Spring 2012 Newsletters

June 25, 2012: Tax Round Table

Please join Attorney David M. Beliveau, Discussion Leader, on June 25, 2012 for a tax round table discussion on important changes to Massachusetts Probate Law.

TAX ROUND TABLE DISCUSSION

PRESENTER: David M. Beliveau, Esq.

DATE: June 25, 2012

LOCATION: The Chateau Restaurant, 195 School Street, Waltham, MA 02451

SCHEDULE: Cocktails at 5:30 p.m.

Meeting begins at 6:00 p.m.

DESCRIPTION: Updates to the Massachusetts Probate Code.

June 18, 2012: Multistate Estate Tax Planning

Attorney David M. Beliveau will be presenting to the Route 128 Practitioners Forum

PRESENTER: David M. Beliveau, Esq.

DATE: June 18, 2012

LOCATION: Sheraton-Needham Hotel, 100 Cabot Street, Needham, MA

SCHEDULE: 8:30 a.m. – 10:30 a.m.

DESCRIPTION: Multistate Estate Tax Planning

IRS cracks down on family gifts of real estate

Amazingly, it appears that most people who have given away real estate to family members in recent years have not filed a gift tax return with the IRS.

The IRS requires a gift tax return to be filed any time a person makes a gift to someone other than a spouse of more than the annual exemption amount (which is currently $13,000). So if a person gives a piece of real estate to a child, or sells it to them for $1, or even sells it to them for a price that is more than $13,000 below its actual value, a gift tax return must be filed. That’s true for residences, vacation homes, and investment properties. [Read more…]

Talk with your heirs about the advantages of inherited IRAs

Leaving an IRA to your children or grandchildren can be a great idea. That’s because withdrawals from the IRA can be “stretched out” over many years, and the IRA can grow tax-free for decades, giving your heirs a huge tax benefit.

However, if you’re planning to leave an IRA to your heirs, it’s important to talk with them now about this strategy – so they understand how to take advantage of it.

A recent study by the AXA insurance company showed that 87% of children who inherit an IRA from a parent liquidate it within a year of the parent’s death. [Read more…]

2012 could be a great time to equalize family gifts

There’s a limit on how much money you can give away each year without paying gift tax. For 2012, for instance, you can give any person up to $13,000 without paying tax.

Many people make annual gifts to family members as part of their estate planning. This is a smart idea, but one problem is that over time it can result in unequal gifts to different parts of a family.

For instance, Edna has three children: Alan is single, Stella is married with one child, and Andy is married with four children. Each year Edna gives $13,000 to each of her children, their spouses, and her grandchildren. [Read more…]

How to transfer a family business to the next generation

Many people who seek estate planning advice are owners of family businesses, and one of their chief concerns is how to pass on the business to the next generation.

The fact is, there are almost as many ways to transfer a family business as there are family businesses. There’s no way to know what’s best for you without a thorough discussion of your goals, your family, and your complete financial picture. However, there’s no question that dealing with a family business is an essential aspect of planning your estate.

Here’s a broad, general look at some of the ways in which a business can be transferred to your children: [Read more…]

How do I organize separate business activities under one business entity?

Additional Information:

I am a teacher in Quincy and in addition to my salary I sometimes receive wages for tutoring, and also income from our rental property.  Is it recommended and is there a way to organize these separate business activities under one business entity?

ATTORNEY ANSWER:

Organizing several side businesses under one umbrella may sound like a good idea at first but there are several reasons (for tax purposes and non-tax purposes) why you should keep all businesses separate.  First, if you have all businesses in one entity (whether a corporation or a LLC) they are all at risk in a lawsuit.  Using your facts, if a guest of your tenant slips and falls on the property they would be able to attach the income from the rental property as well as any tutoring income (if they get a judgment against the business).  Also, losses from rental activities are treated very differently from all other business activities.  If you generate a net operating loss from an activity you are materially participating in (tutoring would likely qualify), that loss can be used to offset income from other activities.  However, rental activities are presumed to be passive activities (unless you can prove you are in the real estate business and devote significant time to that activity) and the losses that are generated can be limited.  Putting any other activity in the rental activity entity might keep you from realizing those losses.  You can achieve better results using more than one entity and you will likely get better protection for all your assets and income. [Read more…]

Properties were foreclosed and I will file for bankruptcy. Am I still responsible for tax leins?

Additional Information:

I owned some rental properties in Braintree that were foreclosed on several months ago. I am getting ready to file for bankruptcy to wipe away the deficiencies. I am still getting bills from various taxing authorities for tax liens on the property.  My question is, since I no longer own the properties and the bankruptcy will wipe away the deficiency, will I still be responsible to pay for the tax liens?

ATTORNEY ANSWER:

Since your questions mentions “various” taxing authorities the answer probably is yes you are likely still on the hook for the taxes owed.  The liens are a mechanism to secure payment only and are generally not dependant on ownership of the subject property.  Had you sold the property in a private transaction, the liens would have had to be satisfied either before the closing, or at the closing and before the proceeds were distributed to you.  It is very likely the taxing authorities will be looking to place liens on other property you own.  If you have the ability to pay a lump sum to erase any of the liens you may be able to negotiate a reduced liquidation payment.  Also, the liens may be able to be removed if you can prove insolvency or in some cases if you file for bankruptcy.

Assuming this refers to Massachusetts State taxes, the back taxes were likely paid by whomever purchased the property at foreclosure – likely the lender/servicer.  For example, say the principal balance of the mortgage was $250K, the arrears plus fees were $15K and the tax lien was $5K, then the foreclosing lender/servicer likely purchased the property at foreclosure for $270K ($250K + $15K + $5K = $270K).  State taxes are always first in line and unpaid taxes have to be paid at conveyance, which includes a foreclosure sale.  The tax lien amount will be included in the total deficiency, which will presumably be discharged in bankruptcy.  [Read more…]

I cannot say enough good things

“I cannot say enough good things about David. When my wife and I decided to get serious about our estate planning, David was the attorney we chose to work with. He took a great interest in making sure we understood all of our options in terms of creating our wills, powers of attorney, and health care directives. His knowledge in all areas of estate planning impressed us immensely. After our initial consultation with David, my wife and I felt 100% comfortable with our decision to hire David. We now have peace of mind when we think of how our assets will be passed on according to our wishes. I have a financial advisory business and only think of David when I have clients who need to complete their estate planning. ” – Peter Murphy, Estate Planning