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Wealth Counselor Archive

7/10/2018: Taking Full Advantage of the 2017 Tax Cuts and Jobs Act

Taking Full Advantage of the 2017 Tax Cuts and Jobs Act

Key Points to Discuss With Your

Clients

Like all things, tax laws are constantly

changing. An important part of serving

your clients is responding quickly and

strategically to new developments in the

tax law landscape. But at the same time,

a knee-jerk reaction is rarely the best

course of action—often resulting in

unforeseen complications in the future.

The best decisions are made by

professional teams working together to

analyze all angles of a situation to come

up with the best strategy in response to

the Tax Cuts and Jobs Act (TCJA), a

historic amendment to the Internal Revenue Code of 1986.

The TCJA affects many Americans in a variety of areas of life, and your clients might not

be aware of what its impact will be on their long-term financial plan. Of course, this law

is going on seven months old, but too many people struggle with taking action in their

financial and tax planning lives, so the historic nature of these changes cannot be

overstated.

The law’s benefits will accrue most for those who take a proactive approach — rather

than those who wait until the last minute. Here are several reasons it needs to be top-ofmind

for both you and your clients:

· The increase in the standard deduction and the general lowering of individual tax

rates means that your clients have likely been enjoying more take-home pay.

· The elimination of the personal exemption means that depending on your client’s

marital status and number of dependents, they may not be able to lower their

taxable income as much as they had in the past. Some clients may face a higher

tax burden, as a result, even after taking into account the lowered rates.

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, clientcentered

legal services in estate planning,

probate and trust administration, tax

planning, and related legal matters.

· The limitations on deductions for state and local income taxes (SALT) means that

for those clients in states or communities with high income taxes, their taxable

income may not be reduced as much as it had been in the past because they cannot

get credit for all the other forms of income tax they have paid. However, if any of

your clients are concerned about this, we may have some strategies (such as

Incomplete Non-Grantor Trusts) to help alleviate the new tax burden.

· The reduction of the alternative minimum tax for individuals means that fewer

individuals must deal with this burdensome and often-complicated tax.

· With the increase in the unified credit to $10,000,000, adjusted for inflation, there

has been a reduction in the overall number of estates affected by the estate tax. If

your clients had previous planning centered around saving estate tax, those plans

need to be re-evaluated to make sure that they are still working towards the

client’s long term objectives now that estate tax may not be a concern. Your

clients may also want to take advantage of the increase by making lifetime gifts,

particularly if they had previously used up their exemption in previous years.

· With the effective repeal of the individual mandate of the Affordable Care Act

effective in 2019, your clients will now have the choice of whether or not to carry

health insurance coverage without suffering the penalty of a fine. However, with

no requirement for coverage, it is speculated that the cost of insurance in the

marketplace could increase without the additional participants. Clients should

carefully balance the costs of paying for their own healthcare against the cost of

maintaining insurance, even after the mandate is gone.

The new tax developments are especially pertinent to your business-owning clients. With

the possible 20% income tax deduction for pass-through entities, they’ll want to review

entity selection for their business operations as soon as possible. Now is also the time to

consider gifting of interests to reduce the limitations inherent in the qualifying business

income calculation and to utilize the increased gift tax exemption.

For clients with “specified service businesses,” such as attorneys, doctors, dentists, and

consultants, it makes sense to consider separating any “non-service” businesses out of

their service business, such as real estate or clerical activity. Utilizing multiple trusts may

also help to facilitate business-owner clients achieve a larger QBI (qualifying business

income) deduction.

Planning Goes Beyond Taxes Too

The implications of the TCJA go much further than taxes alone. Your clients will always

need extensive guidance around asset protection, privacy, retaining control, avoiding

issues like guardianship and probate, and ensuring that their loved ones are cared for for

years to come. These aspects of financial and estate planning are constant regardless of

fluctuations of tax reform. Clients who haven’t considered these issues should discuss

them with an estate planning attorney as soon as possible.

These are sophisticated, complex, and multi-faceted planning strategies. For the right

client, they can save tens of thousands of income tax. But they can cost dearly if

implemented incorrectly. For this reason, collaboration with us and the rest of your

clients’ financial team is increasingly indispensable for success. Help your clients plan

for whatever comes next with the guidance of a well-rounded advisory team.

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 10, 2018 Continue reading

6/12/2018: Which Asset Protection Strategies Are Right for Your Clients?

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 You Can Keep Claims From Threatening Their Property

Most of us do not expect to be sued. However, lawsuits are filed every day the courthouses are open. If your clients’ estate plans don’t include adequate asset protection, they could end up losing a substantial amount of their wealth in the event of a claim – even a “frivolous” one.

It’s well worth talking to your clients about what asset protection strategies their current plan includes. Many existing plans may need a revamp, while other clients will need to implement a new plan entirely. Shielding their assets and property against legal claims takes sophisticated planning and teamwork. We’re here to help you develop a tailored asset protection strategy for each of your clients.

Several issues and strategies merit examination in your asset protection conversation with your clients.

