Is Your Financial Information in Order?

Preparing and organizing your financial information for when you are no longer capable will bring peace of mind to you today. At the same time, it may relieve your loved ones’ burden in the future. You’ll ensure proper management of your financial situation and remain in control over your end-of-life care and legacy. The goal is to make and maintain accurate financial records.

Planners and books like “My Life Directory” and “I’m Dead. Now What?” are readily available to help you understand the scope of such a project. These resources can get you started with the process of organizing all your records and personal information. Whether you are a parent, near retirement, or both, putting together informational instructions on your finances now could help spare your family a great deal of work and heartache down the road.

Keep This Information With Your Estate Planning Documents

The assumption is that you already have an estate plan with necessary documents such as a will, living will, durable power of attorney, and health care proxy.

If this is not the case, retain your estate planning attorney to create these important legal documents. They can properly outline documents that instruct your family not only on your wishes in medical emergencies, but also on how to distribute your money and property after you’re gone.

You can then focus your attention on the financial details they will need to carry out your wishes. These steps should include a list of all relevant information, such as:

• Names and contact information for bankers, lawyers, and insurance agents
• Digital and hard assets
• Bank accounts, bills, debts, credit cards
• Insurance policies, annuities, pensions
• PINs and passwords

Include a list of all companies and invoice types (monthly, quarterly, annually) that automatically debit money from your checking account. This list is about anyone and anything that is part of your financial life.

Planning Resources

The numerous books, planners, and online free worksheets available today can serve as your starting point. They may help you identify things to include in your list of financial information. There are also websites and apps designed to store your data and instructions securely for a one-time or recurring fee. These sites are typically referred to as estate planning organizers, end-of-life planners, document storage, and even death apps.

While these options may sound intriguing, a self-directed approach is generally best. Turning over consolidated personal financial data comes with some risk. Using these services may open you to the possibility of identity theft, hacking, misuse of your records, erasure, and loss.

Safely Storing Information at Home

Digitize your information in a computer document or spreadsheet and store it on a flash drive. Print hard copies of your instructions and information, and leave them with other important documents like your will or the deed to your home.

Are you low-tech? There is no shame in a binder or spiral notebook containing this information.

It’s a bit more cumbersome to update, but many people choose to leave instructions to family members in handwritten letters, lists, and notebooks. Perhaps consider purchasing a fireproof, floodproof safe for your home, where you can store this information. (Or, find a safe deposit box at a bank.)

Ensure your handwritten instructions don't vary with multiple scattered and undated papers. Stick to a standard method and throw out old documents.

Updating Your Information

Keep these records accurate with annual updates. Whenever there is a fundamental shift in how you (or someone else) manage your finances, revised your records accordingly. Be sure your executor and other relevant family members know the location of this information for future reference.

You may want your wishes to remain private. Consider sealing your information by storing them on flash drives and as hard copies in envelopes.

Preparing your financial records for your family can be time-consuming, but it’s not complicated. The true goal of this task is organization and consolidation. And it’s one of the most important financial tasks you will undertake during your life.

When you feel your project is near completion (other than annual updates), ensure you are not overlooking anything. Consult your attorney. They will not only make sure you have all the necessary legal documents in place, but they also can talk with you in further detail about your planning needs.

Contact us

Questions? Contact us at Elise Lampert, Attorney at Law

   

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

Mitigating the Impacts: Sunsetting the Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (TCJA) took effect on Jan. 1, 2018, and impacted personal income taxes, small businesses, estate tax rules, capital gains rules, special needs accounts, and much more. The TCJA is scheduled to sunset at the end of 2025. This will lead to significant changes for taxpayers. So, are there ways to avoid potential tax impacts to you or your loved ones? Read on to learn more.

Gift Now and Get the Benefit of the Current Gift Exclusion

One of the most discussed effects of the TCJA sunsetting is the slashing of the federal estate and gift tax exclusion to pre-2018 levels, as adjusted for inflation. The current exemption is $12,920,000 per individual. Starting in 2026, it will go down to the 2017 exemption of $5,490,000 per individual (as adjusted for inflation). This drop is potentially a big hit for the heirs of anyone who passes away after Jan 1, 2026.

