Salt Lake City Estate Planning

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Your estate plan will instruct how your assets are distributed when you pass away.

If you don’t have an estate plan, then you still sort of have one. However, it’s the one everyone else who doesn’t take the time to do it right has: it’s written into the intestacy laws of the state. These may not be in the same as your wishes, but death will trigger a transfer of assets—regardless of whether it is professionally planned or not, and regardless of what your wishes may have been.

A recent article, “Why Continuous Estate Planning Is Essential For The Rich And Super-Rich,” from Forbes reminds us that estate plans should be updated regularly to address changes. These could be changes in our lives or changes in tax and estate laws. New laws and regulations can bring with them obstacles and opportunities.

The larger your estate, especially for the rich and super-rich, the more important it is to stay current. Those with complex business structures and international investments are always going to be required to adjust their financial and estate plans more often than those with smaller, simpler assets.

The more investments you have, the more important it is to be on top of the situation to be certain that your wishes are carried out at death.

Updating estate plans for everyone is a wise move. However, many fail to stay current. About 90% of highly accomplished business owners have estate plans that are more than five years old. These people are ignoring ways to maximize their wealth, but more importantly, they may also be setting up their wealth to be distributed in a manner that doesn't reflect their current wishes.

The statistics are similar for many of the super-rich. They, too, have outdated plans. Research shows that the estate plans for the exceptionally wealthy families are also more than five years old.

An estate plan that’s more than a few years old should be reviewed and adjusted as needed, with the help of a qualified and experienced estate planning attorney.

This potentially severe mistake of failing to ensure that estate plans are current is a mistake that is easy to fix, if you act rather than wait until it’s too late.

Reference: Forbes (September 6, 2017) “Why Continuous Estate Planning Is Essential For The Rich And Super-Rich”

Call our office to get your free Estate Planning Consulting done, 801-438-7120!

Most Wealthy People Are Over 80

Six of the 25 richest Americans are over 80, says the Bloomberg Billionaires Index. Bloomberg’s recent article, “Octogenarians Rule the Rich,” says new IRS data shows the age of the top millionaires and billionaires in the U.S. People over 80 years of age make up only 3.7% of the population, but the IRS estimates that they control a larger share of the nation's top fortunes than people under 50.

The wealthy have most likely always been older than the general population, because it typically takes some time to amass great wealth. Facebook’s Mark Zuckerberg, the world's fifth-richest person at age 33, is the exception to the rule.

The IRS regularly analyzes the wealth of the richest Americans in its Personal Wealth Study. This research looks at those potentially subject to the estate tax, which is imposed on individual fortunes of $5.5 million or more. The most recent study estimated personal wealth in 2013. It found that 584,000 Americans, or about 0.2% of the U.S. population, have a combined net worth of $6.9 trillion. People in their 80s and 90s control $1.2 trillion of that wealth. Adults under 50 (about 43% of the population), have only $1 trillion.

Research from the University of California-Berkeley found that the share of U.S. wealth held by the top 0.1% has more than tripled from 1978 to 2012. That’s an increase of 7% to 22%.

Wealthy people in their 80s have the highest average net worth of any age bracket in the U.S.  These richest Americans may be far wealthier than the IRS estimates. This is because wealth managers and estate planning attorneys use strategies like trusts to help the rich pass money to their heirs tax-free before they die.

The IRS research provides a unique insight into the portfolios of the wealthiest Americans. For example, the richest Americans invest heavily in businesses and non-public stock. Their personal residences also make up a small part of their wealth—just a little more than their art collections.

One reason why so many wealthy people are living and prospering into their 80s and 90s is that they're staying much healthier than other Americans. The wealthiest men are outliving poorer Americans by a widening margin. As recently as the early 1980s, the death rates of the rich and the general population were about the same. At ages 65 to 79, men in the top 1% were 12% less likely to die than the average American man in any year in that range. In the most recent estimates, the richest men in that age range had mortality rates 40% lower than average.

