The Estate of The Union Season 2|Episode 8 is out now!
Homelessness is not going away. How we manage it can be frustrating and sometimes seems futile. It’s not. In Homeless But Not Hopeless, Brad and Alan Graham, the founder and CEO of Mobile Loaves and Fishes have a lively conversation on what he, Mobile Loaves and Fishes, and their Community First! Village program are doing to improve the lives of the homeless, and improve our city too.
If you’ve ever wondered about what to do when approached by a homeless person at an intersection, Alan has an answer for that too!
If you would like to learn more about how to volunteer or donate to Mobile Loaves and Fishes or Community First! Village, please visit mlf.org
In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 2|Episode 8 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links below to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.
Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.
If you are a wealthy family looking into estate planning, beware of tax scams involving Charitable Remainder Annuity Trusts. The IRS has issued a warning about promoters aiming specifically at wealthy taxpayers, advises a recent article, “IRS Warns Of Tax Scams That Target Wealthy,” from Financial Advisor. Charitable Remainder Annuity Trusts (CRATs) are irrevocable trusts that allow individuals to donate assets to charity and draw annual income for life or for a fixed period. A CRAT pays a dollar amount each year, and the IRS examines these trusts to ensure they correctly report trust income and distributions to beneficiaries. Of course, tax documents must also be filed properly.
Some sophisticated scammers boast of the benefits of using CRATs to eliminate ordinary income or capital gain on the sale of the property. However, property with a fair market value over its basis is transferred to the CRAT, the IRS explains, and taxpayers may wrongly claim the transfer of the property to the CRAT, resulting in an increase in basis to fair market value, as if the property had been sold to the trust.
The CRAT then sells the property but needs to recognize the gain due to the claimed step-up in basis. The CRAT then purchases a single premium immediate annuity with the proceeds from the property sale. This is a misapplication of tax rules. The taxpayer or beneficiary may not treat the remaining portion as an excluding portion representing a return of investment for which no tax is due.
In another scam, abusive monetized installment sales, thieves find taxpayers seeking to defer the recognition of gain at the sale of appreciated property. They facilitate a purported monetized installment sale for the taxpayer for a fee. These sales occur when an intermediary purchase appreciated property from a seller in exchange for an installment note, which typically provides interest payments only, with the principal paid at the end of the term.
The seller gets the larger share of the proceeds but improperly delays recognition of gain on the appreciated property until the final payment on the installment note, often years later.
Anyone who pressures an investor to invest quickly, guarantees high returns or tax-free income, or says they can eliminate taxes using installment sales, trusts, or other means, should be dismissed immediately. Beware of tax scams involving Charitable Remainder Annuity Trusts. Your estate planning attorney is well-versed in how CRATs, LLCs, S Corps, trusts, or charitable donations are used and will steer you and your assets into legal, proper investment strategies. If you would like to learn more about charitable giving, please visit our previous posts.
The reality and finality of death is uncomfortable to think about. However, people need to plan for death, unless they want to leave their families a mess instead of a blessing. In a family-owned business, this is especially vital, according to a recent article, “All in the Family—Transition Strategies for Family Businesses” from Bloomberg Law. There are strategies you can use to protect the family business for the next generation.
The family business is often the family’s largest financial asset. The business owner typically doesn’t have much liquidity outside of the business itself. Federal estate taxes upon death need special consideration. Every person has an estate, gift, and generation-skipping transfer tax exemption of $12.06 million, although these historically high levels may revert to prior levels in 2026. The amount exceeding the exemption may be taxed at 40%, making planning critical.
Assuming an estate tax liability is created upon the death of the business owner, how will the family pay the tax? If the spouse survives the business owner, they can use the unlimited marital deduction to defer federal estate tax liabilities, until the survivor dies. If no advance planning has been done prior to the death of the first spouse to die, it would be wise to address it while the surviving spouse is still living.