  • Domestic Asset Protection Trust (DAPT): DAPTs can protect your clients from a legal claim that may arise in the future by allowing them to place their assets into a special trust that protects them from the reach of a creditor. DAPTs aren’t available in every state, and the most popular states for DAPTs are Alaska, Delaware, Nevada, and Wyoming. DAPTs are a sophisticated strategy that’s not right for everyone. But, for the right clients, they are a potent tool for protecting assets. Like any sophisticated legal and financial strategy, it’s best to work with a team.
    • Planning Tip: Another option is an offshore asset protection trust established under foreign laws. However, placing your clients’ assets out of the U.S. adds significant tax reporting burdens. Also, court orders for asset repatriation can lead to a client being held in contempt of court. Because of the ongoing tax compliance, fiduciary fees, and overall complexity of these foreign trusts, offshore planning is usually not a great option for most clients.
  • Lifetime Trusts: Lifetime trusts protect your clients’ beneficiaries’ inheritances. Think of this tactic as asset protection for the next generation. Although it does not provide any asset protection benefit for your current clients, these trusts can secure the financial well-being of their children after they’re gone. Additionally, assets left in lifetime trusts need long-term management, providing you a valuable opportunity to be introduced to and work with the next generation.
  • Inheritor’s Trusts: Inheritor’s trusts are an excellent choice for clients who expect to receive an inheritance. Rather than acquire assets outright or through a less-than-ideal trust set up by their family (usually parents or grandparents), your clients can strategically secure their inheritances with this type of trust. These trusts work best when they are coordinated with the client’s overall plan. Any client – especially well-off ones – expecting a large inheritance should consider this option.
  • Risk Management Planning: Setting up a corporation, LLC, limited partnership, buying appropriate insurance, negotiating contracts effectively, using retirement plans and other exempt accounts, and other strategies are all part of what we could call risk management planning. Some of these may be built into your clients’ estate plan while others may be part of your client’s business plans.  Many clients have not taken the time to develop a risk management strategy fully, but it is well worth the effort since many of these strategies are “low hanging” fruit, especially compared to more sophisticated strategies like DAPTs.

No matter what kind of asset protection strategies you help your clients implement, make sure they don’t sleep on it. Planning of this type should not be delayed or neglected. Effective strategies like these only protect your clients when they’re put into place early enough — well ahead of a lawsuit, credit claim, or bankruptcy. For clients who have already implemented one or more strategies, it is also a great time to review and ensure the plan will work as expected. Many trusts – even “irrevocable” ones – can be modernized (and their benefits possibly enhanced) using tools like a modification or decanting. Of course, the traditional concerns of estate planning, such as client privacy, freedom to determine who will be in charge of their assets, and reduction of income and estate taxes, must be addressed. Asset protection lets you improve your value to clients by enhancing client control over their property.

  • Planning tip: The Tax Cuts and Jobs Act of 2017 also impacts your clients’ asset protection needs. Far fewer individuals and married couples will have to pay inheritance taxes because of it. However, it also means that lawsuits — even “frivolous” ones — can still spell trouble for your clients. Bankruptcy and divorce can also come into play here, so protective planning to protect and preserve assets is extremely important, even as estate taxes have receded in importance.

We’re here to help you and your clients.
Your clients trust that you have the expertise to guide them toward their financial goals, and that often means pulling an estate planner into the conversation as part of their team of experts. Give us a call today to chat about how we can build asset protection into your clients’ 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.

 

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 

June 12, 2018 Continue reading

5/9/2018: Solve the Troubled Adult Child Beneficiary Dilemma in Three Easy Steps

Solve the Troubled Adult Child Beneficiary Dilemma in

Three Easy Steps

How to Plan a Successful Financial

Future for Every Family

Many clients with concerns about a

struggling adult child are apprehensive

about discussing such a sensitive topic.

But broaching this subject can lead to a

number of benefits for all parties

involved — for the family, for the adult

child, and for you as their financial

advisor.

Working with us rounds out the team of

professionals needed to achieve the

client’s goals and fully protect a client’s

family, resolving these sensitive

situations smoothly.

Step #1: Discuss the issue with your client

Adult children who are struggling with addiction, irresponsibility with money, or messy

marital issues all fall into the “troubled adult children” category because these issues

typically concern parents. Many parents are concerned about where their financial assets

will end up if distributed to these troubled children. No one wants their legacy to be

squandered on a harmful addiction, seized by a creditor, or absorbed by a contentious

divorce.

If you sense that this is an issue with a family you advise, ask them, on a scale of one to

ten, what level of anxiety they feel about distributions going directly to the child in

question. This is an easy way to determine how much follow-up is needed. If the anxiety

is high (anything over a seven), then loop us in as soon as possible. This first step can be

daunting, as it often touches on an emotionally loaded topic for the family, but asking

them about the anxiety level in these numerical terms, rather than the specifics of the

situation, helps clients express their concern without having to discuss potentially

uncomfortable details. As a result, you can begin to put their minds at ease, assuring them

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, clientcentered

legal services in estate planning,

probate and trust administration, tax

planning, and related legal matters.

that there are ways to manage the situation with everyone’s best interests in mind.