Reference: Bloomberg (August 23, 2017) “Octogenarians Rule the Rich”

If you want helping learning how to plan for your future, please give our office a call for a free consultation 801-438-7120!

Kansas State University Announces Fantastic Year of Charitable Giving

The results of Kansas State University’s fundraising results this year mark fiscal year 2017 as the second most successful year in KSU’s history, says Abilene-Reflector Chronicle, in its recent article, “KSU Foundation announces $152M in FY 2017 fundraising.

Greg Willems, president and CEO of KSU Foundation, commented, “As K-State’s strategic partner for philanthropy, the KSU Foundation inspires and guides philanthropy toward university priorities to boldly advance K-State.”

KSU said that of the $152.6 million raised in fiscal year 2017, donors gave 41% or $61.8 million through endowed gifts, pledges and deferred gifts. This, they say, will ensure the long-term prosperity of the school.

In addition, fiscal year 2017 provided another important first for the university,  since the value of its endowment pool went above $500 million in assets for the first time.

KSU said endowment growth is a critical element in its goal of becoming a Top 50 public research university by 2025.

KSU noted some other key philanthropic achievements for the 2017 fiscal year. This included 31 gifts and commitments of $1 million or more, the most $1-million gifts recorded in one year in KSU Foundation history; gift commitments through estate planning, including wills, trusts and annuities, hit an all-time high of $57 million; and endowed gifts and commitments totaled $61.8 million.

The school’s officials explained that endowed gifts create a legacy for the donor—they provide long-term funding for the purpose they support.  It can include student scholarships, faculty chairs or professorships.

“The extraordinary philanthropic momentum we’ve experienced in the last decade says volumes about the K-State family’s commitment to the university’s future,” said Rand Berney, chairman of the KSU Foundation board of directors.

Reference: Abilene-Reflector Chronicle (August 23, 2017) “KSU Foundation announces $152M in FY 2017 fundraising”

If you need help figuring out which charitable giving is best for you, give our office for a free consultation, 801-438-7120!

A Guide to Charitable Giving with Potential Tax Reform Looming

 

There are many reasons that motivate charitable giving. They include a moral obligation, religious tithing, a desire to improve the world, or to create a legacy. One other factor is the tax benefits for giving. This may soon change, if Congress is successful with tax reform legislation.

While few people donate just for the tax breaks and are unlikely to stop giving altogether, the Congressional Budget Office and other analysts say tax incentives increase how much you donate, both in life or at death.

CNN Money recently reported in the story, “How tax reform could hit charitable giving,” that Republicans are proposing to reduce or eliminate key tax breaks for giving, which some note has worried charitable organizations.

Republicans have proposed to nearly double the standard deduction, lower income tax rates and repeal the estate tax. Most believe the charitable deduction would remain, but an increase in the standard deduction would result in fewer people itemizing deductions and being able to claim the break. Lowering tax rates also would make the deduction less worthwhile for those who still take it.

The double impact of doubling the standard deduction and decreasing the highest tax bracket to 35% from 39.6% could reduce giving by between $5 billion and $13 billion a year, or up to 4.6%, according to research by Indiana University.

An increase in the standard deduction would have the greatest negative impact because it would reduce those who itemize to just 5% of filers, compared to about 30% currently. This is because the main reason to itemize, is when your deductions are more than the standard deduction.

The 25% who used to itemize will probably give, but maybe less.

Many charity groups have asked Congress to make the charitable deduction "universal," so that everyone can take it even if they don’t itemize. Lawmakers say they are considering this, but a universal deduction would cost the federal government between $191 billion and $515 billion in lost revenue over ten years.

