Who’s In Charge?

A key question that should be answered unequivocally in the estate planning process is who will be in charge when you are incapable of making decisions on your own.  There are two important points in time where the answer to this question is crucially relevant:

(1) who will make decisions with respect to your property and health care when you are incapacitated and

(2) who will be put in charge to manage your estate when you have died.

Generally, a power of attorney for property and a power of attorney for health care, or other equivalents depending on your jurisdiction, provide the ability to appoint an agent to act on your behalf during periods of incapacity prior to your death.

After death, your will and, if applicable, your trust will provide for an executor and/or trustee to assume this role upon your death.

Recently, Kelley Long, a Forbes contributor, explained the importance of having someone appointed to act as your agent in the event of incapacity in her article “The Most Important Estate Planning Issue Boomers Need To Address.”     Click on the linked article and consider the points Ms. Long addresses prior to meeting with your estate planning professional.


IRS Delays New Basis Reporting Requirement…Again

Estate planners and estate tax advisors have been keenly aware of the recently enacted changes to the Internal Revenue Code (“Code”) affecting basis reporting for assets transferred at death.

Section 6035 of the Code requires executors to file a statement with the IRS that identifies both the basis of assets, as determined for federal estate tax purposes, transferred at death and all of the beneficiaries receiving such assets.  A copy of the statement must be provided to the beneficiaries  receiving any of the disclosed assets.

According to this newly enacted section, the statement must be filed and provided to the beneficiaries either (i) 30 days after the due date of IRS Form 706 OR (ii) 30 days after the filing of such form.

Shortly after the enactment of this section, the IRS extended the deadline to February 29, 2016 for any required statements as of the effective date of the new law to allow for the drafting of instructions and a form to comply with this requirement.

As of February 11, 2016, the IRS further extended the deadline for the filing of these statements to March 31, 2016.  According to Notice 2016-19, the extra month will “. . . provide executors and such other persons the opportunity to review the proposed regulations to be issued under sections 1014(f) and 6035 before preparing a Form 8971 . . .”.

Click on the following link to view a copy of this Notice:  IRS Notice 2016-19.

In January of this year, the IRS released a draft of Form 8971 to comply with this requirement (see a draft of the form here:   IRS Form 8971.).

Christopher Floss, a Chicago based estate planning and tax planning attorney, is an associate at Hoogendoorn & Talbot LLP.  If you wish to contact Christopher, please call 312-786-2250 or email him at cfloss@htlaw.com. 


Trusts and Retirement Funds: Should They Meet?

A significant portion of wealth in an average estate typically exists in some form of qualified or non-qualified retirement plan.  Most people are generally aware of the common parameters governing their plans, such as contribution limitations, penalties for early withdrawal and so forth.  What most retirement plan participants overlook are the rules governing distributions after death.

Given that most estate plans include some form of trust agreement that contains the plan’s operative components, it is crucial to be aware of the requirements for trusts when they are named as a beneficiary of a retirement plan.  The article, “Designating A Trust As Retirement Beneficiary,” offers a very concise introduction to these requirements.  As always, professional counsel is imperative when addressing specific concerns about your estate plan.

Up For A Challenge In 2016?

How are your 2016 New Year’s resolutions coming along?  Whatever your goals or objectives are, hopefully you’ve taken at least one small step to achieving them.  If you haven’t, it’s not too late!

A theme that’s common to many New Year’s resolutions involves planning.  Saving money, managing time more efficiently, even losing weight — the success of any goal under these very broad categories involves thinking ahead and planning.

Planning does not come naturally for some.  It’s so much easier to look at the next few hours than it is to look well into the future — 5, 10, 20, 40 years down the road.  It’s even more difficult for some to think about what will happen when a death occurs, either of someone close or, yes, even your own.  In any event, planning ahead, at least to some degree, is in everyone’s best interest.

Estate planners challenge their clients to plan ahead.  Asset management,  tax planning, and providing for loved ones are very common concepts that are typically addressed in the estate planning process.

As many of you are aware, I’ve used this blog platform to discuss relevant topics to estate and tax planning.  My challenge for this year is to provide a discussion forum for those seeking to learn more about estate planning.  While this forum will not, in any way, provide legal advice that is specific to anyone’s circumstance, it allows those who are interested in learning about the process to take the first step.  I repeat:  there is no substitute to reviewing your specific circumstances with a professional who can address your needs.  Nonetheless, hopefully the information learned from the topics discussed here will prompt further conversations with the professionals who attend to your estate and tax planning needs.

My challenge to you is to engage in the conversation in whatever way you wish.

To begin, I’d like to refer to an article I posted some time ago:  Estate Planning: Do I Need It?   This article addresses the following topics: four myths that have plagued the meaning of estate planning, five reasons why everyone should pursue some form of estate planning and a general definition of the various components of the estate planning process.  Read it through and tell me what you think.

Finally, it is my hope that the information you learn here will facilitate conversations with your trusted professionals, friends, colleagues and loved ones regarding your estate planning goals and objectives.

Stay tuned every Wednesday for further topics!

About the author:

Christopher Floss is an associate attorney at Hoogendoorn & Talbot LLP, a law firm based in Chicago. Chris concentrates his practice on matters pertaining to estate planning, tax compliance and planning, and estate administration. For more information on the content of this article or on his practice, you may contact Chris at cfloss@htlaw.com or by telephone at 312–786–2250. 

S-Corps and Saving Tax

Recently, President Obama enacted the Protecting Americans from Tax Hikes Act of 2015.  While there are several changes to the tax code covered in this Act, the following linked article addresses a permanent change to the recognition period for built-in gains for the sale of assets within the S-corp tax structure.  Read here for a brief summary:  Less Time To Tax!

When Does A Gift Save You Money?

Estate planning involves the assessment of various factors beyond the simple question of “Who gets what?” when you die.  Individuals who have estates worth anywhere near $5 million need to consider the estate tax consequences that may occur upon death.  Two very general methods of estate tax planning involve locking in value and removing assets from an estate, the goal of each being the reduction of the estate’s value at death.  A common way for individuals to “remove assets” from an estate is to make gifts during life.  For example, current tax law allows an individual to make gifts to others up to $14,000 per donee without subtracting from the donor’s exemption amount.  While “per donee exclusion” gifting is very common, there are more sophisticated means by which individuals may reduce the value of their estate over time and, hopefully, reduce the amount of estate tax assessed upon death.

As the end of the year draws closer, those looking to implement gifting strategies as a part of estate planning should consider their options.  For other ways to utilize gifting, read the article, Gifting Your Way to Lower Estate Taxes.