Wednesday, August 29, 2018

Grantor or Non-Grantor Trusts - What's the Dif?

Some of the advice financial advisors give clients concerning setting up trusts may be outdated or overly simplistic, Martin Shenkman, a New Jersey CPA and attorney fears. In an article in Financial Planning, Shenkman offers a guide explaining the distinction between grantor and non-grantor trusts.

1. Grantor trust - the client sets up the trust and pays the tax on the income. Some plans, such as those involving life insurance, might be best held in this type trust. All revocable living trust are considered grantor trusts while the grantor is alive.

2.  Non-grantor trust – the trust, not the client, pays income tax on the income. This type of trust might be recommended for those who want to maximize charitable contributions deductions.

“Advisors need to understand the nature of the trust’s structure,” Shenkman explains, “as it affects not only income tax planning but also asset location decisions.” While advisors don’t need to be experts, he says, they need to have some understanding of the different nuances. When the client’s attorney recommends a type of trust, the planner must truly understand the nature of that trust, the author comments.

There are more variations of trusts than ever before, which means clients and their families can benefit from more strategies, Shenkman says, and planners should remain proactively involved in the planning.

“Recognize the value in a strong partnership between financial planner and estate planning attorney,” urges Mike Piershale in “It’s vital that clients have not only a strong estate plan, but have their finances secured as well.”

At Rebecca W. Geyer & Associates we fully agree. As a full-service estate planning and elder law firm serving the people of central Indiana, we work as a team with our clients’ tax, insurance, and financial planning advisors to best meet our clients’ estate planning and business goals.

Whether building a room addition or an estate plan, one important part of any strategy involves choosing the right tool. The choice of a grantor or non-grantor trust – and the choice to work as a team with our clients’ other advisors - can make a very big difference in terms of achieving the desired estate and tax planning outcomes!
- by Ronnie of the Rebecca W. Geyer blog team

Wednesday, August 22, 2018

Priority Added to the Indiana Health Care Act

Indiana has joined other states in specifying an order of priority for health care decision-making. House Bill 1119 establishes which parties can make health care decisions for an adult who:
  • is incapable of consenting to medical treatment (too physically or mentally impaired, or unconscious)
  • has not appointed a health care representative
How does the process work under the new law?
1.  The health care provider must make reasonable inquiry (by examining medical records and personal effects), attempting to locate and contact persons who can act on behalf of the patient.

 2. The law establishes a specific order of priority, (from most preferred to least preferred) of individuals who can make health care decisions for the patient in the absence of legal documentation appointing a representative:
  • judicially appointed guardian or representative
  • spouse (but not one who is legally separated from the patient or where a petition is pending for separation or annulment)
  • adult child
  • parent
  • adult sibling
  • grandparent
  • adult grandchild
  • nearest other adult relative
  • adult friend (one who has maintained regular contact and is familiar with the individual’s activities, health, and religious or moral beliefs
  • religious superior
House Enrolled Act 1119, remember, is designed to establish priority when the patient has not appointed a health care representative. At Geyer Law, a health care proxy document, which allows you to give another individual legal authority to make health care decisions for you, is an important part of the estate planning process. A second document, the living will, allows you to determine if you want your life artificially prolonged by tubes and machines if you’re suffering from an incurable illness or injury.

House Bill 1119 contains a second section referring to a document about end-of-life decisions called a POST or POLST (Physician Order for Life Sustaining Treatment).  While your living will is part of your legal documents, a POST is a medical order signed by a doctor, Advance Nurse Practitioner, or Physician Assistant, referring to immediate treatments. POSTS are usually recommended for terminally ill or very frail seniors, explains.

Although it’s a positive development that Indiana law now prioritizes who may make medical decisions on your behalf, advance directives ensure that your wishes are respected.

 - by
Rebecca W. Geyer

Wednesday, August 15, 2018

Beginning Next Year, Roth Conversions Can't Be Undone

With the halfway mark of 2018 behind us, it might be appropriate to direct some thought towards calendar-sensitive estate planning and tax planning topics. (Last week in our blog we covered donating Required Minimum Distributions from IRA accounts to charity, noting that the law has allowed more flexibility in the timing of Qualified Charitable Distributions.

Unfortunately, when it comes to Roth IRA conversions, flexibility appears to be going away. As Bill Bischoff puts it in, the new tax law “creates a perfect storm for Roth IRA conversions.”

By way of quick review, Roth IRAs have two big tax advantages as compared with “traditional IRAs:
  1. Withdrawals are federal income tax-free (assuming you’ve kept a Roth account open for at least five years, and you’ve reached age 59 ½ - or have become disabled).
  2. There are no annual required minimum distributions, even after age 70 ½.
Because of these two advantages, many individuals moved significant sums of money into Roth IRAs by “converting” their traditional IRA accounts to Roth status.  Yes, the conversion is treated as a taxable withdrawal, usually triggering a big federal and state tax bill, but…many believe today’s tax rates are the lowest we might see for the rest of our lives.