Certain provisions in the tax code may mitigate or prevent the need to sell the business to raise funds to pay the estate tax. One law allows the executor to pay part or all of the estate tax due over 15 years (Section 6166), provided certain conditions are met. This may be appropriate. However, it is a weighty burden for an extended period of time. Planning in advance would be better.
Business owners with a charitable inclination could use charitable trusts or entities as part of a tax-efficient business transition plan. This includes the Charitable Remainder Trust, or CRT. If the business owner transfers equity interest in the business to a CRT before a liquidity event, no capital gains would be generated on the sale of the business, since the CRT is generally exempt from federal income tax. Income from the sale would be deferred and recognized, since the CRT made distributions to the business owner according to the terms of the trust.
At the end of the term, the CRT’s remaining assets would pass to the selected charitable remainderman, which might be a family-established and managed private foundation.
Family businesses usually appreciate over time, so owners need to plan to shift equity out of the taxable estate. One option is to use a combination of gifting and selling business interests to an intentionally defective grantor trust. Any appreciation after the date of transfer may be excluded from the taxable estate upon death for purposes of determining federal estate tax liabilities.
For some business owners, establishing their business as a family limited partnership or limited liability company makes the most sense. Over time, they may sell or gift part of the interest to the next generation, subject to the discounts available for a transfer. An appraiser will need to be hired to issue a valuation report on the transferred interests in order to claim any possible discounts after recapitalizing the ownership interest.
The ultimate disposition of the family business is one of the biggest decisions a business owner must make, and there’s only one chance to get it right. Consult with an experienced estate planning attorney and don’t procrastinate in protecting the family business for the next generation. Succession planning takes time, so the sooner the process begins, the better. If you would like to learn more about succession planning, please visit our previous posts.
The Estate of The Union Season 2|Episode 4 – How To Give Yourself a Charitable Gift is out now!
This is the time of the year when people feel most inclined to provide donations to organizations and charities that mean something to them. The saying goes that “Charity Begins at Home”, but sometimes you can give money to charity and bring it back home too – No Kidding!
In this episode, Brad Wiewel discusses charitable donations and how you can use “give and get” techniques to turn those donations into income and tax deductions for yourself. Just in time for the holiday season. You do not want to miss this one! These are complex estate and tax matters, requiring the guidance of an experienced estate planning attorney for optimal results. If you would like to learn more about charitable giving in your estate planning, please visit our previous posts.
In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 2|Episode 4 – How To Give Yourself a Charitable Gift can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the link below to listen to the new installment of The Estate of The Union podcast. We hope you enjoy it.
Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.
Let’s get this out of the way: preparing for death doesn’t mean it will come sooner. Quite the opposite is true. Most people find preparing and completing their estate plan leads to a sense of relief. They know if and when any of life’s unexpected events occur, like incapacity or death, they have done what was necessary to prepare, for themselves and their loved ones. Minimizing taxes should be a part of your plan.
It’s a worthwhile task, says the recent article titled “Preparing for the certainties in life: death and taxes” from Cleveland Jewish News and doesn’t need to be overwhelming. Some attorneys use questionnaires to gather information to be brought into the office for the first meeting, while others use secure online portals to gather information. Then, the estate planning attorney and you will have a friendly, candid discussion of your wishes and what decisions need to be made.
Several roles need to be filled. The executor carries out the instructions in the will. A guardian is in charge of minor children, in the event both parents die. A person named as your attorney in fact (or agent) in your Power of Attorney (POA) will be in charge of the business side of your life. A POA can be as broad or limited as you wish, from managing one bank account to pay household expenses to handling everything. A Health Care Proxy is used to appoint your health care agent to have access to your medical information and speak with your health care providers, if you are unable to.
Your estate plan can be designed to minimize probate. Probate is the process where the court reviews your will to ensure its validity, approves the person you appoint to be executor and allows the administration of your estate to go forward.
Depending on your jurisdiction, probate can be a long, costly and stressful process. In Ohio, the law requires probate to be open for at least six months after the date of death, even if your estate dots every “i” and crosses every “t.”
