Six Tips For Cutting Taxes In Your Salt Lake City Retirement

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A lot of things change in retirement, and your taxes are one of them. But they don’t have to be so painful.

There are a lot of variables in play when it comes to budgeting for retirement, to include ever lengthening life-spans and ever increasing medical bills. No one said it would be easy. One variable you will not want to ignore is taxes and how they will affect you.

For some advice on how to make the finances last, and how to preserve wealth both for yourself and your heirs, be sure to read a recent article in Morningstar titled “6 Ways to Curb Taxes in Ret irement.”

The six ways? Roughly:

Tip 1: Diversify Your Assets by Tax Treatment

Tip 2: Consider a Roth Conversion–Even in Retirement

Tip 3: Get Savvy With RMDs

Tip 4: Mind State Taxes, Too

Tip 5: Bundle and Time Your Deductions

Tip 6: Avoid the ‘Tax Torpedo’ [i.e. Social Security tax payments]

After you have read the original article, consider your own finances, or those of your elderly loved ones. Retirement is an important stage in life and one requiring careful financial planning so you do not outlive your money. Taxes are a major threat to your retirement financial security.

How do your end-of-life finances coordinate with your plans for your estate? That is the next question, of course.

Reference: Morningstar (March 1, 2014) “6 Ways to Curb Taxes in Retirement

Don’t Lose Sight Of These Estate Expenses

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Beware of these not-so-obvious expenses associated with executing a will.

Choosing an executor of your estate involves great thought and a lot of planning. After all, their responsibility to settle your estate is not an easy task. In addition to the big task at hand, do not lose sight of the hidden costs to settling an estate, too.

A recent article in Daily Finance titled “The Hidden Costs of Settling an Estate” provides an overview of many of these hidden costs.

When it comes to costs associated with estate administration, many are foreseeable. For example, these include court fees to open the probate, publication costs to give notice to creditors, as well as legal and accounting fees. On the other hand, some hidden costs have to do with everything around the edges.

One common hidden cost concerns disposition of tangible personal property. The executor is duty bound to deliver each item safely to its named beneficiary. What happens when the named beneficiary is in Anchorage, but the fine china or gold bullion and executor are all in Miami? Ensuring safe delivery is neither easy nor cheap, but less so than from Paris, Texas to Paris, France. To make matters worse, getting something from Paris to Paris might take a translated legal document or three, with proper apostilles and the works, simply to appease the court.

Yes, hidden costs can mount up as fast as the questions triggering them. Is property scattered in each of these locations? Are the beneficiaries scattered, as well? Are the beneficiaries all adults? Are the (potentially priceless) items in need of cleaning? Are they in need of appraisal? Does the estate already have an itemization of assets, or will the executor have to do some digging or even walk around the house with a clipboard and pen?

The point is this: when it comes to administering an estate, there are many details to mind and each has a terrible tendency to become the executor’s problem. It is hard to plan for everything, but that does not mean you cannot try. When planning your own estate, do not forget to pay heed to the details.

Reference: Daily Finance (February 23, 2014) “The Hidden Costs of Settling an Estate”

Selling The Utah Business? Avoid Post-Sale Battles!

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Figure you and your lawyer will negotiate around all those post-closing efforts to chisel you out of a fat chunk of what you spent decades building? Think again.

If you and your family are considering the sale of the family business, and maybe considering an actual offer on the table, there is some business thinking that should enter the mix. This is especially true when it is your exit from the business.

Consider the warning alarm sounded by Forbes in a recent article titled “You’ve Finally Sold Your Business: Now The Ugly Negotiations Really Begin.”

It is in the interests of most sellers to make the price of the business dependent upon its future success. Consequently, there is some money upfront with a promise for full payment upon full performance. Sometimes, the idea is just to stagger full payments for the sake of financing.

Plans like these can give both buyer and seller the best of both worlds, or it can mean a world of litigation when there is a disagreement or things go wrong. Remember, when planning for the sale of the family business, it really does matter just how you sell the business and it pays to be aware of the issues in advance. Read the original article for a number of common scenarios.

