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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.

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

May 9, 2017 Continue reading

4/11/2017: How a Community Property Trust Can Save Tens of Thousands of Dollars in Capital Gains Taxes

How a Community Property Trust Can Save Tens of Thousands of

Dollars in Capital Gains Taxes

Community property trusts can save your

clients tens of thousands of dollars in capital

gains taxes, and that is just one of their many

benefits. This lesser-known strategy is not

necessarily the best fit for all couples either

because of their assets or state of residence.

However, for households you work with that

can make the most of them, it is a planning

tactic that could have a significant impact on

keeping more of the value of their estates in

the family.

These trusts offer a huge benefit to couples

who take advantage of them. There’s also a

lot to gain for their financial advisors. Thanks

to the double step-up for property held in this

type of trust, your clients will retain a

significant amount of wealth that would

otherwise go to the IRS because of capital gains tax. So it is a solution that provides better cash

flow for your clients and more assets under management for you: a win-win for all parties.

What is community property, and what is a community property trust?

However, before we get into the details, let’s start with a few quick and easy definitions:

Community property: Assets a married couple acquires by joint effort during marriage if they

live in one of the nine community property states: Arizona, California, Idaho, Louisiana, Nevada,

New Mexico, Texas, Washington, and Wisconsin.

Community property trust: A special type of joint revocable trust designed for couples who

own low-basis assets, enabling them to take advantage of a double step-up. Tennessee or Alaska

are the two places you can form these trusts, even for clients who do not live in those states.

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.

Note: Differentiating between community property states and states in which community property

trusts can be created can be a bit tricky. To put it simply, assets acquired jointly during marriage

within those nine states are automatically considered community property. However, in

Tennessee and Alaska, married couples can create a special trust called a community property

trust. This trust effectively opts your clients into the same benefits that couples automatically

enjoy in those states, at least for assets transferred into these trusts.

As you already know, assets are given a new basis when transferred by inheritance (through a will

or trust) and are revalued as of the date of the owner’s death. If an asset has appreciated above its

basis (what the owner paid for it), the new basis is called a stepped-up basis. A stepped-up basis

can save a considerable amount of capital gains tax when the new owner later sells an asset. After

implementing a community property trust, the entire value of the property gets a basis step-up

when one of the spouses dies, hence the term double step-up (rather than only one-half of the

property receiving the adjustment, which is what usually happens with jointly owned assets). So if

a surviving spouse sells community property, the double stepped-up basis on the entire property

can significantly reduce or even eliminate the capital gains tax.

CPTs in action: Max and Sophia

Imagine Sophia and Max, a couple who’ve been married for decades, each with their own fulfilling

and lucrative careers. Early on in their marriage, they decided to invest and build assets,

eventually jointly buying a commercial property.

The value of the commercial property had appreciated substantially since the time they bought it.

They kept the property up-to-date and were able to lease it to quality tenants, contributing to the

value of the building. Because of the increase in value, Sophia and Max’s basis was low compared

to the current value. If either spouse passed away and the surviving spouse opted to sell the

property, a significant portion of the sales profit would be lost to capital gains taxation, as you can

see from the example below.

Sophia and Max met with their estate planning attorney and learned that they could create a

community property trust. The commercial property became one of the assets owned by the trust.

Upon Max’s death, the basis of the entire property is stepped up to its current market value.

Without the community property trust, only Max’s half of the property would have received a

step-up. However, with the trust, both Max and Sophia’s halves are stepped up, saving a

considerable amount of income taxes. As a result, Sophia can sell the property to diversify with

potentially no capital gains tax payment.

Jointly Owned Property With Community Property Trust

Basis (what they paid for the

property) $50,000 $50,000

Fair Market Value at Max’s Death $1,000,000 $1,000,000

Sophia’s Basis after Max’s Death $525,000 (. of $1M value, plus .

of original basis)

$1,000,000 (fair market value at

Max’s death)

Gain Upon Sale (Fair Market Value

at Max’s Death minus Sophia’s

Basis after Max’s Death)

$475,000 $0

Tax Due on the Gain (assuming

23.8% capital gains rate – 20%

capital gains plus 3.8% net

investment income tax)

$113,050 $0

Cash Available to Invest After

Sale $886,950 $1,000,000

Now when Sophia decides to sell the property, the capital gains tax will only be drawn from the

appreciated value since Max’s death, which if the sale is consummated quickly enough will be

minimal or even zero. As you can see in the example above, Sophia saves $113,050 in capital gains

taxes when she and Max use a community property trust rather than joint ownership. This tax

outcome applies to all the community property managed under the trust, leaving Sophia with

significantly more money to make the most of her golden years and pass along to her children,

charities, or other intended beneficiaries.

