11 Feb 2020
0

Bypass the SALT Deduction Limit with a Nongrantor Trust

Roger Rossmeisl, CPA
Estate Planning Briefs
Use Nongrantor Trusts to Bypass the SALT Deduction Limit

If you reside in a high-tax state, you may want to want to use nongrantor trusts to bypass the SALT deduction limit (the $10,000 federal limit on State And Local Tax deductions. The limit can significantly reduce itemized deductions if your state income and property taxes are well over $10,000. A potential strategy for avoiding the limit is to transfer interests in real estate to several nongrantor trusts, each of which enjoys its own $10,000 SALT deduction. Grantor vs. nongrantor trusts The main difference between a grantor and nongrantor trust is that a grantor trust is treated as your alter ego for tax purposes, while a nongrantor trust is treated as a separate entity. Traditionally, grantor trusts have been the vehicle of choice for estate planning purposes...

07 Feb 2020
0

Non-Deductible IRA Contributions Require Tracking

Roger Rossmeisl, CPA
Estate Planning Briefs
Non-Deductible IRA Contributions Require Tracking

If, like many people, your traditional IRA holds a mixture of deductible (after-tax) and nondeductible (pretax) contributions, it’s important to know that non-deductible IRA contributions require tracking. Why? Because the IRS treats distributions as a blend of pretax and after-tax dollars. If you treat distributions as fully taxable, you’ll end up overpaying. An example Dan, age 62, withdraws $40,000 from his traditional IRA on August 1, 2019. At the time, his IRA balance is $200,000, consisting of $50,000 in deductible contributions, $80,000 in nondeductible contributions and $70,000 in investment earnings. On December 31, 2019, the IRA’s balance is $170,000 — $200,000 minus the $40,000 distribution plus additional contributions and earnings after August 1. To ensure that his distribution is taxed correctly, Dan must calculate the portion attributable to nondeductible contributions. These are...

04 Feb 2020
0

QOFs as Part of Your Estate Planning

Roger Rossmeisl, CPA
Estate Planning Briefs
QOFs as Part of Your Estate Planning

The Tax Cuts and Jobs Act (TCJA) created a new program to encourage investment in economically distressed areas through generous tax incentives. The Qualified Opportunity Zone (QOZ) program relies on investments in Qualified Opportunity Funds (QOFs) — funds that can provide wealthy taxpayers with some new avenues for estate planning. 3 big tax benefits Investors in QOFs stand to reap three significant tax breaks: They can defer capital gains on the disposition of appreciated property by reinvesting the gains in a QOF within 180 days of disposition. The tax is deferred until the QOF investment is sold or Dec. 31, 2026, whichever is earlier. Depending on how long they hold their QOF investment, they can eliminate 10% to 15% of the tax. After 10 years, post-acquisition appreciation...

01 Feb 2020
0

Large Gifts Now Won’t Hurt Post-2025 Estates

Roger Rossmeisl, CPA
Estate Planning Briefs
Large Gifts Now Won't Hurt Post-2025 Estates

The IRS has issued final regulations that should provide comfort to taxpayers interested in making large gifts under the current gift and estate tax regime. The final regs generally adopt, with some revisions, proposed regs that the IRS released in November 2018 meaning that large gifts now won't hurt post-2025 estates. The need for clarification The Tax Cuts and Jobs Act (TCJA) temporarily doubled the gift and estate tax exemption from $5 million to $10 million for gifts made or estates of decedents dying after 12/31/17, and before 1/1/26. The exemption is adjusted annually for inflation ($11.40 million for 2019 and $11.58 million for 2020). After 2025, though, the exemption is scheduled to drop back to pre-2018 levels. With the estate tax a flat 40%, the higher threshold...

26 Jan 2020
0

Life Insurance Beneficiary Pitfalls

Roger Rossmeisl, CPA
Estate Planning Briefs
Life Insurance Beneficiary Pitfalls

Life insurance is an important asset (in the case of whole life policies) that should not overlooked by families. It can also be a powerful financial and estate planning tool, but its benefits can be reduced or even eliminated if you designate the wrong beneficiary or fail to change beneficiaries when your life circumstances change.  Common life insurance beneficiary pitfalls to avoid include: (1) Naming your estate as beneficiary Doing so can subject life insurance proceeds to unnecessary state inheritance taxes (in many states), expose the proceeds to your estate’s creditors and ensure that the proceeds will go through probate, which may delay payment to your loved ones. (2) Naming minor children as beneficiaries Insurance companies won’t pay life insurance proceeds directly to minors, which means a court-appointed guardian...