Finally, do not forget that the family business is likely an important part of your estate, too. More often than not, the family business is your estate. If that is the case, then be mindful to structure the sale in accordance with the family needs.

Reference: Forbes (February 21, 2014) “You’ve Finally Sold Your Business: Now The Ugly Negotiations Really Begin”

Wills — The Devil Is In The Details

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To keep your will from “going wrong,” avoid these common mistakes.

The intention of creating a will is so that your wishes will be carried out when you are no longer here. It’s a pretty powerful document, no doubt! So what happens if there is a mistake in the will?

There are numerous ways in which a last will can go wrong. For a basic introduction to get you thinking like a preemptive problem-solver, consider reading a recent Forbes article titled “Wills Gone Wrong: Mistakes That Can Thwart Your Last Wishes.”

There are three basic issues when a last will can go astray. First, the wording can be unclear, incomplete, incongruous or incorrect. Second, the words can be outdated. Third and finally, the words can be absolutely perfect, but the will is nowhere to be seen or some other draft is discovered first. Moreover, rarely do the  “will-in-a-box” wills foresee the long term problems that can occur with your estate.  T

If nothing else, to get it right, draft your will with the assistance of a professional. hen, to keep your estate in order, be sure to respect your last will as the document it is. Accordingly, be careful to protect it, keep it current, and keep it within easy reach of the right people once the time comes.

The original article presents specific problems and even a few stories to illustrate them. Be sure you get it right, unlike the tragic stories in the article. Planning your estate is not a do-it-yourself project. There is just too much at stake.

Managing Utah Caregiver Expectations: Will There Be Compensation For Services?

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Suzanne M. Cheney performed many services for her stepfather, Anthony R. Turco, expecting to receive a share of his estate. However, to her great disappointment, he left her nothing.

There is a difference between care given out of responsibility and that given out of expectation of payment. Similarly, there is a difference between payments for services and an inheritance. Even if you do not live in Massachusetts, if you are caring for an elderly loved one and may or may not be an heir apparent, there is something to be learned from a recent case in the Bay State, Cheney v. Flood (84 Mass. App. Ct. 1134, Feb. 7, 2014).

ElderLawAnswers considered the Cheney case in an article titled “Don’t Just Hope for an Inheritance; Get It in Writing.”

In the case in question, Suzanne M. Cheney and her family offered many services to her stepfather, Anthony R. Turco. They provided these services without an actual agreement for payment. Well, Anthony passed away and Suzanne was left out of any inheritance.

Suzanne was, as a result, not happy. She took the estate to court, arguing that she was due reasonable compensation for her care independent of any inheritance. The court disagreed, finding that there was no evidence she offered her care with expectation of compensation.   In fact in Utah, in order for an agreement to make a bequest in a will to be enforceable, the will must either (a) make specific reference to the contract, (b) express a reference to the contract with extrinsic evidence proving the contract, or (c) there must be a writing signed by the decedent evidencing the contract.  Utah would have also denied Suzanne’s claim.

In reality, there truly is a difference between an inheritance and compensation for services rendered. It is easy to think the worst, but in these cases oftentimes is a very legitimate conversation to be had about the needs and expectations of the caregiver as much as the needs of the elderly loved one.

If you care for an elderly loved one, there are some very real ways to structure the relationship that might serve to benefit everyone. These conversations (and written agreements) are much better worked out by family in advance than by a court later on.

Reference: ElderLawAnswers (March 17, 2014) “Don’t Just Hope for an Inheritance; Get It in Writing”

Alzheimer’s Deaths Higher Than Prior Estimates

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“Understanding that AD may contribute to almost as many deaths as the two leading killers in America, heart disease and cancer, is an eye-opening figure that may convince the public and policy makers that AD funding should be increased,” James said.

As you plan for old age, and even while planning for the estate itself, it is essential to plan accordingly. Unfortunately, some recently released news regarding Alzheimer’s deaths has brought the need for proper planning up a notch.

Earlier this month, Reuters reported on a recent Alzheimer’s study in an article titled “Alzheimer’s deaths much more common than realized: study.”

