Wednesday, November 14, 2018

When Paying Taxes Isn't a One-Time-a-Year Task

“For many retirees, paying taxes isn’t a one-time-a-year task”, a recent issue of Kiplinger’s Retirement Report points out. Even after taking care of their 2018 tax return, many seniors will need to work on their Form 1040-ES to pay estimated 2019 taxes, with the first quarterly payment due in April.

One thing that is true all year round, but which becomes most obvious as year-end approaches, is this: tax law and estate planning overlap. Just as tax attorneys and CPAs must regularly take into account their clients’ estate planning goals, we as estate planning and elder law attorneys must think about the tax ramifications of the planning we do with our clients.

At Geyer Law, part of our responsibility includes staying familiar with the laws that relate to the tax aspects of:
  • wills and trusts
  • social security benefits
  • medical and long term care benefits
  • Medicare
  • life insurance
  • pensions and other retirement plans
  • real estate property
  • charitable gifts
  • college planning for children and grandchildren
  • veterans’ benefits
 What’s more, since quite a number of our Geyer Law clients are business owners, we must work in cooperation with their insurance, tax, and financial planning advisors on their:
  • choice of business entity
  • internal corporate documents
  • liability issues
  • succession planning,
all of which relate to their estate planning. Proper succession planning is crucial for business situations, because of the three what ifs: the death, disability, or retirement of a current owner.  

For those old enough to remember the song lyrics, there’s a real parallel here:  “Love and marriage, love and marriage, go together like a horse and carriage.” The “marriage” of tax planning and estate planning is not just a one-time-a-year task!
- by Rebecca W. Geyer

Wednesday, November 7, 2018

Year-End Planning - Where Estate and Tax Planning Meet for Seniors

For all of us, falling leaves are a reminder that, as year-end approaches, we need to make sure all our tax-related i’s are dotted and our t’s crossed. Year end is also a time when tax planning and estate planning are most inter-related for seniors.

As the AARP book The Other Talk points out, “The kids will need to know the location of your most recent seven years of tax returns.” Why?

  1. for IRS queries while you’re still here
  2. for determining the extent of assets in your estate and filing a final income tax and estate return and/or a revocable trust return.

Author Tim Prosch urges elders not to procrastinate when it comes to making notebooks for each adult child. “The more information your kids have, and the sooner they get it, the better for you and for them.” Documents that could go into the notebooks, in addition to those seven years’ tax returns, might include:

  • will
  • trust
  • advance directives (durable healthcare power of attorney and living will)
  • summary list of all doctors – along with contact information- and medical advisors
  • contact information of all key advisors
  • insurance information for life, health, home, vehicle, and boat insurance
  • banking information
  • inventory of current investments
  • credit card information
  • burial and funeral arrangement information

End-of-year planning also means IRA planning. After reaching age 70 ½, owners of IRA and other tax-deferred retirement accounts must take an annual RMD (Required Minimum Distribution).  The account values as of December 31 of 2017 are used to calculate this year’s RMD, Bob Carlson reminds us in Forbes. Carlson cautions the RMD rules are not simple ones, and are, in fact, “the source of many mistakes and oversights by account beneficiaries, resulting in lost opportunities, extra taxes, and penalties.”

It happens often – we’ll be talking to clients here at Rebecca W. Geyer & Associates about their estate planning and mention the RMD requirement.  While they will have heard about the RMD, many will have forgotten the way the rules work. While at Geyer Law we do not offer tax preparation,(instead working together with clients’ tax advisors to craft a unified plan), IRAs represent one area where there is a large overlap between tax planning and estate planning.

Year-end is that time of year when we’re reminded that the distribution of assets out of IRA
accounts,  whether to the owners while they are still alive or to their beneficiaries after they’ve passed on – even when there is a notebook prepared -  is no simple matter.

- by Rebecca W. Geyer