Part of the estate planning process is reviewing assets to see how and if they might be taken out of your probate estate. This may involve creating trusts, legal entities to own property and allow for easier distribution to heirs. Charitable donations might become part of your plan, using other types of trusts to make donations, while preserving assets or creating an income stream for loved ones.
Minimizing taxes should be a part of your estate plan. While the federal estate tax exemption right now is historically high $12.06 million per person, on January 1, 2025, it drops to $5.49 million adjusted for inflation. While 2025 may seem like a long way off, if your estate plan is being done now, you might not see it again for three or five years. Planning for this lowered number makes sense.
Reviewing an estate plan should take place every three to five years to keep up with changes in the law, including the lowered estate tax. Large events in your family also need to prompt a review—trigger events like marriage, death, birth, divorce and the sale of a business or a home. If you would like to read more about taxes and their influence of estate planning, please visit our previous posts.
To maximize the benefits of a trust fund, you’ll need to understand how trusts funds work and how to create a trust fund the right way, advises this recent article from Yahoo! Money titled “How to Start a Trust Fund the Easy Way.” You don’t have to be a millionaire to start a trust fund, by the way. “Regular” people benefit just as much as millionaires from using trusts to protect assets and minimize taxes.
A trust fund is an independent legal entity created to own assets and ensure money and property are used to benefit loved ones. They are commonly used to transfer assets to family members.
Trust funds are created by grantors, the person who sets up the trust and transfers money or assets into it. An experienced estate planning attorney will be essential, since creating a trust is not like going to the bank and opening an account. You need the assistance of a professional who can create a trust to reflect your wishes and comply with your state’s laws.
When assets are moved into a trust, the trust becomes the legal owner of the property. Part of creating the trust is naming a trustee, who manages the trust and is legally bound to follow the wishes of the trust following the grantor’s wishes. A successor trustee should always be named, in case the primary trustee becomes unwilling to serve or dies.
Subject to compliance with specific requirements, assets owned by an irrevocable trust are not countable towards Medicaid, if someone in the family needs long-term care and is concerned about qualifying. Any transfer must be done at least five years in advance of applying for Medicaid. An elder law attorney can help in preparation for this application and to ensure eligibility. This is a very complex area of law. Do not attempt it alone without the assistance of an elder law attorney.
Trusts can have a long or short life. Some trusts are held for a child until the child reaches age 25, while others are structured to distribute a portion of the assets throughout the beneficiary’s lifetime or when the beneficiary reaches certain milestones, such as finishing college, starting a family, etc.
A revocable trust allows the grantor to have the most control over the assets in the trust, but at a cost. The revocable trust may be changed at any time, and property can be moved in and out of it. However, the assets are available to creditors and are countable towards long-term care because they are in the control of the grantor.
The irrevocable trust requires the grantor to give up control, in exchange for the benefits the trust provides.
There are as many types of trusts as there are situations for trusts. Charitable Remainder Trusts reduce estate taxes and allow beneficiaries to receive an income stream for a designated period of time, at the end of which the remainder of the trust’s assets go to the charity. Special Needs Trusts are created for disabled persons who are receiving means-tested government benefits. There are strict rules about SNTs, so speak with an experienced estate planning attorney to ensure that your loved one continues to be eligible, if you want them to receive assets from you.
Trusts are often used so assets will pass through the trust and not through the probate process. Assets owned by a trust pass directly to beneficiaries and information about the assets does not become part of the public record, which is part of what occurs during the probate process.
Your estate planning attorney will help you maximize the benefits of a trust fund, achieve your specific wishes and are in compliance with your state’s laws. A boilerplate template could present more problems than it solves. For trusts, the experienced professional is the best option. If you would like to learn more about the benefits of a trust, please visit our previous posts.
The idea of leaving a large inheritance to loved ones is a dream for some parents. However, without careful planning, heirs may end up with a large tax bill. When Congress passed the SECURE Act in December 2019, one of the changes was the end of the stretch IRA, as reported by Kiplinger in a recent article titled “Getting Around the Stretch IRA Block.” There are alternatives to replace a stretch IRA.
