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Ask A Trust Officer: Federal Estate Taxes
What’s up with the federal estate tax? I heard that it’s suspended next year, for one year only? Should I review my will?
The Grantor Retained Annuity Trust (GRAT) has been getting quite a bit of attention from estate planners recently. The reason is that low market interest rates create a window of opportunity for passing assets to heirs without incurring much, if any, estate or gift tax.
Speaking on the anniversary of the collapse of Lehman Brothers, Fed Chairman Ben Bernanke said that from a technical perspective, “The recession is very likely over at this point.” He cautioned, however, that the economy may remain weak. In its final meeting of the quarter, the Fed seemed to confirm that view, suggesting that economic activity had “picked up.”
Should Your IRA Take a Tax Haircut
In the debate over which is better—the immediate tax deduction for contributing to a traditional IRA or the potential for tax-free income from a Roth IRA—the answer tends to turn on one’s assumptions about tax rates.
Ask A Trust Officer: Tax-Saving Trusts
Can I use a trust to save on my income taxes?
“Probate” is a word with two meanings. Specifically, it means proving to a court that a will is valid. More generally, “probate” refers to the whole process of settling an estate disposed of by will—assembling assets, notifying creditors, paying taxes, distributing bequests and so on.
The standard rule for valuing estate assets is to use the fair market value on the date of death. If the value is high enough, a federal estate tax will be due. A long-standing choice permits an estate’s assets to be valued instead at an alternate valuation date, six months after the individual’s date of death.
IRAs have become a mainstay in many retirement portfolios, very often as receptacles for lump sum distributions from employer plans. Here are three private letter rulings that illustrate some of the complexities that may come with these accounts. The names in these otherwise true examples are fictitious.
Ask A Trust Officer: Where's The Bottom?
How much longer is this recession going to last?
Estate Tax On Lottery Winnings
If estates consisted only of cash and marketable securities, determining their values and death taxes due would be simple. But estates often have assets that are very hard to value, and much estate tax litigation with the IRS concerns getting that value right.
There were some hopeful signs during the second quarter, but the recession remains far from over. On the plus side, major stock indexes were briefly in the black for the year, overcoming the steep first-quarter losses.
With asset values low, some owners of traditional IRAs may be wondering whether this might be a good time to convert their accounts to Roth IRA status.
Ask A Trust Officer: Charitable Gifts From IRA's
I made a multi-year pledge to my charity a few years ago, but my source for funding this gift has dropped in value. Can I satisfy the pledge from my IRA this year? Is this a smart financial move?
What would you do if you suddenly came into a lot of money? Such as, for example, winning a $144 million Powerball jackpot? That was the question faced by a long-time Washington, D.C., resident who bought a single $1 lottery ticket with the numbers randomly selected.
Although the stock market has been doing better lately, it is still well off the highs of 2007. Many IRAs have been hard hit by the fall in asset values. However, even bad markets can create tax planning opportunities.
When William joined his employer’s saving and investment plan (SIP), he signed a beneficiary designation to identify the person to receive the account balance, if any, at his death. He named his wife, Liv, the approach most people ordinarily would take. William was free to change or revoke the beneficiary designation at any time, and if no one were designated, the funds would pass to his estate.
Ask A Trust Officer: Companion Animal Planning
Can I provide something for my pets in my will? Didn’t Leona Helmsley set up a trust for her dog?
There are new players on the municipal bond stage, Build America Bonds (BABs). The new instruments, introduced by the American Recovery and Reinvestment Act (also known as the “stimulus bill”), are a new type of taxable municipal bond.
Questions To Ask A Prospective Financial Advisor
When the financial markets are in turmoil, a reshaping of the financial and investment advisory industry isn’t far behind. When considering a new financial planner, there are a number of questions that you should ask.
For comedians, and perhaps for life in general, timing is everything. Our tax code includes innumerable examples of that, which is what contributes to its extraordinary complexity. Congress affixes special dates to some tax breaks to lower their “revenue costs.” Here are three new examples, taken from the “stimulus bill” enacted in February.