Reference: CNN Money (August 6, 2017) “How tax reform could hit charitable giving”

If you would like help with you Charitable giving taxes, give our office a call for a free consultation, 801-438-7120 

Managing the Many Moving Parts of Retirement

There are a LOT of moving parts when it comes to transitioning into retirement. That includes plenty of key decisions—many of which don’t have easy answers. Kiplinger’s June article, “How to Generate Income in Retirement” says one of the most critical issues in transitioning to retirement is income planning. You’ll need to balance investment risk, longevity, and your lifestyle, which is not so simple

Having a budget in place is the foundation of retirement planning. Start by determining your expenses, and then make some modifications by considering these retirement-specific issues:

• Lifestyle plans. Will you travel extensively or settle down in a less expensive community?
• Life expectancy. Today, the average 65-year-old will live almost 20 years, but that’s an average.
• Health care. There’s more to it than just paying Medicare premiums. Don’t forget about long-term care, prescription drugs, and other out-of-pocket expenses. These all need to be in your budget.
• You’ll still be filing a return, so plan ahead.
• It will impact your normal, everyday expenses, and your dollar may not stretch as far year after year.

Once you have the estimates based on your own lifestyle costs and what may happen, start strategizing for your income. First, look at your income sources. Most retirees get their incomes from a combination of the following:

• Social Security benefits;
• Employer pension plans or annuities;
• Qualified retirement accounts and other financial investments;
• Income-generating investments like property or a privately held business; and
• A part-time job, if necessary.

Some income sources are static, while others are discretionary. Consider how your “guaranteed” or static income sources relate to your budget. Will it work or will you need to supplement them with money from your investments?

That is the tough question for retirees and their financial assets. You want to generate income for as long as possible, but you also want to know that your savings are secure. To balance these competing priorities, you may need to assume more investment risk than you anticipated.

If your investments are growing at a low but steady rate that keeps up with inflation, you won’t have fluctuating returns, but you’ll be losing money every year with withdrawals. You could outlive your assets. If you assume more investment risk, you’re more likely to achieve higher long-term growth, and you’re less likely to outlive your savings. But that means you also have higher investment account volatility and a greater chance of losing principal in down markets.

The best thing may be a diversified approach that uses investments suited for an individual’s needs. This depends on a number of financial and personal factors, such as the degree to which you’ll need to rely on your investment accounts for income; the stability of your other income sources; and your lifestyle and anticipated longevity.

Reference: Kiplinger (June 2017) “How to Generate Income in Retirement” 

If you would like help planning for your retirement, please give us a call for a free consultation at: 801-438-7120 

Oregon Passes Law for Quality and Safety in Long-Term Care Facilities

 

The Oregon Legislature recently passed legislation that bolsters quality and safety in long-term care settings. House Bill 3359 provides a comprehensive approach to improving safety and quality in licensed long-term care settings, according to the state’s Department of Human Services.

KTVZ.com in Bend, OR, reports in, “New Oregon law aims to improve long-term care,” that special emphasis was given to the improvement of training for those who care for people with Alzheimer's disease and other types of dementia.

With more than 1,000 Oregonians experiencing abuse in licensed long-term care settings every year, the bill was designed to address a variety of areas.

Oregon HB 3359  requires that administrators of residential care facilities, including assisted living and memory care, must be licensed by an independent board by July 2019. There will be regulations promulgated on the process for this new requirement. The bill also updates amounts and caps for civil monetary penalties for elder or adult abuse and harm within licensed long-term care settings. These caps were set in the 1970s. The legislation increases fines for incidents categorized as serious harm from a maximum of $500 up to $2,500. It also adds new penalties for facilities, specifically a penalty for "failure to report suspected abuse" and "failure to perform corrective action noted during a survey or inspection."

Oregon HB 3359 also updates licensing fee amounts for residential care/assisted living facilities and nursing facilities and authorizes the department to impose an immediate suspension in residential care facilities, when there are critical health, safety, or welfare issues. Previously, there was a 10-day wait for a hearing.

The new law also requires the Oregon Department of Human Services to develop an enhanced oversight and supervision program for residential care facility oversight and requests the development of a technology-based, acuity-based staffing tool for use by providers and Oregon DHS. This tool would let providers determine staffing patterns based on current residents' needs.

The bill establishes a variety of training and certification requirements for care staff in long-term care facilities and adds new safety requirements, licensing options and establishes new quality measurements.

