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Wealth Counselor Archive

9/12/2017: 4 Times You Should Call an Estate Planning Attorney Right Away: Using Your Clients’ Entire Financial Team Improves Results

From savings-building strategies to

concerns about investments, financial

advisors like you work closely with your

clients throughout the year. As estate

planning attorneys, we typically see those

same clients far less often, but there are

numerous circumstances where

collaboration between us can help secure

the best outcomes for our mutual clients.

It may not seem intuitive to loop in an

estate planning attorney. After all, you offer

comprehensive services to your clients.

Why bring more cooks into the kitchen?

The truth is, working collaboratively with

estate planning attorneys can add

significant value to your clients’ outcomes.

Sustainable planning is a team sport

Think of a typical client of yours—let’s call her Elizabeth. Like any fiscally responsible person,

Elizabeth has put together an all-star team to help her reach her financial goals. On her team,

every player has their role. The team works best when there’s clear communication at every

play. The team can rely on each other to assist when there is an opportunity to score extra

points for Elizabeth.

4 situations to pick up the phone

We don’t need to be in touch for every decision, but here are four situations where two heads

are definitely better than one. Give us a call when you run across any of these scenarios.

1. High-growth assets

What about that high-growth asset that’s just about to pop up in value tomorrow? Maybe it’s

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.

founder’s stock, a private placement that’s about to go public, an art collection that’s suddenly

spiked in demand, or something else entirely. Wealth can change overnight, and Elizabeth’s

financial plan must be flexible enough to allow for room to grow.

How we can help: With the help of an estate planning attorney, Elizabeth could sign onto an

incomplete non-grantor trust that would organize her state and federal tax liabilities into

separate entities. This way, her high-growth asset could be managed under the trust in a state

with favorable income tax laws. That means that when Elizabeth does decide to sell her hot new

startup or her collection of Warhols, she’s only responsible for the federal portion of the taxes

associated with the sale. This strategy could save significant state income taxes if she lives in a

high-tax jurisdiction, and that’s a big win for her.

2. Hard-to-value assets

Hard-to-value assets like commercial real estate, small business interests, and closely held

companies are another reason you might want to bring us into the loop as soon as possible.

Suppose that Elizabeth has inherited her father’s regionally-beloved ice cream franchise. It’s

hard to tell what the company’s current value is, but it’s easy to tell that the number of

franchises in different locations makes her vulnerable to heavy estate taxation and challenging

valuations going forward.

How we can help: A wide variety of planning options are available to Elizabeth depending on

her goals and her other assets. A business succession plan, a grantor retained annuity trust

(GRAT), a life insurance trust (ILIT), or several other tools could help Elizabeth incorporate this

new hard-to-value asset into her holdings. Of course, it doesn’t just have to be an inheritance

that’s hard to value. Any difficult to value assets should be considered when developing a

comprehensive financial plan and estate plan, thereby providing a big relief for Elizabeth and

those like her.

3. New homeownership

Buying a new house, be it a principal residence, vacation property, or rental property, is a huge

decision. Is she making the right choice, and is she taking smart, strategic financial steps in the

process? Thanks to Elizabeth’s career success, she’s able to purchase the type of high-value

house she’s been dreaming of for her family. But before signing for it, there’s an estate planning

tactic that could substantially benefit her down the road by removing the appreciation of the

property from her estate.

How we can help: Before the purchase is official, Elizabeth could set up a qualified personal

residence trust with the help of an estate planning attorney. This helps her in a few ways. For

one, she can name her children as beneficiaries that would inherit the property after her death,

with less gift tax cost than she’d otherwise have to deal with. She can still live in the home

during the tenure of the trust. Now Elizabeth has both a new home and a great asset lined up

for her children in the future. Even if a qualified personal residence trust isn’t a great fit, it still

makes sense for Elizabeth to discuss whether her new home should be titled in the name of her

trust.

4. Charitable giving

If Elizabeth is thinking about making a large charitable gift, you’ll want to make sure to work

with us to assess any opportunities to get the most out of Elizabeth’s generosity.

How we can help: There are numerous charitable tools available, such as charitable remainder

trusts, charitable lead trusts, gift annuities, donor advised funds, and private foundations. There

are no one-size-fits-all solutions to planned giving, but there are so many options available that

it’s almost certain that something will work for Elizabeth to make the most of her gift.

Give us a call today

We can work with you to help you strengthen your client relationships by solving these issues.

Collaborate with us to improve outcomes and generate strong, long-lasting relationships with

your clients. Give us a call today.

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

September 12, 2017 Continue reading

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.

Unsubscribe from this newsletter

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.

Unsubscribe from this newsletter

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