Annapolis, Maryland Wills, Trusts & Estate Planning

Annapolis Estate Planning: The Joys Of Giving (Privately Or Publically?)

The death of Jobs has sparked conversation about the motivations and merits that surround anonymous giving. And for those who either eschew the spotlight or hold to a religious tradition that espouses anonymous donation, giving in secret sounds downright attractive.

The recent passing of Steve Jobs has, for many admirers, raised anew the question of anonymous giving: is it better to give without taking credit? As a recent Reuter’s article points out, whether
for Jobs or for the average donor, there are some important considerations to bear in mind.

Jobs was famous for a great many accomplishments, not the least of which was being a self-made entrepreneur who transformed a garage-sized company into a titanic icon. As a result, he was a
powerful force in business and popular culture alike. He also is famous for not being a charitable giver, quite unlike his Microsoft foil, Bill Gates. However, that raises the very real possibility that he did give to charity, perhaps in death, if not also in life… but he did so in secret. Indeed, it wouldn’t have been terribly hard, especially for one who has proven himself to be a private person. But why would Jobs (or you) elect to give anonymously?

There are multiple sentiments supporting “quiet” giving. Whether you are bashful and wish to avoid undue accolades, or you simply want to avoid further solicitation, privacy is of considerable
importance to many donors. Another basis supporting anonymous giving is religious tradition, as evident in traditions as disparate as Judaism and Buddhism. In the end, giving without recognition and fanfare holds an undeniably powerful pull and is the right choice for many.

Nevertheless, there remains at least one consideration favoring the public giver, as pointed out in the article. Although giving privately provides an opportunity to do good in the world, giving publicly provides an opportunity for others to witness good being done in the world. In short, it provides a generous role model to the world.

Either way, private or public, it’s clear that thinking about how to give can be as important as thinking about to whom. Whether Jobs gave privately is his own business. If he gave privately it’s
because he wanted it that way. The question remains, however, how do you want to give?

Reference: Reuters (October 10, 2011) “Steve Jobs and Giving Anonymously”

Holden-Campbell LLC, Annapolis Estate Planning Attorneys

Annapolis Estate Planning: The Joys Of Giving (Privately Or Publically?)

The death of Jobs has sparked conversation about the motivations and merits that surround anonymous giving. And for those who either eschew the spotlight or hold to a religious tradition that espouses anonymous donation, giving in secret sounds downright attractive.

The recent passing of Steve Jobs has, for many admirers, raised anew the question of anonymous giving: is it better to give without taking credit? As a recent Reuter’s article points out, whether
for Jobs or for the average donor, there are some important considerations to bear in mind.

Jobs was famous for a great many accomplishments, not the least of which was being a self-made entrepreneur who transformed a garage-sized company into a titanic icon. As a result, he was a
powerful force in business and popular culture alike. He also is famous for not being a charitable giver, quite unlike his Microsoft foil, Bill Gates. However, that raises the very real possibility that he did give to charity, perhaps in death, if not also in life… but he did so in secret. Indeed, it wouldn’t have been terribly hard, especially for one who has proven himself to be a private person. But why would Jobs (or you) elect to give anonymously?

There are multiple sentiments supporting “quiet” giving. Whether you are bashful and wish to avoid undue accolades, or you simply want to avoid further solicitation, privacy is of considerable
importance to many donors. Another basis supporting anonymous giving is religious tradition, as evident in traditions as disparate as Judaism and Buddhism. In the end, giving without recognition and fanfare holds an undeniably powerful pull and is the right choice for many.

Nevertheless, there remains at least one consideration favoring the public giver, as pointed out in the article. Although giving privately provides an opportunity to do good in the world, giving publicly provides an opportunity for others to witness good being done in the world. In short, it provides a generous role model to the world.

Either way, private or public, it’s clear that thinking about how to give can be as important as thinking about to whom. Whether Jobs gave privately is his own business. If he gave privately it’s
because he wanted it that way. The question remains, however, how do you want to give?