Finally, the bill creates a Quality Measurement Council. This group will have representatives from the Office of the Long-Term Care Ombudsman, Alzheimer's advocacy, elder rights advocate, academics with data/metrics expertise, members of the Oregon Patient Safety Commission, provider associations, and Oregon DHS.

The bill will go into effect, once it’s signed by the Governor.

"The main focus for the Oregon DHS Aging & People with Disabilities program is on the safety of the Oregonians we serve," the news release said.

Reference: KTVZ.com (Bend OR) (July 17, 2017) “New Oregon law aims to improve long-term care”

If you need any help protecting your loved ones, give our office a call for a free consultation 801-438-7120

Charitable Giving 101

Roughly $400 billion was donated by Americans to charitable causes last year. That’s about 2% of the U.S. gross domestic product. These donations came in many forms, like personal checks and distributions from trusts. 

According to Morningstar’s recent article, “7 Tips for Better Charitable Giving,” creating a long-term charitable or philanthropic plan means careful consideration with your family, as well as professionals. You want to develop the right giving strategies that address estate, tax, and investing issues. Here are a few ideas to make certain that your money is donated wisely.

Make a Plan. Some donors feel they should leave large, one-time gifts to colleges, hospitals, or other charitable institutions. Others divide their donations among multiple causes over a period of time. Start with a "goals analysis" of your charitable strategy and implement a basic financial plan. Write down your charitable priorities and look at which have the most immediate need and where a donation can do the most good.

Research Your Causes. Look at how much the charity spends donor funds on marketing and administrative expenses.  It is important to see the percentage of donations that actually goes to the programs. Some charities have very high administrative costs, while others run lean operations.

Determine the Timing. Some people choose to leave some of their estate to specific causes after they die and others donate while they're still alive. How might this impact your retirement income?  You should also consider whether you want to make ongoing contributions or a lump sum.

Work with Professionals. An experienced estate planning attorney can help you with your charitable-giving strategy. An attorney will analyze how your donations impact your estate and heirs, potential tax benefits during your lifetime and the types of donations you can make. Your charitable giving should be a component of your overall estate planning strategy.

There are many ways to donate, depending on when you want to give and how. Work with your attorney to develop a plan that makes sense from a tax and philanthropic perspective.

Reference: Morningstar (July 29, 2017) “7 Tips for Better Charitable Giving”

If you need help finding out safe and financial safe ways to charitably give, call our office for a free consultation, 8801-438-7120. 

New York Considers Legislation to Help the Elderly

“Elder abuse is an under-reported crime that preys on the people who worked hard to build our communities.”

Several pieces of legislation in New York are being considered that are aimed at helping health care workers and bank employees identify abuse and fraud, so they can notify the authorities.

The Times Union in Albany NY recently published an article, “New Legislation to Protect New York Seniors from Exploitation and Abuse.” The article notes that in New York State, approximately 260,000, or 1 in every 13 seniors, experienced some form of elder abuse in the previous year. Financial exploitation was found to be the most common form of abuse.

One Assembly bill would require the state Office for the Aging to create guidelines to help health care providers and employees identify abuse and maltreatment of seniors. Another directs the superintendent of the state Department of Financial Services to develop training to help bank employees recognize and report signs of financial exploitation. This bill would protect banks and other financial institutions from state liability, when reporting suspected financial abuse in good faith. The measures ensure that the elderly have additional allies watching out for their financial well-being.

The Assembly also passed a measure that requires banks to notify customers who want to open a joint account, if the bank also offers convenience accounts. Unlike joint accounts, which grant the co-signer the right of survivorship and the assets of the account if the other signer passes away, these convenience accounts allow the other accountholder to make basic transfers or withdrawals which must be in the best interest of the main account holder, as well as simplifying check writing and bill paying. If the holder of a convenience account passes away, the money in the account is part of his or her estate.

The last piece of legislation streamlines the estate planning process by simplifying the power of attorney (POA) form to a single simple document. This simplifies the process of executing a POA and helps ensure that third parties honor a valid POA. The bill also allows courts to impose sanctions against third parties who unreasonably and unfairly refuse to honor a valid POA form.

