In my Personal Family Lawyer® Firm, I regularly see the consequences of overlooked assets and inadequate estate planning. Let’s explore how assets are lost and become “unclaimed,” how to prevent your assets from ending up in this $70 billion pool, and, most importantly, how to ensure your hard-earned assets reach your loved ones the way you want.

How Assets Become “Lost”

You might wonder how billions of dollars in assets could go missing. The truth is, it happens more easily than you’d think. Think about this: you become incapacitated or die, and someone in your family (either someone you named legally or someone chosen by a judge) has the job of finding all of your assets. Would they be able to find everything? How easy would it be for you to find everything, and you know what you earned, the accounts you set up, when you worked for that one company that set up a retirement account for you, got that insurance policy, etc. 

What we see commonly when someone passes away without an updated estate plan (including a comprehensive asset inventory), is that their loved ones often have no idea what assets exist or where to find them. Those assets could eventually end up in state custody instead of going to the people you love. That money could be used to fund your children’s education, an investment in a loved one’s business, or to enhance the lives of the people you love most.

“Traditional” or “old school” estate planning often contributes to the problem. With an estate plan drafted by a financial advisor or lawyer who sells a will or trust rather than a comprehensive plan (or from a DIY tool like cheap legal or AI), you typically receive a set of documents to review and sign. You might take these documents home, put them on a shelf or in a drawer, and never look at them again. There’s usually no inventory of your assets, which means that some of your assets could be lost or overlooked and end up part of that $70 billion in unclaimed property. 

Why an Asset Inventory and Regular Review is Crucial

As a Personal Family Lawyer® firm leader, I know that effective estate planning isn’t a one-time event – it’s a lifelong process that includes an inventory of what you have, as well as regular updates to your inventory, as well as the legal documents that go along with it. My process begins with a Legacy Vision Planning Session, where you’ll create an inventory of your assets, ensuring nothing gets overlooked or forgotten. This inventory includes not just the obvious assets like your home and bank accounts but also:

• Life insurance policies
• Retirement accounts from all previous employers
• Investment accounts
• Business interests
• Valuable personal property
• Intellectual property rights
• Digital assets and cryptocurrency

Digital assets present a particular challenge in today’s world. Cryptocurrency, online banking accounts, social media profiles, and digital business assets can be especially difficult for loved ones to track down and access without proper planning. Many people don’t realize that without proper documentation and access instructions, their digital assets could become effectively lost forever, even if their family and friends know they exist.

When you work with me, I’ll also help you keep your inventory updated throughout your life. I do this by conducting regular reviews of your plan to ensure your asset inventory stays current and properly aligned with your goals, wishes, and values. This comprehensive approach helps prevent your assets from becoming lost so they can go to the people you want in the way you want.

Beyond the Financial Impact

While creating an asset inventory is crucial, my Life & Legacy Planning process goes several steps further. It’s not enough to simply list what you own – you need to ensure these assets are properly titled, beneficiary designations are up to date, and your loved ones know how to access everything when the time comes. I support you with it all. I will also be there for your loved ones when you no longer can.

In addition, there’s another crucial part of planning that’s often omitted from traditional or DIY planning. It’s the realization that the value of many assets isn’t financial. Family photographs stored in the cloud, emails containing important family history, and digital collections of music or art can have tremendous sentimental value. Yet without proper planning, these too can become effectively “unclaimed property” – inaccessible to the very people meant to inherit them. When these invaluable family legacies are lost, they become another kind of unclaimed property, though their value can’t be measured in dollars.

Remember, proper estate planning isn’t just about having the right documents – it’s about taking all the steps needed to make things as easy as possible for your loved ones. It’s the greatest act of love you can give to the people you cherish most.

Your Next Step

As your Personal Family Lawyer® Firm, I can help you create a comprehensive Life & Legacy Plan that includes a complete asset inventory, regular reviews, and updates to ensure nothing gets lost or forgotten. I’ll also support you to create a Legacy Interview so your most valuable assets – your values, traditions and love – get passed on to the people you love most. Let’s work together to protect your legacy.

Click below to schedule a complimentary 15-minute consultation and learn more about how I can help!

The post National Unclaimed Property Day: Why Estate Planning is More Than Just Documents appeared first on Law Office of Ruby Steinbrecher.

