 percent gift tax rate. One drawback to making gifts now, however, would be if the gift giver died this year, when there is no estate tax. In that situation, any gift taxes paid would have proven unnecessary. To get around this, many elderly are drawing up the paperwork now to make gifts on December 31. See How to Ask Grandma for $1 Million (Oct. 8, 2010).

Timothy Burke writes in FiGuide about what to consider when lending to family members. He suggests that the loan be documented, that the loan earn interest at no less than the IRS’s Applicable Federal Rate, and that crystal clear expectations be set for the loan repayment. See 5 Things to Consider When Lending To a Family Member (Oct. 13, 2010).

Friday, September 24, 2010

Press Coverage of Estate Planning this Week (September 24, 2010)

Charles Passy of the Wall Street Journal interviewed several financial planners regarding what steps to take today given the uncertainty of the estate tax in 2011. Most advisors suggested making gifts this year to capitalize on 2010's low gift tax rate of 35 percent. Other planners advised having at least some plan in place rather than waiting for the uncertainty to clear. See What You Should Do Now (Sept. 20, 2010).

Karen Hube of Barron’s discusses passing real estate to children now rather than later, again to take advantage of this year’s low gift tax rate. Two strategies to consider, a Qualified Personal Residence Trust (QPRT) and a Family Limited Partnership (FLP), are reviewed. See Pass Along Your Real Estate Now (Sept. 18, 2010).

Anne Tergesen and Leslie Scism of the Wall Street Journal caution against selling an existing life insurance policy to raise cash, in large part because the price investors are willing to pay for life-settlement transactions has declined steeply in the past few years. See Life Insurance: Think Before You Sell Your Policy for Cash (Sept. 18, 2010).

Lauren Foster of Barron’s tells readers what an ethical will is and why it is important. Ethical wills, while not legally binding, are generally an effort to convey one’s values, not one’s valuables. In addition to discussing the benefits of ethical wills, she offers some tips on what should be included in the document. See Bequeathing Smart Strategies (Sept. 18, 2010).

Friday, September 03, 2010

Press Coverage of Estate Planning this Week (September 3, 2010)

Kelli B. Grant of SmartMoney offers six suggestions for cutting the cost of a funeral. Many families spend too much, according to the article, because they are not prepared, not informed, and in no mood to bargain. Suggestions include learning your rights when dealing with funeral homes, planning ahead to set a reasonable budget for a funeral, and shopping around for a casket. See How to Cut Funeral Costs Now (Aug. 30, 2010).

Paul Sullivan of the New York Times discusses taking advantage of 2010’s relatively low 35 percent gift tax rate in anticipation that the tax will rise next year. Because of the uncertainty, some planners are advising clients to determine a course of action on gifts now, then wait until the final weeks of this year to enact it, in light of any federal legislation that could pass between now and the beginning of 2011. See A Year to Give to Your Heirs, and Save on Taxes (Aug. 27, 2010).

Friday, April 02, 2010

Press Coverage of Estate Planning this Week (Apr. 2, 2010)

Deborah L. Jacobs of Forbes cautions that making gifts to family members and relatives during these difficult economic times must follow the same rules as other lifetime transfers, including transfers designed to reduce the size of one’s estate to avoid estate taxes. She offers advice on five gift giving approaches and what the law permits. See Five Tax-Free Gifts to Family (Mar. 26, 2010).

Friday, January 29, 2010

Press Coverage of Estate Planning this Week (Jan. 29, 2010)

Liza Horvath of The Herald of Monterey County discusses including incentives in trusts to encourage good behavior, such as a bonus upon the attainment of a college degree or gainful employment. Disincentives can also be used, for example prohibiting distributions if a beneficiary exhibits self-destructive behavior such as gambling, substance abuse or criminal activity. See Using Trusts as Incentives for Success (Jan. 25, 2010).

Tom Stemmy writes in The Capital (Annapolis, Md.) about filing gift tax returns even if no gift tax is due. He includes some examples of where things can go wrong, and tips on making gifts within the IRS guidelines. See Gift Transfers – Is Reporting to the IRS Really Necessary? (Jan. 24, 2010).

Eileen Ambrose of the Baltimore Sun recounts how the federal estate tax lapse occurred, and some of the problems it may cause for existing estate plans. See Look Out for Confusion Over End of Estate Tax (Jan. 26, 2010).

Friday, October 02, 2009

Press Coverage of Estate Planning This Week (October 2, 2009)

Janet Taylor of Auburnpub.com (Auburn, NY) writes on ways to discuss finances and estate planning with your parents, with some tips on how to start the conversation.  See Tips for That Difficult Talk (Sept. 29, 2009).

