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Wealth Counselor Archive

8/8/2017: Tell Your Clients It’s Not Too Late for a Portability Election

Tell Your Clients It’s Not Too Late for a Portability Election

New Opportunity for Late Portability Just

Opened Up by IRS

Portability has brought both convenience

and confusion to the estate planning

community. Available for surviving spouses

after 2011, portability allows an unused

estate tax exemption to be transferred

from a deceased spouse to his or her

surviving spouse.

While this sounds like an appealing

prospect to look into for your clients, it has

come with its fair share of hassle thanks to

ever-shifting policies and narrow windows

of time in which to take action. Taking

advantage of portability has been harder in

practice than was anticipated.

IRS Revenue Procedure 2017-34

Previously, surviving spouses had a mere 15 months (9 months plus a 6-month automatic

extension) in which to elect portability after the death of their partner. As you know, your

clients are only human: The experience of losing a spouse is always a trying one, and their

priorities are rarely focused on legal and financial matters in the year following such a huge life

event. It’s all too easy to go past the deadline, especially if an estate tax return is not required

by the IRS.

But this summer, the IRS has amended the way the portability deadline works. Now is the

perfect time to share this good news with your clients and save them potentially hundreds of

thousands of dollars in taxes in the long run. Here are the significant developments put forth by

this new IRS procedure, which was just announced on June 26, 2017:

From

Condie & Adams, PLLC

611 4th Avenue, Suite A

Kirkland WA 98033

425-450-1040

Condie & Adams, PLLC is a

values-driven law firm

committed to providing

individuals, families and small businesses

with personalized, client-centered legal

services in estate planning, probate and

trust administration, tax planning, and

related legal matters.

Late filing relief: Executor spouses can now file a late portability election until January 2,

2018, for spouses who have passed away any time after 2011. This is a significant opportunity,

but you and your clients must act quickly to take advantage of it. Previously, those who didn’t

elect portability were left with the unappealing option of trying for a private letter ruling to try

to get it. This revenue procedure makes late filing possible for a much greater spectrum of

clients. There are, of course, some qualifying criteria, so please give us a call to discuss any

specific clients you think might benefit.

Increased time to act: Whereas surviving spouses previously had 15 months to elect

portability, they now have two full years. The IRS deadline is either January 2, 2018, or two years

after the death of the spouse, whichever is later.

What else does this mean for my clients’ estate plans?

Not only could this new procedure save significant taxes upon the death of the surviving spouse

— but it could also open up estate planning opportunities that might otherwise not be available.

For example, a surviving spouse may make a significant lifetime gift using the added exemption

and avoid paying gift taxes.

This development simplifies elections for portability for those who were late and not otherwise

required to file an estate tax return (i.e. those with estates less than $5 million, as adjusted each

year). But, the “classic” 15-month rule still applies for clients whose estates contain over $5.49

million.

Any client who lost a spouse since portability came into effect after 2011 should at least look at

whether it makes sense to file a “late” estate tax return now. The time for relief is limited. Does

this situation affect any of your clients? Now is the time to share the good news with them,

collaborate with us, and help your clients achieve their estate planning and wealth preservation

goals.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a

Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax,

accounting, financial, or legal planning strategies.

You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any

questions about this or any matters relating to estate planning.

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Condie & Adams, PLLC 611 4th Avenue, Suite A Kirkland WA 98033

August 8, 2017 Continue reading

7/11/2017: Dynasty Trusts – A Planning Tool for the Masses?

Dynasty Trusts – A Planning Tool for the Masses?
From

Condie & Adams, PLLC

611 4th Avenue, Suite A

Kirkland WA 98033
425-450-1040

Condie & Adams, PLLC is a values-driven law firm committed to providing individuals, families and small businesses with personalized, client-centered legal services in estate planning, probate and trust administration, tax planning, and related legal matters.

Think Twice Before Ruling One Out

When most people hear the term “dynasty trust,” they assume it is something for only the wealthiest of families. Dynasty trusts are not as out of reach as many people and advisors might think, and can be used by many more families of a greater wealth spectrum than currently use them. Read on to see whether this type of trust is the perfect estate planning solution for keeping your clients’ financial resources within the family from one generation to the next.

Demystifying dynasty trusts
Dynasty trusts keep your clients’ wealth within their family for a long time. When properly designed, they can last forever, which is a draw for many individuals and families who want to ensure lasting security. Dynasty trusts are, however, irrevocable. That means that adjustments to the plan require a great deal more work than they do for a garden-variety revocable living trust. Planning with dynasty trusts requires crucial conversations with clients to develop an in-depth understanding of their needs and goals.

