Idaho Estate Planning

Large Charitable Gifts and Taxes in Idaho

Here we have another blog in our series of "greates hits". This one first appeared in July of 2011 and is still valid advice in 2013.

Giving to charity can be a very noble thing and for many of us it comes quite naturally. Unfortunately it’s also rather easy to give incorrectly, at least as far as taxes are concerned. To prevent a simple but all too common mistake, the Wall Street Journal offers a mantra: “Get the letter. Get the letter. Get the letter.”

If you are making a donation of more than $250, the charity must properly acknowledge your donation before the IRS will, and that means a letter. Indeed, the IRS is surprisingly literal about this and refuses to bend or accept other means of proof, even when people go out of their way to offer alternatives. You must have a letter written by the charity that clearly delineates the amount of the donation. Further, the letter also must affirm that no goods or services were rendered or, if there was an exchange, the letter must itemize and deduct the cost of those goods and services from the overall donation.

When it comes to any tax deduction, charitable or otherwise, remember the IRS likes to have hard answers and cold facts. Laura Peebles, a director at Deloitte Tax in Washington summed it up for the WSJ, “If you don't have the correct paperwork, there's no way to fix the problem.”

Understanding Taxes and Charitable Donations is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

Idaho Estate Planning Attorney, Mark Wight - You Tube Star!

Regular readers of our blog have probably noticed the addition of videos to some of our articles. We are excited to have these educational and promotional videos available for the public. We invite you to visit our You Tube Channel, browse the videos and let us know what you think. If you know someone who might benefit from watching one of our videos be sure to let them know about this great resource.

 

Treasure Valley Moms Know Best - Have "The Talk" With Her

Oh the dreaded “talk.” Where do you start? Who should you approach first, Mom or Dad? Experts suggest starting the money and finances “talk” with Mom.

Fidelity Investments specifically suggests that moms are the best source of open dialogue, even when it comes to the “money talk.” In fact, MarketWatch recently considered this in an article titled “In family-money talks, start with mom.”

A summary of the numbers from that article:

In the survey of 975 parents and 152 adult children, 64% of mothers said it was “not at all difficult” to start a conversation with an adult child about their finances; only 54% of fathers felt the same way. In addition, 79% of women, versus 69% of men, reported having had “comprehensive discussions” with their adult children about estate planning or wills.  The same was true of 66% of women vs. 56% of men about health and elder-care topics and 70% of women vs. 55% of men about running out of money in retirement.

Although there are many reasons why moms might be the best to approach, most of them are mere conjecture. More important, however, is the reality that senior parents really do not enjoy talking about their finances. That is understandable.

All that noted, “the talk” needs to be had, sooner rather than later. At Idaho Estate Planning, we can help. We know how to help your family get things moving forward. Call us now to schedule a consultation. Remember, good planning is no accident.

Inherited IRAs in Idaho Still Require RMDs

The different ways you inherit assets are just as varied as the assets themselves. Such is the case with an inherited IRA. When is it “yours” and how do you avoid tax issues?

The Slott Report recently addressed the consequences of when a surviving spouse inherits the IRA of their deceased spouse and both have reached age 70 ½, the age for Required Minimum Distributions (RMDs). The article titled “Inherited IRA: When do You Own It?” noted that one must be very careful.

For starters, the inheriting spouse must be the “designated” beneficiary. Assuming that is the case, what happens when your spouse dies in December and has not withdrawn the required RMD? Must you as the surviving spouse calculate your RMD on both account balances, your spouse’s and your own?

RMDs are always tricky because the penalties are steep, with a 50% penalty tax on the amount required but not taken.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we'll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

 

The LLC in Idaho - Powerful Asset Protection When Used Wisely

Business owners often focus on the tax consequences of business structure. But asset protection is a growing concern in these litigious times, leading to the rising popularity of “limited” forms of business such as the Limited Liability Company (LLC).

LLCs have a unique asset protection feature against charging orders. Maybe you have heard of these? A recent Forbes article titled “The Misunderstood Charging Order,” offers a basic explanation:

The charging order itself is not the lien; rather, the lien is what is placed by the charging order. Think of the charging order as a can of spray paint, and the paint is the lien. The charging order basically sprays the lien on the debtor/member’s interest. Stated differently, the charging order is the vehicle by which the lien is placed on the debtor/member’s interest — it is not the lien itself.