Alzheimer’s is actually a fatal disease. However, the real toll from the disease occurs first during life. More to the point, the recent study found that, “Nearly half a million elderly Americans likely died from Alzheimer’s disease in 2010, a figure almost six times higher than previous estimates of annual deaths.”

The original Reuters article has much to say about the study and about the nature of the disease itself. Nevertheless, beyond the data, this news should get us thinking about what it means to be living and planning for old age or an estate in an era of Alzheimer’s.

This is a story about medical facts, but Alzheimer’s also brings economic and legal issues to confront. If a loved one already shows signs of the disease, then there is much to learn and understand. Do not ignore the matter. Get help now, not later. Contact a qualified elder law attorney to help you with the legal issues and coordinate the professional resources you will need.

Reference: Reuters (March 5, 2014) “Alzheimer’s deaths much more common than realized: study”

Tax Savings With Frozen Assets in Utah

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Estate freezing, under the right circumstances, can become a vital component of an intelligent wealth preservation strategy.

A “frozen asset” can be viewed as an investment that refuses to move with the market. Fewer things are more annoying to a savvy investor! If an investment isn’t growing, what is the point?

No, Gordon Gekko is not the only one to see it this way, either. Then again, if you are not investing in growth, but in your family and a powerful estate plan, there are some times when capping or transferring growth and, yes, even “freezing” assets is a definite boon.

The concept of asset freezing, at least as it pertains to estates and estate planning, was illuminated nicely in a recent Forbes article titled “Freeze Your Assets To Save On Taxes.”

This concept of “freezing assets” is a useful but often complex concept to explain. The principal is fairly clear, however. You see, more often than not, you want to pass along valuable assets to the next generation, especially assets on the order of a small business. Unfortunately, the more valuable the asset the more tax liability it likely will trigger, especially if the estate tax threshold is surpassed after a period of unexpected growth.

On the other hand, if you transfer future growth from your own potential estate tax equation or even divert it to your heirs now, then you may avoid an estate tax catastrophe later.

How does one do that?

Well, first you must assess what your assets and investments are. A small business formed as a corporation may have to be treated differently than an LLC. Perhaps you only own investments in public companies rather than your own. In addition, the structure of your assets can be beneficial.

When it comes to estate planning strategies, a Grantor-Retained Annuity Trust (GRAT) or an Intentionally Defective Grantor Trust (IDGT) may be worth considering to freeze and transfer your assets. There are many processes to explore should your assets, their growth, and your estate plan all begin to bump into the estate tax ceiling.

There is no time like the present to evaluate your options and set a course to efficiently avoid the tax man and transfer more wealth to our loved ones.

Reference: Forbes (March 5, 2014) “Freeze Your Assets To Save On Taxes”

Key Issues Of Reverse Mortgages In Utah

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Death of the borrower triggers the loan payoff, but the estate and heirs will never owe more than what the home is worth.

Family homes are unique assets. And like many assets, family homes can be as complicated as they are meaningful. Even when heirs inherit a home with no strings attached, issues can arise.

But what about when there are strings that come with inheriting the family home? What if there is still a mortgage or, increasingly common, a reverse mortgage? Notably, when a reverse mortgage is in play there are a few more things an heir needs to know.

Kiplinger recently examined this topic in an article titled “What Heirs Need to Know About Reverse Mortgages.”

The key issues are timing and payoff. At the passing of the last borrower named in the reverse mortgage, that mortgage has to be paid off. Why? Because that is what a reverse mortgage does.

A regular mortgage offers money for the borrower to buy the home while a reverse mortgage offers money for the equity a borrower already has locked up into their home. To keep the house you inherit, then, you have to pay off the lender. Consequently, to earn anything from the sale there must be more equity in the home than debt incurred by the reverse mortgage.

But what if the reverse mortgage balance is greater than the value of the home? Fortunately, reverse mortgages can never force an estate into debt greater than the value of the home itself or allow the lender to collect against the estate beyond the home (they are “nonrecourse” loans).

In short: there is a very definite need to quickly determine what is to be done with the home and if it is financially feasible.

Whether as an heir or a planner, a reverse mortgage is an important financial product to understand and to plan accordingly.

