Tag Archive for Estate Planning

Significance Of Stepped Up Basis In Estate Planning IRC 1014

According to Internal Revenue Code Section 1014 the basis of property acquired from a decedent is the fair market value of the property at the date of the decedent’s death.

This is often referred to as stepped up basis and it is profoundly significant for U.S. taxpayers dealing with the myriad of issues surrounding estate planning or tax preferential transfer of assets. Read more

Estate Planning For American Expatriates

Retiring abroad is more popular than ever, thanks to perceptions of a better quality of life, more affordable health care, and a warmer climate.

Americans living abroad earning over $10,000 a year (or just $400 of self-employment income) are still required to file a U.S. tax return though, declaring their world wide income. This includes expats who have retired or settled permanently abroad. Read more

Stepped Up Basis In Estate Planning IRC 1014

According to Internal Revenue Code Section 1014 the basis of property acquired from a decedent is the fair market value of the property at the date of the decedent’s death.

This is often referred to as stepped up basis and it is profoundly significant for US taxpayers dealing with the myriad of issues surrounding estate planning or tax preferential transfer of assets. Read more

Good To Know… Part 1 – From Larry Stolberg, CPA, CA

Short Blog Posts In One Location…

◊ U.S. Tax withholding for Canadians
Make sure you have the correct amount withheld from US income received. Generally amounts withheld in excess of treaty rates  will not be creditable in Canada. In order to get the a refund from the IRS, you will need to file a U.S. 1040NR return and apply for an ITIN (individual taxpayer identification number) with the ITIN office.
Waiver forms such as the W8BEN should be submitted  to the payor prior to the anticipated receipt of any US income to ensure the lower treaty rate (which could be 0%, 5%, 10% or 15%) in lieu of the US IRS code withholding rate of 30%. Interest, dividends, royalties, pension are usually the types of income  that are overlooked. Read more

Start 2015 Tax Planning Now! Part 3

Tax Code Changes Create Challenges

Inheritance taxes and estate planning are a growing concern for affluent baby boomers. What are some of the major issues?

In addition to the double step-up in basis on community property discussed above, the baby boom generation will benefit from some of the most generous estate tax loopholes in history. For example, married couples have complete spousal exemption from estate and gift tax when transferring property to each other. This has not always been the case.

For 2015, every person has a lifetime net gift and estate tax exemption up to $5.43 million. Considering that the top gift and estate tax rate is 40%, this exemption represents an Read more

IRC 1014 And The Significance of Stepped Up Basis In Estate Planning

According to Internal Revenue Code Section 1014 the basis of property acquired from a decedent is the fair market value of the property at the date of the decedent’s death. This is often referred to as stepped up basis and it is profoundly significant for US taxpayers dealing with the myriad of issues surrounding estate planning or tax preferential transfer of assets.

For those of you not used to the term ‘basis’ it generally is defined as the cost or value of an investment, asset or something that is owned, given or inherited at the time it was acquired. It also refers to any investment in improvements made to the asset while you owned it. Read more

Non-Statutory Asset Protection Trusts


In the United States, there has been a malpractice crisis for the medical profession for a number of years. It has at its roots the American Trial Lawyers who advocate a position that the medical profession is not adequately regulated for physicians whose practice causes harm to their clients. Its associations vigorously contend that victims of malpractice by physicians are inadequately compensated from injury and demand that no limits can be imposed as to the amounts mandated by the jury. The insurance underwriters of medical professionals assert that large verdicts have caused them to raise premiums where they depart from economic reality. When a physician factors in the cost of insurance in terms of doing business, the risk-reward analysis in specific Read more

Estate Planning Part 3 – Old Age

TaxConnections Blog Picture After a lifetime of working, retirement sounds like it would be fun.  When you get to retirement there are lots of changes in your life and one of them should be your estate planning.  At this point your kids are grown and maybe you have grandchildren.  Reworking your will and trusts to include grandchildren and account for other changes in the family can be important.

Gifting can play a major role in your estate planning.  In Minnesota, the estate and gift exemptions are only $1M so annual gifts can be useful in keeping an estate under the $1M threshold.  A couple of kids plus spouses, plus a few grandchildren can make for a big gifting base.  In 2013 you can gift $14,000 to each person without filing a gift tax return.  If you are so inclined, you could gift $14,000 to each person and quickly reduce the assets in your estate.

Another way to change your estate planning is to change the beneficiary designations on your retirement plan accounts.  IRAs and 401ks can be a great way to skip generations in your estate planning.  When a non-spousal beneficiary receives an IRA or 401k from an estate, they are required to make minimum distributions each year.  Those minimum distributions are based on the age of the beneficiary.  A 55 year-old child that inherits an IRA will need to withdraw 3.4% each year, while a 25 year-old grandchild only has to withdraw 1.7% each year.  That can make a huge difference over time as the account grows tax free.  Each family situation is different and the needs of the family and each beneficiary can vary, but it’s important to update your estate planning at each stage of your life.

