Over four years ago, I published an article in my newsletter entitled “Planning For Your Digital Assets.” Within it, I introduced the concept of “digital assets”; property stored on the Internet or in an electronic version rather than in a safety deposit box or filing cabinet. I emphasized that digital assets, like traditional assets, have both monetary and sentimental value and thus should be provided for in wills, trusts and powers of attorney.
Missouri adopted its version of the Uniform Trust Code in 2004. Section 456.8-813.1.(1) of the Revised Statutes of Missouri states in part, “A trustee shall keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.”
This year’s passing of a new tax law has raised many estate planning questions that require your consideration. At the end of 2012, the nation approached what was popularly known as the “fiscal cliff”, as the Bush-era tax cuts were set to expire on December 31st. If that had been allowed to happen, the applicable estate tax exclusion amount would have dropped from $5 million to $1 million per person, and the tax rate for most estates would have shot up to 55%.
The Comprehensive Estate Plan is designed for clients with medium or large estates. Our office will supervise and assist in the transfer of your assets into the name of your Living Trust.
As many people are aware, if a distribution is made from an IRA prior to the time the individual has attained age 59 1/2, the distribution is classified as a premature withdrawal and an additional 10% penalty tax is levied on the amount of the withdrawn funds. There are, however, some exceptions to this rule. One of the most common exceptions is if a person takes a series of substantially equal periodic payments over a period of time.
Many of my clients have created a living trust in connection with their estate plan. I like to compare a living trust to a safe. A safe is designed to hold and protect assets that have been placed inside it, likewise, a living trust holds and protects assets that have been retitled into the name of the living trust.
A recent case before the IRS (PLR 200803002) exposes some problems with not reviewing the beneficiary designations of annuities in relation to your overall estate plan.
In this case a decedent had purchased a non-qualified annuity during his life and named his trust as the beneficiary. During his lifetime, the annuity increased in value. At the time of his passing, the decedent had not received any distributions from the annuity, nor had the annuity reached its starting date.
The Missouri Supreme Court recently ruled that non-compete agreements between an employer and an employee are valid in certain limited situations. In its ruling, the Missouri Supreme Court stated:
The IRS had issued rules regarding required minimum distributions for retirement plans and IRAs. For the majority of people, these rules will reduce the required minimum distribution during their lifetime and after their death.
You might have heard of a federal law entitled the Health Insurance Portability and Accountability Act, commonly referred to as “HIPAA”. Pursuant to HIPAA, the United States Department of Health and Human Services (“DHHS”) enacted regulations concerning the privacy of medical records (“Privacy Rules”). The Privacy Rules enacted by the DHHS apply to individually identifiable health information, defined by the Privacy Rules as “Protected Health Information” (“PHI”). The Privacy Rules attempt to provide national standards for the protection of your PHI.
In “Trust Spotlight”, we pick a trust and simplify it to help you better understand how it works. This issue’s spotlight covers the Grantor Retained Annuity Trust, or GRAT.
Missouri Estate Planning, 3rd Ed., Vol. 2, §13.20 states in part, that “the purpose of a GRAT is to transfer future growth in the value of trust assets to family members . . . free from the imposition of federal transfer taxes.”
Beginning on January 1, 2008, the Mortgage Forgiveness Debt Relief Act of 2007, (Public Law No. 110-142) allows a surviving spouse up to two (2) years from their spouse’s date of death of to exclude up to $500,000 of gain from the sale of their primary residence. The new law amends Section 121(b) of the Internal Revenue Code, Exclusion of Gain from the Sale of Principal Residence.
In meeting with clients and reviewing their estate plans, I have noticed many problems with the beneficiary designations on IRA’s, and annuities. Sometimes I have noticed that beneficiaries have not even been named! Sometimes I have noticed that the percentages for the beneficiaries do not add up to 100%. Other times I have noticed that clients have named a Living Trust as either the primary or contingent beneficiaries of their plans.
In general, a federal tax lien arises when three (3) conditions are met: (i) assessment, (ii) demand for payment from the IRS, and (iii) a refusal to pay by the taxpayer. If the taxpayer fails to pay after the IRS has made its demand, then 10 days later the lien becomes effective and attaches to all property that the taxpayer owns. However, the tax lien is not valid against third parties until notice of the lien is filed. Filing the lien perfects the lien against third parties.
Planning For Your Digital Assets – Summer 2015
In the last decade, advances in technology have completely changed the way we live our lives. We communicate through e-mails and text messages rather than phone calls or handwritten letters. We store our financial records online instead of in file cabinets. We keep our family photos and other items of intrinsic value on social media sites like Facebook, Twitter, and Instagram, and file storage services such as Dropbox or iCloud. Some of us conduct business and make money solely from the use of the Internet, such as those who create ad-supported blogs whose revenue is generated by the number of individuals who visit their page. We no longer buy our music from the record store, but from services like iTunes and Spotify.