Laura Casey of the Contra Costa Times discusses the importance of naming a guardian for your children, with some tips on how to choose the right person.  See Choosing a Guardian for the Children Is a Difficult But Necessary Task (Sept. 30, 2009).

Dan Peare, Esq., writes in the Wichita Eagle that relatively low asset values, low interest rates and an anticipated rise in estate taxes makes this a good time to make gifts to the next generation.  See Now’s the Time to Think About Sharing Wealth (Oct. 1, 2009).

Kent Sepkowitz writes in Newsweek that dying at home is not as easy as it sounds for the survivors.  As a doctor, he still favors it, but you should plan to get the police involved (to record that no foul play occurred), have a doctor come by (to record that the person is indeed dead), and select an undertaker.  See Dignity in Dying (Sept. 26, 2009).

Friday, June 05, 2009

Press Coverage of Estate Planning This Week (June 5, 2009)

Tyra Pacheco of the Cape Cod Times (Hyannis, Mass.) finds that many people spend more time planning for a vacation than they do planning their estate.  Although the reasons are numerous, she lists why drafting at least a will makes sense.  See Why You Need a Will (May 31, 2009).

Stacey L. Bradford adapted a portion of her recent book "The Wall Street Journal Financial Guidebook for New Parents" to address whether you should consider setting up a trust for your children.  In a Q&A format, she addresses many of the most important questions facing parents.  See Deciding if Your Kid is Trust-Worthy (June 3, 2009).

Janet Morrissey of Fortune Magazine covers some basics in reducing the size of your estate to avoid estate taxes.  See How to Avoid the "Death Tax" (June 4, 2009).

William Edy, Esq. writes in the News-Press.com about how to leave an IRA to children to achieve tax deferred savings and protect children from taking the money out too soon for imprudent purchases.  See Elder Law: IRA Can Be Stretched to Pay Out Over Lifetime (May 31, 2009).

Friday, May 22, 2009

Press Coverage of Estate Planning This Week (May 22, 2009)

Carolyn Bigda of Money Magazine points out that the depressed economy and recent federal estate tax changes may have made your current estate plan obsolete.  She lists five important questions to ask when determining if your estate plan needs updating.  See Rethinking Your Estate Plan (May 18, 2009).

Matthew M. Wallace, Esq. writes in the Times Herald (Port Huron, Mich.) about factors to consider and questions to ask a prospective attorney if you are seeking estate planning advice.  One nugget: "Planning an estate is the equivalent of legal heart surgery. You don't go to a family doctor for heart surgery, why would you go to a general practitioner for estate planning services?"  See Planning Matters: Picking Estate Attorney Complex (May 17, 2009).

Deborah Jacobs of the New York Times includes three stories in a recent section highlighting estate planning.  First, the benefits and pitfalls of powers of attorney for finances. See Putting Your Faith in a Power of Attorney (May 21, 2009).  Second, the importance of creating a record of accounts and passwords for online financial accounts and authorizing a trusted child or friend to manage the accounts if you become incapacitated.  See When Others Need the Keys to Your Online Kingdom (May 21, 2009).  Third, the practice of adult adoption, why it's done, and what can go wrong.  See Adult Adoption a High-Stakes Means to an Inheritance (May 21, 2009).

Arden Dale of Dow Jones Newswires writes about giving away stocks as gifts.  Several factors should be considered when choosing which stocks to give, and you will need to analyze the interplay between gift taxes, estate taxes and income taxes.  See Thinking About Taxes When Giving Stock (May 18, 2009)

Friday, May 01, 2009

Press Coverage of Estate Planning This Week (May 1, 2009)

Michael G. Shinn writes in The Seattle Medium that estate planning is the most overlooked area of financial planning.  He quotes a funeral home director who claims that 80-90 percent of decedents don't have any estate planning.  See Your Money Really Matters: "An Encounter with the Undertaker" (Apr. 29, 2009).

Paul Sullivan of the New York Times writes about the basics of life insurance and disability insurance, and how they sometimes function as estate planning tools.  See Life and Disability Insurance: What You Need to Know (Apr. 29, 2009).

Kathleen M. Rehl writes in Investment News how a legacy letter, also known as an ethical will, can enhance what you leave to your children, and also be a profound experience for the writer.  See Passing on More Than Just Money (Apr. 26, 2009).

Kirk Shinkle of U.S. News and World Report discusses ways to efficiently make lifetime and testamentary gifts to those most important to you, including your pets.  See How to Give: Tips for Passing on Wealth to Kids, Your Charity, and Your Dog (Apr. 28, 2009).

