Annapolis, Maryland Wills, Trusts & Estate Planning

Planned Giving Benefits Medical Center and Enriches Community - Annapolis Estate Planning

Through the generosity and civic dedication of a visionary philanthropist, New Jersey hospital and community benefited during his life and after his passing.

Emil Simonetti was actively engaged in his community, supporting a number of organizations by taking leadership positions and giving generously of his time and financial resources. His compassion and dedication will long be remembered, since he has left a legacy of service and a vision for the future.

Simonetti wanted to extend his charitable commitment well beyond his lifetime, through planned giving. After he died on August 1, 2015, much of the former Butler, New Jersey resident’s estate was donated to the causes and institutions he valued most. These included Chilton Medical Center, which received $1.2 million to benefit its Emergency Department. The hospital said that an area of the facility will be dedicated to Emil and his wife Carol.

Tap Into Montville’s recent article, “Former Butler Resident Bequeathed $1.2 Million to Chilton Medical Center,” reported that Emil Simonetti lived a life of service. Simonetti was born in Paterson, New Jersey, and served his country as a member of the U.S. Army during World War II. He also was a Councilman and Police Commissioner of Butler, as well as an advocate for Morris County residents with disabilities.

Simonetti also showed a strong interest in health care: he was involved with several health-centered organizations. He was appointed to two governing boards at Chilton Medical Center, where he contributed his financial expertise and participated on the hospital’s Senior Advisory Committee. In that capacity, he helped to develop programs for the community’s senior population.

“Emil held Chilton in high regard and had great confidence in what we do. He attended many of our fundraising events and was a member of Chilton’s Legacy Circle, expressing his desire to support the hospital through estate planning,” commented Mario R. Rosellini, Jr. of the Chilton Medical Center Foundation Board of Trustees.

Rosellini also mentioned that Simonetti talked about leaving a legacy and leaving something to Chilton. The medical center had no idea of the magnitude of his generosity until recently, when it learned of his $1.2 million bequest.

As a result of Simonetti’s gift, the hospital will make improvements to its emergency department, investing in equipment for imaging and diagnostic technology, modernizing its facility and enhancing the center to provide patients and families with a better experience.

Reference: Tap Into Montville (October 18, 2017) “Former Butler Resident Bequeathed $1.2 Million to Chilton Medical Center”

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Can You Avoid Your State’s Inheritance Tax? – Annapolis Estate Planning

If you live in a state that still has an inheritance tax, there are some steps you can take to avoid the tax.  However, they must be done carefully, so that you don’t create any other issues.

Here’s what people often don’t know about inheritance taxes: in states like New Jersey, the inheritance tax isn’t based on the size of the estate. It depends upon who is receiving the proceeds. A recent article from NJ.com, “How to avoid the inheritance tax,” provides all of the details.

New Jersey doesn’t impose an inheritance tax on transfers to a parent, grandparent, spouse, domestic partner, child, step-child or grandchild. These are all Class "A" beneficiaries. However, an inheritance tax is imposed on transfers to a niece or nephew, who are considered Class "D" beneficiaries. The tax rate is about 15 or 16%, depending on the amount transferred.

An important point to remember is that all transfers made within three years of death, are presumed to be “in contemplation of death.” These transfers may also be subject to inheritance tax. In addition, transfers designed to take effect at or after death are included in a person's estate for inheritance tax purposes.

One way to get around some inheritance taxes is to gift funds to your relatives during your lifetime. You can make outright gifts or pay for a family member’s medical costs or educational expenses. Inheritance taxes can also be avoided with an irrevocable trust in some situations. With this type of trust, you must give up control and use of the assets placed in a trust.

An individual can make annual gifts of $14,000 per person without any gift taxes. If the annual gift exceeds $14,000, the excess amount will utilize a portion of the individual's estate and gift tax exemption of $5.49 million.

If someone wished to pay for medical or educational expenses, there are no limits on gifts, as long as payments are made directly to the medical provider or educational institution. Your estate planning attorney will be able to help you plan for your state’s inheritance tax for yourself or your heirs.