Step #2: Explore trusts and policies together

One solution that can mitigate the negative impacts of unstable adult children on a

family’s wealth is the use of the lifetime trust. Lifetime trusts hold and manage assets,

while making distributions throughout a beneficiary’s life rather than a one-time

distribution of assets. This minimizes the risk of irresponsible or unwise spending.

Because the inheritance is never distributed into a joint account, these types of trusts can

also keep the assets out of the hands of unhappy ex-spouses after a divorce. Plus, lifetime

trusts can contain tax planning that minimizes income and estate taxation.

Keeping money within a trust not only solves your client’s concerns by adding extra

protection to the management and distribution of a child’s inheritance, it also benefits you

as their advisor by allowing you to retain more assets under management. It’s a win-win

for all parties involved. Additionally, unmet life insurance needs, annuity needs, and

other factors may need to be met in order for the plan to fully protect the client and his or

her family.

Step #3: Work with a professional team

Working in concert as a professional team makes it easier to provide your clients with a

sustainable and beneficial roadmap for dealing with the issue of troubled adult children.

You can enjoy an enormous value-add when you partner with us to deliver a solution that

puts the client’s mind at ease.

As a trusted financial advisor, you are perfectly positioned to empower clients to protect

their family from bad decisions and bad people, and we can help. Call us today to discuss

how we can transform this all-too common challenge into a fantastic outcome for all

parties involved.

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, 2018 Continue reading

4/11/2018: Helping Clients Plan From the Heart: Beyond Money in Estate Planning

Many clients and advisors think of estate planning as a logistical process designed to reduce taxes, avoid court, and protect assets. Of course, proper planning does enhance the security of their families and assets, but estate planning is actually much more.

Although we write frequently to you about the tax, asset protection, and court-avoiding benefits of estate planning, the process can also be an expression of love, hopes, dreams, and goals for your clients’ loved ones. There are a number of ways your clients can pass on their legacy to their heirs through archival projects, incentivized trusts, charitable contributions, and more. By highlighting and helping deliver on the human side of estate planning, you can strengthen client relationships and increase retention, build a stable base of long-term retention of assets under management, and become known in your community as an advisor that cares about more than just the numbers.

Telling their story
Your clients may not realize that a will or trust can do more than just provide for the distribution of their assets.  In their estate planning documents, they can specifically reference and provide context for important family artifacts left behind. These family artifacts include audio or video recordings, collections of notebooks or letters, photo albums, and sentimentally-valuable heirlooms. Clients can then pass down the physical items along with the personal and family significance of the items.

By designating who will be the caretaker of important family items and sharing “final messages” with the family through a video or letter, estate plans can serve as a sort of time capsule distilling the views and values your clients wish to be remembered for. By facilitating the conversation about the client’s legacy, you’ll strengthen your relationship with them and their families, leading to a greater intergenerational bond that will serve all parties in the long run.

Incentivizing values and sharing wisdom
In addition to using estate planning to share the family story and history, clients can also incorporate core interests and beliefs into their estate plans. Many clients wish to pass along values like responsibility, dedication, or perseverance, while discouraging or minimizing the risk of so-called “affluenza.” There are a variety of specific estate planning strategies that can incentivize certain life paths for their beneficiaries, empowering your clients to pass along values and wisdom alongside wealth.

Facilitating personal expression for your clients creates a tremendous relationship building opportunity. What are their beliefs about the best ways to approach wealth? What are their hopes and dreams for the future lives of their beneficiaries? What are some struggles they have overcome on their path to success that may guide beneficiaries?

Estate planning need not be dry and unemotional. Revealing the potential for personal expression in their planning is a great way to build trust and loyalty with your clients and their families. This type of expression, when backed with some of the strategies discussed below, provides you with the opportunity to deepen relationships with every generation of the family.

Just talking about values is one thing. For the plan to achieve the client’s legacy goals, it must be backed with a sound legal and financial structure. Many options exist, depending on the needs of the client.  For example, an educational trust establishes funds for children, grandchildren, or even great-grandchildren to pursue higher learning. An incentive trust can ensure disbursements only under certain conditions, such as a beneficiary keeping a full-time job or performing a certain type of work your clients want to encourage. For those clients that are philanthropically minded, there are many charitable planning options, ranging from charitable trusts, donor advised funds, or private foundations. Although the 2017 tax reform reduced the overall tax incentive for charitable giving for many clients, using charitable planning is a great way for clients to keep their legacies alive by setting aside certain assets to support causes that mean a lot to them.

Expressing their hopes
In addition to helping your clients decide how they’d like to pass their values on through their estate plan, you can also remind them that they have the freedom to decide how they’d like their life to be celebrated. It’s often overlooked when clients consider the components in their plans because the focus is so often on taxes, asset preservation and protection, but their visions for their funeral service and memorials can also be included in their plans.

As we’ve discussed, estate planning isn’t only estate tax planning or about assets and liabilities. Connecting with the purpose behind planning results in greater client retention and engagement and an opportunity to bond with the next generation that will inherit wealth. Give us a call today so we can strategize the best approaches to take with your clients in exploring  and developing the human side of their estate plans.

April 11, 2018 Continue reading