John Lane Law

Widows and Widowers Get Break with New Tax Ruling - John M. Lane Law, PLLC

“Revenue Ruling 2017-34 eases the process for an executor to get relief from having failed to make a timely ‘portability election’ to allow a surviving spouse to take advantage of a deceased spousal unused exclusion amount (DSUE).”

Forbes’ recent article, “IRS Offers Estate Tax Relief To Widows And Widowers,” advises that some quick action may be needed to take advantage of the relief from the deceased spousal unused exclusion amount (DSUE).

DSUE comes from a simplification of the estate tax in 2010 and the two most important provisions of the estate tax for many “moderate” millionaires: (i) the unified credit, which protects $5.49 million from estate tax in 2017; and (ii) the unlimited marital deduction. The unlimited marital deduction allows any amount left to the surviving spouse to be free of estate tax, if chosen.

A big concern of basic estate planning in the past was to make sure that a couple did not waste one of their unified credits. The DSUE saves people from creating trusts to work around losing the unified credits.

The relief offered by Revenue Procedure 2017-34 is available for the estates of decedents who died after December 31, 2010, in instances where no estate tax return was required and none was filed.

The executor can take advantage of the relief by filing an estate tax return with the election and making a reference to the revenue procedure at the top of the first page of the return. It’s available until January 2, 2018. After that, the procedure is available up to two years after the date of death.

This issue should be considered by moderate millionaires (those with a few million dollars), if they’re surviving spouses of people who died after 2010, where no estate tax return was filed. Look at the administrative headache of accomplishing the filing versus the chance that you might die with a net worth over the exclusion amount.  It is important to remember: it’s not your current net worth, but rather what your date of death net worth might be.

Speak with an estate planning attorney, if you believe that this is something you should do. Avoid the estate tax preparation rush in December.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Forbes (June 12, 2017) “IRS Offers Estate Tax Relief To Widows And Widowers”

The Time for Estate Planning is Now - John M. Lane Law, PLLC

“As the New Year turns, and with it, thoughts of income tax report preparation and filing, it might be a wise idea to do what many producers also do: spend time developing and honing transition and estate plans for their farm and ranch operations.”

The (Dodge City, KS) High Plains Journal, in “Estate planning is for everyone,” notes that people spend a lifetime working and building an estate to enjoy in their retirement years. Yet, many believe estate planning is only for the rich. This is not true. Putting in the effort now, will help you to avoid the confusion, delay, expense, and stress in your family that might occur if you were to die without an estate plan.

Speak with your family and manage their expectations to keep the lines of communication open. Most estate planning attorneys say that there are six basic steps in the estate planning process:

1. Start the discussion. Many families face a lack of communication as their greatest hurdle because family members don’t want to talk about estate planning. Parents may delay a discussion because the thought of growing old and dying is, honestly, not pleasant. Adult children may not want to bring up estate planning to avoid stressing parents and grandparents—and because they don’t want to look greedy. But the subject may come up when a neighbor, friend, or relative dies that may lead a family to having a discussion.
2. Take stock. Examine your present financial situation since it’s the foundation of your entire estate plan.
3. Develop goals. As you begin your estate plan, think about your objectives. These will vary from family to family due to differences in liabilities and assets, abilities and ages of survivors, the number of children, along with the values that are important to the creator of the estate plan. Your objectives may change with your age, or changes in marital status, income, assets or other factors in your life.
4. Use professional advisers. Estate planning is technical and complex. An experienced estate planning attorney can coordinate the work of other team members. Ask questions and make sure that you understand your plan and its implications.
5. Consider alternatives and implement the plan. There may be several ways to reach your objectives. Ask your attorney to explain the options. Once the plan has been created, it’s important to implement it.
6. Review and modify. Review your estate plan every few years. Tax laws and circumstances change, so it’s important to review and modify your plans with a qualified estate planning attorney when it’s warranted.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: The (Dodge City, KS) High Plains Journal (January 30, 2017) “Estate planning is for everyone”

Time to Review your Financial Planning - John M. Lane Law, PLLC

“There's no time like the present to take stock of your financial life.”

Business Insider’s recent article, “A financial adviser shares a 5-step checklist to complete before the end of 2016,” notes that many folks spend more time planning vacations than they do their finances or retirement. The beginning of the new year is an excellent time to take a comprehensive review of what you have—both assets and liabilities—to prepare for the year ahead and any financial milestones or challenges you may face. These can include things like marriage, a home purchase, adopting a child or retirement.

Here are some important financial steps to at the start of 2017.

Take financial inventory. Consider aggregating your accounts and identifying what you have, such as IRAs, bank accounts, and life insurance. You should take an inventory of your debt and determine how you will pay it off in 2017.