Estate Planning Part 2 – Middle Age

TaxConnections Blogger postEstate planning needs to be re-evaluated during your lifetime as your situation changes.  For middle aged taxpayers there can be significant changes to your estate planning needs.  When your kids are minors, your will should include provisions for caring for the children in case something would happen to you and your spouse.

A great way to set aside assets for minor children is to use trusts.  Trusts can have any number of provisions in them, but they commonly set aside assets that provide for the children until they reach age 25.  It’s probably not a good idea for your 15-year old kids to just inherit all the assets free and clear.  Having a trustee to keep an eye on the money until they are a bit older is probably a good idea.

Once your kids are grown and hopefully responsible adults, you might want to look at your will and trusts again.  Changing beneficiary designations is always a part of estate planning.  When the kids were younger, the beneficiary designations might have been to a trust for the benefit of the kids.  When they reach an age of maturity, you can make them the direct beneficiaries and there might be no need to include trusts in the estate planning.

Estate Planning Part 1 – Charity

TaxConnections Picture - Living Trust Estate PlanningEstate planning is very important, but it’s obviously an uncomfortable topic to discuss with the family. The sooner you address it, the more options you will have and the better off the beneficiaries will be. Let’s break this into three parts with Part 1 focusing on the charitable aspects of estate planning. Part 2 will focus on a middle aged person who maybe has kids and who has parents that might still be living. Part 3 will focus on the classic grandparents getting older and their kids are grownups, with probably some grandkids in the mix.

For taxpayers that are somewhat charitable in nature, estate planning can play an important role in their charitable giving both while they are alive and after they pass. The simplest way to give money to charity is to include them in your will. Either a specific amount or a residual amount of the estate can be given to charity. One common example is to give your beneficiaries the amount that would be tax free, and any excess assets that the estate has would go to charity. That’s simple to do and simple to understand but sometimes that is not the best solution.

For people with substantial assets and a charitable inclination, a CRUT can be a great solution. Basically there is a chunk of assets set aside for the charity and the taxpayer gets a current charity deduction (present value). When the taxpayer dies, the charity gets all the money. While the taxpayer is still alive they receive an income distribution from the CRUT so they haven’t given up the income stream during their lifetime. It’s a bit more complex to understand and there are some costs to setting up and operating a CRUT, but it can be worthwhile for people with larger estates.

Why You Need An Estate Plan, Even If You Think You Don’t Have An Estate

TaxConnections Picture - Living Trust Estate PlanningPeople often assume that an estate plan is only necessary for those with a certain level of net worth. The reality, however, is always everyone needs an estate plan, regardless of the value of the assets. There are so many reasons to establish an estate plan, none of which have any relevance to the value of your estate. Below are four good reasons:

1. To name guardians for minor children. Admittedly, there is no one better to raise your children than you. But if the unthinkable happens and you are not around to do the job, the next best thing is for you to choose who will take on the responsibility of raising your children. And if you know that there is someone you do not want raising your children, then it becomes even more important for you to express your choice of guardian. If you haven’t committed your choice of guardian in a legally valid document, then a judge in the county probate court will decide who is best to raise your children without your input.

2. To avoid the cost, time, and public nature of a probate action in the county court. If you do not decide now how you would like to transfer your assets, then the probate court will be involved in distributing your assets. Almost everything that takes place in probate court is a matter of public record and anyone can see who will receive what. Additionally, the fees due to the lawyer and the representative of your estate are established by statute and are calculated on a percentage of the GROSS value of your estate (regardless of the amount of any debt).

3. To direct the disposition of your assets to your beneficiaries upon your death. With careful estate planning, you can direct your beneficiaries’ use of your assets long after your death. You can include conditions relating to the completion of education, require a certain level responsibility, or simply hold assets until a time you decide is best for distribution. If you Read more

Estate Planning You Should Do Right Now

TaxConnections Blogger Betty Williams posts estate planningThere is one simple estate planning tool you can accomplish immediately and without having to call a lawyer-updating your beneficiary designations.

Many assets, including bank, retirement, brokerage, company benefit plan, life insurance, and 529 college accounts are passed at death via a beneficiary designation. It is easy to name the beneficiary by completing the proper form provided by the financial institution. It’s also easy to forget to turn the form in or to make sure the beneficiary you designated when the asset was acquired is still your intended beneficiary. In most cases, the beneficiary form will overrule your will, trust, and even state law so it is important to make a periodic review of your designated beneficiaries.

The Supreme Court has faced this issue on at least two occasions. In 2001, the court ruled that a decedent’s ex-wife was the legal beneficiary of his pension benefits and life insurance proceeds because the decedent failed to update the beneficiary designations after their divorce. The Court ruled that the beneficiary designations overruled the state law that would have automatically disinherited the ex-wife and so the decedent’s children from a prior marriage received nothing. Egelhoff v. Egelhoff, 532 US 141 (2001). In another matter, the Court determined that the beneficiary Read more