Reference: NJ.com (July 14, 2017) “How to avoid the inheritance tax”

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Protect Your Business with Estate Planning – Annapolis Estate Planning

Between taxes and ex-spouses, you'll want to do an estate plan to protect your business or it may pass soon after you do.

It's amazing how quickly a business can get picked to pieces after the death of an owner. With the use of good estate planning, according to The Huffington Post article, "5 Things Estate Planning Can Do for You and Your Business," you can protect your business and your legacy. Otherwise, your business is at the mercy of government taxes, co-owners and even family members who will stake their claims.

Use estate planning to avoid unfortunate events and to prevent seizure and depreciation of the business assets. This can decrease the stress and hassles that occur immediately after you die. Here are some good estate planning ideas to help protect your business.

1. More options for your business. Solid estate planning gives you the option of buy-sell agreement. If your business has one or more co-owners, this agreement ensures that upon the death of any owner, the interest of the deceased is automatically purchased by the other owner(s). The beneficiaries of the deceased owner, such as the spouse, children, or other family member won't unintentionally become owners. This strategy can alleviate some stress in an already stressful situation, immediately after the death of an owner or part owner of a business.
2. Guarantee the longevity of your business. Sole proprietors, small businesses, and big companies all want to pass their enterprises to future generations to keep their legacies alive. Estate planning can ensure the longevity of your business with a business transition plan.
3. Minimize taxes. A business owner can transfer business assets to his or her children and retain a source of income by establishing a grantor retained annuity trust (GRAT). This will help make sure that when business assets grow over time, the appreciation in equity and value of your business will not be hit with huge tax bills.
4. Succession planning for your business. Good estate planning will ensure that your business is preserved and operating the way you'd want it to run. Any issues in the transfer of management and ownership when you're gone are conducted effectively with wise estate planning.
5. Start your planning now. Yes, now. It can take years to develop a succession plan. While doing so, you will develop a long-range view for your business, which may yield valuable information for the business's continued growth. It will also provide you with peace of mind if legacy planning has always been a goal for your business.

Reference: Huffington Post (March 31, 2016) "5 Things Estate Planning Can Do for You and Your Business"

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Grab the Bull by Both Horns: Money and Death – Annapolis Estate Planning

Don't wait until it's too late to discuss money, death and your personal values with your heirs. If your family can't manage the discussions, then you'll at least know that another tactic is needed.

We don't like to talk about money or death. Our children hate the thought of it, and it's uncomfortable. But Baby Boomers who have not had conversations with their heirs about estate plans need to start talking, and soon. A recent MarketWatch article, "How to tell your kids how much money you're leaving them," provides excellent guidance to help the process along.

A recent survey found that 72% of parents experience at least some reluctance to discussing financial matters with their children. That's not in anyone's best interest. Disorganization and miscommunication can be costly. The costs can be in dollars, as heirs miss tax deadlines and other opportunities sorting through the files, and in hurt feelings and confusion, as children struggle to understand their parents' decisions.

Here are some ideas for boomers who want to start the process:

Decide how you want to communicate. Don't ambush your children with this discussion. Instead, the first conversation should be how to have a discussion about this subject. Tell them what you want to discuss and ask them how they'd like to proceed. Ready them for several conversations so that they're not overwhelmed with everything in one sitting. If you have several kids, ask if they'd like one-on-one conversations or a group talk. Decide on a date for the first conversation, set the agenda, and review your financial and estate planning documents.

Don't start with the bottom line. You might want to jump to the big stuff and discuss who's getting what, but an estate plan involves much more than divvying up assets. It should involve values, which ideally started with parents talking about money with their children when they were young and emphasizing the value of hard work and the importance of saving. If that didn't happen, it's never too late to start. Next, discuss who you plan to designate as your health care power of attorney to make medical decisions in the event you can't do so yourself and who you'll name as your financial power of attorney to handle financial transactions on your behalf. Many people name their spouse as their primary agent, but you should also name a younger person to serve as a secondary agent if the first can't. Also, mention who you plan to name as the executor of your will.

