Attorney Keith McManus is the weekly featured guest on SHP Financial's Retirement Road Map show. The radio format allows for interesting discussions of financial and legal topics that concern everyone, and listeners feel included in the friendly talk. To hear episodes, just click on the titles below.
Planning for 2018 Taxes
Now is the time to look ahead to filing your taxes for 2018. It's never too early to consider ways to reduce the amount of taxes you'll owe, and you'll want to do it before the end of the year. Derek talks with Attorney Andrew Garcia about a strategy that allows you to reduce the size of your estate while providing gifts to loved ones. You may give up to $15,000 a year to anyone you choose without any tax liability to either the recipient or you as the donor. If you are married, each spouse may gift $15,000. You do have to report gifts in excess of that amount, but with no current tax obligation.
Who Should Own Your Real Estate
The ownership of your home may seem straightforward, but if you plan to leave the house to heirs as part of your estate, titling the property correctly will help your heirs avoid possible litigation and bad feelings when your estate is settled. A simple life-estate deed may look easy, but there can be serious complications. One example involves siblings who are to share in the proceeds of the sale of the house: If one has been living in the home and doesn't want to leave, eviction may not be an option if both are now owners. That's just one reason why you may want to consider having all your real estate owned by a living trust or trusts.
Getting It All Together
Don't be daunted by the prospect of meeting with an attorney to create an estate plan. At the beginning of the planning process—before your first meeting with the attorney—it's important to have a conversation with your spouse, children, or others who may eventually benefit from your estate so that all concerned know your wishes and plans. Your attorney and financial advisor can work together to guide you on what information you'll need to gather about your investments, retirement accounts, and other assets. This is also a good time to make sure the beneficiaries you've named in the past are still the people you want to benefit from your estate. With a little advance preparation, you can streamline the process of creating both your estate plan and a trust, and ensuring the trust is fully funded.
Communication Is Key
Planning for the future and that of loved ones is just as important for people of modest means as it is for the wealthy. If you've worked with an attorney to create an estate plan and one or more trusts, be sure your financial advisor knows her or his role in funding the trust. If you should become incapacitated or die, the fact of your having created a trust won't benefit your heirs if the trust is not properly funded with all the assets you want to pass on. This is a good time to be sure your financial adviser and attorney are working together to ensure your estate goes, without punishing estate taxes, to the beneficiaries you choose.
Why Do You Want an Estate Plan?
One of the many reasons it's a good idea to have an estate plan in place is to provide for an heir who may not be able to manage assets or even to provide for him- or herself. One of my clients recently passed away, leaving a grown son who has multiple challenges. But the mother had prepared in advance for his care after her death. The trust I helped her set up allowed for bypassing probate and avoiding estate taxes, which left all her assets to care for her son.
Protecting Assets from Nursing Home Costs
When planning for retirement, consider how long-term care might factor into your financial well-being. Health care could be a costly component, easily reaching $500,000 or more, but many people and their financial advisers don't plan for this potential expense in advance. They may use life estate deeds to protect assets from future nursing home costs. But life estates are subject to complex rules, so it's important to get proper legal advice about the pros and cons of that approach.
Estate Planning Should Be Multigenerational
Your estate planning, or lack of it, can affect not only your children and grandchildren but also your parents. Consider a single mom who died unexpectedly, leaving a minor child. Instead of setting up a trust, she purchased an insurance policy, naming her mother as beneficiary. While the grandmother would intend to use the money for the benefit of the minor child, should she require long-term care, the state would consider the proceeds of the insurance a countable resource. This situation can be avoided with the help of an attorney specializing in trust-based estate plans.
A Trust Can Be a Beneficiary
Does your financial advisor know about your estate plan? It's important for anyone who handles your investments to know about beneficiaries. If you have a beneficiary who is still a minor—and investment assets that are not owned by a trust for the minor's benefit—Probate Court may have to be involved. Setting up a conservatorship can be a lengthy and expensive process. To avoid this, you may want to designate a trust as beneficiary of your investment accounts.
Do Your Advisors Work Together?
If you already have a map for your retirement through a financial planner, that advisor should be in touch with your estate-planning attorney. Whether you have a sound estate plan in place or are just beginning the process of creating one, all the people who advise you on financial and legal matters should know the whole picture. For your own peace of mind and the security of your family and heirs, make sure all the planners you work with communicate.
The Massachusetts Estate Tax
A couple owning property in multiple states had been relying on advice from a financial planner in Florida who didn't know about the Massachusetts Department of Revenue Estate Tax. By putting the right trust documents in place, they saved a lot in taxes for the next generation. It's important to have a holistic financial plan and the right kind of trust.
Asset Ownership for Businesses and Individuals
Often, people do not fully understand the legal effects of how they hold title to real estate. The same holds true for business partners. There are many different legal implications and tax outcomes. Let's explore some of the best options.
Life Insurance: Help or Hindrance?
In a previous show, we saw that an estate with assets of $1 million or more is subject to both federal and Massachusetts estate taxes. Today, we're talking about life insurance. Even though its death benefit payments are not taxable, life insurance can subject an otherwise modest estate to this tax burden. Proper ownership is key.
Benefits of a trust: four things to consider
When you are planning for the way your estate will be passed down, there are four main reasons for setting up a trust: (1) avoiding the probate process (court filings, litigation, hiring attorneys) for assets you want to transfer to your heirs; (2) minimizing both federal and state estate taxes (which will provide significant savings to your heirs); (3) minimizing the significant impact of capital gains tax on your heirs' sale of an asset; (4) protecting assets for an heir (some estate plans transfer assets without protection).
Protect Your Heirs from Hefty Tax Bill
It's important to schedule a regular professional analysis of your estate plan. And right now it's more important than ever if you have a high net worth and perhaps a family business. It's very likely that estate planning laws will be changing at the end of 2016, which means that tax advantages that are available right now for family-owned businesses will disappear when the new law goes into effect.
You've Created a Trust.
Now What Do You Do with It?
Often when people create trusts, they and their attorneys neglect to move assets into the trust. That's one reason why it's important to have an experienced estate attorney perform a regular review of your estate plan, including any trusts.
Types of Trusts, and Why
You Should Have One
Trusts are not just for the wealthy. We define both revocable and irrevocable trusts; talk about the reasons to create them; and discuss situations in which they might best be used.