26 Jan 2020
0

Making Direct Payments of Tuition and Medical Expenses

Roger Rossmeisl, CPA
Estate Planning Briefs
Make Direct Payments of Tuition and Medical Payments

With the lifetime gift and estate tax exemption at $11.40 million for 2019 ($11.58 million for 2020), you may think you don’t have to worry about gift and estate taxes.  However, there are no guarantees that estate tax law won’t be revised in the future or that your accumulated assets won’t eventually exceed the available exemption (which is scheduled to drop significantly in 2026). Thus, there’s a need to investigate other tax-saving possibilities. Beyond annual exclusion gifts Under the annual gift tax exclusion, you can reduce your taxable estate without using up any of your lifetime exemption by giving each recipient gifts valued up to $15,000 a year. For example, if you have three children and seven grandchildren, you can give each one $15,000 tax free, for a...

18 Jan 2020
0

Don’t Be Afraid of Probate

Roger Rossmeisl, CPA
Estate Planning Briefs
Dont be Afraid of Probate

The word “probate” may conjure images of lengthy delays waiting for wealth to be transferred and bitter disputes among family members. Plus, probate records are open to the public, so all your “dirty linen” may be aired. That said, don't be afraid of probate.  The reality is that probate doesn’t have to be so terrible, and often isn’t, but both asset owners and their heirs should know what’s in store. Defining probate In basic terms, probate is the process of settling an estate and passing legal title of ownership of assets to heirs. If the deceased person has a valid will, probate begins when the executor named in the will presents the document in the county courthouse. If there’s no will — the deceased has died “intestate”...

12 Jan 2020
0

How to Choose a Guardian for Your Child

Roger Rossmeisl, CPA
Estate Planning Briefs
How to Choose a Guardian for Your Child

If you have minor children, arguably the most important estate planning decision you need to make is choosing a guardian for them should the unthinkable occur. If you haven’t yet made this decision, formalize your choice as soon as possible.  When it comes to choosing the best candidate for a guardian for your child, you probably already have a short list consisting of members of your immediate family. This is an excellent start, but don’t forget about extended family members and trusted friends. Things to consider when choosing a guardian for your child There are many issues you’ll need to consider in making your decision. Perhaps the most important issue is whether you and your guardian choice share similar values, such as parenting philosophy, religious and moral beliefs,...

12 Jan 2020
0

Flexibility is Key in an Unpredictable Estate Planning Environment

Roger Rossmeisl, CPA
Estate Planning Briefs
Flexibility is Key in an Unpredictable Estate Planning Environment

The Tax Cuts and Jobs Act (TCJA) made only one change to the federal gift and estate tax regime, but it was a big one. It more than doubled the combined gift and estate tax exemption, as well as the generation-skipping transfer (GST) tax exemption. This change is only temporary, however. Unless Congress takes further action, the exemptions will return to their inflation-adjusted 2017 levels starting in 2026.  What does this mean for your estate plan? If your estate is well within the 2019 exemption amount of $11.40 million ($11.58 million for 2020), the higher exemption won’t have a big impact on your estate planning strategies. But if your estate is in the $6 million to $11 million range, it’s important to build some flexibility into...

29 Dec 2019
0

Beneficiary Defective Inheritors Trusts

Roger Rossmeisl, CPA
Estate Planning Briefs
Beneficiary Defective Inheritors Trusts

By temporarily doubling the gift and estate tax exemption, the Tax Cuts and Jobs Act (TCJA) opened a window of opportunity for affluent families to transfer assets tax-free. To take advantage of the higher exemption amount, many families that own businesses or other assets worth more than the pre-TCJA exemption amount are planning substantial gifts to their children before 2026.  Traditionally, parents use trust-based gifting strategies to transfer assets to their children. Even though these strategies offer significant tax-planning benefits, they also have a major drawback: They require you to relinquish much of your control over the assets, including the right to direct the ultimate disposition of the trust assets. One strategy for avoiding this drawback is to use beneficiary defective inheritors trusts (BDIT). It’s better to...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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