Before the SECURE Act, people who inherited traditional IRAs needed to only take a minimum distribution annually, based on their own life expectancy. The money could grow tax-deferred for the rest of their lives. The tax impact was mild, because withdrawals could be spread out over many years, giving the new owner control over their taxable income. The rules were the same for an inherited Roth IRA. Distributions were based on the heirs’ life expectancy. Roth IRA heirs had the added benefit of not having to pay taxes on withdrawals, since Roth IRAs are funded with post-tax dollars.
After the SECURE Act, inherited traditional and Roth IRAs need to be emptied within ten years. Heirs can wait until the 10th year and empty the account all at once—and end up with a whopping tax bill—or take it out incrementally. However, it has to be emptied within ten years.
There are some exceptions: spouses, disabled or chronically ill individuals, or those who are not more than ten years younger than the original owner can stretch out the distribution of the IRA funds. If an underage minor inherits a traditional IRA, they can stretch it until they reach legal age. At that point, they have to withdraw all the funds in ten years—from age 18 to 28. This may not be the best time for a young person to have access to a large inheritance.
These changes have left many IRA owners looking for alternative ways to leave inheritances and find a work-around for their IRAs to protect their heirs from losing their inheritance to taxes or getting their inheritance at a young age.
For many, the solution is converting their traditional IRA to a Roth, where the IRA owner pays the taxes for their heirs. The strategy is generous and may be more tax efficient if the conversion is done during a time in retirement when the IRA owner’s income is lower, and they may be in a lower tax bracket. The average person receiving an IRA inheritance is around 50, typically peak earning years and the worst time to inherit a taxable asset.
Another alternative to replace the stretch IRA is life insurance. Distributions from the IRA can be used to pay premiums on a life insurance policy, with beneficiaries receiving death benefits. The proceeds from the policy are tax-free, although the proceeds are considered part of the policy owner’s estate. With the current federal exemption at $12.06 million for individuals, the state estate tax is the only thing most people will need to worry about.
A Charitable Remainder Trust can also be used to mimic a stretch IRA. A CRT is an irrevocable split-interest trust, providing income to the grantor and designated beneficiaries for up to twenty years or the lifetime of the beneficiaries. Any remaining assets are donated to charity, which must receive at least 10% of the trust’s initial value. If the CRT is named as the IRA beneficiary, the IRA funds are distributed to the CRT upon the owner’s death and the estate gets a charitable estate tax deduction (and not an income tax deduction) for the portion expected to go to the charity. Assets grow within the charitable trust, which pays out a set percentage to beneficiaries each year. The distributions are taxable income for the beneficiaries. There are two types of CRTs: Charitable Remainder Unitrust and a Charitable Remainder Annuity Trust. An estate planning attorney will know which one is best suited for your family. If you would like to read more about managing retirement accounts, please visit our previous posts.
With numerous bills still being considered by Congress, people are increasingly aware of the need to explore options for tax planning, charitable giving, estate planning and inheritances. Tax sensitive strategies for the near future are on everyone’s mind right now, according to the article “Inheritance, estate planning and charitable giving: 4 strategies to reduce taxes now” from Market Watch. These are the strategies to reduce taxes that you should be aware of.
Offsetting capital gains. Capital gains are the profits made from selling an asset which has appreciated in value since it was first acquired. These gains are taxed, although the tax rates on capital gains are lower than ordinary income taxes if the asset is owned for more than a year. Losses on assets reduce tax liability. This is why investors “harvest” their tax losses, to offset gains. The goal is to sell the depreciated asset and at the same time, to sell an appreciated asset.
Consider Roth IRA conversions. People used to assume they would be in a lower tax bracket upon retirement, providing an advantage for taking money from a traditional IRA or other retirement accounts. Income taxes are due on the withdrawals for traditional IRAs. However, if you retire and receive Social Security, pension income, dividends and interest payments, you may find yourself in the enviable position of having a similar income to when you were working. Good for the income, bad for the tax bite.
