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Wealth Advisor Archive

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

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

How We Can Future-Proof Your Estate

Plan

The recent political news cycle has been

nothing if not lively. Are you concerned

about how your taxes, healthcare, and

trusts might be impacted by changes in

our government under the new

administration? If so, you are not alone:

Considering how many twists and turns

the first 100 days of Trump’s presidency

has provided, many Americans are

wondering what’s happening with estate

planning and what they can do to secure

their future.

While there have been several proposals

that may impact your estate, 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 you can use to make sure

your estate plan is future-proof.

Actions from the first 100 days that could affect your estate

To provide the best possible service to our clients, we closely monitor legislative changes

that could throw a wrench in the gears of your estate plan. Likewise, we’re always

looking for opportunities to take advantage of government changes that might benefit

your family 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.

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.

2. Repealing the federal estate tax and GSTT

The federal estate or “death” tax doesn’t 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’re

watching the situation and let you know as soon as something more definitive presents

itself.

Another point of consideration is what would happen to the gift tax and generationskipping

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 your estate plan needs 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 estate 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 doesn’t 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 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 your plan is both

flexible enough to handle any changes that come your way and sturdy enough to weather

them. In addition to providing wills, trusts, powers of attorney, and other core documents

making up your robust estate plan, we will continue to keep our fingers on the pulse of

the legislative developments that will matter to you most.

Times are changing, but a well-planned and flexible estate is always a benefit for you and

your family. Feel free to get in touch with us anytime to set up your next estate planning

appointment, and together we can make sure your plan is 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

4/11/2017: Are You Familiar With Community Property Trusts?

Are You Familiar With Community Property Trusts?

Learn How These Special Trusts Can Help

Reduce Income Taxes

Community property trusts can save your

family tens of thousands of dollars in

capital gains taxes, and that’s just one of

their many benefits. This lesser-known

strategy isn’t right for everyone, but for

households that can make the most of it,

it’s a planning tactic that could have a

huge impact on keeping more of the value

of your estate in the family.

What is community property, and what

is a community property trust?

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

(more on this below). Tennessee or Alaska are the two places you can form these trusts.

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

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, creating a special trust called a

community property trust can effectively opt you into the same benefits that couples

automatically enjoy in those nine states, even if you don’t live in Tennessee or Alaska.

But how do you know if your assets acquired jointly during marriage are low-basis, and

what is a double step-up? Unpacking these two terms is also necessary before we can get

into figuring out whether a community property trust is a right strategy for you.

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.

Basis: Typically, this is what you paid for an asset, although it can sometimes be

different for property that was given to you as a gift, rental property, or small business

interests such as S Corporations or partnerships. Regardless of how you determine basis, it

is important to know because it is used to determine gain or loss for income tax purposes.

Stepped-up basis: 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 original owner paid for it), the new basis is called a

stepped-up basis. A stepped-up basis essentially wipes out the capital gains bill that would

otherwise be owed and can save a considerable amount of capital gains tax when an asset is

sold by the new owner. For jointly owned property, most married couples receive a step-up

in basis for one-half of the value of the property.

Double step-up: For community property, the entire value of the property gets a

basis adjustment step-up when one of the spouses dies, rather than only one-half of the

property; hence the term double step-up. This double step-up allows a surviving spouse to

reduce or even potentially eliminate his or her capital gains tax liability.

Let’s look an example:

Community Property Trusts 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 greatly 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 managed 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. But 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 Max and Sophia

originally 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 (½ of $1M value,

plus ½ 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 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.

Community property trusts are one strategy, but they necessarily fit everyone’s

circumstances. It’s appropriate for married clients that have low basis assets that they’re

comfortable holding onto until one of them dies. There are lots of other strategies to talk

about, too. Call us to discuss your goals, and we’ll work together to keep the wealth you’ve

worked so hard for within your family for generations to come.

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

3/14/2017: Estate Plans for College Students and Other Young Adults

Estate Plans for College Students and Other Young Adults
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.

Why It’s the Perfect Time to Set Your Kids Up for Success

As spring break swiftly approaches, the parents of young adults experience a mixed bag of emotions.

It can be exciting to see your children branching out and becoming successful adults in their own right — a time full of hard work and self-discovery that hopefully lays the groundwork for a fulfilling career in the coming years.

But, it can also be a time of anxiety for some parents. We all want to know that we are doing absolutely everything we can to make sure our kids stay safe, healthy, and secure so they can pursue their dreams to the fullest.

Preparing for legal adulthood

Whether your child is just turning the corner on their senior year of highschool or they’re already in the midst of their undergraduate studies, their 18th birthday undoubtedly marks the transition to adulthood when it comes to their legal affairs. This can impact you as their parent in a few distinct ways:

  • Medical decisions: When your children become legal adults, you no longer have the authority to know their medical details or make healthcare decisions on their behalf. Without proper legal documents in place, you may need to petition a court to be named as guardian or conservator — a time consuming, expensive, and distracting process.
     
  • Probate: Many young people own cars, have a checking or savings account, and have life insurance — assets that could end up in a probate court if inadequate planning, like only using the beneficiary form at the insurance company, is done. A basic trust may be all that’s necessary now for your children’s estates. Some people are concerned about planning “too early.” But, since revocable trusts can be updated as your child’s circumstances change, there’s never really a time that’s too early. By working with your children now, you’ll instill a great habit of being proactive when it comes to legal affairs while providing protection for your family along the way.

A simple way forward

Turning 18 isn’t just an opportunity to be able to vote or serve in the military. It’s also the first time individuals need to come in and have a conversation about estate planning.

As a parent, it’s an opportunity to help your child enter the world of adulthood and maturity. It also presents a unique opportunity for families to work together toward a common goal and can serve as a bond-strengthening experience for parents and children alike.

