By Robert S. Keebler, CPA, MST, AEP (Distinguished) Bracket management has always been an important part of income tax planning. As we noted in our May newsletter, however, the 3.8% Medicare Surtax and higher tax rates make it even more important in 2013. We listed the following strategies that taxpayers can use to avoid the surtax and stay out of the higher tax brackets: (1) Income smoothing CRTs; (2) income shifting CRTs; (3) using NIMCRUTS as a substitute for or supplement to a retirement plan; (4) CLATs; (5) Life Insurance; (6) deferred annuities; (7) installment sales; (8) managing IRA distributions;…
New Tax Haven: Puerto Rico
By Jeffrey M. Verdon, Esq., Travor Moses, Esq. & Fernando Goyco-Covas, Esq. Puerto Rico’s politicians have aimed to spur investment and economic activity in Puerto Rico by changing their tax code. These series of reforms, including the Individual Investors Act (Act 22-2012 and 138-2012), now mean that Puerto Rico offers the potential for exceptionally advantageous United States and Puerto Rican income tax exemptions which, as long as certain requirements are met within the United States Internal Revenue Code of 1986, as amended (the “IRC”),[i] can provide remarkable income tax relief to a wide universe of US citizens, residents, and even…
New Trustee Liability: Failure to Review Trust-Owned Life Insurance
By Richard Gilman, CFP® and Philip J. Kavesh, J.D., LL.M. (Taxation), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law The Uniform Prudent Investor Act (UPIA) requires trustees of Irrevocable Life Insurance Trusts (ILIT) to evaluate the appropriateness of the Trust Owned Life Insurance (TOLI) and to manage ILIT assets in a manner that minimizes costs and maximizes benefits to trust beneficiaries. This equates to a duty to not only acquire the right policy, but to review it periodically to be sure it still is in the best interests of the beneficiaries. (Be aware that…
PLR Opens Door to Post-Death Exchanges of Non-Qualified Annuities Tax-Free!
By Robert S. Keebler, CPA, MST, AEP (Distinguished) & Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL IRC § 1035 generally allows taxpayers to make a tax-free exchange of one annuity for another better suited to the taxpayer’s needs. Until recently, however, this benefit was not available to taxpayers who inherited non-qualified annuities. Such taxpayers were stuck with the annuity selected by the decedent no matter how unfavorable it may have been for them. Recently issued PLR 201330016 now gives a green light to tax-free exchanges of such annuities, however, provided that certain requirements are satisfied. This…
7 Tips for Taking Better Notes & Being More Efficient!
By Kristina Schneider & Megan DeLaGarza, Executive Assistants Whether you’re an executive assistant or any other type of administrative staff member, note-taking is an inevitable and unavoidable task that you will have in your daily routine. There are so many different details and tasks necessary to complete your job that it is impossible to keep track of them all. If you aren’t currently in the practice of taking notes during your meetings with your boss or supervisor, we highly recommend that you start now. It’s a great way to prevent overlooking the small items and, if there’s ever any confusion…
What’s Wrong with Variable Annuities?
By Richard Gilman, CFP® After the stock market crash in 2000 and “Great Recession”, investors have justifiably become more concerned about their retirement. Many people no longer trust Wall Street. Having suffered through dramatic market swings, they are unwilling to keep putting their savings at risk. They worry about exploding health care costs and outliving their money. They know they need to do something — but what? Annuities of all kinds are being positioned by insurers, the government, the media and financial planning community as part of the solution. And annuities may very well be one part of the solution. …
Tax and Economic Implications of the DOMA Decision
By Robert S. Keebler, CPA, MST, AEP (Distinguished) Section 3 of the Defense of Marriage Act (DOMA) provided that in determining the meaning of any Act of Congress, the word “marriage” meant only the legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife. On June 26, 2013, the U.S. Supreme Court invalidated this section of the Act in United States v. Windsor. The decision has far reaching planning implications for married same-sex couples whose marriage is recognized under…
Is the JEST Trust a Joke?
By Alan Gassman, J.D., LL.M. (Taxation), Florida State Bar Certified Specialist in Wills, Trusts & Estates, AEP (Distinguished), and Christopher J. Denicolo, J.D., LL.M. Can a married couple in a non-community property state establish a joint revocable trust that will facilitate obtaining a date of death stepped-up basis on the death of the first dying spouse, and the full funding of a credit shelter trust (to the extent of the first dying spouse’s estate tax exemption) that can benefit the surviving spouse and descendants without being subject to federal estate tax on the surviving spouse’s death? After extensively researching these…
Life Insurance from the Estate Planning Attorney’s Viewpoint
By Steven J. Oshins, J.D., AEP (Distinguished) Estate planning attorneys are often known for “killing” life insurance sales. Since the attorney owes the client a duty to do what is in the client’s best interest, if the attorney truly believes that the client does not need the insurance policy, then the attorney is arguably satisfying his or her ethical responsibilities to the client. However, the attorney often automatically says “no” to the client’s detriment. Perhaps the problem is that many attorneys just don’t understand the different life insurance products. And human nature is often such that if you don’t understand…
Should Your Clients Be Using the “OBIT” Instead of the AB?
By Edwin P. Morrow III, J.D., LL.M.(Tax), CFP®, RFC® For many taxpayers, the traditional trust design for married couples is now obsolete. Traditional AB trust designs risk incurring higher income taxes after the first death, and reduced basis increase at the second death. New trust designs can not only mitigate against this risk, but create income tax advantages over outright bequests. Some practitioners advocate using a marital deduction trust, even if there is no need for the federal marital deduction, to allow the family to achieve a second step-up in basis with the asset protection and control of a trust….