Articles Posted in Estate Planning

One of the biggest stories of 2017 is the new legislation that passed in December that drastically changed the government’s tax code. With such sweeping new changes, it is more important than ever to make sure that your estate plan is as comprehensive as possible and still addresses your need effectively. Some of the major changes many individuals with existing estate plans need to worry about are discussed below.

Estate Tax

One aspect of the bill that has a significant impact on estate planning approaches and portfolios is how the estate tax was handled. In essence, the estate tax threshold has doubled. In the past, the exemption hovered around five million dollars for individuals and roughly double that for couples. Now, the exemption has been increased to nearly eleven million dollars for an individual and double that for a couple. As in the past, the exemption threshold is tied to inflation and will continue to increase each year.

We have recently written about various estate planning mechanisms that can enable you to pay for a young person’s college tuition. If you are interested in making those types of arrangements, it is important to understand how they might affect your estate plan. A college savings plan could become an important part of your comprehensive estate planning strategy.

The Basics

College savings plans, or 529 plans, come in a variety of shapes. There are many characteristics that you need to consider when determining the plan that is right for you. One of the most popular 529 plans is the prepaid tuition plan. With this type of plan, you make cash contributions to an account that invests that money and gains interest over the life of the account. The earnings the account makes are tax-free so long as they are used for qualifying expenses related to higher education.

Most people want to help their family members have everything they need. In fact, one of the main reasons to create a comprehensive estate plan is to make sure that you are able to distribute your assets in a way that provides the most security for your beneficiaries. During our lives, there are times when we have family members in need and may be in a position to help them. If we choose to do so with a loan, it is important that the details of that loan are written down and thoroughly understood by all parties involved in the transaction. Otherwise, there could be potential problems when it comes to administering your estate.

Pitfalls of Loans

One of the biggest problems with loans happens when the lender passes away, often unexpectedly. If there is an outstanding loan to a friend or family member, especially one that may also be a beneficiary, there is likely to be some disagreement over the terms of various documents within the estate plan.

There are many different assets that combine to form your overall estate, and there are many different options when it comes to protecting those assets. Your estate can include real estate, stocks, copyrights, bonds, vehicles, and many other types of property. Your estate value also includes the cash you have on hand. In today’s world, it is not uncommon for high-value estates to be low on cash. While the estate itself may be worth a great deal because of many of the holdings within the estate, there is often a lack of ready cash to take care of important expenses like funeral costs or even state and/or federal estate taxes. If you find yourself in that position, a second-to-die life insurance policy could be an important part of your estate planning toolkit.

Benefits

A second-to-die life insurance policy has many benefits for many different types of families. However, they can be especially useful in situations where there is a large estate involved. With new legislation, the federal estate tax exemption has doubled and a lot more people do not have to worry about owing the estate tax as the exemption for an individual has been raised to around $11 million and for a couple to around $22 million. The exemption for New York’s state-level estate tax is currently at $5,250,000. Only estates valued over these amounts will be subject to the estate tax.

Unfortunately, the old adage that death and taxes are unavoidable is true. Unfortunately, they are also both closely related. For individuals with estates that are subject to a federal and/or a state-level estate tax, there exists the possibility of being double taxed if you maintain a residence in more than one state. Unfortunately, this is all-too-common of an occurrence. A comprehensive approach to estate planning can help avoid this unpleasant surprise.

How It Happens

Double taxation typically occurs in situations where individuals have multiple properties spread across different states. It is not uncommon for an individual to have a home in New York and another home in, say, Florida. Potentially, the second home could be even closer – like Pennsylvania. Wherever your multiple residences are, you need to be aware of the potential tax consequences of maintaining property in various states.

Millions of senior citizens will soon find out just how high their Medicare Part B premiums will be in 2018 and whether or not their cost of living increases from Social Security will be able to help offset those adjustments. Unfortunately, many low income seniors may be due for some especially bad news as the board of trustees of Medicare are likely to ask for a premium increase consistent with the expected cost of living adjustment from Social Security, leaving may struggling to better their current situation.

According to reports, the Social Security Administration is poised to increase monthly benefits by 2.2 percent, a raise from an average monthly allowance from $1,360 to $1,390. Although the increase is not dramatic, it is much higher than the miniscule 0.3 cost of living adjustment given last year. Those cost of living increases from the Social Security Administration are important because they have a direct impact on whether or not Medicare can increase premiums.

Under the law, Medicare’s board of trustees cannot allow any premium increases that would effectively decrease the amount of benefits individuals would receive from Social Security. While seniors did not see any increases in their Medicare Part B premiums over the past few years, this was because there was no corresponding increase in Social Security benefits.