Get some feedback. Children's feelings may be hurt if they don't understand why you designated one child over the other. Tell them your reasoning and ask for input through phrases like "Am I missing anything?" or "Tell me if I'm thinking about this the right way." But remember that you're the ultimate decision maker, and you don't need to change your plans because of your children's opinions. You can just say, "I respect your feelings, but I decided to go ahead with this plan."

If the discussion about powers of attorney and executors doesn't go well, you may think about ending it right there and not discussing your assets. If the discussion goes south, maybe you need to just let your will or trust do the talking after you're dead. You can always include a letter of intent explaining decisions posthumously.

Move carefully with the assets. If you decide to discuss your assets, proceed with caution. There may be arguments over small, symbolic items like jewelry. If so, parents could ask their children which items they'd like the most and do their best to give them some of them.

With dividing up dollars, many middle-class families don't know how much money they'll have left over, if any, after their retirement. That's reason enough to use percentages and not dollar amounts. But adult children still need to know where assets are located if they need to pay for long-term care. If you have these discussions now, it will be much easier to communicate that in the wake of a sudden accident or illness.

Your estate planning attorney can be a helpful part of this conversation, and you may even want to invite your family members to meet with your attorney as a group. You'll be able to cover any technical questions, and this will give your family members a chance to get more comfortable with the concept of life continuing after you are gone.

Reference: MarketWatch (January 29, 2016) "How to tell your kids how much money you're leaving them"

Holden & Campbell – Annapolis, Maryland Estate Planning Attorneys

Be Proactive concerning an Advance Notice of a Change to Popular Planning Strategy - Annapolis Estate Planning

The word is out in the estate planning bar that the IRS is looking at making an announcement this September about a favorite tax benefit gained from the use of family partnerships and LLCs.  New regulations would effectively raise the taxable value of assets transferred into these entities, which currently enjoy a generous discount. Wealthy clients are being advised to set up partnerships now to capture what remains of these discounts before the new rules take effect.

 

According an article in Barron’s titled “IRS Considers New Tax on Wealthy Families,” any changes to tax benefits affection family partnerships and LLCs could have significant consequences.

 

The article explains that partnerships and LLCs currently let families pass on a minority stake in the family business or in a pool of privately-held investments to their children with little or no tax consequences. This is because minority shares in a private business are illiquid, or unable to be easily sold or exchanged for cash without a substantial loss in value. They are worth less, from a tax perspective, than their stated market value. This is a big help to families who want to lower the taxable value of their assets, and in some cases below the $5.43 million gift-tax exemption. It also works even if the underlying investments getting passed on are liquid. The discount could be as much as 20% to 25%.

 

The article gives this illustration: the family business is worth $25 million and is entirely private owned by the family. You decide to pass on a 25% minority holding in it to your daughter via a partnership or LLC. The current IRS rules let you to discount the shares up to 35%, because they are illiquid. This works to your benefit, as the IRS discount means that instead of passing on $6.25 million in shares—and paying taxes—you’re only passing on shares valued by the IRS at $4.1 million. That amount makes the transfer tax free because it’s under the $5.43 million gift-tax exemption.

 

The Treasury Department has put the estate planning community on notice that this may change and has hinted that new rules on family partnerships could be released before the fall. The rules would restrict definitions and possibly decreasing narrowing discounts for certain assets.

 

The article suggests that you speak with an attorney if you are thinking about forming or making changes in the organization of a family entity. With all of these changes in the wind, this may be a great time to get going with these discussions, as any stricter rules that are created could be made effective immediately, with the fine details sorted out later.

 

Reference: Barron’s (June 30, 2015) “IRS Considers New Tax on Wealthy Families”

 

Holden & Campbell - Annapolis, Maryland Estate Planning Attorneys

Get to Know the Estate Tax in 2015 - Annapolis Estate Planning

Here are five rules you need to know about the estate tax for 2015.

 

The estate tax exclusion is now $5.43 million. The federal estate tax applies only to those whose taxable estates exceed a certain amount. The U.S. has a unified gift and estate tax system, so if you make taxable gifts during your lifetime you'll use up some of this $5.43 million in advance. In addition, you will need to file a gift tax return even though you won't have to “pay” a gift tax at the time you make the gift.