Review your estate plan. OK, it’s not that exciting, but it’s important. Don’t wait until this time next year, because tragedy can strike at any time. If you fail to plan properly, and something unfortunate happens, your family may be left unprepared. It's critical to have control over what will happen to everything that you leave behind.

Update your beneficiary forms. This is a task that should be reviewed periodically—especially if you've been married or divorced, had children or retired in recent years. A designated beneficiary on an insurance policy or an IRA has precedence over a will or a trust. As a result, it's important to make adjustments after major life changes.

Make some smart tax moves. You should know how the taxes work on your 401(k)s and IRAs, so take a look to be certain you're saving effectively. The maximum annual contribution to a 401(k) is $18,000 or $24,000 if you're over 50. Therefore, if you've got a holiday bonus, that’s the perfect reason to add to your retirement accounts.

You should also remember that you can gift as much as $14,000 per person annually to as many people as you'd like without a gift tax liability. In addition, with any tax planning for retirement, you might think about converting your retirement money through a Roth IRA conversion ladder. Money transferred from a traditional IRA to a Roth is tax- and penalty-free after paying taxes on the conversion.

Evaluate your path to retirement. Retirement planning is important at every stage of life, so be pro-active. If you create a plan, it can hold you accountable. It is important to speak with a qualified estate planning attorney. Don’t just “set it and forget it.” Stay on top of issues and continually monitor the situation.

If retirement is in the near future, or if you're planning to retire early, start to have discussions about identifying guaranteed income, social security, your pension options, and how to utilize any or all of them into your overall income plan, along with the tax consequences.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Business Insider (December 9, 2016) “A financial adviser shares a 5-step checklist to complete before the end of 2016”

Check This Checklist and See What You Need to Do for Your Estate Plan - John M. Lane Law, PLLC

“No matter your age, this estate planning checklist will help you get started on the process.”

People tend to put off estate planning. As a result, they risk dying without leaving their financial affairs in order and handing their heirs a host of potentially significant problems.

The Business Times recently published an article entitled “Use this checklist to get started on your estate planning.” The article discusses some pointers for those averse to buckling down and creating an estate plan.

Create a will if you don’t have one. A 2015 survey found that 54% of Americans ages 55 to 64 and about 70% of Americans ages 45 to 54 don’t have a will in place. A legally valid will could save your heirs from expensive problems with probate.

Add related documents. Depending on your estate planning needs, you may need a trust, durable financial power of attorney and medical powers of attorney, as well as a living will.

Review beneficiary designations. Check your documents and verify the designated beneficiaries. These take priority over the provisions of wills when it comes to retirement accounts, life insurance, and other non-probate assets.

Make a list of assets and debts. Give your heirs an estate planning organizer so that they can reference it if you pass away. List your real property and personal property assets, as well as real estate you own and its value. Also list personal property items that have a monetary worth. You can also list your bank and brokerage accounts, retirement accounts, other investments and insurance policies. Finally, make a list of your credit card debts, mortgage, home equity line of credit, and any consumer loans.

Consider making gifts to reduce the size of your taxable estate. The lifetime individual federal gift, estate, and generation-skipping tax exclusion amount is unified and is set at $5.45 million for this year. So a married couple can transfer up to $10.9 million tax-free.

Reduce, communicate and make wise decisions. Consolidate your IRAs and bank accounts to shorten your list, eliminate statements, reduce paperwork and avoid fees. Tell your heirs which causes and charities you value and select a reliable executor.

Work with an estate planning attorney. Do-it-yourself estate planning is not recommended because there are numerous financial, legal and emotional issues and pitfalls to avoid.

Ok, you’re not a multimillionaire yet. But if you own a business, have a blended family, have a child with special needs, are concerned about dementia or want to pave a smooth road for the loved ones left behind, use this checklist to get going now.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: The Business Times (Sept. 20, 2016) “Use this checklist to get started on your estate planning”

Gift Tax Reminders - John M. Lane Law, PLLC

“While the words ‘gift’ and ‘taxes’ don’t seem like they belong in the same sentence, they do—and the gift tax can definitely matter to you.”

Forbes’ recent article, “Why The Gift Tax Matters So Much to You,” reminds us that certain wealth transfers are excluded from gift taxes. You can currently give $14,000 per year or $28,000 per year as a couple to an individual or separately to as many individuals as you wish without paying taxes on any of the gifts. In addition, the recipient doesn’t owe any taxes on the gift received. But what some folks don’t understand is this: the $14,000 limit applies to filing a gift tax return—not the total amount you can give each year.

In addition to the $14,000 annual exclusion, there’s also a lifetime exemption from gift taxes—now at $5.45 million (or $10.9 million per couple). That means you can make total gifts of up to $5.45 million before you have to pay gift taxes. Any remaining exemption can be used as an exemption from estate taxes when needed.