Converting an IRA into a Roth IRA is increasingly popular for people in this situation. Taxes must be paid, but they are paid when the funds are moved into a Roth IRA. Once in the Roth IRA account, the converted funds grow tax free and there are no further taxes on withdrawals after the IRA has been open for five years. You must be at least 59½ to do the conversion, and you do not have to do it all at once. However, in many cases, this makes the most sense.
Charitable giving has always been a good tax strategy. In the past, people would simply write a check to the organization they wished to support. Today, there are many different ways to support nonprofits, allowing for better tax advantages.
One of the most popular ways to give today is a DAF—Donor Advised Fund. These are third-party funds created for supporting charity. They work in a few different ways. Let’s say you have sold a business or inherited money and have a significant tax bill coming. By contributing funds to a DAF, you will get a tax break when you put the funds into a DAF. The DAF can hold the funds—they do not have to be contributed to charity, but as long as they are in the DAF account, you receive the tax benefit.
Another way to give to charity is through your IRA’s Required Minimum Distribution (RMD) by giving the minimum amount you are required to take from your IRA every year to the charity. Otherwise, your RMD is taxable as income. If you make a charitable donation using the RMD, you get the tax deduction, and the nonprofit gets a donation.
Giving while living is growing in popularity, as parents and grandparents can have pleasure of watching loved ones benefit from the impact of a gift. A person can give up to $16,000 to any other person every year, with no taxes due on the gift. The money is then out of the estate and the recipient receives the full amount of the gift.
All of these strategies to reduce taxes should be reviewed with your estate planning attorney with an eye to your overall estate plan, to ensure they work seamlessly to achieve your overall goals. If you would like to learn more about tax planning, please visit our previous posts.
Charitable trusts can be a critical component of your estate plan and a rewarding way to make an impact for a cause you care deeply about. Charitable trusts can be created to provide a reliable income stream to you and your beneficiaries for a set period of time, says Bankrate’s recent article entitled “What is a charitable trust?”
There are a few kinds of charitable trusts to consider based on your situation and what you may be looking to accomplish.
Charitable lead trust. This is an irrevocable trust that is created to distribute an income stream to a designated charity or nonprofit organization for a set number of years. It can be established with a gift of cash or securities made to the trust. Depending on the structure, the donor can benefit from a stream of income during the life of the trust, deductions for gift and estate taxes, as well as current year income tax deductions when the assets are donated to the trust.
If the charitable lead trust is funded with a donation of cash, the donor can claim a deduction of up to 60% of their adjusted gross income (AGI), and any unused deductions can generally be carried over into subsequent tax years. The deduction limit for appreciated securities or other assets is limited to no more than 30% of AGI in the year of the donation.
At the expiration of the charitable lead trust, the assets that remain in the trust revert back to the donor, their heirs, or designated beneficiaries—not the charity.
Charitable remainder trust. This trust is different from a charitable lead trust. It’s an irrevocable trust that’s funded with cash or securities. A CRT gives the donor or other beneficiaries an income stream with the remaining assets in the trust reverting to the charity upon death or the expiration of the trust period. There are two types of CRTs:
A charitable remainder annuity trust or CRAT distributes a fixed amount as an annuity each year, and there are no additional contributions can be made to a CRAT.
A charitable remainder unitrust or CRUT distributes a fixed percentage of the value of the trust, which is recalculated every year. Additional contributions can be made to a CRUT.
Here are the steps when using a CRT:
Make a partially tax-deductible donation of cash, stocks, ETFs, mutual funds or non-publicly traded assets, such as real estate, to the trust. The amount of the tax deduction is a function of the type of CRT, the term of the trust, the projected annual payments (usually stated as a percentage) and the IRS interest rates that determine the projected growth in the asset that’s in effect at the time.
Receive an income stream for you or your beneficiaries based on how the trust is created. The minimum percentage is 5% based on current IRS rules. Payments can be made monthly, quarterly or annually.
