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Entries in IRS (3)

Monday
Nov022015

Trusts, Estates, Exemptions and Taxes

Trusts & Estate Planning

 

by Kira S. Masteller

818.907.3244

 

It may be hard to believe that in 2001, the estate and gift tax exemption, also known as the unified credit, was a mere $675K.

In 2016 that credit is anticipated to go up to $5.45M for single filers; potentially $10.9M for married couples. This year, the exemption is $5.43M per individual.

These are projected figures from Thomson Reuters Checkpoint, and are based on the Consumer Price Index. The Internal Revenue Service will release official figures later this year, but the projections are probably on point, since U.S. Tax Code requires periodic adjustment for inflation.

Below the Threshold

Though not a huge increase (basic exclusion amounts rose by $120K in 2012, $130K in 2013 and $90K in 2014 and 2015) high net worth individuals and couples are reminded to review their tax planning to insure they are taking advantage of the exemptions properly and looking into other tools to keep the taxable portions of their estate as low as possible. 

The GST, or Generation-Skipping Transfer Tax exemption should also rise to $5.45M next year, and the gift tax annual exclusion will remain at $14K.  Remember: Filers may gift $14K to as many individuals as they like without reducing their lifetime gift exemption, in addition to making lifetime gifts that are reportable and do apply to their  exemption. 

Additional payments may be made for health or education expenses, and will be treated as excluded gifts so long as the payments are made directly to the provider. 

Married Couples and Portability 

Combined exemptions for married couples can get a little complicated. 

Portability should be elected on the estate tax return of the first spouse to die, even if there are no estate taxes owed. If the deceased spouse has not used his or her entire lifetime gift or estate tax exemption, the surviving spouse can “port” the remaining exemption so that it is added to his or her exemption.

All assets passing to a surviving spouse (who is a US citizen) are estate tax-free.

Kira S. Masteller is an Estate Planning Attorney and Shareholder at our firm. Contact her via email: kmasteller@lewitthackman.com, or by phone: 818.907.3244 for more information. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
May142014

Retirement Planning for Same-Sex Married Couples

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

In September, the Internal Revenue Service issued Revenue Ruling 2013-17 which clarified when, for federal tax purposes, the IRS will recognize same-sex marriages.

As of September 16, the Department of the Treasury and IRS recognized a same-sex marriage if the couple was married in a state where it is legal. It became the state of celebration that mattered to the feds, rather than the state of domicile.

Now the IRS has released further guidance, which addresses questions regarding certain retirement plans for same-sex married couples. Revenue Ruling 2014-19:

1. Describes when marital status is relevant to the payment of retirement benefits;

2. Outlines how tax requirements for same-sex married couples should be satisfied following the Supreme Court's decision in United States v. Windsor – in which Section 3 of the Defense of Marriage Act (marriage declared to be between one man and one woman) was deemed unconstitutional – and  Revenue Ruling 2013-17; and  

3. Provides guidance regarding when retirement plans should be amended for compliance.

 

Same-Sex Retirement Benefits: The Basics

Now is a good time to review your retirement plan, check your beneficiary designations, and check with your employer to see if the retirement plan will be amended to provide additional benefits to same-sex surviving spouses.

Keep these three things in mind:

1. Ruling 2014-19 is retroactive, applying the 2013-17 definitions of married couples for tax purposes to retirement plans. Remember, it's the state of celebration, rather than the state of residence that is important now.

So if a same-sex couple married in California and later moved to a state where gay marriage is not recognized – the surviving spouse will still be eligible to receive benefits according to the IRS. 

 

2. If a spouse passes away on or after June 26, 2013, the same-sex surviving spouse will be entitled to profit-sharing and stock bonus plans, and other potential benefits, if the spouse is named the primary or partial beneficiary.

If the deceased participant did not designate a beneficiary, the plan administrator must recognize the spouse (gay or straight) as the default beneficiary.

 

3. If someone other than the spouse is the designated beneficiary, the surviving spouse whether straight or gay, must have provided written consent to that effect.

If you need more information regarding who to designate as beneficiary for your estate's assets, please read Designated Beneficiary Assets: Consider Your Income, Capital Gains & Estate Taxes.

 

Kira S. Masteller is a Gift Tax and Estate Planning Attorney at our firm. Contact her by phone: 818.907.3244 or email: kmasteller@lewitthackman.com for more information.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Jul252013

How Does the DOMA Ruling Affect Estate Planning?

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

 

The United States Supreme Court's ruling on Section 3 of the Defense of Marriage Act (DOMA) on June 26, declaring the definition of marriage as a union between one man and one woman unconstitutional, means same-sex couples in several states can now take advantage of certain tax savings when estate planning. For federal tax purposes, homosexual married couples will now be treated the same as heterosexual married couples.

Granted, the IRS is still struggling to determine how they will deal with individual and joint tax returns for same-sex couples. But federal estate planning benefits may now apply to same-sex married couples in California:

  1. Company Retirement Plans: The Employee Retirement Income Security Act of 1974 gives spouses the right to be sole beneficiaries of certain accounts.

  2. IRA Rollover Rights: When a spouse inherits funds from an IRA or other qualified plan, s/he can roll those assets into her or his own IRA account to postpone the required minimum distributions.

  3. Annual Exclusion Gifts: Any individual taxpayer can gift up to $14K per year, to as many beneficiaries as needed, without triggering gift taxes. Together, spouses can gift up to $28K either from individual or joint accounts.

  4. Lifetime Gift Tax Exclusion: This one amounts to $5.25M for individuals, and $10.5M for married couples – significant savings for your estate.

  5. Portability: Speaking of the gift tax exclusion, portability allows the widow or widower to add the deceased spouse's unused exclusion to their own exclusion, totaling up to the limit of $10.5M.

  6. Other Tax Breaks: Using a marital deduction, spouses can make transfers to each other during life or at death.

Keep in mind that a same-sex spouse who moves to a state where gay marriage is not recognized, may not qualify for these benefits. The ruling in United States v. Windsor simply says the federal government will recognize a couple's marriage if the state where they reside recognizes the union.

Remember too, that the Prop 8 and DOMA rulings broke new ground in the legal landscape, and that for same sex couples in California and other states that recognize gay marriage, estate planning may be constantly changing for a while. Contact me if you need help keeping track of the current benefits and financial liabilities.

Kira S. Masteller is an Estate Planning Attorney and Shareholder at our firm. Email her at kmasteller@lewitthackman.com for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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