Gift giving is generally looked upon as a positive thing. It would be logical assume that you can give gifts to people without being taxed for your troubles. However, the tax man takes a different approach. There is a federal gift tax, and it exists to stop people from giving gifts so that they can avoid the estate tax. There is a federal gift and estate tax exclusion. It is alternately called a credit, and it is the amount that you transfer to anyone who is not your spouse before the estate …
Why Would I Need a Pour-Over Will?
A pour-over will would be necessary if you use a revocable living trust to facilitate future asset transfers. Before we look at pour-over wills, we should explain the value of revocable living trusts. Efficient Asset Transfers If you use a standard last will to arrange for the future distribution of your resources to your heirs, you name an executor when you create the document. The executor is the estate administrator. This individual is empowered to handle the business of the estate after …
What Is a Letter of Final Instruction?
You state your final wishes when you create an estate plan, and this is done through the execution of legally binding devices. At the same time, there is some practical, hand to mouth information that you need to pass along to your estate administrator. You share this information when you create a letter of final instruction. If you use a last will to facilitate future asset transfers, the estate administrator is going to be the executor. The executor must have access to all important …
What Is the Difference Between SSI and SSDI?
Social Security is a government program that for the most part provides senior citizens with income. You earn Social Security eligibility when you are paying those pesky FICA taxes throughout your life. Taxpayers can earn up to four retirement credits per year, and you will be eligible for Social Security as a senior if you earn at least 40 credits. People who have earned sufficient retirement credits can potentially qualify for Social Security Disability Insurance (SSDI) benefits. If you can …
Is There a New York State Estate Tax?
Tax efficiency is an important factor for many people who are looking ahead toward the future. There is a federal estate tax that you may have to contend with depending on the size and scope of your estate. For the rest of 2014, the federal estate tax credit or exclusion is $5.34 million. You can transfer this amount tax-free, but anything that you transfer that is in excess of this figure could be exposed to the federal estate tax. The top rate of the tax is 40 percent. If you see a …
Will a Living Trust Reduce My Income Taxes?
A revocable living trust is a very effective estate planning tool, and it can be a good alternative to a last will as a primary vehicle of asset transfer. The thing that many people don't understand about a last will is that a will must be admitted to probate, and the estate must be probated before the heirs can receive their inheritances. In New York, probate matters are handled by the Surrogate's Court. The simplest of cases can potentially pass through probate in around nine months, but it …
How Do I Fund My Revocable Living Trust?
Some people never consider the utilization of a revocable living trust, because they do not understand all of the facts. They do not consider themselves to be wealthy, and they think that trusts are only for high net worth individuals. In fact, a revocable living trust can be a good choice for you even if you are not wealthy. These trusts facilitate smooth and efficient postmortem asset transfers, because the trustee that you name in the trust agreement can distribute assets outside of the …
What Advantages Do Trusts Provide?
There are various estate planning tools that you can use to bring your wishes to fruition. Trusts are very useful, and there are different types of trusts that serve different purposes. We will look at some of them in this post. Asset Protection If you want to protect assets from creditors and claimants, you could use an asset protection trust. Such a trust can be used to protect assets for your own purposes, but you can also protect assets that you are leaving to a loved one. For example, …
Is There an Inheritance Tax in New York?
People are sometimes confused about estate taxes and inheritance taxes, and rightly so. It would be logical to assume that the two terms describe the same type of tax, but in reality, they are different. Plus, there are taxes on the federal level, and there are also taxes on the state level, so the whole situation can be somewhat perplexing to the layperson. Estate Tax vs. Inheritance Tax An estate tax would be imposed on the entire taxable portion of the estate in question. For example, …
Should I Change My Living Trust When I Acquire Assets?
You may want to consider the creation of a revocable living trust, even if you do not consider yourself to be wealthy. People sometimes think that trusts are only useful for high net worth individuals, but this is not the case when it comes to a revocable living trust. When you create a revocable living trust, you facilitate timely and effective asset transfers to the beneficiaries. These distributions would not be subject to the legal process of probate. On the other hand, if you use a will to …
What Is a CLAT?
In the realm of estate planning, there are some acronyms used that are probably foreign to you as a layperson. We look at them from time to time on our blog, and in this post we will examine the legal device that is called a CLAT. Charitable Giving This acronym stands for a charitable lead annuity trust. A CLAT can be useful as a transfer tax efficiency tool under certain circumstances. To understand the value of a charitable lead annuity trust, you should first know some things about …
What Is a Step-Up in Basis?
To understand what a step-up in basis is all about, you need some background information about the capital gains tax. If you are in possession of an appreciated asset, the gain would be taxable if and when you realize it. The holder of an asset would realize a gain if the asset was liquidated and the appreciation was in hand. Under the tax code, there are short-term capital gains, and long-term capital gains. A gain would be a short-term capital gain if it was realized less than a year after …
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