Reference: Reuters (October 10, 2011) “Steve Jobs and Giving Anonymously”

Holden-Campbell LLC, Annapolis Estate Planning Attorneys

Annapolis Estate Planning: Gift Tax Return Gotcha

Surprise. It’s a big year for the IRS and they’ve been opening many new fronts in the drive to assert tax law compliance. One of the largest and most unique fronts the IRS has opened has been a far-reaching gift tax audit on real estate transfers. As a recent Forbes article reports, the battle is tough going for the IRS, too.

The IRS estimates that somewhere between 60% and 90% of taxpayers will fail to file a gift tax return, despite having engaged in activity that requires a filing. As a result, it’s clear this is neither a petty problem in the Service’s eyes nor is it merely chump change waiting to be claimed. The problem with enforcing the gift tax has been the inability to catch someone in the act.

Never fear, the IRS has found just the right tool in the form of land records maintained at the state and local levels. Why? These public records allow the IRS to independently track the movement of properties between persons that haven’t shown up in gift tax returns. Family homes are just the sort of thing to pass easily between family members. However, things are rarely that easy when the IRS gets involved and that is just what’s happening now.

The lesson to be learned, regardless whether you have transferred any land in the past, is to be aware and diligent. While there are many ways and means to accomplishing your wealth transfer goals, you have to use the right tools. Alternatively, those taxpayers who have transferred property without due diligence to the IRS’s gift taxes (and anyone following this story) have a grand development to watch. The IRS needs the states’ compliance to make their plan work and, while this has meant a great deal of cooperation in much of the country, it has met with resistance in California. There the courts have bristled at the IRS’s attempts to demand records. Forbes has a story to tell in the original article and the question remains: Will State courts further mire the IRS’s great gift tax audit effort?

Reference: Forbes (October 19, 2011) “The
New Gift Tax Audits: IRS Identifies Non-Filers Using State Property Records”

Annapolis Estate Planning Blog: New Credit Card Paperwork for Businesses

A new Internal Revenue Service rule could make life trickier for most businesses that get paid with credit cards — from online retailers to the local deli.

Whether you make every deal for your business with a handshake or you fastidiously create, execute, and file away every bit of paperwork, you probably don’t like paperwork. And, you’re not alone.

Unfortunately, a new IRS rule may involve even more paperwork for you, if your business gets paid by credit cards. As the Wall Street Journal reports, this year credit-card companies are required to track the dollar amounts that individual merchants get from credit card transactions. In turn, the credit card companies then report this information to both the IRS and the merchant on
1099-k forms. The IRS made the rule so it’s prepared, but is your business prepared?

If you’ve been reporting your income properly all along, then you have little to fear. However, it does mean a good amount of extra work if you want to be sure that the credit-card company
is correct. This means an entirely new accounting protocol for which many firms are simply unprepared … and are likely unaware they’re about to face.

According to Melissa Labant, technical manager at the American Institute of CPAs, the new law "creates an administrative burden to separately account for different transactions — and
to break it down month by month if they want to reconcile to the 1099-Ks they receive."

Reference: The Wall Street Journal (November 14, 2011) “New IRS Rule Creates (What A Shock!) More Paperwork”

Holden-Campbell, LLC, Annapolis Estate Planning Attorneys

Annapolis Estate Planning: Cecking Out Charities

"You often just don't know what you're going to end up with if you donate" to smaller charities, says Ken Berger, president and chief executive officer at charity evaluator Charity Navigator. You may not know "whether or not [the charity] is truly well-meaning … and whether [it] is really vetting and thoughtfully finding the greatest need out there."

Giving charitably can be a tough thing. You want to make sure your money goes as far as it can. A lot of donors choose smaller charities with less overhead to help ensure their money is used as intended and to the fullest extent. However, if you’re thinking small, it’s worth ‘digging deeper’, and not just into your pockets. No, dig deep into the charity and make sure it is as you want it to be.

The good thing about a large charity is that it’s fairly well established. For example, it has the power to complete its goals and likely it has a history that is readily examinable. The reason not to give to a big charity is that your money also will go towards funding all the bureaucracy and red-tape that have made the charity big in the first place. This can mean few dollars actually advance the charitable cause.

