Charlotte had several grown children, and from time to time she would give the children money. Sometimes she called it a gift, but sometimes she called it a loan. A few of the “loans” were small, but sometimes they were $25,000 or more, such as when a child was starting a business. Sometimes the children promised to pay the money back, but they didn’t say when. Sometimes Charlotte called something a “loan,” but it was clear
Some people have been reluctant to review their wills is recent years because the estate tax laws have been so uncertain. They’ve taken the attitude that they want to wait until the dust has settled. Well, with the “fiscal cliff” law on the books, the dust has now settled – or at least things are far more settled now than they have been in a very long time. That fact in itself is a good reason
Congress has temporarily revived a law that lets you make charitable donations directly from your IRA, which might provide some significant tax advantages. But the “IRA charitable rollover” will be allowed only until the end of 2013, so if you think this might benefit you, you should take advantage of it this year. If you’re over the age of 70½, you’re required to take minimum distributions each year from your IRA, and you have to pay
Three big changes in the way that trusts are taxed starting in 2013 are making it far more important to be careful about trust distributions. A trust’s income and capital gains will now be taxed very differently – and much more heavily – than income and capital gains for individuals. As a result, you’ll want to think very carefully about how you arrange distributions. And you might also want to have any existing trusts reviewed to
Year Exemption Amount Top tax rate 2001 $675,000 55% 2002 $1 million 50% 2003 $1 million 49% 2004 $1.5 million 48% 2005 $1.5 million 47% 2006 $2 million 46% 2007 $2 million 45% 2008 $2 million 45% 2009 $3.5 million 45% 2010 Repealed 2011 $5 million 35% 2012 $5.12 million 35% 2013 $5.25 million 40%
A federal estate tax return doesn’t have to be filed every time someone dies. In fact, most estates never have to file one. However, a provision in the new “fiscal cliff” tax law may make it very advantageous to file an estate tax return if the deceased person is survived by a spouse – even if a return is not legally required. Here’s why: Generally, when a person dies, his or her estate can give an
The new tax law that resolved the “fiscal cliff” issue in January allows employees with a 401(k) plan at work to roll over any or all of the assets in their current plan into a Roth 401(k) plan. This is a big change, and should at least be considered by anyone who is eligible. In a traditional IRA or 401(k) plan, employees contribute pre-tax earnings to the plan. The assets grow tax-free until retirement age, at
The annual gift tax exemption has been increased to $14,000 in 2013, up from $13,000 last year. That’s due to an adjustment for inflation. This means that you can give any person $14,000 this year without any gift tax liability at all. Making annual gifts of the exemption amount is one of the best and easiest forms of estate planning, because it transfers assets from one generation to the next without any tax liability whatsoever. If
In a big surprise to many people, when Congress passed a law to resolve the “fiscal cliff” in January, it retained the large ($5 million-plus) estate, gift, and generation-skipping transfer tax exemptions that had been available in 2011 and 2012. These taxes will now be 40% of amounts over this exemption. Without this new law, the exemptions would have dropped to only $1 million at the start of 2013, with a tax rate of 55%. The
Often, older people will add the name of one or more of their children to their checking accounts or brokerage accounts. They might do this to make it easier for the children to help them with their financial affairs. Or they might think that it’s a clever way to avoid probate. Joint ownership can be good in some cases, but there are a number of dangers in setting things up this way. To illustrate, imagine that
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