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Friday, July 26, 2013
A Great Estate Planning Tool: Life Insurance
What if we told you that there is a financial product available that does the following:
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Transfers wealth tax-free to your spouse and/or your heirs (that includes Pennsylvania inheritance tax, federal estate tax, federal income tax and state income tax).
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Ensures that any income loss as a result of your death does not affect your spouse or family negatively.
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Provide safety of investment from market risk or market loss.
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Provide you with long term care coverage if you need it.
Certain life insurance policies can achieve all of those goals! Yes, not everyone can get covered or is eligible, but you'd be surprised how insurance companies are rapidly changing and covering more individuals under these types of policies.
One of the greatest benefits of these policies is providing you with long term care coverage if you ever require it. Your death benefit would be used towards your long term care costs. That means no traditional long term care policy is needed, and your estate won't be diminished if you need care, leaving nothing for your family.
Interested in learning more about this type of life insurance? Call us today at (215) 706-0200 to schedule your complimentary consultation.
Monday, September 24, 2012
Long Term Care Planning Options
Long Term Care Insurance: A small minority of individuals own a long term care insurance policy. They're expensive and many providers are dropping coverage. But if you can get underwritten at a good rate, a small policy may make sense to cover some of the costs. However, even small policies can be expensive.
Hybrid Life Insurance Policy: New whole life insurance products are available to convert a death benefit into available funds for long term care costs. In addition, whole life insurance has a host of other benefits, including being tax free, estate/inheritance tax free, and can be used as a wealth transfer and accumulation tool depending on the policy.
Asset Preservation Planning with Trusts: An elder law attorney can help shelter a portion of your wealth so that it doesn't have to be "spent down" on long term care before you can qualify for Medicaid. However, this type of planning must be done while you're still healthy.
Do Nothing: Many people take a chance and hope they don't have long term care needs. Even if you end up needing long term care, an elder law attorney can help preserve assets at that moment of crisis.
Tuesday, June 05, 2012
Jeremy Wechsler Releases New Book on Estate Planning
Looking for a great resource on estate and retirement planning? Jeremy Wechsler, your Estate & Elder Law Attorney, recently co-authored a new book with Peter R. Wechsler, his father and Your Retirement Quarterback. The book is an easy read but full of valuable information on estate and retirement planning.
Learn more about the book here: https://solvingtheretirementpuzzle.com
Monday, March 05, 2012
Are you getting all of your benefits?
Check out this web site we came across, www.benefitscheckup.org. It's a wonderful site that allows adults ages 55 and over to check and see if there are any federal, state or local benefits that they may be qualified for but not receiving.
According to the web site, "Many adults over 55 need help paying for prescription drugs, health care, utilities, and other basic needs. There are over 2,000 federal, state and private benefits programs available to help. But many people don’t know these programs exist or how they can apply." Take 15-20 minutes on this web site and let it find unused benefits for you.
We hope this helps!
Monday, January 30, 2012
Gifting the House For $1: Good Idea or Not?
Many people ask us if it is a good idea to give their home to their children. While it is relatively easy to do, giving away your house can have major tax consequences, among other negative results.
GIFT TAX ISSUES: When you give anyone property valued at more than $13,000 in any one year, you have to file a gift tax form. Also, under current law you can gift a total of $5.12 million over your lifetime without incurring a gift tax. If your residence is worth less than $5.12 million, you likely won't have to pay any gift taxes, but you will still have to file a gift tax form. Congress may change the gift tax exemption, which is now scheduled to revert to $1 million in 2013 unless Congress acts.
CAPITAL GAINS TAX ISSUES: While you may not have to pay gift taxes on the gift, if your children sell the house right away, they may be facing steep taxes. The reason is that when you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose you bought the house years ago for $150,000 and it is now worth $350,000. If you give your house to your children, the tax basis will be $150,000. If the children sell the house, they will have to pay capital gains taxes on the difference between $150,000 and the selling price. The only way for your children to avoid the taxes is for them to live in the house for at least two years before selling it. In that case, they can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.
Inherited property does not face the same taxes as gifted property. If the children were to inherit the property, the property's tax basis would be "stepped up," which means the basis would be the current value of the property. However, the home will remain in your estate, which may have estate tax consequences.
PA INHERITANCE TAX ISSUES: In Pennsylvania, there is no gift tax. However, to avoid PA Inheritance Taxes (the rate is 4.5% for assets passed to children or grandchildren), you must live at least one year from the time the gift was made. Often times, 4.5% of inheritance tax is worth paying rather than gifting the house in this manner, due to the risks involved.