Conversely, smaller charities can be more efficient, but may lack those same assurances, unless you’ve done your research. Depending on your charity of choice, the local history might indicate the effectiveness of the charity. As to its value, you always can check its progress against its mission statement. What are they trying to accomplish? Do they know? How do they do so?

In addition, don’t be too bashful to ask “who’s in charge” and what they do with the donations? To help guide you through the process, try various services like the Charity Navigator ratings system, or GuideStar to determine how charities use their funds.

In the end, giving to a smaller charity may be that much more rewarding, and with all your research you might end up giving your time, too. Indeed, work first-hand can be a good way of learning
and for giving back as well.

Heading into the Holiday season, with Thanksgiving at our doorstep and carolers not far behind, it’s as good a time as any to start your research and your charitable donations.

Reference: The Wall Street Journal (October 30, 2011) “Dig Deeper When Checking Out Smaller Charities” Holden-Campbell, LLC, Annapolis Estate Planning Attorneys

Annapolis Estate Planning: Loans vs. Gifts – When It’s All in the Family

Whenever making loans — to anyone — there should be a written promissory note that spells out the amount borrowed, whether interest is being charged and how repayments are to be made. It’s fine if it’s merely a demand loan and there’s no repayment schedule. But parents should also specify, in their wills or trusts, how the loan should be handled after they die. Require it to be repaid? Forgive the loan? Offset it with interest? Without interest?

A loan is not a gift; if you’ve spoken with a bank representative or a particularly pennywise
relative. We talk a lot about gifts when it comes to estate planning, but loans are just as important, as evident in a recent piece on the New Old Age Blog. A loan must have a minimum rate of interest as determined by a flucating interest rate published each month by the IRS. Failure to charge that minimum interest rate could result in unanticipated taxable income called "deemed income." I advise all my clients to distinguish between a gift and a loan. When making a loan, the loan should be in wiriting and include typical terms such as the term of the loan and the interest rate.

In the article, a piece by Craig Reaves, past president of the National Academy of Elder Law Attorneys, a family had their mother’s estate plan in shambles. The culprit? A small notebook found under her bed. Apparently, there were many disagreements, but none so deep seated as those caused by the notebook. Why? Because it has a little ledger of the “loans” she had made to
all the family members.

Some of the family members hadn’t received any money, but at least one had received $20,000. Other family members had repaid in full and some had not so much as begun to do so. This
case raises an important question: To what extent does the amount of an unpaid loan get added to the decedent’s estate, and does it simply come out of each family member’s share in proportion to their loans?

One thing that’s clear, of course, is that the money is not gone and out of the estate. Why, it’s a loan and not a gift, after all. The second thing that’s clear is that the mother hadn’t thought about how these “loans” figured into her estate.

That family aside, it should be noted that any loan evidenced by a signed promissory note can become an asset in the estate. And, even if it’s a family loan, the promissory note has
to be repaid.

An estate planner can ease this problem with a bit of foresight. For example, the loan can be forgiven, meaning they relinquish any expectation of being repaid. For that matter, too,
the loan can be “offset” and thereby deducted from any assets made available through inheritance.

While there are a number of things that can be done, forgetting the loan is not one of them. After all, the IRS is waiting just within earshot and has a trained eye to recognize the difference between a loan and a gift, as well as the additional tax burdens it can assign if it spots a gift or a poorly executed loan.

Reference: The New York Times – The New Old Age Blog (November 15, 2011) “Ask the Elder Law Attorney: Family Loans”

Holden-Campbell, LLC, Annapolis Estate Planning Attorneys

Annapolis Estate Planning: Family Limited Partnerships

The moral of the story is that in order for the plan to work you must have coordination between the attorney who prepares the plan and the accountant who will be preparing the relevant returns. If you don’t want to trouble yourself with what entity should pay what bill or accept what deposit, etc., let that piece be handled by your professionals, also, but again in an integrated manner. There has to be somebody who cares what account is used, because that is their job. And now for an understatement: “Family Limited Partnerships Require Good Planning and Execution.”