Here are some of the preliminary documents we can use to lay the foundation of your children’s estate plans:

  • Asset inventory: Asset inventories are a great way to get the ball rolling for those brand new to estate planning. Include assets like insurance policies, valuable or meaningful personal property or heirlooms, savings accounts, real estate, investments, and retirement plans.
     
  • Basic will: Wills contain instructions for the management and distribution of assets after death. However, since wills must go through probate, they are usually not a great planning tool for most people.
     
  • Living will: This document records the individual’s wishes in the event of terminal incapacity.
     
  • Revocable trust: A revocable living trust is a great way to keep an individual’s assets out of reach from potential court interference. And since they are revocable, these trusts can be altered as often as necessary throughout the course of one’s life.
     
  • Financial power of attorney: A financial power of attorney is the document used to appoint a person to handle the individual’s financial affairs.
     
  • Healthcare power of attorney: This type of power of attorney covers medical decision-making that could impact an individual’s health and lifestyle if they become unable to make those decisions themselves due to mental or physical impairment. In concert with a revocable trust, a financial power of attorney and healthcare power of attorney can provide a powerful plan for incapacity that sometimes strikes younger people (like the well-known case of Terri Schiavo, who became legally incapacitated in her late 20s).

Now is the right time to act

Estate planning for young adults doesn’t need to be prohibitively expensive or time-consuming. Work with us to build a comprehensive plan so you and your children can get back to the business of being in such an exciting part of life.

Whether your children are returning from spring break trips or getting ready for graduation in a few months time, now is a great opportunity to give us a call today to discuss how we can work together to keep your children and family fully protected, no matter what life brings their way.

 

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.

2/14/2017: Why “I Love You” Wills Really Don’t Say “I Love You”

Why “I Love You” Wills Really Don’t Say “I Love You”

As Valentine’s Day brings heart-shaped

chocolate boxes and roses by the dozen

into your imagination, seize the moment

to learn about the drawbacks of “I love

you” wills and introduce yourself to the

estate planning move that’s actually

going to ensure you do well by your

loved ones: a lifetime beneficiary trust.

Rise above the misconceptions

No aspect of estate planning brings out

as much emotional decision-making as

the division of assets. Many people

think, “I love you,” so I’ll leave you

everything. In order to understand why “I

love you” wills are, contrary to their

name, not the most caring of estate

planning gestures, it’s important to understand the risks of “I love you” wills.

Simply put, an “I love you” will is a common name for a will in which the maker leaves all

of his or her assets outright to his or her surviving spouse. Many people consider or

even use this approach because they think that leaving assets in trust shows they don’t

trust their spouse. They may also think that a lack of federal estate taxes protects their

assets from getting into the wrong hands. Sadly, many people also think that a will can

be used to avoid probate. Unfortunately, none of these things are true.

Understand why “I love you” wills aren’t effective

Say you want to make sure your spouse, Lisa, gets access to your wealth upon your

death. In the case of an “I love you” will, Lisa will have to go to the probate court in order

to validate your will and ultimately transfer the assets. Since Lisa receives the assets

outright, Lisa’s estate plan will eventually control the distribution of whatever assets are

left at her death. This could be a significant problem because Lisa could alter her estate

plan at any time. Any verbal agreements about what will be done with those assets could

go out the window, contrary to your wishes or any agreements you may have made.

· You could inadvertently disinherit your children. If you use an “I love you” will,

your assets are now Lisa’s assets for her to leave however she wants. For

example, Lisa could leave her assets to her own kids, a charity, a lover, or a new

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, clientcentered

legal services in estate planning,

probate and trust administration, tax

planning, and related legal matters.

husband. Likewise, assets left outright to children could be lost in a divorce.

· Basic planning with outright inheritance sets your heirs up for asset protection

issues. Once your assets are owned outright by your beneficiaries through a

direct inheritance, those assets can be seized by creditors, divorcing spouses, or

lost in bankruptcy. Even if your estate is below the exemption for the death tax,

predatory creditors and lawsuits could still spell trouble.

· These wills still have to go through probate. Surviving spouses do not receive an

exemption from probate. Even a simple will still has to go through the process,

which you may not be anticipating — especially if you had hoped to keep the

details of the will private. Trusts, however, don’t need to go through probate.

· An “I love you will” does not protect against guardianship or conservatorship

court involvement for you or for your beneficiaries. For example, if you leave all

of your assets to Lisa and she develops dementia, her entire estate (her assets

plus the inheritance she received from you) could be under the control of a

guardianship or conservatorship court.

· Basic plans pile more assets into survivors’ estates. Although portability between

spouses can help, it still doesn’t prove useful with the generation-skipping

transfer tax (GSTT). Portability isn’t available for non-spouse beneficiaries. This

will only affect a very narrow group of people with very high net worth, and we

don’t know yet what will happen with tax policy under the new Trump presidency.

In a changing tax policy landscape, keeping yourself as informed as possible is

an important tactic for ongoing success.

Explore lifetime beneficiary directed trusts

Comprehensive, trust-based estate planning with lifetime beneficiary trusts is a better

option than outright inheritance for surviving spouses, children, grandchildren, or other

beneficiaries. If you leave your assets in lifetime beneficiary trusts, you retain control

over where assets end up in the long run. Plus, your beneficiaries obtain robust asset

protection features that can keep wealth safe from courts, creditors, and divorcing

spouses. Your family’s private information can stay out of public record. You can also

take advantage of more sophisticated tax planning than you can with a basic will or trust

with outright distributions.

With this approach, you can focus enjoying your life with the knowledge that a qualified

estate planning attorney is working for your best interests now as well as down the road.

Now that’s something to love and truly expresses “I love you” to your beneficiaries.

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