The estate and gift tax exclusion is essentially a credit applied to gifts made by a person while they are alive or a person’s total taxable estate upon their death to minimize how much will be subject to federal tax. So, for example, under current rules, if a person has a total taxable estate of $8 million and made $1 million of gifts in their lifetime, their estate can apply a $9 million exclusion or “credit,” and not owe taxes. However, if this person passes away in 2026, their estate will likely suffer tax consequences as there would not be a credit sufficient to cover an $8 million taxable estate (if the gifts were made before 2026, they may be covered, as explained below).

It is possible to mitigate this potential scenario in several ways. One of them is making large gifts before December 31, 2025, while the gift tax exclusion amount in effect is at record highs. The IRS has stated that this practice won’t harm estates after 2025. Specifically, IRS regulations have a special rule that allows an estate to take an estate tax credit using the greater of the exclusion applicable to gifts made during life, or the exclusion in effect on the date of death. The result is that if gifting makes sense in your situation, you can make large gifts up to the exclusion limits until 2025 without worrying that the temporarily higher tax benefits will be lost if you pass away after 2025.

And don’t forget that a person can gift up to $17,000 per year (or $34,000 per year for couples who file jointly) to as many people as they wish. These gifts don’t count toward their lifetime exclusion. So, for a couple with three children and six grandchildren, they can gift these individuals $153,000 per year without touching their exclusion. This can be an easy way to transfer wealth to the next generation tax-free.

Maximize Gifts to 529 Plans

Another option to get ahead of the TCJA ending is to contribute the maximum amount of money to 529 plans set up for children and grandchildren (and other selected categories of people). Current law allows up to five years of annual gifts to a 529 plan in one shot. And, starting in 2024, distributions from 529 accounts will no longer be counted as income to the student when applying for federal student aid.

So, if you want to give funds to loved ones but have concerns about how it may be spent, you can deposit $17,000 ($34,000 for a couple) into a 529 account for their benefit. Current rules also allow you to make an accelerated gift of up to five years’ worth of gifts to a 529 account in one year and spread out the gift tax liability over five years. If you gift less than the annual gift tax-free amount, there is no tax liability.

The result is that a couple could gift $170,000 now to a 529 account. They would, however, need to file a gift tax return and elect the five-year treatment. One caveat to this option is that the gift giver must survive beyond the five-year period for the gifts to be fully excluded from their taxable estate. To ensure this is done correctly, it is essential to consult with a qualified tax professional. However, if done properly, it is an effective way to reduce a person’s taxable estate.

Consider an Irrevocable Life Insurance Trust

Another potential way to leave money to loved ones and not increase your taxable estate above the impending lowered exclusion amount is to purchase a policy owned by an irrevocable life insurance trust. The benefit paid to your beneficiaries is also potentially tax-free income for them. This planning technique should not be undertaken without the counsel of an attorney, as it may have other implications for your personal situation.

Max Out ABLE Account Contributions

An ABLE account is a savings program run by the state for certain individuals with disabilities. Beneficiaries may use ABLE account funds to pay for qualified expenses tax-free. ABLE accounts are also disregarded as assets when determining if a person qualifies for Supplemental Security Income (SSI) and certain other means-tested federal benefits. If your loved one qualifies for an ABLE account, you may be able to improve their quality of life while reducing your future taxable estate. You can contribute up to the annual gift tax exclusion amount.

Furthermore, the TCJA allows an employed beneficiary who does not participate in an employer-sponsored retirement plan to contribute up to 100 percent of their earned income to their ABLE account up to the prior year’s poverty line amount for a one-person household ($14,580 as of 2023).

So, ABLE accounts can be built up quickly where a parent makes a gift contribution and the disabled child also contributes their earned income. The child, if over 18, may also be able to claim the Saver’s Credit on their tax return for up to $2,000 of contributions they made to their ABLE account. But, as with other TCJA provisions, these benefits will end on December 31, 2025.

Not all these options may be appropriate for everyone, and it is always prudent to make any financial planning decisions with the advice and counsel of a professional. However, the sooner you act, the more options you may have before the TCJA sunsets.