However, for many families, the benefits far outweigh the drawbacks of irrevocability and perceived lack of flexibility. While there are several types of laws affecting these trusts that vary from state-to-state, dynasty trusts offer several benefits:
●       They consolidate and build intergenerational wealth (providing you an opportunity to build your book of business and deepen your relationship with generations of families while providing your clients with peace of mind and security).
●       They help avoid estate, gift, and generation-skipping transfer taxes.
●       They protect your client’s wealth from creditors and divorce.
●       When creatively designed, they can incentivize desirable behavior from trust beneficiaries.

How is a dynasty trust different than other types of irrevocable trusts?
Simply put, a dynasty trust is one that is designed to consolidate and build intergenerational wealth over a very long time. Other common types of irrevocable trusts (like GRATs, ILITs, QPRTs, CRTs, etc.) are created to achieve a specific tax result. Dynasty trusts build on these other planning strategies and are appealing because they allow your clients to take a long view of estate planning for their family.

Why is now the time to explore this option with your clients?
In today’s favorable tax and legal environment, dynasty trusts can make more sense than ever – even for a family with $1 million of wealth. Any clients that have significant life insurance policies, a small business, or other assets that might increase in value significantly (like founder’s stock or vacant land in a fast growing area) should have a talk with us about whether a dynasty trust makes sense.

Families haven’t always had such wide opportunities to explore dynasty trusts. Many states have laws against perpetuity designed to prevent trusts from lasting many generations. While these laws still exist in some states, there is a trend toward less rigid application or even outright removal of these rules. One reason for this is that financial institutions stand to benefit from management fees associated with dynasty trusts. However, your clients’ families benefit as well because wealth that’s consolidated and managed (as in the case of a dynasty trust) tends to be more likely to be preserved and successfully pass to the next generation versus wealth that’s divided and distributed (as in the case of many garden-variety estate plans). A dynasty trust is a win-win for you and for the families you serve.

Do you have clients who would benefit by implementing a dynasty trust?
Most people think of dynasty trusts as something only the highest net worth families should even consider. In reality, they are something that is a great solution for many families. Although they require the help of a skilled estate planning attorney, who can navigate the complex interplay between state and federal laws, along with the qualified long-term investment advice that you offer, the rewards of asset consolidation, preservation, and growth make them an attractive option for your clients. For you, they also provide an opportunity to build trust and connect with multiple generations of your clients’ family.

Don’t pass up the opportunity to discuss these trusts with your clients. Dynasty trusts provide the perfect structure to build and maintain long-term relationships with families and help them consolidate and build assets from generation to generation. Give us a call today to see how a dynasty trust can help you and your clients.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

 

You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.

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Condie & Adams, PLLC 611 4th Avenue, Suite A   Kirkland WA 98033 

July 11, 2017 Continue reading

6/13/2017: Free Your Clients From Old, Obsolete Trusts

Free Your Clients From Old, Obsolete Trusts
From

Condie & Adams, PLLC

611 4th Avenue, Suite A

Kirkland WA 98033
425-450-1040

Condie & Adams, PLLC is a values-driven law firm committed to providing individuals, families and small businesses with personalized, client-centered legal services in estate planning, probate and trust administration, tax planning, and related legal matters.

The Perils of Outdated Plans and How to Overcome Them

Estate planning needs evolve. An old, obsolete estate plan often fails to achieve client goals, resulting in dissatisfaction, unnecessary taxes or probate costs, and a greater likelihood of lost assets under management. Fortunately, we can help your clients revitalize the obsolete aspects of their plans and get them back on track for the future, making you the hero and enhancing your relationship as a trusted advisor.

How to spot an outdated trust or will
There are two types of outdated trusts and wills: (1) documents your clients have created and (2) documents created by deceased loved ones of your clients where your clients are beneficiaries.

The fastest way to determine whether documents your clients have created are outdated is to look at the signature pages. If the documents were signed during or before 2012, your clients need an immediate estate plan review. Of course, if there are no signatures (a not unheard of situation), then we absolutely need to speak with your clients since their wishes are likely not legally valid.

For trusts and wills signed in 2013 and afterward, it’s a good idea for us to sit down with your clients to make sure the plan still meets all of their needs and avoids confusion, complexity, and needless cost due to obsolete tax planning.

