In the past, many people’s wills included a sizable donation to charity. Because the federal estate tax was so burdensome, including charitable bequests in a will was a good idea since it reduced the amount of tax the estate had to pay. Now, however, the federal estate tax applies only to estates of well over $5 million. As a result, for a great many people, leaving money to charity in a will no longer provides any
Some taxpayers with large state income tax bills have been trying to avoid them through the use of out-of-state trusts. These trusts have been created in three states that have no or minimal state income tax – Wyoming, Nevada and Delaware. The idea is that people in high-tax states can set up trusts in these low-or-no-tax states to hold the investments that produce the income. The trusts are called “incomplete non-grantor gift trusts.” A Wyoming incomplete
Eight states are reducing their estate tax burden in 2015, which is good news for anyone who lives or owns property in those states. New York and Maryland are increasing their exemption amounts (the amount of assets an estate can have before any tax is due). For 2015, the New York limit goes from $1 million to just over $2 million, and the Maryland limit goes from $1 million to $1.5 million. Both states plan to
There’s now a big danger if you’re rolling money over from one IRA into another IRA, as a result of a decision from the U.S. Tax Court. Under federal law, you can only do one IRA-to-IRA rollover per year. If you try to roll over more than one IRA in a 365-day period, it’s considered a distribution, and you’ll be subject to significant taxes and penalties. In the past, the IRS has told taxpayers that this
If you’re planning to leave an IRA or other retirement account to your heirs, you might want to consider creating a trust to hold the account. That’s the upshot of a recent ruling from the U.S. Supreme Court. That’s because IRAs that are inherited from anyone other than a spouse are no longer protected from creditors in a bankruptcy. Heidi Heffron-Clark and her husband Brandon filed for bankruptcy after their pizza shop failed in 2009. They
As Yogi Berra supposedly said, “It’s hard to make predictions, especially about the future.” Yet when you create a trust for your heirs, you have little choice but to make predictions about what their needs will be many years down the road. Because circumstances change, it’s a good idea to make your trust flexible enough to accommodate the unexpected. If you tell your trustee what to do in too much detail, the trust might end up
One of the greatest perks of owning a small business is flexibility. You can set your own hours and salary. You can plot the firm’s trajectory without consulting your boss, upper management, or even corporate policy. But that same flexibility may become a curse if handled unwisely. A small business owner without discipline and a well-thought-out strategy may fall into serious financial trouble. Employees in larger firms often rely on the human resources department to establish
There’s not much time left to make tax-saving moves for 2014. Some ideas to consider: Make your January mortgage payment before December 31 to squeeze an extra interest deduction into 2014. Make tax-free gifts to use your annual gift tax exclusion for 2014. This year you can give up to $14,000 to as many individuals as you like without tax consequences. These gifts to individuals are not deductible by you; nor are they taxable to the
Your retirement funds are protected from creditors even if you file for bankruptcy, with only a few limitations. This protection extends to funds in all government-qualified pension plans, including IRAs (traditional and Roth), 401(k)s, 403(b)s, Keoghs, profit sharing, money purchase, and defined benefit plans. A recent U.S. Supreme Court decision has held, however, that an inherited IRA is not a “retirement fund” and therefore doesn’t qualify for bankruptcy protection. An inherited IRA is a traditional or
Here’s some good news for people who live in – or are thinking of entering – a “continuing care retirement community.” These are communities for older people that provide an entire continuum of care, from independent living to nursing home, so that residents can “age in place” and not have to move elsewhere if their faculties start to diminish. These communities are an appealing option, but they can be very expensive. The good news is that there
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