Two Types Of Trusts

There are two primary types of trusts — revocable living trusts and irrevocable trusts — and each one comes with different tax consequences.

Revocable Living Trust

A revocable living trust, also known simply as a living trust, is by far the most commonly used form of trust in estate planning. And as long as you are living, there is absolutely no tax impact of creating a living trust. 

A living trust uses your Social Security Number as its tax identifier, and this type of trust is not a separate entity from you for tax purposes. However, a living trust is a separate entity from you for the purpose of avoiding the court process called probate, and this is where the confusion regarding taxes often comes from. But before we explain the tax implications of a living trust, let’s first describe how a living trust works. 

A living trust is simply an agreement between a person known as the grantor, who gives assets to a person or entity known as a trustee, to hold those assets for the benefit of a beneficiary(s). In the case of a revocable living trust, the reason there are no tax consequences is because you can revoke the trust agreement or take the assets back from the trustee at any time, for any reason. In fact, as long as you are living, you can change the terms of the trust, change the trustee, change the beneficiaries, or terminate the trust altogether.

However, upon your death, a revocable living trust becomes irrevocable, and this is when tax consequences come into play. Following your death, the trustee you’ve named will step in and take over the management of the trust assets, and one of the first things that your trustee will do is to apply for a tax ID number for the trust. At this point, the trust becomes a taxable entity, and any income earned inside of the trust that is not distributed in that year would be subject to income taxes, at the taxable rates of the trust (or at the tax rates of the beneficiaries, if income is distributed to the beneficiaries). 

Irrevocable Trusts

An irrevocable trust is created when you make a gift to a trustee to hold assets for the benefit of the beneficiary, and you cannot take back the gift you’ve made to that individual.

When you create an irrevocable trust, either during your lifetime, or at death through a testamentary trust (a trust that arises at the time of your death through your will), or through a revocable living trust creating during your lifetime, the trust is a separate tax-paying entity, and it is either subject to income tax on the earnings of the trust at the rates of the trust or at the rates of the beneficiaries.

Unlike a revocable living trust, an irrevocable trust is (as the name implies) irrevocable. This means that the trust’s terms cannot be changed, and the trust cannot be terminated once it’s been executed. When you transfer assets into an irrevocable trust, you relinquish all ownership of those assets, and your chosen trustee takes total control of the assets transferred into the name of the trust. Because you no longer own the assets held by the trust, those assets are no longer considered part of your estate, and as long as the trust has been properly maintained, the assets held by the trust are also protected from lawsuits, creditors, divorce, serious illness and accidents, and even bankruptcy. 

However, as mentioned earlier, irrevocable trusts also come with tax consequences. As of 2024, the income earned by an irrevocable trust is taxed at the highest individual tax bracket of 37% as soon as the undistributed taxable income reaches more than $13,450. To avoid this high tax rate, in some cases, an irrevocable trust can be prepared so that the tax consequences pass through to the beneficiary and are taxed at his or her rates, which are typically much lower. 

We often set up a trust in this way when creating a Lifetime Asset Protection Trust for a beneficiary. When set up like this, the trust can provide the beneficiary with protection from common life events, such as serious debt, divorce, debilitating illness, crippling accidents, lawsuits, and bankruptcy, without being taxed at such a high rate on such little income.

If you have a trust set up, and would like us to review its income tax consequences for your loved ones upon your death, meet with us, your local Personal Family Lawyer®.

The Estate Tax: What It Is & Who Pays It

The estate tax is a tax on the value of a person’s assets at the time of their death. Upon your death, if the total value of your estate is above a certain threshold amount, known as the federal estate tax exemption, the IRS requires your estate to pay a tax, known as the estate tax, before any assets can be passed to your beneficiaries.

As of 2024 federal estate tax exemption is 13.61 million per individual and 27.22 million for a married couple. Simply put, if you die in 2024, and your assets are worth $13.61 million or less, your estate won’t owe any federal estate tax. However, if your estate is worth more than $13.61 million, the amount of your assets that are greater than $13.61 million will be taxed at a whopping 40% tax rate. 

You can reduce your estate tax liability—or even eliminate it all together—by using various estate planning strategies. Most of these strategies are fairly complex and involve the use of irrevocable trusts, but such strategies are without question worth it, if you can save your family such a massive tax bill. To learn how to save your family from such a major tax burden, meet with us, your Personal Family Lawyer® to discuss your options.