ASSET PROTECTION ISSUES: By transferring your house to your children, you are making all of their future financial and family problems YOUR problems. That means the house could end up being taken away due to creditor problems, bankruptcy, litigation, or divorce. Would you want your son-in-law to get part of your house while you're still living?
MEDICAID/LONG-TERM CARE ISSUES: Beyond the tax consequences, gifting a house to children can affect your eligibility for Medicaid coverage of long-term care. There are other options for giving your house to your children, including putting it in a trust or selling it to them. Before you give away your home, consult with an elder law firm such as our law firm, where we can advise you on the best method for passing on your home.
CONCLUSION: "Gifting the house for $1" is a phrase that's tossed around quite a bit, and several families go ahead with this planning. As you can see, casual planning like this is fraught with potential landmines. Be careful. There are options out there to transfer the house properly. Speak with an estate planning or elder law attorney about this type of planning.
Monday, December 12, 2011
Estate Tax Update / 4 Common Estate Planning Questions
Q&A: Four Commonly Asked Estate Planning Questions
1. Most of my assets are jointly titled, or they are qualified accounts with beneficiaries named. So do I still need a Will? Having a Will is still a necessity, but it can be more or less important to you depending on your estate. A Will is always needed to make sure an Executor is named, and take care of assets that are not titled jointly or with beneficiaries. It always makes sense to have a Will no matter what your circumstances.
2. How can I plan for avoiding Pennsylvania Inheritance Taxes? Most assets are subject to PA Inheritance Tax. However, one asset that's typically not subject to PA Inheritance Tax is life insurance. Life insurance also provides liquidity upon death to pay taxes, fees, etc. The inheritance tax rates are 0% between spouses, and 4.5% to kids and grandkids.
3. I have two kids, can't I just name both of them as Co-Executors? That may seem harmless, but could cause big problems for your estate later on. Putting two or more people in charge of one task is a recipe for conflict. Would it make sense to have two CEO's in charge of a company? Both children can be treated equally under the Will while one serves as Executor. Bottom line: Choose one primary, and two backup Executors.
4. What is the "Five Year Lookback Period"? When a client is in a nursing home or will be heading there and wants to qualify for Medicaid, federal law requires that any gifts made within the five previous years be accounted for. A gift made within five years could cause a penalty (based on a formula) that will prevent one from receiving benefits for a certain period of time. Qualifying for Medicaid is become increasingly complicated, and the best advice is to plan early while you're still healthy.
Have more questions? Email us at info@jawatlaw.com.
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Latest News on the Federal Estate Tax
What's happening with the federal estate tax? Recently, a Democratic Congressman proposed a bill in the House of Representatives to lower the federal estate tax to a $1 Million exemption per person. Currently, the exemption is $5 Million. If the bill passed, many more people would be hit by the tax.
The bill has no chance of passing, and the estate tax exemption will remain at approximately $5 Million for 2012. However, we will be watching 2013 closely, when the current law expires. Congress and the President will need to act at some point in 2012 to avoid the estate tax going back to $1 Million in 2013. Who knows what Congress will do... or when they will do it. We'll keep a watch and keep you updated.
Article Link: McDermott Tries To Rewrite Estate Tax
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Monday, November 28, 2011
Evaluate Your Estate Plan
2012 is quickly approaching, and there is no better time than now to re-evaluate your estate planning goals.
Estate planning can be broken down into three distinct areas: tax planning, legacy planning, and long-term care planning. Which area is the most important to you? Once you determine that, you can update your plan based on your goals.
Tax Planning
Tax planning has not been at the forefront in the last few years for most families. The federal estate tax exemption is $5 Million per person, and $10 Million per married couple, so only a small percentage of individuals are affected. However, you should be aware that in 2013, the estate tax exemption will revert to $1 Million per person unless Congress acts. 2013 will come sooner than we think, and while both political parties have an incentive to come together on taxes, all bets are off. Keep reading our newsletter to keep posted on federal estate taxes.
Legacy Planning
Legacy Planning is an important component of estate planning for many families today. Legacy planning ensures that your plan is crafted carefully so that any conflicts in the family are avoided, and that your children, grandchildren or other beneficiaries are protected against themselves and others.
Long-Term Care Planning
Excessive long-term care costs are a concern for many families today. As people live longer and long-term care costs rise (much faster than inflation), the question becomes how you protect your estate from being spent down completely on health care costs. There are proven asset protection strategies that help to preserve part of your estate. The earlier you plan (i.e., while you're still healthy), the better.
