Tax Planning

What If I Don’t Want My Inheritance?

Published on: January 22, 2019 | By McCulloch & Miller, PLLC

It sounds crazy, but there are many good reasons why someone would not want to receive an inheritance. Making sure that you are not forced to receive assets must be done very carefully, so you’ll need an estate planning attorney on your team.

An estate waiver, also known as an inheritance waiver, releases a person from the right to claim assets in the event of another person’s death. You’ll need such a waiver, if you don’t want to be stuck with state or federal taxes based on the value of the estate, or you don’t want a piece of real estate that is located far from where you live. Another reason for not wanting an inheritance: you may be in the middle of litigation or a divorce and the last thing you want is to increase your assets.

Whatever the reason, this article from Investopedia, “How Inheritance and Estate Tax Waivers Work,” provides some tips to consider when deciding on an inheritance or estate waiver release.

What Singles Need to Know About the Tax Cuts and Jobs Act

Published on: January 3, 2019 | By McCulloch & Miller, PLLC

Single with a net worth less than $11.4 million in 2019? You’re in luck—you can die knowing that all of your money will pass free of any federal estate tax to your heirs.

It was good news for the wealthy—the Tax Cuts and Jobs Act (TCJA) amped up the unified federal estate and gift tax exemption to $11.4 million for 2019 (and up to $11.18 million in 2018). If that wasn’t generous enough, those exemptions will be increased annually for inflation from 2020 to 2025. As comedian Mel Brooks would say, “It’s good to be the king.”

MarketWatch’s recent article, “How single folks should handle estate-tax planning under the new tax law,” explains that taxable estates above the exemption will have the excess taxed at a flat 40% rate. An individual’s cumulative lifetime taxable gifts in excess of the exemption are taxed at the 40% rate. Likewise, taxable gifts are those that are more than the annual federal gift tax exclusion of $15,000 for 2018 and 2019.

How Do Trust Funds Work?

Published on: December 26, 2018 | By McCulloch & Miller, PLLC

Trusts serve a variety of functions in estate planning, and they aren’t just for wealthy people.

Trusts can be simple, or they can be complex, depending on what type of trust is being considered and how they are structured. Trusts should be set up by an estate planning attorney, who is familiar with asset ownership and how trusts impact inheritances and taxes.

U.S. News & World Report’s recent article, “Setting Up a Trust Fund,” explains that a trust fund refers to a fund made up of assets, like stocks, cash, real estate, mutual bonds, collectibles, or even a business, that are distributed after a death. The person setting up a trust fund is called the grantor, and the person, people or organization(s) receiving the assets are known as the beneficiaries. The person the grantor names to ensure that his or her wishes are carried out is the trustee.

Tis the Season to Be Generous—Thanks to the IRS

Published on: December 22, 2018 | By McCulloch & Miller, PLLC

An end-of-year decision from the IRS about the new tax law and gifting has given people with generous spirits and hefty bank accounts reasons to be cheerful about gifting.

Increases to basic estate and gift tax exemptions were welcome by many, when the new tax law details were unveiled. However, questions were raised: how long will those exemptions be in place? What happens when they expire?

The changes increased the exemption to $10 million per person from $5 million. When you account for inflation adjustments, that exemption is currently at $11,180,000 for 2018, increasing to $11,400,000 for 2019.

One Dozen Must-Have Documents

Published on: November 6, 2018 | By McCulloch & Miller, PLLC

To make sure that your wishes are carried out, you’ll have to do your homework. Make sure that you cover these most important documents.

The last thing you want to do, is leave a bureaucratic mess for your loved ones when you die. Not only will it cause the family stress during a difficult time, it could change how your family thinks of you. That should be more than enough reason to get this done in advance!

US News & World Report’s recent article, “12 Documents to Prepare Now for Your Heirs,” says that when people don't have their paperwork ready, it can be a huge headache for the family. A family can be left with all kinds of paperwork to sort out while dealing with grief. Even worse, heirs may forfeit life insurance proceeds and tax deductions or overlook accounts they don't know exist. That's why it's critical to have important documents ready for loved ones. Here are the documents you should start preparing right away:

Another Facet of Social Security to Learn: The Earnings Test

Published on: October 25, 2018 | By McCulloch & Miller, PLLC

If it seems like every time you start to understand Social Security, there’s something else to learn, you’re right. However, this is an important part of your retirement income, so it’s important to understand.