While this is a complex subject, basically a charging order is a creditor’s first and last tool to extract your interests and capital from your business (assuming they don’t try to pierce the veil). In a corporation, a charging order can allow a creditor to actually gain a debtor’s stock interests in the business. This can be disastrous. “Limited” company structures are specifically designed with charging order protection, something that could be important to you as a business owner. 

The original article goes into greater detail, but essentially the charging order protection means that while a creditor can place a lien on your LLC membership interests and claim any distributions, a creditor cannot claim the membership interest itself and sabotage the business.

While a “limited” company structure does provide a level of asset protection, keep in mind it is not a panacea. Do not just presume that a creditor will see an LLC and run away or settle for pennies on the dollar (as LLCs are often marketed), as that is rarely the case.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we'll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

Should Estate Planning Attorneys in Idaho Fire Their Unmarried Clients?

According to the U.S. Census Bureau, the divorce rate of first marriage is around 50 percent; second marriages are at 60 to 67 percent and third marriages are at 73 to 74 percent. The fact is married couples frequently disagree … even when it comes to estate planning.

Marriage counselors stay in business because of marital disharmony. Commonly, they represent both spouses and seek to find common ground in a team approach. When it comes to estate planning, however, attorneys face a potential ethical dilemma. For example, estate planning attorneys cannot favor one spouse over the other, nor can they keep the secrets of one spouse from the other spouse in the course of “dual representation.”

While there’s no sense starting trouble where there is none, nor in approaching anything in an overly legal or litigious way, sometimes spouses really do have different estate planning interests. It’s an ethical problem for the spouses and their estate planning attorney alike, as pointed out in a recent Forbes article titled “Ethics in Estate Planning for a Married Couple.” This certainly is an issue for attorneys (and their malpractice carriers) to fret about, but also for their clients to understand and appreciate. 

Indeed, at certain junctures it might be necessary for spouses to even engage separate counsel to wrangle their way through an estate planning impasse. This happens many times with prenuptial and postnuptial agreements, but in other instances as well.

Do you not need separate counsel? Great! Still, take a moment to read the Forbes article about potential hazards.  Above all, if you choose “dual representation,” make sure you both truly are represented – and included in all attorney-client communications.

For more information on this and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

Idahoans Beware of the Time Traveling IRS

Why wouldn’t you file a gift tax return if you made a taxable gift? Well, for a lot of people, the answer might be “I didn’t know it was required.” But, in this case, Redstone argues the transfer wasn’t gift, but rather the result of an “intra-family lawsuit” and thus “an ordinary business transaction.”

So, how long does (or can) the IRS scour your financial history to find taxable gifts? Well, it seems they do (or can) go back some 41 years. Whether you are a billionaire or a regular “Joe,” this case is worth watching.

You can get the high points of the case from a recent Bloomberg article titled “Billionaire Redstone Challenges IRS on Tax for 1972 Gift.” Normally the IRS is bound by a statute of limitations set to about three years. However, an exception to this rule includes the failure to file a tax return like the allegedly missing gift tax return of Mr. Redstone.

Apparently, the difficulty arose over certain shares of National Amusements Inc., and a family lawsuit resulting in a “transfer” of shares. The IRS is now calling that “transfer” a “gift” with $1.1 million in taxes, penalties, and interest due and owing.

According to Richard Behrendt, a former estate and gift tax auditor turned director of estate planning, “This is unheard of… I can’t remember ever hearing of anybody going back 41 years to raise an issue. It’s really unprecedented in my experience.”

Note: Mr. Redstone may have become a target, given the fact he is the chairman of both Viacom and CBS, not to mention National Amusements and all the related subsidiaries of the three. Reportedly, Mr. Redstone is worth approximately $4.9 billion. Nevertheless, this 41-year-look-back is a troublesome precedent.

The take-away (even if you have a smaller fortune) is that timely filing of an accurate gift tax return will start the clock running on a three-year statute of limitations. If no gift tax return is filed, the statute does not apply. Thus, if a taxpayer fails to file a gift tax return, the IRS can pursue you indefinitely.

For more information on this and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

Your IRA Can Benefit Your Favorite Idaho Charity

One thing you should never forget about your IRA – even though you make contributions with pre-tax dollars, and once inside these accounts your money grows tax-free, the government is counting on getting their share of tax revenue from you at some point. Which is why only those over age 70-1/2 are eligible to make tax-free transfers (of no more than $100,000) from IRA funds directly to charity. By limiting eligibility and capping the transfer amount, the government limits their exposure to lost revenue.