 

The annual gift tax exclusion is still $14,000. This an annual exclusion makes most gifts nontaxable, so you can give up to $14,000 in cash or property to anyone again this year.

 

Gift or estate tax? The estate tax laws have rules that make certain types of gifts and bequests non-taxable, like the marital deduction. This deduction allows you to give as much as you want to a spouse without any gift or estate tax consequences. Also, charitable donations are not subject to tax—either in estates or as gifts during your lifetime. You can also make gifts for educational expenses or medical expenses in an unlimited amount without any estate or gift taxes.

 

A recent Motley Fool article, titled “Estate Tax in 2015: 4 Rules You Should Know,” reminds us that we need to pay the institution directly, rather than sending money through the family member or other person who incurred those educational or medical expenses. Otherwise, you don't get to use the exclusion and might have to file a gift tax return.

 

Double your estate tax exemptions if you’re married. If you're married, the typical estate plan involves leaving everything to your surviving spouse. Even so, the deceased spouse's benefits are available later to the surviving spouse even if they were left unused. This is useful for married couples because it can give the surviving spouse as much as double the total estate tax exclusion, saving couples as much as $2 million in tax liability. This “portability” has been a permanent part of the estate tax laws since 2013, but some folks have out-of-date documents with the old rules. Make sure you are taking full advantage of this.

 

Talk to an experienced estate planning attorney and discuss these issues. Be prepared to handle estate tax issues if they come up in 2015.

 

Reference: Motley Fool (December 28, 2014) “Estate Tax in 2015: 4 Rules You Should Know”

Holden Campbell, LLC - Annapolis, Maryland Estate Planning Attorneys

Advantages of 529 Plans - Annapolis Estate Planning

Even though many gifts no longer make tax sense, 529 plans remain viable options for both estate tax exclusion and income tax reduction, without much complexity and cost.

Which gifts make sense for taxes these days? Consider your options.

Before recent changes to the federal estate tax exemption amount (i.e., $5 million per taxpayer, as indexed for inflation), taxpayers were encouraged to make lifetime gifts to reduce their federal estate tax. This was especially the case when the exemption was $1 million per taxpayer with top 55% rate on any amount over that. Now, however, the common advice is for all but the über wealthy to retain their assets to ensure there is enough to live on during their lifetime. According to a recent National Law Review article, titled "529 Plans: Estate Tax and Income Tax Advantages," a second benefit of passing assets at death is that the recipient of the assets obtains a "step up" in the assets' basis to fair market value—avoiding income tax on the sale.

The original article advises that gifting is appropriate for tax purposes for grandparents and parents wanting to save for escalating college tuition. Contributions to 529's are treated as gifts for tax purposes, and they qualify for the $14,000 annual gift tax exclusion. Another benefit is that these contributions can be "pre-funded" for five years. This means that $70,000 per parent (or $140,000 for a married couple) can be removed from the donor’s estate more quickly than annual contributions. Remember, though, that the donor must survive the five years, or some of that gift with be placed back in the taxable estate.

The investment grows tax-free as far as federal income taxes, and the distributions to pay for the beneficiary's college costs also are not taxed. State law, however, may impact the state income tax liability.

Other advantages to a 529 plan include the donor's control of the funds. In a custodial account, the recipient receives the funds at 18 or 21, and other gift strategies give up control to get an estate tax exclusion.

The only real disadvantage for 529’s is if you are applying for financial aid, as the 529 may be deemed an asset. 529 plans can still be a sound choice from the perspective of both estate tax exclusion and income tax reduction without a great deal of expense or time. Even so, talk to an estate planning attorney and get sound advice on where to go to set up the best 529 for your child and to implement the best strategies for your education situation.

Reference: The National Law Review (September 8, 2014) "529 Plans: Estate Tax and Income Tax Advantages"

Holden Campbell, LLC - Annapolis, Maryland Estate Planning Attorneys

Think You Don’t Need an Estate Plan Because You Don’t Have Children? Think Again! - Annapolis Estate Planning

Did you think estate planning would be easier because you don’t have children … or that you don’t really need an estate plan? If so, you couldn’t be more wrong!