The Social Security earnings test is a way that the agency determines the limit of the amount of money individuals who have not yet reached full retirement age (FRA) can earn, while they are collecting Social Security retirement benefits.

For 2018, for every $2 that a worker who has not yet reached FRA earns over the annual threshold limit of $17,040, Social Security will withhold $1 from your benefits.

New Tax Law Calls for An Estate Plan Review

Published on: August 21, 2018 | By McCulloch & Miller, PLLC

Don’t assume that the new tax law means that you don’t need an estate plan. If anything, you need to review your estate plan to make sure you’re not missing out any new opportunities.

When was the last time you reviewed your estate plan? If it’s been more than a few years, you could be risking making some big mistakes, in terms of taxes and what you leave behind for your loved ones.

The new tax law in effect doubles the federal estate-tax exemption to roughly $11.2 million per person. As a result, most people won’t be subject to federal estate tax. However, before you unfriend your estate planning attorney on social media, understand that the drastic increase in the federal exemption amount means that old wills and trusts may be in dire need of an update.

Making Smart Decisions About Your Pension

Published on: August 20, 2018 | By McCulloch & Miller, PLLC

The burden of saving for retirement shifted from employers to employees. It is now unusual for companies to offer pensions. If you’re lucky enough to have one, make your decisions wisely.

It’s hard to imagine today, but years ago, it wasn’t unusual to stay with one company for a lifetime, then retire and collect a generous company-provided pension that lasted as long as you lived.

Investopedia’s recent article, “Choosing How and When to Receive Pension Benefits,” reminds us that times have changed. Pensions have been replaced in large part by 401(k)s or other employer-sponsored savings plans. Those fortunate enough to still have a pension, will make it a large part of their retirement plan. If you have a pension, you’ll have to make some decisions, when you are ready to retire.

Did the New Tax Law Change Roth IRA Contribution Limits for 2018?

Published on: May 17, 2018 | By McCulloch & Miller, PLLC

If you are 50 or older, you can put $6,500 into your Roth IRA: that includes a “catch up” contribution of $1,000. Typical Roth IRA contributions are still limited to $5,500 a year. There are income limits, which you’ll need to be careful about.

One good thing about the new tax law: it raised income limits to qualify for the maximum contribution to a Roth IRA. However, the maximum contribution to a Roth IRA in 2018 is the same as 2017.

Kiplinger’s recent article on this topic asks “How Much Can You Contribute to a Roth IRA for 2018?” In its answer, the article explains that the maximum amount you can contribute to a Roth IRA for 2018 is $5,500, if you're younger than 50. Those age 50 and older can add an extra $1,000 per year in "catch-up" contributions. That is $6,500, which is the maximum contribution amount and the same as 2017.

Under New Tax Law, Roth IRAs are More Attractive

Published on: April 25, 2018 | By McCulloch & Miller, PLLC

The new Tax Cuts and Jobs Act have made the Roth more attractive as retirement savings vehicles.

Here are the two biggest tax advantages from Roth IRAs: withdrawals are tax free, and you don’t have to worry about required minimum distributions. According to MarketWatch’s article, “How the new tax law creates a ‘perfect storm’ for Roth IRA conversions,” today’s federal income tax rates might be the lowest you’ll see for the rest of your life.

Tax-Free Withdrawals. Unlike traditional IRA withdrawals, qualified Roth IRA withdrawals are federal-income-tax-free and most often state-income-tax-free. A qualified withdrawal is one taken after you, as the Roth account owner, have met both of the following requirements: (i) you’ve had at least one Roth IRA open for more than five years; and (ii) you’ve reached age 59½ or become disabled or dead. To satisfy the five-year requirement, the clock starts on the first day of the tax year for which you make your initial contribution to your first Roth account. That initial contribution can be a regular annual contribution or a conversion contribution.