Graber Johnson Law Group, LLC writes about matters involving the creation of trusts, wills, limited liability companies, limited partnerships and corporations, as well as trust administration, probate, real estate, and oil and gas.
October 17-23 is National Estate Planning Awareness Week! If you've had questions about estate planning or have been putting off getting your planning done, contact us to schedule an appointment today!
Whether one wishes to donate capital gain property, tangible personal property, or unsold grain, the rules over donating assets to charity can be a bit of a hassle in regard to receiving tax breaks.
Contributions to charity are a highly favorable way to gain a deduction in tax at the end of the year. However, many taxpayers slip up when donating their assets.
Assets like stocks and mutual funds are deducted based on their current fair market value.
According to Andy Biebl in his article "Watch Charity Rules," best asset to gift to charity for tax purposes is property held over 12 months that will be taxed as capital gain. The charitable deduction of such property, like farmland, will be the value at the time of the gift, and must be determined by its appraisal value if it exceeds $5,000. These situations are carefully monitored, as aspects like date of appraisal, qualifications of appraiser, and appraisal state can greatly influence or even disqualify the deduction.
Donating tangible personal property triggers trickier tax rules. This deduction is calculated by its exempt function. For example, a taxpayer who donates artwork to a museum versus a hospital auction. The deduction at the museum would be greater because the museum would be able to secure an appraisal. The hospital, however, would only have a deduction that would be limited to its historical cost.
Farmers have a very easy to use strategy for gifting property that others may not, and that is gifting unsold grain. No appraisal is necessary. The farmer must deliver the grain in the name of the charity, and the charity must sell the grain in its name. In this instance the tax savings is in the fact the income from the sale of grain will not be shown in the farmer's income tax return. This is a better alternative than selling the grain and donating the cash from the sale to a charity. However, farmers must be careful in doing this, as certain government program payments and insurance are dependent on tracking yields, so you will want to speak with your attorney, crop insurance agent, and USDA-FSA agent to make sure you keep the records necessary to prove your yields.
If one wants to receive such deductions, it is important to understand the laws associated with them. Be sure to visit with your accountant or attorney regarding gifting strategies before implementing them.
It is not all that unusual for a child to not live up to the expectations of parents. Sometimes parents will be so disappointed when that happens, that they will attempt to cut the child out of their estate plans. They might want to reconsider.
Wealthy parents often have extremely high expectations for their children. They want their children to go to school, get a good job, raise a family and do all of the things that made the parents so successful.
However, sometimes a child just does not live up to those expectations.
Sometimes there is a black sheep who does everything the parents would not want him or her to do.
If the problems are severe enough, then the parents might even stop contact with the child and seek to cut him or her out of their estates.
One big thing to consider is that a child who receives nothing has no incentive to not cause problems.
A no-contest clause can prevent someone who does receive an inheritance from challenging an estate plan that they do not like, but it cannot prevent someone from doing so who is set to receive nothing or very little from an estate.
This can make cutting a child out of an estate plan a very expensive proposition. This is because the child has no reason to not launch legal fights.
A black sheep child can also be more easily controlled by using an estate plan to incentivize that child into desired behaviors, or at least leaving them enough to where they would think twice about causing problems if they were to lose what they were given.
An estate planning attorney can help you create a trust, for example, that only distributes money to the child when certain actions are taken by the child.
People who are opposed to eliminating the estate tax are often seen as wanting to do nothing more than to punish the wealthy. However, some of them are more concerned about the impact that estate tax repeal could have on charities.
At first glance, it might not seem like there is much of a relationship between the existence of the estate tax and charities.
The former takes money from the wealthiest estates involuntarily and uses it to help fund government programs. The latter are entities that people voluntarily give money to, in support of causes that they think benefit society.
It is not enough to get an estate plan once and leave it alone for all time. It needs to be constantly reviewed and updated to take account of changing circumstances.
Some people can get away with getting an estate plan once and never looking at it again. If someone never gets divorced, remarried, has more children or increases assets, then the first estate plan they get might be good enough for the rest of their lives.
However, most people's lives are not that constant.
In fact, most people have significant changes in their lives as they get older.
The more wealth that you have, the more often you will probably need to change your estate plan.
This is because your assets will grow, how you hold those assets will change and tax laws will also change.
Nevertheless, it is not just the wealthy who need to constantly review and update their estate plans.
Everyone should do so, whenever there is a significant change in their lives that should be reflected in an estate plan.
Examples of these changes include divorce, remarriage, a new child, a new higher paying job, a new grandchild and much more.
Almost everyone’s estate plan should look different when their children are grown and they are almost ready to retire compared to an estate plan they created when they were younger with young children.
If you have not changed your estate plan recently, then take a look at it.
Ask yourself whether it still does what you want it to do, given all the changes in your life.
If the answer is no or even maybe not, then talk to an estate planning attorney.
Prenuptial agreements are a great way to set the terms for what will happen if a couple ever gets divorced or when one of the spouses passes away. They are meant to protect assets when necessary, but they are increasingly being used for something more.
When two people get married, it is not unusual for one or more of them to have much greater wealth than the other. The wealthier person can use a prenuptial agreement to guard against a divorce that strips him or her of too much wealth.
Another common issue is when one or both of them enters the marriage with children from a previous relationship.
They might want to protect against a spouse getting too much of an estate and leaving their children with little to inherit.
Prenuptial agreements are an excellent way to guard against both of these potential problems.
They allow a couple to come to terms beforehand, so everyone is happy.
A big concern for many people when they are planning their estates, is that they do not trust the people their children married. They fear that a son or daughter-in-law will waste their children's inheritances.
The situation where parents do not get along with their sons and daughters-in-law is a Hollywood cliché. TV sitcoms often feature running storylines featuring the cliché that play out over multiple seasons.
There is a reason for the cliché.
It is based in reality.
There is often tension between in-laws.
In estate planning, this plays out with the parents being wary that their son-in-law or daughter-in-law will meddle in the inheritance of the parents’ own children and waste the inheritance.
A recent example comes to us from the U.K., where someone wrote into a This Is Money advice column and asked how to protect a child's inheritance from a bad son-in-law.