Legislators say the bill will help ensure that the state’s regulations and protections keep up with and adapt to society, so it can help prevent elder abuse before it happens.

Reference: (Albany NY) Times Union (July 7, 2017) “New Legislation to Protect New York Seniors from Exploitation and Abuse”

What about the Taxes on Inherited Property?

It’s not uncommon for a family to have questions about the taxes on a property that is inherited at the death of a surviving spouse. This involves the property’s cost basis, which can be a bit confusing

There are a couple of issues to understand in this scenario, says NJ.com in “Figuring cost basis for an inherited home.” When an appreciated asset is inherited, the person who inherits the asset gets a step-up in basis. This means the appreciation in the property that took place during the deceased person's lifetime, isn’t attributed to the person inheriting the asset.

If we assume that a husband and wife owned real property that appreciated in value, the surviving spouse would receive a step-up in basis at the death of the first spouse on the one-half interest of that deceased spouse.

When the second spouse dies, the children who have inherited the property also get a step-up in basis for the entire property equal to the fair market value (FMV) of the property, as of the date of the death of the second spouse.

Here’s a quick illustration:

A husband and wife purchased real property for $400,000. They don’t make any improvements to the home. When the husband passes away, the fair market value of the property is $500,000. That’s an appreciation of $100,000. The wife receives a step-in basis of the husband's 50% interest in the property. That interest is now valued at $250,000. In addition, the wife also retains her cost basis in the property ($200,000, or one half of the $400,000 purchase price) for a total cost basis of $450,000. That would be her cost basis, if she sold the property during her lifetime.

However, if the wife as the surviving spouse retains the property at the time of her death (and the property is still worth $500,000), then the children who inherit it would receive a step-up in basis of $500,000. So, if we say that the property is worth $600,000 at the time of the wife's death, the children's step-up in basis would be $600,000.

An experienced estate planning attorney will be able to help you find the best way to pass the family home onto the next generation, if that is your wish, or to help your heirs navigate the calculations and any tax liabilities, if they inherit the family home.

Reference: NJ.com (July 6, 2017) “Figuring cost basis for an inherited home”

If you have questions about your inherited property taxes, give us a call for a free consultation 801-438-7120

Retirement Secrets to Share

 

Aging Edge’s recent article, “Retirement secrets no one wants to talk about,” says there’s a lot more to retirement than you might think. If you don’t plan carefully, you may see some big surprises

 However, understanding these facts can help you to improve your chances for a great retirement.

1. Retirement could last a long time. Many folks don’t think about life expectancy, when it comes to retirement planning. However, we should consider the fact that we need to plan for a longer life. That means planning for a longer retirement. As you plan, you should take into account that your retirement might last a few decades. Be sure that you have enough saved to live comfortably.
2. Plan to stay busy. A life of leisure in retirement sounds great. You could quickly become bored, however, if you don’t have some ways to spend your days. Create a game plan to keep yourself busy and engaged. Without a plan, your health and spirit might decline. This includes staying physically active by exercising regularly. You can also stay mentally engaged, by working in a paid or volunteer position.  You can start a new hobby or enroll in courses online, at a community center or at a local school.
3. Time your Social Security claim right. We all know you can begin collecting Social Security retirement benefits as early as age 62. That’s the most common age for claiming benefits. However, people are frequently shocked by how much their benefits are reduced by claiming Social Security early. If you start to take benefits at 62, you could receive 30% less.

To receive your full benefit, you have to wait until your full retirement age. That’s age 66 for people born between 1943 and 1954. It increases by two months up to age 67 for every birth year after 1954 up to 1960. If you were born in 1960 or later, the full retirement age is 67. Therefore, you’re better off delaying past your full retirement age to start collecting Social Security. If you wait until age 70, your benefits increase by 8% a year.

Reference: Aging Edge (July 6, 2017) “Retirement secrets no one wants to talk about”

If you need help planning for your retirement, call our office for a free consultation 801-438-7120.