When it comes to settling the estate, handling creditors is a serious responsibility and a reverse mortgage is a serious undertaking. If a reverse mortgage becomes part of the financial plan late-in-life, it also carries with it significant estate consequences that must be navigated very carefully.

As an additional consideration regarding reverse mortgages you need to understand what happens when there is no one living in the home during the life of the mortgagor.   Many reverse mortgages have provisions that allow the lender to accelerate the due date of the mortgage if there is no one living in the home for 12 months.  So if Mom is a widower and has to move to assisted living for a period of over 12 month’s the lender may require Mom to pay the loan or lose the house prior to Mom’s passing.  Careful planning is required before entering into a reverse mortgage.

Reference: Kiplinger (March 2014) “What Heirs Need to Know About Reverse Mortgages”

Assisting Loved Ones With Assisted Living in Utah

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Choosing whether assisted living would be the right option can be a complex decision requiring a dispassionate evaluation of the situation and careful consideration.

The challenges of helping an aging parent plan for their late-in-life care can be strenuous and life changing for you as well. There are financial, medical and even emotional aspects of this type of planning.

By way of a primer, consider reading (and sharing) a recent Forbes article titled “The Basics: Assisted Living For Your Parent.”

Some of the most important issues in planning for late- or end-of-life care include knowing when to consider assisted living and understanding the various kinds of facilities and treatments available. Choosing an assisted living facility for your parent is one of the most difficult.  There is, for example, a decided difference between nursing home care and an assisted living situation.

Even within assisted living communities there are many different kinds of facilities, from the large to the small and the homey to the clinical. In the end, you must know what to look for and what is appropriate for the elderly loved one in need of care.

The key, if possible, is to include your loved in the evaluation process. Ensure that they are included in the discussions and options. Otherwise, expect resistance to change because the transition to care away from home is by nature very disruptive on many levels.

Once you know the kind of care needed and your loved one is on board, then comes the question of how to pay for it and how to understand Medicaid, Medicare, and the programs that can help fill the gaps.

Needless to say, this can be a complex process. Be sure to read and share the original article to help you and your loved one make a transition that is right for their circumstances.

Reference: Forbes (March 13, 2014) “The Basics: Assisted Living For Your Parent”

Utah Corporations 101: Structure And Taxes

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For many years, when an individual outgrew a proprietorship, a corporation was the norm. Today, limited liability companies (LLCs) are popular. But despite the inroads of the LLC, corporations persist. But there are key differences between S and C status.

If you own a business or are chosen to inherit one, it is important to know how the business is structured. Is it a C Corp or an S Corp? Are there other alternatives?

There is a significant difference between the C Corporation and the S Corporation. Fortunately, Forbes helps clarify the distinction in an article titled “Key Facts About Corporations, S Elections & Buy-Sell Agreements.” If nothing else, it might dissuade you from a “corporation” at all.

Essentially, a corporation is always a corporation, but they do come in two flavors based on how you will be taxed. With an S corporation, the corporation will be “disregarded” and your personal profits from it will be taxed to you personally. On the other hand, a C corporation (generally larger in size) will be taxed as a separate entity all on its own before and in addition to any tax paid by owners.

When you are doing business this taxation is clearly important (you hope to make some money, no?). However, when you are planning for the future and longevity of the business this is no less important. Perhaps some different business structures are worth considering. For example, you might jump for the newer, stylish and (maybe) more agile LLC or Limited Liability Company.

If you have a corporation, then make sure you have a buy-sell agreement. The buy-sell agreement allows shareholders to agree how their shares will pass if one or more of them become disabled, retire or die. Otherwise, letting shares loose or in the wrong hands can even threaten the tax structure, never mind the health and longevity of the business in all regards. Then again, maybe you have a different plan for how ownership should transition.

These are a few key facts worth knowing, and if you own or may soon inherit a business then there is much to learn about business ownership and business structure. There are many more key facts to know, and maybe there is work to be done in restructuring the business itself.

Reference: Forbes (March 18, 2014) “Key Facts About Corporations, S Elections & Buy-Sell Agreements”