This is a strategy that can work incredibly well in the right circumstances, but it does not fit all

clients at all times. It is appropriate for married clients that have low basis assets that they are

comfortable holding onto until one of them dies. There are lots of other strategies that work for

other situations. Call us to discuss your client and their goals so we can deliver a solution.

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

April 11, 2017 Continue reading

3/14/2017: Estate Planning Should Always be a Team Effort

Estate Planning Should Always be a Team Effort

A Team of Coordinated Professionals Is Your

Clients’ Best Bet

Picture a symphony’s worth of classical

musicians all trying to play a piece in

perfect harmony, but they can’t see one

another. Each of them also has slightly

different sheet music. It doesn’t take a

stretch of the imagination to know it’s

not going to sound pretty.

That’s what it’s like for clients whose

various advisors don’t communicate. Of

course, an individual’s wealth

management strategy doesn’t come from

just one part of their approach, but rather

a comprehensive and holistic

combination of the efforts of several

professionals.

A little miscommunication goes a long way

You might be surprised to consider just how often disjointed planning and advising can impact a

client’s long-term financial well-being. Estate planning attorneys, CPAs, financial advisors, and

insurance agents may have access to the same initial set of client documents or client goals. But,

once isolated strategies created by each of those advisors are in place, things can begin to go

sideways. On the other hand, a quick recap among a client’s advisors is often all it takes to

smooth over any issues and develop a great, integrated plan for clients.

Put yourself in your clients’ shoes

Consider the situation of a typical client — let’s call her Dana. Dana is a successful IT manager

with a rich family life and a very busy schedule. Even though free time is hard to come by, she’s

decided it’s time to stop putting off financial and estate planning. Here are a few of the advisors

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.

she’ll likely meet with in order to get started:

1. Insurance agent: Dana realizes that in order to make sure her spouse and children will

be well taken care of when she passes away, she’ll need to put a robust life insurance

policy in place. If her insurance agent isn’t in communication with Dana’s estate

planning attorney, the beneficiaries designated in her policy won’t coordinate with or

support her estate plan.

2. CPA: From marriage and dependents to new types of deductions, Dana decides it’s time

to employ an accountant rather than do her taxes through a rudimentary online system.

Her new CPA takes stock of all of her financial assets and may learn about something

that didn’t come up in Dana’s communication with her insurance agent.

3. Financial advisor: Dana’s financial advisor helps her determine what types of

investments are smart choices for her and coaches her in establishing long-term

financial goals. Everything in her financial plan seems perfectly organized. But, as a

result of creating this financial plan, the amounts of insurance in Dana’s policy may no

longer be optimal.

4. Estate planning attorney: Dana finds a local estate planning attorney to implement a

trust-based estate plan that names people she trusts to make decisions if she can no

longer make them, ensures her assets will pass to those she intends, and avoids or

eliminates as many costs and taxes as possible. Without good communication and

collaboration between her team, her estate planning sessions could seem like a

reinvention of the wheel — eating up more of Dana’s time than she and her family care

for. But there are serious implications down the road as well, as Dana now has four sets

of siloed information.

Without collaboration between these specific professionals, she does not realize these

discrepancies herself. It might not become clear that anything is wrong until complex and

stressful situations arise that bring problems to the surface.

A little communication goes a long way, too

Even a 20-minute roundtable discussion may be all that’s needed in order to share a quick

rundown of pertinent details and determine if any further action is needed to make Dana’s

various plans fit together.

In addition to finding problems that can be easily resolved now, they may also notice missed

opportunities that could benefit Dana and her family for years to come. When opportunities to

benefit clients are discovered, it’s only a matter of time before each of these professionals

receives referrals from Dana’s colleagues and friends.

For example, Dana’s financial advisor and CPA might recognize that she has several low basis

assets. They notify her estate planning attorney, who suggests she add a charitable remainder

trust and an irrevocable life insurance trust to diversify her portfolio at a lower tax cost. Her life

insurance agent then implements a policy for the ILIT that essentially replaces the value of the

now donated asset in the charitable remainder trust.

On the other hand, let’s say Dana doesn’t have charitable goals and she’s comfortable holding

onto a specific asset instead. With no immediate need to diversify the portfolio or divest the

asset, a community property trust might provide a significant income tax savings after her

death. By extension, the community property trust will improve the availability of assets for her

surviving spouse (and, of course, those assets will need management by the financial advisor).

These are just two examples of ways that a little communication and collaboration can yield

amazing results for clients.