Your Next Steps
I recommend that you sit down with your family and review your estate plan every year. You may find that minor or major changes need to be made. Perhaps you were more interested in tax planning a few years ago, but now realize you need to focus on long-term care costs and how to protect assets against those costs. Once you decide changes need to be made, make sure to implement those changes as soon as possible.
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Monday, November 21, 2011
Executors; Estate & Gift Tax Update
THE ROLE OF THE EXECUTOR... The Executor is the CEO of an estate. The individual or institution filling that role is, in essence, the owner of your estate when you pass on, and has a “fiduciary duty” to do what is in the best interests of your beneficiaries, the people you leave your stuff to.
Executors and trustees (if you have a living trust instead of a Will) need to be careful and diligent about their work, and consider hiring outside assistance (attorney, CPA, etc.) as needed to ensure accountings are filed correctly, and inheritance tax and estate tax returns are prepared properly.
Transparency is key when you are an Executor. For instance, sharing a full accounting and a copy of the Will with the beneficiaries goes a long way.
Also, if an estate has creditors, you must be diligent in ensuring they receive proper notice. If an Executor fails to give proper notice to creditors and the Executor distributes the estate, there is a possibility that the creditor could later appear, make a demand, and hold the Executor personally liable.
Being Executor is not impossible to handle without a lot of outside help, especially for simple estates. But where there are complexities, beneficiaries with some conflict, creditors, etc., it makes good sense for your estate for the Executor to consider outside assistance. Remember, the Executor has a legal obligation and a fiduciary obligation.
FEDERAL TRANSFER TAX UPDATE... The so-called “super-committee” had apparently floated the ideas of changing the gift tax and federal estate tax before the year is out. Fun rumor, but not going to happen, as we have heard over the weekend that Congress is... surprise, surprise… deadlocked!
The gift tax exclusion stays basically the same in 2012. You can make $13,000 annual gifts to as many people as you want, no tax due and no filing needed. Over $13k, you have a $5.12 million lifetime gifting exemption. Anything above $13k, you need to file a Gift Tax Return (IRS Form 709). Any gift over $5.12 Million in 2012 is taxable at a 35% rate. This will potentially change again in 2013. Now is the time to make large gifts.
The federal estate tax remains at a $5.12 Million exemption in 2012, affecting very few people. Anything above $5.12 Million, or $10.24 Million for a married couple, is taxed at 35%. Again, 2013 could see major changes in this scheme.
The Pennsylvania Inheritance Tax rates will remain the same in 2012.
Of course, we’ll keep you updated on any changes.
Have a Happy Thanksgiving! Best wishes to you and your family.
Monday, November 14, 2011
Estate Planning Misconceptions
This week, we have selected five common estate planning misconceptions that we often hear from our clients.
1. Gifting the house for $1 to my kids is always good idea
Gifting your house to your kids may save some inheritance tax dollars, but there will be no “step up in basis” if the kids try to sell the house after you pass on. To put it simply, there may be more taxes due than if you just left the house in your name. Additionally, once the kids own the house, you’re on the hook if they get into any sort of creditor or marriage trouble.
2. I only need a simple will, or no will at all
Every provision in your will is important. You want your will to be perfect, otherwise it could spell trouble for your family later on. You need to speak with an attorney about what type of estate planning tool you need.
3. I don’t need a will because all of my assets have beneficiaries on them
It always makes sense to have a will, regardless if anything will pass through the will. Inevitably, we find the will always disposes of some assets.
4. A power of attorney is just a form and is the same for everyone
Powers of attorney are subject to the most lawsuits because of this assumption. Your power of attorney needs to be carefully tailored so there aren’t too many powers.
5. I can’t gift more than $13,000 per year
As it stands now, you have a $5 Million lifetime gifting exemption through 2013. You can make the $13k gifts each year without paying taxes or filing gift tax returns. Anything over $13k is not taxed, but must be accounted for. Anything above $5 Million is taxed at 35%. For years, the lifetime exemption was $1 Million, so the $5 Million jump presents a great opportunity for wealthy individuals and families to make transfers.
Estate planning should be undertaken with a qualified estate planning attorney. Everyone needs to engage in estate planning to ensure they leave a legacy that's free of conflict and confusion. For a complementary estate planning consultation, please call our office at (215) 706-0200.
Was this week’s blog entry helpful to you? If so, we encourage you to forward it on to friends and family members who you think may find it informative as well.
Have a great week!
Monday, October 24, 2011
Did Steve Jobs Have An Estate Plan?
Even several weeks after his death, people are still talking about Steve Jobs and his contributions to the technological advances we've made in the last 30 years. Just last week, there was a memorial for Apple employees, shutting down every Apple store for a couple of hours, to celebrate the life of Steve Jobs. I remember using the Mac Classic, a black and white Apple computer from the 1980’s, and being fascinated by what was then advanced technology (no WiFi, no Facebook, no internet but still great!). People are going to be talking about Steve Jobs for a long time.