Ask A Trust Officer: Inflation Unleashed?
With all the money that the Federal Reserve is pumping into the economy, coupled with the surge in deficit spending, should I be concerned that inflation will be affecting my lifestyle?
The fraud perpetrated by Bernard Madoff remains in the headlines months after it first came to light. At least some of the recent news gives some hope of relief for as many as 13,000 investors who may have lost as much as $65 billion.
It’s complicated enough for parents of college-age children to find their way through the maze of federal loan applications. Sorting through the list of possibilities for tax relief for tuition expenses, and eligibility for them, only adds to the headaches.
As bad as the stock market’s performance was during President Bush’s final quarter in office, it was worse still as President Obama took the reins. The Dow Jones Industrial Average fell to 6,469.95 in March, and the S&P 500-stock index slipped to 666.79, levels last seen in the last century, when Alan Greenspan famously warned of “irrational exuberance.” That’s a 54% drop from the high set in October 2007; the only worse period for the stock market in modern history was the 89% drop in the Dow from 1929 to 1932.
IRS Audits Down - But Your Audit Chances May Be Up
The IRS examined only 1.01% of all individual income tax returns in 2008, down slightly from 2007. But the Service audited almost 3% of $200,000 plus returns, up 16% from 2007; 49% from 2006. For those earning $1 million or more, the figure jumped to almost 5.6%
Ask A Trust Officer: A Parental “Buyer’s Assistance Program”
Finally, our son’s and daughter-in-law’s dream of owning their own home seems within their grasp. The hand metaphor is apt, because they still need a helping hand from us. Any tips about the best way to help them? We’ve been reading about the tax credit for first-time homebuyers and admit we are a bit confused about it. Clarification gratefully appreciated!
Surveying The Muni Bond Landscape
Last year was a tumultuous one for municipal bonds. Muni prices tumbled on average 4% in 2008. The Wall Street Journal cited a Morningstar finding that ten muni bond funds fell by at least 15% last year. That’s happened only four times in the last 25 years.
In light of recent economic and market events, many people have rethought and, perhaps, adjusted some financial goals. It’s unlikely, however, that they have undertaken a major reassessment of the values and ideals that they live by.
Ask a Trust Officer: Market Forecasting
Does the stock market do better when a Republican or a Democrat is President? Does it make a difference which party is in control of Congress?
Life-Care Communities: One Place to Call Home
If you are like some people, you may not want to leave your home, ever. But suppose that after you retire, your plan is to move out of state, or you’re healthy and active but just tired of all the work associated with home ownership.
Many investors have long relied upon dividend-paying stocks. Retirees felt secure that they had a dependable source of regular income. Conservative investors found them a safe way, relatively speaking, to generate growth by reinvesting their dividends.
Talking to Teens About Tough Times
Many psychologists believe that children, especially teenagers, are well aware that their parents are concerned and are feeling—if not necessarily expressing—their own anxiety. In an ABC News poll conducted last November, 75% of 12- to 17-year-olds who said that their parents were worried about the economy also said that they were worried themselves.
Ask a Trust Officer: Past Imperfect
It’s been a few years since my wife and I revised our wills. We used trusts that our advisors told us would allow us to take advantage of our federal estate tax exemptions, so that we’d owe little or no tax when we pass on. We understand that the exemption this year is $3.5 million. Our assets are less than $7 million. Are we correct in assuming that there is no immediate need to look at our estate tax strategy again?
If you’re approaching—or already have crossed—the finish line to retirement, you should focus on meeting two goals. One, providing yourself with an income that will let you live comfortably, and, two, making certain that your retirement resources will last for your lifetime.
IRA owners received an early Christmas present at the end of 2008 when Congress suspended the rule that requires mandatory withdrawals starting at age 70 1/2. The suspension, which also applies to other retirement plans such as 401(k)s and IRA beneficiaries who must withdraw funds from inherited IRAs over five years, is in effect for 2009 only.
January 2, 2009. The economic news throughout the final quarter of 2008 was unremittingly bleak.
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