If you’re a fan of business law horror stories, then this recent article by Peter Reilly at Forbes and the case of Estate of Paul H. Liljestrand v. Commissioner should be both entertaining and instructive. The subject is the role of the Family Limited Partnership (FLP), an entity common to small business and estate law alike, and the problems that can be created. You’ll need to read the story for yourself, as well as Reilly’s asides, but the bottomline wisdom is that an FLP, like any other business entity, exists on at least three fronts. First, what you do with the partnership itself. Second, the accounting system of money going in and out of the FLP. Third, and of utmost importance, the FLP is a legal entity with various requirements of which real honesty is essential.

To my ears, it sounds like the case above is a failure on all three fronts – it’s a mess – but Reilly
identifies a disconnect between the accounting and the legal aspects to be the most fundamental downfall. In the end, the moral is to ensure you’re doing it right, or, as Reilly concludes: The
moral of the story is that in order for the plan to work you must have coordination between the attorney who prepares the plan and the accountant who will be preparing the relevant returns. If you don’t want to trouble yourself with what entity should pay what bill or accept what deposit, etc., let that piece be handled by your professionals, also, but again in an integrated manner. There has to be somebody who cares what account is used, because that is their job.

Check out the full story.

Reference: Forbes (November 12, 2011) “Family Limited Partnerships Require Good Planning and Execution”

Holden Campbell, LLC, Annapolis Estate Planning Attorneys

 

 

Annapolis Estate Planning

If you’re in the fortunate position of deciding where to leave your millions or billions, take some advice from billionaire Warren Buffett’s son, Peter: Don’t spoil them.

It doesn’t take an experienced estate planner to say so, but “money is the root of all evil.” Unfortunately money bears with it the potential for good and bad ends alike. An experienced
estate planner can help your loved ones lean to the positive when it comes to the inheritance you leave them.

When it comes to trust money, and inheritances in general, you need to find a balance that will help your children become the people you know they can be. For some solid tips, check out
this article and the5 trust fund rules to help children. The balance these rules help to create, as so aptly put by Warren Buffet, give your children “enough to do anything, but not enough to do nothing.” So, let’s review a few of the rules.

Carrots and Sticks. A trust need not just leave money; but it can be a tool. By building the appropriate provisions, you can offer certain tests and incentives to guide your heirs towards positive goals. You earned your money through hard work and, likewise, the trust can help foster similar
lessons as you see fit.

Timing. The funds in a trust can be made readily available or made available over time, with or without incentive goals. After all, you might not want to lock a child into set goals (you might not know enough about which goals are appropriate for them), but you might want to keep their access to the funds at a pace consistent with their age and maturity. Generally speaking, such an approach generally is a solid bet. It can give a sense of security,without instilling laziness, too.

Money Isn’t Everything. In keeping with the above, consider using the conditions that surround the trust (i.e., your death) as an opportunity to provide your wisdom through your own letters or videotapes of success stories, so that the trust fund is opened as your words are received.

That’s only three of the five rules. For the other two, read the original
article. Regardless, the time to act is
now.

The issues surrounding how to create the trust are worth mulling over, but just as important is the planning that goes into creating the trust and the correct timing to maximize its value. You can make good use of this timing given the present generous state of our estate and gift tax law, along with the currently depressed asset values.

Again, whether it’s thinking about the funds to put in the trust or the future of the inheritor, there’s no time like the present!

Reference: The Fiscal Times (September 20, 2011) “5Trust Fund Rules That Can Really Help Children”

Holden-Campbell, LLC Annapolis Estate Planning Attorneys

Annapolis Estate Planning: Gift Tax Exemption Being Reconsidered

 

The current Federal gift tax exemption of $5 million (or $10 million for married couples who elect to split gifts) is scheduled to revert to $1 million (or $2 million for married couples who elect to split gifts) on January 1, 2013. A proposal was submitted to the Super Committee to revert to a $1 million Federal gift tax exemption one year earlier, on January 1, 2012. As noted above, there are also concerns that the reversion could be accelerated to as early as November 23rd of this year.

Accordingly, clients may wish to consider making immediate gifts to use part or all of the $5 million (or $10 million) Federal gift tax exemption.

Holden Campbell, LLC Annapolis Estate Planning Attorney