The reason to file a Form 709, Gift Tax Return, is for you and the IRS to have an accounting of the amount of your lifetime exemption you’ve used. Plus, some gifts are also not considered taxable—like gifts of up to $14,000 to as many different people as you want, charitable gifts, gifts for education expenses and gifts for medical expenses.

While you are at it, you can make contributions to a Section 529 tuition plan and exclude up to the annual $14,000 limit, or you can give up to $70,000 in one year and use up five years’ worth of the exclusion. But if you do this, you can’t make another gift to that individual for the next four years.

Remember: if you want to help someone with tuition fees or medical bills, send the money directly to the institution or party that provided those services—such as the college or hospital. Don’t give the gift to the friend or relative you want to help, or the gift will be deemed taxable income.

Make sure that you get advice from a qualified estate planning attorney.  Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Forbes (July 17, 2016) “Why The Gift Tax Matters So Much to You”

How to Convince Mom to Draft a Will Now That Dad Has Passed Away - John M. Lane Law, PLLC

"Drafting a will can be a stressful and sometimes frightening task."

The article "How to handle a parent not having a will" from New Jersey 101.5 says that some people may postpone this for as long as possible to avoid dealing with fears relating to their own passing. They also may feel overwhelmed by the process.

Also, if Dad has recently passed away, Mom may be hearing, "You're gonna die soon, so please leave me an appropriate share." That can be difficult, too. And talk of drafting a will may bring back painful emotions linked to the father's death. These feelings are natural.

But instead of the children pressuring Mom, they should point out some of the benefits a will can provide, such as how a will allows her to specify how her assets will be transferred at her death. This can include making bequests of family heirlooms to specific people or include charitable contributions. If there's no will, Mom won't have any control. Her assets will pass according to the intestate laws of the state.

Probating an estate without a will can mean more time and money than an estate with a will. In addition, not having a will leaves the heirs to contend with it on top of their grieving.

Proper planning allows Mom to minimize estate taxes, inheritance taxes, and even some income taxes depending on her circumstances. This allows more wealth to pass to her heirs.

Parents can be quite uncomfortable talking about these issues with their children, so you might solicit the help of a close friend or other family members like an aunt or uncle to help bring up the subject. Many families find that an estate planning attorney can help facilitate the process. 

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: New Jersey 101.5 (April 7, 2016) "How to handle a parent not having a will"

New Results Show More Parents Concerned About Children's Financial Future

"One third of parents with children aged 18-34 are willing to have a less comfortable retirement to support their children."

More and more U.S. parents are concerned about their adult children's financial situation and are willing to put their own financial well-being at risk to support them, according to a report issued by the BMO Wealth Institute. The report, entitled "The Bank of Mom and Dad: a Source of Comfort for Everyone," found that parents with children aged 18-34 would be willing to make sacrifices to provide financial support for their children. This willingness shows the anxiety parents have about their adult children's future well-being, says CNN Money in a recent report, "Half of U.S. Parents Would Retire Later to Support Adult Children Financially."

An experienced estate planning attorney can assist parents with this concern to reach their own financial goals, including retirement—and to add in financial support to their children into a comprehensive plan.

Parents should remember that today's young adults face unique financial challenges and may require different levels of support than they themselves received. If parents and children talk about the amount of support they expect to provide or receive, they can avoid misunderstandings that could jeopardize their financial futures. The report offers parents the following financial planning tips:

• Start Early. You should try to teach your children about money at an early age. Understanding the basics of personal finance at a young age can help set up a child for future financial success and independence.
• Implement a Roth IRA. A Roth IRA can make savings more tax efficient and extend parents' ability to use their resources to meet financial goals. Although annual contributions are limited by IRS guidelines, income earned in an IRA is generally not subject to any federal or state tax.
• Take Advantage of the Gift Tax. When possible, use the exceptions in the federal gift tax rules to increase the benefit available to children and dependent parents, such as gifts made for tuition or to pay medical expenses.
• Leave a Legacy of Financial Comfort: Parents can make certain that their estate plans, including wills and trusts, adequately provide for their children. In addition, sound insurance planning can be used to supplement the income of a surviving spouse or to support children who may be struggling financially.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: CNN Money (December 22, 2015) "Half of U.S. Parents Would Retire Later to Support Adult Children Financially"

Best of Intentions...

"The real reasons to do estate planning are to take care of ourselves and our families the way that we want to."

In a review of their finances for the New Year, many well-meaning parents may unknowingly plant a tax bomb for their children in their estate plan. Fox 61 News' recent report, "Tips to avoid an income tax and estate planning time bomb," explains how timing is critical to gain the most from an inheritance. Simply put, the taxes due on the sale of an asset can be drastically different depending on how the asset was inherited by an heir.