The website dailycall.com recently posted an article, titled "Aging and estate planning for singles and couples without children," to help get you thinking about the special challenges people face who do not have adult children to assist them in their aging years.

Here are some of the ideas suggested:

• Choose your advocates wisely. Select individuals you can trust. This could be a friend, family member, or a trustee — just make sure everyone knows and will support your wishes. Select some younger people as alternates, if the people you ask are about your same age, in the event someone is not able to perform his or her responsibilities.
• Determine your asset distribution. A will is an easy way to put your intentions for your assets in writing and into a binding legal document. Your estate planning attorney is well-equipped to help you draw up a will that states how and to whom you want your assets distributed. If you do not have a will, your estate may be probated according to the statutes of your state. This may or may not be what you intended for your assets.
• Create a gifting plan. Another part of your estate plan can include strategies for giving monetary gifts before or after your passing. Currently, you can give up to $14,000 per person to an unlimited number of individuals without gift tax consequences. Another idea is to pay college tuition for others without gift tax liability and without using any of the annual or lifetime gift tax exclusions (provided payment is made directly to the institution).

 Reference: dailycall.com (August 2, 2014) "Aging and estate planning for singles and couples without children"

Holden Campbell, LLC - Annapolis, Maryland Estate Planning Attorneys

 

College Assistance from Grandpa and Grandma - Annapolis Estate Planning

Many grandparents want to help their grandchildren pay for college, but don't know the best ways to do that. Financial advisers who can show them how to make those contributions and reap financial advantages for themselves can shine.

Many families struggle enough to meet their current needs that they just do not have enough to pay for their children's college education. And with the costs of college education increasing year after year, it is almost impossible for students to make enough to pay for it with part-time jobs. Consequently, grandparents are starting to look into ways to help pay for their grandchildren's college education. They have already earned their wealth and are in a better position than the parents to pay for school.

 A recent Reuters article examined how grandparents can pay for their grandchildren's college education while getting a tax benefit for themselves. The article, titled “YOUR PRACTICE-Selling grandparents on the perks of 529 college savings plans,”suggests a 529 college savings plan. This unique account can be used to contribute more than the yearly gift tax exemption into an account that a grandchild can later use for educational expenses. The accounts are not perfect as they could make a grandchild ineligible for financial aid.

 Paying for college is difficult, but grandparents who want to do so have several options. A 529 plan is one of them, but in some cases a more traditional trust is a better option. The key is to talk to an estate planning attorney about your best options, in conjunction with your financial advisor. Different families have different needs. Your attorney and financial advisor team can help grandparents sort through the options to come up with the best solution for their needs.

 Reference: Reuters (July 18, 2014) “YOUR PRACTICE-Selling grandparents on the perks of 529 college savings plans”

Holden Campbell, LLC - Annapolis, Maryland Estate Planning Attorneys

A Strategic Plan For Gifting - Annapolis Estate Planning

Here are a few easy approaches that can reduce or avoid taxes, and are also effective wealth transfer techniques.

Gifting makes up one of the pillars of estate planning. Strategic gifting can mean all the difference between a plan for family wealth that works and a plan that doesn’t. Forbes recently offered a helpful list of strategies in an article titled “5 Family Gifting Strategies.” This article brings some important techniques front and center.

While it is worth your time to read the entire article, here is a quick list of the five strategies offered:

1. Make use of your full annual exclusion with a tax-wise gift every year.
2. Start a Roth IRA with a younger heir.
3. Pay college tuition or medical bills directly and escape the annual exclusion requirement.
4. Gift appreciated assets, especially to heirs in lower tax brackets.
5. Gift in the form of 529 plan contributions and remember those state income tax deductions.

Gifting with purpose can provide many ways to work legally in and around the tax code to strategically move family wealth. Nevertheless, you have to start early and plan carefully. A powerful estate plan can use such strategic gifting to move a great deal of wealth over several years rather than all at once. The best part? You get to be there to see your heirs make use of the gifts you give.

Reference: Forbes (May 8, 2014) “5 Family Gifting Strategies”

Holden & Campbell, LLC - Annapolis, Maryland Estate Planning Attorneys