Bring your clients’ estate planning attorneys into the loop

The goal of every advisory professional is to put their clients in the best possible position to

achieve their aims. And collaboration with estate planning attorneys is a fantastic strategy to

have at your disposal. When we work together as a coordinated team, we’re strengthening our

own practices as well as the chances for highly positive outcomes for our clients. Get in touch

with us today to discuss how we can benefit our mutual 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

March 14, 2017 Continue reading

2/14/2017: The Superior Alternative to “I Love You” Wills

The Superior Alternative to “I Love You” Wills
From Jared Adams

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.

Guide Your Clients to Lifetime Beneficiary Directed Trusts Instead

As Valentine’s Day brings heart-shaped chocolate boxes and roses by the dozen into your clients’ imaginations, seize the moment to educate them about the drawbacks of “I love you” wills and introduce them to the estate planning move that’s actually going to ensure they do well by their loved ones: a lifetime beneficiary trust.

As a financial advisor, you may already be well aware of what estate attorneys call “I love you” wills. You can recognize these wills because they are often short and their hallmark is that the maker of the will leaves everything, outright, to his or her surviving spouse. Hence the “I love you” name: “I love you so much, I’m leaving everything to you.” But this all-too-common approach creates significant risk for beneficiaries and, contrary to their name, is often not the most caring of estate planning gestures. These types of wills are an excellent opportunity to take action on behalf of your clients’ best interests while providing extra value that will enhance your career as well.

Clear up client misconceptions

Few aspects of estate planning bring out as much emotional decision-making as the division of assets in a will or trust, and that puts you in the perfect position to guide your clients away from these wills and toward a more caring solution. In order to help them understand why “I love you” wills are not a good estate planning strategy, here are a few helpful points.

Why “I love you” wills aren’t effective

Say your client Bob wants to make sure his wife, Lisa, gets access to his wealth upon his death. In the case of an “I love you” will, Lisa receives the assets outright and, initially, it looks as if those assets will be handled according to Lisa’s current estate plan when she dies. However, Lisa could alter her estate plan at any time — meaning any verbal agreements she made with Bob about what will be done with those assets could go out the window, contrary to Bob’s wishes.

Here are several other points you can use to help clients like Bob see “I love you” wills for the poor planning strategy that they are.

  • Basic planning can mean little to no asset protection. Once your clients’ assets are owned outright by their beneficiaries, those assets can be seized by creditors or lost in bankruptcy. Even if your client’s estate is not worth enough for concern about estate taxes, predatory creditors and lawsuits could still mean trouble for virtually anyone.
  • These wills still have to go through probate. “I love you” wills and surviving spouses don’t get an exemption from probate. Even a simple will still has to go through some form of probate process, consuming valuable time and money. Probate is a public process, which can be particularly frustrating for clients that hope to keep the details of their family’s inheritance private. Trusts, however, don’t need to go through probate, offering a level of privacy and freedom that many clients find appealing.
  • Guardianship or conservatorship involvement. Wills provide no protection against guardianship or conservatorship court involvement, a distracting, costly, and potentially embarrassing situation that can occur if a client can no longer make decisions for himself or herself. A will isn’t effective until death, so any instructions it contains are not valid until a client dies. In contrast, a fully funded revocable living trust can avoid guardianship or conservatorship court control and allows your clients to select people they trust to manage their property.
  • Basic plans pile more assets into survivor’s estates, potentially resulting in increased taxes. Although portability between spouses can help with this issue, it still doesn’t prove useful with the generation-skipping transfer tax (GSTT). Although the estate tax and GSTT will only affect a very narrow group of people with high net worth, we don’t know yet what will happen with tax policy under the new Trump presidency. In a changing tax policy landscape, keeping your clients as informed as possible is an important tactic for ongoing success. Lifetime beneficiary trusts can provide flexibility to deal with tax changes.
  • Inadvertent disinheritance. “I love you” wills like Bob’s offer no guarantee that the assets left to his wife Lisa will eventually end up in the hands of his children, as they are now Lisa’s assets for her to leave however she wants. For example, Lisa could leave them to her own kids, a charity, a lover, or a new husband. Bob could have inadvertently disinherited some of his beneficiaries due to a lack of continuing, lifetime beneficiary trusts that would have explicitly expressed Bob’s intentions.​

We Can Help

A lifetime beneficiary trust is a better option than outright inheritance because it avoids all the pitfalls of “I love you” wills. Introduce us to any clients who might be operating under false assumptions regarding their “I love you” wills. Not only will they now know they can rest assured with their assets managed precisely according to their wishes through a comprehensive estate plan, but they’ll also have redoubled faith in you as their trusted financial advisor. You’ll also gain an opportunity for long-term management of assets held in these trusts, since you can be introduced to the next generation of beneficiaries.

Opening the discussion about lifetime beneficiary trusts now can be an important relationship-building effort with downstream beneficiaries whose accounts you might acquire as well. Take the first step by giving us a call today to learn more.


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.

February 14, 2017 Continue reading