As your estate planning attorney, I was intensely curious about what type of estate plan Jobs created. We have plenty of wealthy individuals who have not engaged in estate planning, and their affairs are simply a mess. People like Elvis Presley, Sammy Davis Jr. and others lost a huge amount of their estate to unnecessary taxes because they didn’t plan properly. We can learn a lot from their mistakes. But we can also learn from those who actually did take the time to plan, like Steve Jobs. To be honest, the less we can learn about their estate plan, the better their estate plan probably was!
To read more about what Steve Jobs did and didn’t do, check out the Forbes article on his estate plan here.
Every estate plan is different. Most people don’t have the wealth that Steve Jobs had. Nonetheless, everyone needs a plan that works for them and avoids disputes, excessive taxes, and unhappy heirs. If Steve Jobs didn’t put the proper plan in place, we will surely find out sooner or later.
Have a great week!
Monday, September 19, 2011
Five Myths About "Living Trusts"
Is the Revocable Living Trust, sometimes just called a Living Trust, the ultimate estate planning tool? It depends who you ask, and what state you’re in.
In Pennsylvania, Living Trusts aren’t used commonly as an estate planning tool. Instead, practitioners in Pennsylvania, as well as clients, tend to favor Wills as the fundamental estate planning tool.
Here are five myths about Living Trusts in Pennsylvania:
Myth #1: Living Trusts save, reduce or avoid taxes:
A Living Trust is NOT a tax reduction or avoidance strategy. You simply cannot avoid estate or inheritance taxes by using a living trust. It used to be that more people were effected by the federal estate tax, and that married couples could reduce their estate tax by using credit shelter trusts. But you could do the same thing in a Will!
Myth #2: They prevent estate challenges:
A Will is easier to challenge than a Living Trust, because a Will is probated and is public. However, just because a Living Trust isn’t probated, doesn’t mean it can’t be challenged in court. It just takes a little more time, effort and money to do so.
Myth #3: They avoid probate because probate should be avoided:
Pennsylvania probate is pretty simple, and a run-of-the-mill estate can be probated by the Executor him or herself without the help of an attorney. So probate shouldn't necessarily be avoided at all costs and you shouldn't be scared of probate in PA. Yes, living trusts avoid probate, but your living trust must be 100% funded with ALL of your stuff to do that! Even missing ONE small bank account means your loved ones will have to go through probate. Anyway, probate is not a big deal in Pennsylvania, unlike in other states such as California (yes, living trusts are popular there because probate is a COURT supervised process!).
Myth #4: A Living Trust will make things easier at the end of my life:
Not really… It is probably takes just as much work to probate the will, settle the estate, etc., as it does to manage an ongoing trust. Trusts need to comply with many rules, tax returns must be filed annually for trusts, and more. A living trust will usually require the help and services of a professional.
Myth #5: I need a living trust to shelter assets from nursing home costs:
A living trust would NOT be a good tool to use if you want to shelter some of your assets from being spent down by nursing homes. You need to use a Medicaid Asset Protection Trust, which is IRREVOCABLE, and establish and fund this trust when you’re still healthy. A living trust used in a situation like this would be a disservice to you and your family.
LIVING TRUSTS MAKE SENSE IN SOME SITUATIONS, BUT NOT ALL SITUATIONS. Estate planning is an individual process that's unique for everyone. A qualified attorney can help guide you to what estate planning tools you need.
Want more information on what estate planning tools make sense for you? Call us today at (215) 706-0200 to schedule your complimentary visit.
The Law Offices of Jeremy A. Wechsler assist clients with Estate Planning, Wills, Trusts, Asset Protection, Special Needs Planning, Powers of Attorney, Will Challenges and Probate/Estate Administration in Willow Grove, PA as well as Abington, Hatboro, Dresher, Horsham, Bryn Athyn, Huntingdon Valley, Fort Washington, Jenkintown, Glenside, Oreland, Warminister, Wyncote, Ambler, Elkins Park, Flourtown, Philadelphia, Warrington, Cheltenham, Gwynedd Valley, Jamison, Feasterville Trevose, Richboro, North Wales, Blue Bell, Lafayette Hill, King of Prussia, Collegeville, Oaks, Phoenixville, Oxford Valley, Langhorne, Penndel, Bristol, Fairless Hills, Bensalem Plymouth Meeting and Furlong in Philadelphia County, Bucks County and Montgomery County.
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