Contact us

Questions? Contact us at Elise Lampert, Attorney at Law

   

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

What Is a Gun Trust?: Estate Planning Q&A

According to Pew Research, 30 percent of adults in the United States report owning a firearm. Gun sales have risen in recent years, particularly during the Coronavirus pandemic. While many reported having weapons for protection and hunting, 6 percent owned guns that were family heirlooms.

If you own a firearm of monetary or sentimental value, you may wonder how to transfer ownership to your loved ones after you die. In addition to creating a will, you may want to make special arrangements for your weapon.

A gun trust, also known as a firearm trust or NFA trust, is a legal entity created to hold and manage guns. Creating a gun trust can help you pass down your gun to your loved ones, shielding them from probate. It could also help you give ownership to several individuals.

Understanding Trusts

A trust is a legal arrangement where the original owner (the grantor) designates an individual (the beneficiary, or multiple beneficiaries) to receive an asset. When something is held in trust, a trustee is responsible for its management.

Trusts can shelter many types of property from probate, in which the court oversees the distribution of an estate. Property that trusts can safeguard includes real estate, bank accounts, and personal possessions such as a jewelry collection or weapons.

Some trusts are revocable, meaning the grantor can change their mind and terminate the trust. Others are irrevocable, so the person making the trust cannot unravel the arrangement. Gun trusts can be revocable or irrevocable.

The National Firearms Act

Creating a gun trust can make it easier for gun owners to comply with the National Firearms Act (NFA), particularly when multiple people want to use the weapon and when the owner intends to transfer ownership.

Congress passed the NFA in 1938 to curb the sale of firearms. The Act imposes specific requirements and regulations on firearms classified as Title II weapons, which include the following:

• Machine guns
• Short-barreled shotguns or rifles (SBSs and SBRs)
• Silencers (silencers)
• Destructive devices such as grenades
• Firearms over .50 caliber, per the Gun Control Act of 1968

The Bureau of Alcohol, Tobacco, Firearms, and Explosives requires individuals intending to own an NFA weapon to complete an application and registration. Registration includes paying a tax and obtaining a tax stamp for each NFA firearm. Those purchasing or possessing NFA firearms must undergo a background check and provide fingerprints as part of the application process. The bureau denies any applications violating federal, state, or local laws.

Benefits of Gun Trusts

Gun trusts have several benefits.

• They avoid probate. If you have a weapon you’d like to pass down to a specific person or people, the court does not have to oversee the transfer, and it is less likely someone will challenge it.
• Trusts continue beyond death. You can set up the trust so that your loved ones do not have to pay the transfer fee. This makes conveying possession easier.
• When you make a gun trust, you can choose multiple beneficiaries. More than one person can own and use the weapon.

Obligations for Trustees

Creating a gun trust does not shield trustees from complying with state, federal, and local weapons regulations.

Before 2016, only one trustee had to register, making a primary advantage of gun trusts that they allowed multiple trustees to bypass government oversight. Yet, in 2016, the legislature amended the NFA such that all beneficiaries must submit to registration, eliminating this loophole.

Per the State Bar of Wisconsin, trustees must inform their local chief law enforcement officer of the identities of all the trustees and the firearm’s location. They must also provide fingerprints and a photo and undergo a background check.

Trustees must also be eligible to own firearms. Violating the NFA is a felony. Felons, recipients of a dishonorable discharge from military service, and people who have been deemed incapacitated cannot possess a gun or be a beneficiary of a gun trust.

When trust creators fail to consider whether the intended beneficiaries may legally possess the firearm, they open the door to criminal liability for themselves and their loved ones. When creating the trust, the lawyer should consider what will happen if a beneficiary loses eligibility to possess the weapon.

Speak With Your Attorney

While some retailers and online vendors offer gun trust templates, working with your attorney is best. The consequences of a mistake can be severe, and the trust must comply with the law. Speak with your attorney today to learn more about creating a gun trust as part of your estate plan.

Contact us

Questions? Contact us at Elise Lampert, Attorney at Law

   

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com