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.

It’s Year End Tax Planning Time!

U.S. News and World Report recently published an article highlighting 11 income tax saving strategies to consider before the end of the year.  If you’re looking for ways potentially to reduce your 2015 income tax liability, you may want to consider some of the ideas contained in this article:  11 Tax Moves Every Taxpayer Should Make Before The End Of The Year.

Is $1 Million Too High?

A recent article in the Washington Post indicates that it might be.  The article, Fixing The Most Expensive Tax Deduction, accurately states that taxpayers who pay mortgage interest on their primary residence typically receive significant tax benefits by way of an itemized deduction for mortgage interest paid on principal mortgages up to $1 million dollars.  The deduction for interest paid on principal mortgage indebtedness above the $1 million cap is limited.  According to the linked article, economic indicators appear to reflect that the $1 million cap might be too high.  Do you agree?  Read the article and provide your comments.

Generation Xers and Millennials: Get Your Estate Planning Done!

Those who read the articles on this blog know that estate planning is for everyone!  (If this is your first time reading this blog, read the following article and you’ll understand why:  Estate Planning: Do I Need It? )  James Salter of TheStreet recently posted the following article:  Why Millennials and Generation Xers Need to Worry About Estate Planning .  It is certainly worth reading!

As Salter points out, one of the major misconceptions about estate planning is that it’s for the elderly and wealthy.  This misconception couldn’t be farther from the truth!  Everyone needs some form of estate planning.  The key is to utilize the proper estate planning tools to accomplish your objectives.

Income Tax 101 For Homeowners!

Most individual taxpayers are aware of the annual income tax benefits of owning a home, such as the ability to deduct from gross income any mortgage interest and real estate taxes paid during the taxable year.  There are, however, other income tax rules of which homeowners should be aware, especially those who are disposing of a primary residence — either by sale or gift — or changing the home’s use from a primary residence to investment/rental property.  The article, 7 Tax Tricks For Homeowners , offers a good overview of the income tax implications that most taxpayers overlook in these circumstances.  As always, there’s no substitute for professional advice in these situations.

Clarity Is Key When Re-Registering Assets Into Trust

Recently, an Illinois appellate court decision held that a transfer of real property could be effectuated when the settlor of a trust indicated in the trust instrument that the property was a part of the trust corpus.  See my article, Do You Really Need A Deed?, for a summary of the court’s opinion.

Retirement Planning:  Should You Pay Off Your Mortgage Or Contribute More To Pre-Tax Retirement Funds?

A significant part of estate and tax planning analyzes different retirement financial planning strategies.  As more retirees enter retirement with large amounts of mortgage debt, financial planners are often suggesting that clients reaching retirement age should be paying off mortgage debt vs making larger contributions to pre-tax qualified plans. As in all planning matters, it’s a case-by-case analysis. Nonetheless, the blog post “Pay off the mortgage or add to the 401(k)” offers some interesting points to consider.