As mentioned earlier, clients may be the beneficiary of a deceased loved one’s trust or estate. You can usually spot this when a trust or account bears someone else’s name with language like “FBO” or “for the benefit of” at the end. For example, the Susie Smith Article 6 Trust FBO Adam Smith. These trusts can sometimes be decades old and almost certainly have obsolete language. It is almost always worth examining these documents to ascertain opportunities for tax and administrative improvement.

Many individuals take a set-it-and-forget-it approach to their estate plans or feel like they cannot modernize an old trust they’ve inherited. Like investment or financial planning, tax planning, health and fitness, and so many other aspects of life, proper estate planning is an ongoing process that clients must revisit regularly.

We routinely monitor the latest developments in legislation and know how to modernize clients’ plans. If outdated plans go unchecked, negative consequences can occur. Let’s look at some potentially obsolete estate planning techniques that are worth a second look.

Be wary of the alphabet soup from yesteryear
FLPs, ILITs, AB trusts, and other convoluted acronyms can be indicative of trusts or planning strategies that have outlived their usefulness to your clients. Admittedly, these strategies can still be a great fit for the right client, but Family Limited Partnerships and other discounting-driven planning tools may produce a worse result now for some clients, as they can increase capital gains taxes. These discounting-driven plans were originally designed to reduce estate and gift taxes, which were a substantial issue at the time that these plans became popular. At the time, these were good strategies to implement, but changes in tax laws make them contraindicated (or even downright harmful) for many clients now.

The current $5.49 million exemption for the estate tax ($10.98 million for married couples) means that the overwhelming majority of clients do not have to worry about paying estate tax and can still take advantage of an income-tax-saving basis step-up on all of their assets.

While estate taxes have become less of an issue, federal capital gains tax rates have been rising and are now up to essentially a 20 percent base rate. For some clients, the net investment income tax (often referred to as the NIIT) tacks on 3.8 percent more. Add on state income taxes (ranging from 5-13.3%), and an obsolete discounting-driven plan could “save” a client on a non-existent estate tax bill while creating a built-in capital gain that could be taxed as high as 37.1 percent.  This happens because discounting-driven planning strategies, such as FLPs, do not obtain a full basis step-up at the death of a client, which can create unnecessary capital gains taxes.  Any plan that saves non-existent estate tax while creating a capital gains tax bill should be reviewed and likely reworked. Any clients with estates less than the exemption of $5.49 million ($10.98 for married couples) that have used these strategies in the past should take a second look.

Clients are not trapped with old plans (even if those plans are “irrevocable”)
Old, obsolete plans can be updated. Just as there are many ways to remodel a home, there are many strategies and legal tools that can be used to modernize obsolete estate plans.

●        Updating an old trust
Once you are aware of an outdated trust posing a potential risk to a client, advise the client to see us so we can help them craft a restatement or amendment. This is a straightforward solution that can update and modernize revocable trusts created by your clients. This makes their plan ready for the realities of the legal and financial landscape we live in today.

A client may have an irrevocable trust, perhaps an inheritance from a parent or grandparent or a trust created by the client for tax reasons that no longer make sense. There are several options to modernize these trusts, including decanting, trust protector restatement, judicial modification, and non-judicial settlement, depending on the circumstances, the clients’ needs, and the laws of the state. There are no one-size-fits-all solutions, but the best place to start is with a discussion about your clients’ circumstances, needs, and goals.

●        Untangling an obsolete plan
Tax-driven planning often utilizes more than a single document. For example, a discounting-driven plan often involves a family partnership or family LLC agreement, one or more trusts, promissory notes, appraisals, and a gifting strategy. Similar to the solutions to old trusts described above, there are many tools and strategies available to unwind these plans when they have outlived their usefulness. Since each client and plan is unique, the way to unwind it will be as well. Coming up with the most effective strategy requires delicate consideration of the client’s current goals and needs, as well as tolerance for risk.

Even though there is no way to know for sure what to do until some analysis is complete, it’s better to have an informed choice rather than acting upon the assumption that the plan is going to work for the best interests of the client or that the plan cannot be changed. These are complex legal processes, and there is no one-size-fits-all answer. But no matter how tangled the threads of your clients’ old trusts or plan seem to be, we can ascertain the right way to smooth things out.