Since withdrawals from a Roth will be federal-income-tax free (so long as at least one Roth account has been open five years or longer), the motivation for doing the conversion now is to pay tax at today’s low rates (and enjoy spending it tax-free later – or leaving it as a legacy with less tax liability for the heirs).

Up until this year, a Roth conversion represented a reversible decision. Under prior law, if it turned out that the decision to convert traditional IRA monies into a Roth had a greater than anticipated negative tax impact, you could undo the deal up until October 15th of the following year. In fact, if you converted a traditional IRA into a Roth in 2017, you have the chance to reverse that conversion between now and October 15, 2018.

However, for 2018 and beyond, no longer will reversals of Roth conversions be allowed.

Handling IRA planning is yet another example of the way tax planning and estate planning tend to overlap. While Rebecca W. Geyer & Associates does not offer direct tax advice, we do coordinate efforts with other advisors to address the tax aspects of the planning process. This is an important change, and we want to be sure to keep our clients and blog readers apprised of all the latest updates in tax law.

 - by Rebecca W. Geyer

Thursday, August 9, 2018

Any Time is Now the Right Time for Donating IRA $ to Charity

After you attain the age of 70 1/2, you're required to take a minimum distribution from your retirement plans on an annual basis, regardless of whether or not you need the money. If you don't need your required minimum distribution (RMD) and have a charitable intent, it is possible to donate the RMD directly to charity and avoid paying income tax.

Details to note:
  1. Does the law include transfers from 401K’s or other pension accounts besides IRAs? The answer is no. A Qualified Charitable Distribution must come – and must come directly - from an IRA account.
  2. Is there a limit on the contribution? If you’re 70 ½ or older, you are allowed to transfer up to $100,000 to charity tax-free each year, even if that is much more than your RMD.  Your RMD for the year will have been satisfied, and the rest will not be included in your adjusted gross income.
  1. You cannot “double dip” by also deducting the money you’ve transferred to the charity as a charitable deduction.
  2. You cannot withdraw the money from the IRA and then write a check to the charity; the money needs to be transferred directly from the IRA to the charity.
Bonus benefits:
  1. Because making a tax-free transfer (rather than taking your RMD) keeps the money out of your adjusted gross income, you help avoid the Medicare high-income surcharge.
  2. Keeping money out of adjusted gross income can mean less of your Social Security benefits might be taxable.
The Qualified Charitable Distribution is just one example of the overlap between tax and estate planning.  And while the attorneys at Rebecca W. Geyer & Associates do not offer tax advice, we do coordinate efforts with other advisors to address the tax aspects of the planning process, and we make sure we keep our clients apprised of all the latest updates in tax law.

When it comes to IRAs, we don’t want you to miss out on any of the details, cautions, or benefits!

 - by Rebecca W. Geyer

Wednesday, August 1, 2018

Does an Indiana Estate Plan Survive a Suicide?

Suicide is a disturbing topic, New York attorney Mark Michael Campanella admits, yet suicide is a reality that many families unfortunately face. While there’s no question suicide can devastate a family, Campanella assures clients and their heirs that if a person’s wishes have been outlined in a properly executed and valid estate plan, those wishes will still be followed regardless of the manner of death. The one caveat, Campanella adds, has to do with life insurance contracts, which are often issued with suicide exclusion clauses.

It’s actually not true that,if you commit suicide, your life insurance will always refuse to pay out, explains. Some insurance policies will pay benefits even if the policyholder committed suicide so long as the policy has been held for a certain minimum period (usually two to three years, depending on the carrier).

Here at Geyer Law, we could not help noticing that just within the past few weeks, headlines announced the suicides of two celebrities - designer Kate Spade and TV personality Anthony Bourdain. “The reality is that suicide does not discriminate based on age, sex, status or financial well-being,” east coast attorney Gary Altman writes, pointing to the following frightening statistic: Suicide is the tenth leading cause of death in the United States. 

If suicide does affect your family, the attorneys at Rebecca Geyer & Associates can help you navigate the difficult issues which arise when someone dies.

A properly executed estate plan describes in detail what happens to a person’s assets at death. The plan goes into effect as soon as a person dies, and will be followed so long as it is valid. The manner of a person’s death is ultimately irrelevant so long as the plan was executed properly, and we can ensure that the individual’s assets properly pass to his or her intended recipients.

- by Ronnie of the Rebecca W. Geyer blog team