For example, parents may decide to deed a home to their son while they are alive to protect it from long-term care costs or to avoid probate. Because the child didn't pay the parents the fair market value of the place, it's considered a gift, and a gift tax return may be required depending on the value of the home. The more the property is worth at the time of its sale, the greater the gain and the larger the tax bill will be.

These parents unknowingly planted an income tax bill bomb for their children by gifting property during their lifetimes instead of allowing the children to inherit the property after their deaths.

However, if the parents had used a revocable trust to own the home, then the residence would be passed on after death. In this scenario, the heir would not owe any income tax, provided the property was sold for what it was worth at the date of death. This works regardless of how much the property is worth at the time of the parents' passing.

Young or old—it doesn't matter—if you don't have an estate plan, have one created now. Start with the basics, and if you need to, do the additional planning as it applies to your situation. Speak with an experienced estate planning attorney. In addition, remember these tips:

• Review and update your beneficiary designations.
• Review and update your insurance policies. Check the amount of coverage and make sure it still meets your family's current needs.
• Consider purchasing long-term care insurance to help pay for the costs of long-term care in case you and/or your spouse ever need it due to illness or injury.

Plus, at a bare minimum, everyone over the age of 18 needs a Power of Attorney for Heath Care, a Living Will, and HIPPA authorizations. Also, a Revocable Living Trust may be better than a will at incapacity because it avoids the court's control over your assets. And while you are at it, review and update the guardian designation for any minor children.

It's critical to work with an estate planning attorney who can keep your estate plan up-to-date with all of the changes in the law, changes in your finances and health, and changes in the health and finances of family members.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Fox 61 News (January 4, 2016) "Tips to avoid an income tax and estate planning time bomb"

Start the New Year Off Right

"With so many regulatory changes affecting retirement, Social Security and estate planning, you should update your estate plan for the New Year."

Maybe not the whole day, but you should spend some time getting started with these important issues. Here are some key elements from The Business Investor's Daily's article "5 Changes to Make to Your Financial Plan Now."

Make gifts to family. Plan to give gifts of cash or tangible property of up to $14,000 per person because there's no limit on how many gifts you can make, and there is no gift or estate tax. Couples can combine their gift giving to $28,000 per person. This is an easy way to reduce a potentially taxable estate. Establish a long-term strategy and give annual gifts to your beneficiaries.

Give to charity. You can also make a donation to a charity, and if you tend to make significant charitable donations, consider establishing a family foundation. To avoid capital gains tax, you should consider donating appreciated assets like stocks. A donor-advised fund is another way to receive a charitable deduction today, avoid capital gains tax and retain the authority to determine its future use.

Check your beneficiaries. This applies not just to your personal estate plan but also to the benefits you have from your employment, like life insurance and retirement assets.

Set up a meeting to address your health care proxies, powers of attorney, and an updated will. Now's the time to schedule a meeting with your estate planning attorney to create or update these documents.

Set up life insurance. You should update or buy life insurance.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Business Investor's Daily (December 18, 2015) "5 Changes to Make to Your Financial Plan Now"

Six Things for You to Do Before the New Year

"If you don't have a 401(k), there is no better time to start one than today!"

We all make resolutions for the New Year. But before the New Year, there are some things we need to do before the old year is through.

US News reminds us in "6 Financial Tasks You Need to Complete Before the End of the Year" that there are several opportunities for smart financial moves and some last chances to take advantage of financial benefits. The article lists six things to consider crossing off your 2015 list in the next few weeks:

Make a Charitable Donation. Your donation to a charity is tax deductible. Why not do this and take the deduction on your 2015 tax filings? Charitable donations are nice for homeowners who itemize because they get the full benefit of the deduction.

Make a Retirement Contribution. Max out your annual contributions to retirement accounts to make certain that their tax benefits help you in 2015—and so those contributions count against your 2015 contribution cap.

Draw Down any Remaining Cash in Your FSA. If you have a flexible spending account, you may want to spend that money before December 31 or lose it.

Make 529 Plan Contributions for Your Kids. Don't forget about your grandchildren or yourself. This strategy is a great way to save for college expenses, and it's a great gift too, with tax-free growth for college savings. The article points out that 529 plan contributions are not federally tax deductible but that many states offer state tax deductions or tax credits on that state's 529 plan.

Give Financial Gifts to Family Members. The federal government allows each person to make cash gifts up to $14,000 to another person without tax liability.

Look at Your Investments. Have you lost money on some investments to balance out financial gains? Did you sell anything this year that earned capital gains? If so, and you also own investments that will be sold at a loss, you may want to go ahead and take that loss now by selling those items.

Take advantage of these opportunities for your own financial benefit before you ring in 2016.  Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: US News (December 1, 2015) "6 Financial Tasks You Need to Complete Before the End of the Year"