Web Link: The (Only) 3 Reasons You Should Have an Irrevocable Trust
Downloadable PDF: The (Only) 3 Reasons You Should Have an Irrevocable Trust
Category: Tax Issues
You Don’t Really Want an Asset Protection Trust
I get a lot of calls from people asking if I can set up an Asset Protection Trust for them. These people usually owe taxes or child support, are contemplating divorce, have recently been the responsible party in an accident or injury to someone else, or anticipate their risky business practices will lead to lawsuits in the future. Despite what they may think, most people in these situations do not want their property owned by an Asset Protection Trust. Asset Protection Trusts are permitted and created in a handful of states (currently 16) such as Delaware, Nevada, Ohio, Alaska and Rhode Island. Trusts created in other states do not have the same level of protection. The idea is that you
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Last Minutes Gifts and Transfers for 2018
Congratulations, you made it through Christmas / Hanukkah / Kwanza, despite the fact you were seated next to your anti-vaxxer cousin who tried to explain to you in two syllable words how the earth actually is flat. All nieces and nephews have been given your gifts (likely a sweater instead of the cool toy they desperately needed to show off to fit in on the school bus), all dishes are cleaned, and all the leftovers have been thrown out unless you are a bachelor. BUT WAIT!! You haven’t wrapped up the Holidays until you make a complete drunken fool of yourself on Snapchat slurring Old Anzine (it’s pronounced “Auld Lang Syne” in Scotland for some reason) and have made the
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When More Money Actually Is More Problems
People let’s get over it: More money usually isn’t more problems. And if it happens to lead to more problems it is usually the kind of problems you want (I have never heard a man say that he wanted a slower Ferrari, or a woman complain that her gold and diamond tennis bracelet were too big, but I suppose it is possible). HOWEVER, there actually are a few circumstances where I can say that too much money actually does cause problems: Whenever a cliff tax is involved. As a rule of nature, cliffs only effect people when they fall off of them, but many people face financial cliffs without knowing about them and, in the dark of night, fall
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5 Reasons UTMA Accounts Are Bad
Parents and grandparents sometimes look for easy ways to give money to younger family members. The challenge arises when the recipient is a minor (minors cannot own property in their own name until 18, with some exceptions) and when the donor wants to minimize legal fees. A Uniform Transfer to Minors Act [“UTMA”] account, which leaves funds to the child when he/she turns 21, used to be viewed as an appropriate way to leave funds to a minor now that would be paid out later when he/she reached a more mature age. UTMAs are inexpensive: You only need to set up the account at a financial institution, name an adult custodian for the account, and let the custodian buy a
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UTMA Accounts: The Good, Bad and Ugly
Uniform Transfer to Minors Act accounts allow a person to leave funds to a minor beneficiary without a court’s interference. In general, minors are not legally able to own property. If a minor comes into possession of a bank or investment account or proceeds from a life insurance policy or retirement plan, a court may have to appoint a guardian over the property. UTMA accounts sidestep this requirement by naming a custodian over the funds: the custodian oversees and invests the funds until the minor turns 21 years old. However, just because UTMAs avoid court oversight, does not mean they are devoid of other problems: Poor Investment Decisions: A custodian who invests the funds poorly relies on state
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5 Special Provisions You Should Add to Your Will
At some level, American Wills have not changed much in the last 200 years: Just like in old-timey England you need to (1) state who gets what, particularly anything left-over (your residuary estate), (2) who shall manage your estate’s affairs (your Executor), (3) you need to sign your Will or have someone do it for you in your presence with your permission if you don’t do so yourself, and (4) you need two disinterested witnesses who sign your Will in your presence as you state it is your Will. However, there are a few modern developments and government programs that justify adding the following provisions to even the most routine Wills: Contingent Ownership of a 529 Plan: If you
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IRAs v. Roths? Choose the “Absolute Benefit”
No one knows their financial future with certainty, but when given the choice, I almost always suggest taking a sure thing now (an “Absolute Benefit”) over risking an uncertain future (an “Uncertain Benefit”). In this regard, I tell all of my clients to take a tax deduction now and invest in a tax deductible IRA or 401(k) instead of contributing to a Roth IRA or Roth 401(k) plan, in order to optimize the certainty of income tax savings. Remember that you take an immediate income tax deduction on a 401(k) or most traditional IRA contributions; you only pay taxes when you withdraw funds (usually after you are retired, and your tax bracket is lower). In contrast, Roth accounts require
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How a Grandparent Should Gift Money to a New York 529 Plan
Funding a grandchild’s college education can be a beast: The amount of money that may have paid for your child’s four year undergraduate education may only pay for one year’s worth of tuition for your grandchild. This coupled with increasing housing costs and other relentless modern-day living expenses, make it hard for your children to adequately fund a 529 Plan to pay for your grandchildren’s college education. Here are a few ownership and funding choices a grandparent may want to consider when funding a 529 Plan for a grandchild: Open a 529 Plan as the Owner: Funding a 529 Plan is unlike most gifts. For most transfers, once you make a gift you have no way to get
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Minimizing Capital Gains Taxes: Being Conscious of Cost Basis
Of all the taxes that get reported by the press, capital gains taxes get the least exposure despite the significant impact they have on Americans. Yes, income taxes affect everyone who has ever received a paycheck, and estate taxes are in the news all the time (even though less than 6,000 estates owed federal estate taxes in 2015). But it is capital gains taxes which are so often paid when they could have been avoided, capital gains taxes which get paid no matter what your income is, and capital gains taxes which may substitute estate taxes as government’s significant source of revenue if the estate tax is repealed by the in-coming Trump Administration and Republican Congress – and they will
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