After a designated time or after the death of the last remaining income beneficiary, the remaining assets in the CRT revert to the designated charity or charities.
There are a number of benefits of a charitable trust that make them attractive for estate planning and other purposes. It’s a tax-efficient way to donate to the charities or nonprofit organizations of your choosing. The charitable trust provides benefits to the charity and the donor. The trust also provides upfront income tax benefits to the donor, when the contribution to the trust is made.
Donating highly appreciated assets, such as stocks, ETFs, and mutual funds, to the charitable trust can help avoid paying capital gains taxes that would be due if these assets were sold outright. Donations to a charitable trust can also help to reduce the value of your estate and reduce estate taxes on larger estates.
However, charitable trusts do have some disadvantages. First, they’re irrevocable, so you can’t undo the trust if your situation changes, and you were to need the money or assets donated to the trust. When you establish and fund the trust, the money’s no longer under your control and the trust can’t be revoked.
Charitable trusts may be a good option if you have a desire a rewarding way to make an impact with some of your assets. Talk with an experienced estate planning attorney about your specific situation. If you would like to learn more about charitable planning, please visit our previous posts.
One of the goals of estate planning is to care for loved ones, particularly those who depend on us for care after we have passed on. Wills, trusts, life insurance and beneficiary designations are all used to provide support to people—but what about pets? There is something you can do to protect your furry companions. A trust can protect your pet says a recent article from The Sentinel,“Elder Care: Estate planning for your furryfriends.”
We love our pets, to the tune of $103.6 billion in expenditures in 2020, including everything from pet food, toys, bedding, veterinary care, grooming, training and even Renaissance style portraits of pets. Scientific studies have proven the emotional and physical advantages pet ownership confers, not to mention the unconditional love pets bring to the household. So why not protect your pets, as well as other family members?
Many people rely on informal agreements with good friends or family members to take care of Fluffy or Spice, if the owner dies or becomes sick to take care of their pet. Here’s the problem: these informal agreements are not binding. Even if you’ve left a certain sum of money to a person in your will and ask it to be used solely for the care and well-being of your pet, it’s not enforceable.
We know all things change. What if your chosen pet caretaker has a child or a new romance with someone with a deathly allergy to pet dander? Or if their pet, who always used to play well during your visits, won’t tolerate your beloved pet as a housemate?
The informal agreement won’t hold the person accountable, and the funds may be spent elsewhere.
A better option is to use a trust to protect your pet. These have been recognized in all fifty states as a lawful way to provide for your animal companion’s needs. A pet trust can be created to provide for your pet during your lifetime, as well as after you have passed, allowing for continuity of care if you become incapacitated and need someone else to have the resources and guidance to care for your pet.
A pet trust is a legal document, prepared by an estate planning attorney and usually includes financial accounts in the name of the trust. Note the pet does not own the trust (animals may not own property), nor do you as the creator of the trust (the grantor). The trust is a legal entity, managed by the trustee.
A few of the things you’ll need to consider before having a pet trust created:
Who is to be the pet’s guardian? Have more than one person in mind, in case the primary pet guardian cannot serve or changes their mind.
If all of your guardians end up unable or unwilling to serve, name a no-kill animal shelter or rescue organization to take your pet. They may require you to plan in advance to cover the cost of caring for your pet. Larger organizations may have a process for a charitable remainder trust (CRT) as part of this type of arrangement.
Give details about pet preferences. If they are AKC registered, use their formal name as well as their regular name. People often fail to use the correct name in legal documents, even for humans, which can lead to legal challenges.
Do you want the same person to serve as trustee, managing funds for the pet, as the guardian? This is a similar decision for naming a guardian for minor children. Sometimes the person who is wonderful with care, is not so skilled at handling finances.
Finally, include instructions about what should happen to the money left after the pet passes. It may be used as a thank you to the person who cared for your beloved companion, or a gift to an animal organization. If you would like to read more about pet trusts, please visit our previous posts.
Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
