It’s a common scenario: An elderly relative is no longer able to live alone, so family members sell the relative’s house and have the relative start living with them or in a nursing home or assisted living facility that’s closer to the family.
One thing you might not consider
Congress has revived a law that lets you make charitable donations directly from your IRA, which might provide older people with some significant tax advantages.
The “IRA charitable rollover” was discontinued at the end of 2014. But Congress has now resurrected it, made it permanent, and also made it retroactive to the beginning of 2015.
If you’re over the age of 70½, you’re required to take minimum distributions each year from your IRA, and you have to pay income tax on those distributions. But the “charitable rollover” law lets you
Once a living trust is in place (also called a declaration of trust), it is important to fund the trust in order to minimize future risk and expense. “Funding” a trust means changing the way the person who made the trust – called a grantor – holds title to his or her assets, from the … Read more
In the past, many people’s wills or trusts included a sizable donation to charity. Because the federal estate tax was so burdensome, including charitable bequests in a will or trust was a good idea since it reduced the amount of tax the estate had to pay. Now, however, the federal estate tax applies only to … Read more
Did you know that it may be possible to avoid paying immediate capital gains taxes when you sell an investment property? That’s true if you’re planning to sell the property and invest the proceeds in another property shortly afterward. For instance, suppose you own a condo as an investment, and you plan to sell it … Read more
When many people hear the words “asset protection,” they think of billionaires with Swiss bank accounts and offshore tax havens. But in reality, asset protection is for everyone. Using a series of basic techniques you can increase the odds that the wealth you’ve accumulated stays with you and your heirs, and not someone else.
Hard-earned wealth can quickly disappear as a result of a lawsuit, a business going under, or a similar event. When taken in advance of any problem arising, asset protection techniques can protect you from these possibilities. You can also use them to help protect your children or other heirs from the consequences of a divorce, lawsuit, business failure, and so on.
It’s actually more important for people of moderate wealth to engage in asset protection than it is for billionaires. After all, billionaires can afford to lose a lot of money, whereas the rest of us cannot.
As a general rule, you can deduct home mortgage interest on your federal income taxes, as long as you itemize deductions. This sounds simple enough, but it can get complicated if a home is owned by more than one person. Recently, the IRS provided an explanation of how this works. According to the IRS, the … Read more
Converting a traditional IRA into a Roth IRA has many advantages and disadvantages, but what many people don’t realize is that it can provide some estate planning benefits.
If you convert to a Roth, you’ll have to pay income tax on the value of the IRA right away – just as if you received the entire amount as income. On the other hand, all future withdrawals will be tax-free, and there are no minimum required distributions during your lifetime.
Converting may make sense if
Did you know that if more than 50% of the interests in a partnership or LLC are transferred within a 12-month period, the business technically ceases to exist under federal tax law?
That’s true even if the business continues to operate as normal for all other intents and purposes.
This “technical termination rule” isn’t the end of the world, but it’s something you need to be aware of. For one thing, a special tax return is due within a few months after the “termination” occurs. Recently, one family business was hit with more than $12,000 in IRS penalties and interest because the family didn’t realize they needed to file such a return.
As a result of changes in the law, a lot of wills that were drafted even relatively recently may now result in a capital gains tax issue, and if you have such a will, you might want to consider revising it to save taxes.
Here’s the background: When a person dies, he or she can leave an unlimited amount of assets to a spouse without incurring the federal estate tax. If assets are left to anyone else, including children, then everything above the “exemption amount” is subject to a very significant tax.
In the past, the exemption amount was not very large. As recently as 2001, it was only $675,000. Back in 2008, it was $2 million.