How to leave items of sentimental value to your heirs

Often, the issue that causes the most hard feelings among family members after a death isn’t how much money everyone received in the will, but who should get the plate on which Grandma served her famous Thanksgiving pie year after year.

Most people don’t think much about items of sentimental value when they do their estate planning. But they should, because doing so can avoid a lot of awkward situations.

For instance, you might plan to leave everything to your children in equal shares, but what about the piece of jewelry that you always promised to your eldest daughter, or the antique vase your cousin loved that no one else in the family liked? Or what if you have a valuable item such as a piano that can’t be divided equally? [Read more…]

Should life insurance be part of your estate plan?

Traditionally, the purpose of life insurance is to replace a person’s income for their family in the event they die before they stop working. For this reason, many people buy “term” insurance that ends when they reach retirement age.

However, there are also some very good uses for life insurance as part of an estate plan. For example:

• You might want to make sure that your heirs won’t have to sell important assets (a business, real estate, etc.) after you die in order to pay estate taxes or because of a lack of liquidity in the period after your death. Life insurance can provide your heirs with ready cash to cover taxes and other expenses. [Read more…]

What you can learn from Philip Seymour Hoffman’s will

When actor Philip Seymour Hoffman died unexpectedly this past February, he hadn’t updated his will in about 10 years, and his estate planning left something to be desired.

Hoffman’s will created a trust for his son Cooper, and left the rest of his roughly $35 million fortune to his longtime companion Mimi O’Donnell.

It’s worth taking a look at what Hoffman might have done differently:

► First of all, apart from the trust for his son, everything passed through probate, which tied up the assets and caused the estate distribution to be made public (which is how we know these details). If Hoffman had used additional trusts, the world wouldn’t know the extent of his wealth or how he planned to distribute it. [Read more…]

Thousands of retirement accounts are ‘ticking time bombs’

Americans have more than $12 trillion stashed away in IRAs, 401(k) plans, and similar retirement accounts. Yet very few people have given careful thought to what will happen to the assets in those accounts if they should pass away unexpectedly. In a surprising number of cases, what would happen is not at all what they would expect – or want.

Over the next decade, as the Baby Boomers continue to age, we will hear many stories of “inheritance disasters” as heirs are surprised by the laws surrounding these accounts. That’s why it’s important to make sure your retirement accounts have been considered as part of a complete estate plan for your family.

Many people assume that if they’ve written a will, then the people they named as heirs in the will are entitled to the assets in their retirement accounts. [Read more…]

Court case changes rules on IRA rollovers

A recent Tax Court decision will change the way the IRS applies the law on IRA rollovers.

For years, the IRS has interpreted the IRA rollover rules to mean that a taxpayer could do one rollover per year for each IRA he or she owned. In doing a rollover, the taxpayer is not taxed on the funds taken from the IRA so long as the funds are redeposited into an IRA within 60 days of the withdrawal.

The recent court decision changed the way the tax rule is applied, ruling that the limit on rollovers should be applied on an aggregate basis – that is, only one rollover per year is allowed for all the IRAs a taxpayer owns. If a taxpayer takes funds from one IRA and rolls the money back into an IRA within 60 days, he or she can’t do any other tax-free rollovers within the following 365 days. [Read more…]

Prepare for the Medicare surtax in your 2014 planning

The new 3.8% Medicare surtax on net investment income (NII) appears to be here to stay. If this tax caught you by surprise when you filed your 2013 tax return, you should be better prepared this year.

Here’s how the tax works.

If your investment income exceeds certain thresholds, you may owe a 3.8% Medicare tax on the excess. The taxable amount would be the lesser of (a) your net investment income (NII), or (b) the excess of your “modified adjusted gross income” (MAGI) above $200,000 for singles, $250,000 for spouses filing jointly, or $125,000 for spouses filing separately. MAGI is adjusted gross income increased by certain deductions and exclusions. [Read more…]

Don’t overlook FBAR filing requirement

If you hold foreign bank or financial accounts and the total value of your account exceeds $10,000 at any time during the calendar year, you may be required to file a Treasury Department report known as the FBAR. It’s easy to overlook this requirement because it’s separate from your federal income tax filing, with a different deadline and strict rules.

FBAR refers to “Form 114, Report of Foreign Bank and Financial Accounts.” That form is new this year, replacing the prior Form 90-22.1.

Your 2013 Form 114 must be filed electronically with the Treasury Department no later than June 30, 2014. No filing extension is available. Contact us if you need details or filing assistance.

Reminder: Second estimated tax payment due June 16

June 16, 2014, is the due date for making your second installment of 2014 individual estimated tax. Your check to the United States Treasury should be accompanied by Form 1040-ES. June 16 is also the due date for calendar-year corporations to make their second quarter 2014 estimated tax payment.