So, why might you want to utilize this IRA-to-Charity strategy? A Charitable IRA Rollover lets you give to your favorite charity while avoiding taxes on IRA distributions. Consequently, this is a very popular win-win strategy for taxpayers who have accumulated a lot of money in their IRAs, but don’t need the money to live one – and would rather be “voluntary philanthropists” as opposed to “involuntary philanthropists.”

A recent Kiplinger article titled “Who Can Transfer IRA Funds to Charity?” explains the ins and outs of Charitable IRA Rollovers. If you think this strategy would be appropriate for you, beware. There are strict rules governing the proper execution of these transfers, as well as their ultimate tax-treatment.

While Congress generally approves the use of this strategy on a year-by-year basis, the good news is that they already approved it for this year. This means you should have plenty of time to plan if you’d like to make a charitable transfer this year.

For more information on IRAs and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

If You Think You Have No Heirs - You Will Be "Escheated" In The End

Estate planning is not a do-it-yourself endeavor; there are plenty of opportunities to make costly mistakes. The biggest mistake is having no estate plan. Why? Because your life’s work may escheat to your state’s treasury by default.

At the very least, a proper will can avoid legal landmines like the escheat rule.

Escheat is the principle that there is no such thing as estate-limbo. Basically, an estate can sit in limbo for only so long before it gets swallowed up by the state where the decedent last resided. Consider the case of Roman Blum in New York, as reported in a recent Forbes article titled “N.Y. State Could Get $40 Million From Man Who Died Without A Will.” You can read all of the details in the original article, but Mr. Blum likely did not intend the State of New York to benefit from his life’s work as a real estate developer.

Here are the lessons to take away from this case:

1. Plan for your loved ones. If you don’t make at least a basic will, your state’s laws of intestacy may apply. To see what would happen in your state, visit the free, interactive website mystatewill.com.
2. Review beneficiary forms. Many assets are transferred via designations on beneficiary forms – from your retirement accounts to life insurance and even bank accounts. Review these forms regularly, and be sure to keep them up-to-date.
3. Benefit charities. Some people refer to this as the “bomb” clause, stating that should your entire family be wiped out in a single incident, your assets should be distributed to specific charities.
4. Sign documents to protect yourself. Someone needs to make important decisions for you when you cannot do so for yourself. With legal documents like health care directives and powers of attorney you can appoint those you must trust to act on your behalf.
5. Make documents accessible. Make sure your legal documents can be found. It won’t matter how many documents you’ve signed if no one can find them!
6. Don’t procrastinate. Apparently, when Mr. Blum was ailing, he had finally agreed to sign the necessary documents, but passed away before getting it done.

For more information on this and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.

Mother's Day Special - Helping Parents Prepare for Their Future

Another oldie but goodie from January 2011 made more timely by the celebration of Mother's Day today. Our Moms (and Dads) deserve our attention when it comes to their potential long term care needs.

There is a very good chance that you or someone you know is taking care of elderly parents now or looking at that possibility in the near future. In 2008 a USA TODAY/ABC News/Gallup Poll of baby boomers found that 41% who had a living parent were providing care for them — either financial help, personal care or both — and 8% of boomers said their parents had moved in with them.

Of those who were not caring for an aging parent, 37% said they expected to do so in the future. About half said they were concerned about being able to provide such care.

 If financial planning and long term care planning have not been done previous to the need for care, the burden falls on the caregiving family member. Decisions about how care will be paid for, who will be responsible for managing the estate as well as how the long term care will be given can cause stress and contention among family members.

It is best for parents and all family members to be involved in planning for future financial needs. The financial resources being used today could change drastically with the occurrence of a stroke, illness or onset of dementia. In order to plan financially for long term care, you need to know what the costs are now and what they will be in the future.

Every year MetLife does a survey of long term care costs. Their 2010 survey shows that the average daily rate for private nursing home is $229 which is up from $219 in 2009. Assisted living monthly base rate cost rose to $3,293 in 2010 from $3131 in 2009. Home health aides average $21 an hour.

Planning financial needs can be very difficult, considering you do not know when long term care will be required or how long it will be needed. Staying in the home for care will require professional home care assistance, travel accommodations to doctor appointments, help with shopping, meals, medical supplies and medication and possibly a 24-hour attendant. Even if a family member is doing most of the care, in most cases professional care will eventually be required or a move to a nursing home facility will be necessary.

When evaluating present income and assets consider how they would work for future needs. Consider the following:

• Care options
• Long Term Care Costs
• Long Term Care Insurance
• Home Care Costs
• Medicaid Planning
• VA Benefits & Planning
• Legal Documents – Estate Planning 

For more information on this and other estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.