Consult with us and let’s see how we can achieve your clients’ goals. Get in touch today for a fast-track solution to your clients’ outdated trusts and obsolete plans.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

June 13, 2017 Continue reading

5/9/2017: Trump’s First 100 Days: Looking Back and Planning Ahead

Trump’s First 100 Days: Looking Back and Planning Ahead
From

Condie & Adams, PLLC

611 4th Avenue, Suite A

Kirkland WA 98033
425-450-1040
Condie & Adams, PLLC is a values-driven law firm committed to providing individuals, families and small businesses with personalized, client-centered legal services in estate planning, probate and trust administration, tax planning, and related legal matters.

How to Help Your Clients Future-Proof Their Estate Plans

Through tried and true estate planning measures, we can make sure your clients’ plans are both flexible enough to handle change and sturdy enough to weather the uncertainty. In addition to providing wills, trusts, powers of attorney, and other core documents that make up a sound estate plan, we will continue to keep our fingers on the pulse of the legislative developments that will matter to them most.

While there have been several proposals that may impact estate planning, no significant changes have already taken effect. Let’s begin with a quick look back at these first 100 days and consider what they’ve meant for the U.S. tax and healthcare landscape. Then we’ll discuss strategies that can be used to make sure your clients’ estate plan are future-proof.

Actions from the first 100 days that could affect estate planning
To provide the best possible service to our clients, we closely monitor legislative changes that could throw a wrench in the gears of estate planning. Likewise, we’re always looking for opportunities to take advantage of government changes that might benefit our clients – and your clients – for years to come. Although no changes have been finalized, here are the key issues we are following:

1. The repeal and replacement of the Affordable Care Act
The Affordable Care Act, known as ACA or Obamacare, has been a hot topic on both sides of the aisle in the past few months and years. The American Health Care Act, which is the House Republican’s proposed replacement bill for the ACA, recently passed the House of Representatives, but still must go through the Senate before it can be enacted into law. At this point, it remains to be seen what the Senate will do and how this administration will ultimately change the healthcare laws.

2. Repealing the federal estate tax and GSTT
The federal estate or “death” tax does not come into play for most Americans, but those with high-value estates are currently taxed at 40 percent for the value of their estate above $5.49 million ($10.98 for a married couple). Repealing the death tax garners lots of attention in the current administration, with hints at possible headway being made all the time. There are numerous proposals in Congress, and it’s currently unclear whether death tax changes will be a separate law or included as part of a larger tax reform bill. We are watching the situation, and we’ll let you know as soon as something more definitive presents itself.

Another point of consideration is what would happen to the gift tax and generation-skipping transfer tax (GSTT) should the estate tax be repealed. Given the uncertainty surrounding these potential high-impact changes, the best tactic at this point is to plan for multiple scenarios and remain abreast of any pertinent proposals or votes in the coming months.

Why flexible planning is crucial in this period of flux
Of course, you know that estate planning does not equal death tax planning.  There are many non-tax reasons estate plans need to stay up to date regardless of legislative changes to our nation’s tax and healthcare laws. Here are just a few of many examples:

●        Privacy: Ensuring that the details of your clients’ estates do not become public record by way of probate proceedings

●       
Protection from court interference:
Avoiding situations like probate or living probate (also known as guardianship or conservatorship) by creating and funding a living trust

●       
Long-term care:
Appointing healthcare providers and healthcare powers of attorney in case you become incapacitated so that it does not become the court’s decision, resulting in guardianship or conservatorship.

Planning with flexibility is now more important than ever. No one can know exactly how proposed changes to our tax and healthcare systems will shake out in the coming months and years. In addition to the new administration’s effect on estate planning, the coming elections in 2018 and 2020 may provide even more changes to tax and healthcare policy. That’s why it’s more important now than ever to create a plan that achieves a client’s goals but has enough flexibility to roll with the punches.

Let’s make your estate plan ready for anything
Through tried and true estate planning measures, we can make sure a client’s plan is both flexible enough to handle any changes that come their way and sturdy enough to weather them. In addition to providing wills, trusts, powers of attorney, and other core documents making up a clients’ comprehensive estate plan, we will continue to keep our fingers on the pulse of the legislative developments that will matter to you and your practice most.

Times are changing, but a well-designed and flexible estate plan is always a benefit for your clients and their families. Feel free to get in touch with us anytime to discuss your clients’ needs in this shifting political climate, and together we can make sure their plans are in excellent shape and ready for whatever comes next.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

 

You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.

Unsubscribe from this newsletter

Condie & Adams, PLLC 611 4th Avenue, Suite A   Kirkland WA 98033 

May 9, 2017 Continue reading