Shaila Dani of the Associated Press discusses how the depressed economy makes this a good time to pass on assets to your children through gifts, intra-family loans, family limited partnerships and charitable lead trusts.  See Downturn Markes it a Good Time to Share Wealth (Apr. 26, 2009).

Friday, April 17, 2009

Press Coverage of Estate Planning This Week (April 17, 2009)

The Wall Street Journal's most recent Wealth Manager Report (Apr. 13, 2009) includes five stories focused on estate planning.  All are worth reading.  In The Mess They Left, Suzanne Barlyn gives advice on how to find a decedent's key documents, including the will or trust, financial statements, personal property memorandums and others.  In The Right Steps, Michaela Cavallaro discusses the unique problems that face blended families, where one or both spouses has children from a prior marriage. In Financial Prescription, Shelly Banjo and Kristen McNamara address estate planning in the context of a chronic illness and incapacity.  In A Time for Giving, Nate Hardcastle reviews why a low interest rate environment is an ideal time to give assets to children.  Finally, in Covering Your Assets, Mark Klimek provides a status report on Family Limited Partnerships with advice on common pitfalls to avoid.

Friday, April 10, 2009

Press Coverage of Estate Planning This Week (April 10, 2009)

Mike Spector and Anne Tergesen of the Wall Street Journal discuss the pros and cons of Intentionally Defective Grantor Trusts, which move money out of your taxable estate so that future appreciation is transferred to your heirs tax free.  Lowered asset values and low interest rates make this strategy more likely to succeed, but risks remain.  See Unusual Trusts Gain Appeal in Unusual Time (Apr. 7, 2009).

Jane Bennett Clark of Kiplinger's Personal Finance writes about the best ways to give money to children and grandchildren without violating the gift tax rules.  See Charity Begins at Home (April 2009).

Kelly Greene of the Wall Street Journal points out a law change that will allow children and others who inherit a 401(k) or other qualified plan to stretch out plan distributions based on the recipient's life expectancy.  Beginning in 2010, children will be able to roll over an inherited 401(k) into their IRA; previously only spouses could do so.  See New Tax Law Will Treat All 401(k) Heirs Equally (Apr. 4, 2009).

Friday, March 13, 2009

Press Coverage of Estate Planning This Week (March 13, 2009)

Dow Jones Newswires reporter Arden Dale writes that the volatility in the financial industry is prompting many trust beneficiaries to opt for new trustees, often moving from firms facing financial difficulties to more conservative trust companies.  The article includes some tips on what to look for when choosing an institution to manage a trust. See Moving Trusts Amid Churn in Market (Mar. 13, 2009).

Computerworld's Sharon Gaudin writes that the proliferation of online services has added a new wrinkle to an old problem: who gets access to your online accounts, including email, social networking sites and photo storage accounts after you die? One (online) company thinks it has the answer.  See Who Gets Your Facebook Page When You Die? (Mar. 11, 2009).

Kiplinger's Jane Bennett Clark reviews several ways to assist children in need while better positioning yourself for estate planning. For instance, low interest rates allow for inexpensive intra-family loans, and depressed stock markets mean you can give children your left-for-dead stocks to get future price appreciation out of your taxable estate. See Charity Begins at Home (April 2009).

The Wall Street Journal's Sue Shellenbarger writes about passing on family stories to children.  The article stresses the lasting effects such stories have, even if the child doesn't appear to grasp the full import at the time.  The article reinforces the view that estate planning can be much more than just financial planning.  See Life Stories: Children Find Meaning in Old Family Tales (Mar. 11, 2009) and also, Estate Planning or Legacy Planning? on the Articles page.

Friday, March 06, 2009

Press Coverage of Estate Planning This Week (March 6, 2009)

The Washington Post moderated an online discussion of pet trusts, with Attorney Peter King of Hauswiesner King LLP. King discussed the advantages of setting up a pet trust, what usually goes in the pet trust, and what happens to trust assets after the death of the pet, among other issues. See Advice for Pet Owners (Mar. 4, 2009).

Dow Jones Newswires reporter Arden Dale writes that passage of new estate tax legislation would make gifting sizable assets to children more popular as an estate planning strategy.  The technique fell out of favor in recent years because of the uncertainty regarding repeal of the estate tax. See Why Children May Get More Gifted (Mar. 5, 2009).

Toledo (OH) Free Press writers Nolan Baker and Mark Clair discuss the importance of maintaining your estate plan, much like you maintain your car.  The writers discuss how law changes and life changes can require updating your plan, and suggest regular estate plan checkups. See It's Time to Dust Off the Estate Plan (Mar. 6, 2009).