And please note, we are only speaking about the federal estate tax here. Currently, 12 states have their own estate tax, which are separate from the federal estate tax. We’ll cover the specifics of what happens in our state regarding your estate tax, when we have a Family Wealth Planning Session. Give us a call to schedule yours, if you have not yet had a Planning Session with us.

The Future Estate Tax

The current $13.61 million estate tax exemption is set to expire on Jan. 1, 2026, and return to its previous level of $5 million, which when adjusted for inflation is expected to be around $6.03 million. Here’s one thing we know for sure: We don’t know what the estate tax exemption will be at the time of your death, and we also don’t know what the value of your assets will be at the time of your death. Because of this, when you plan with us, we will ensure that we put in place planning strategies to protect your estate from estate taxes, regardless of the amount of the estate tax exemption or the size of your assets.

We’re Here For You

If you are trying to decide whether a revocable living trust, irrevocable trust, Lifetime Asset Protection Trust, or some other estate planning vehicle is the right solution for you and your family, meet with us, as your Personal Family Lawyer®. We will support you in making that decision, so your estate can provide the maximum benefit for the people you love most, while paying the least amount of taxes possible. Call us today to schedule your visit.

The post Trusts & Taxes: What You Need To Know appeared first on Law Office of Ruby Steinbrecher.

These are just a few reasons why it is important for you to know the following about estate planning:

A will and a living trust are both essential estate planning tools, and although both can be used to transfer assets upon death, they serve separate purposes. A living trust can take effect while you are alive or after death. It allows you to hold assets for your benefit during your life, which may prove useful if you become incapacitated in the future. A living will can also be beneficial if you own real estate in another state. A will only takes effect upon death, and is used to appoint guardians for minor children, cover assets that are not part of a living trust and create trusts that kick in after death.

Women need to execute financial and healthcare durable powers of attorney and consider choosing a member of the family if that person is willing to assume the responsibility of making financial and/or medical decisions on their behalf in case of incapacity. And, if you are married or partnered, make sure your spouse or partner does the same because you’ll be the one who is handling things if anything happens to your spouse/partner and you want it to be as easy as possible.

Make sure your partner/spouse has life insurance to support you for as long as you will need support and that there’s enough to last your whole lifetime, unless you will have your own savings.

Don’t own your own life insurance policy as the proceeds will be subject to estate tax after you die. Instead, if your life insurance is designed to pay estate taxes, designate a spouse or other family member as owner or set up an irrevocable life insurance trust (ILIT), which buys the policy and holds the proceeds for beneficiaries. And again, if you have a taxable estate, make sure the same is set up for your spouse’s life insurance.

Keep beneficiary forms for retirement accounts (IRAs, 401(k)s, etc.) up to date, as they determine who receives the assets of each one of your accounts.

Make sure there is enough cash held in a joint account to handle any immediate expenses if your spouse dies suddenly. You may not be able to access a deceased spouse’s separate bank account right away.

Surviving spouses are allowed to add the unused portion of a deceased spouse’s estate tax exclusion to their own. However, this exclusion transfer must be claimed by the deceased spouse’s executor filing an estate tax return. There’s other critical items that must happen when your spouse dies that can easily be overlooked. Contact an estate planning attorney within a few weeks of your spouse’s death whether you have a sizable estate or not.

Married couples can participate in “gift splitting” during life. We recommend you transfer as much as possible during life for many reasons. Ask us about it.

The best way to learn about protecting yourself and your family is to talk with us about a Legacy Vision Planning Session, where we can identify the best strategies for you to provide for and protect the financial security of your loved ones.

Register for our Proactive Planning for Women (PPW) Workshop and Webinar on March 25 & 26, respectively!

The post What Women Need To Know About Estate Planning appeared first on Law Office of Ruby Steinbrecher.

For plenty of folks, it’s easy to know what to do when it comes to home organization, but the idea of legal and financial ordering can be complex and confusing. This article will give you a few places to start:

01 | Review Your Beneficiary Designations

Request updated beneficiary designation forms from your life insurance account and retirement account custodians. Look at the form and identify whether you have a minor designated as either a primary or contingent beneficiary. If you do, those assets will be tied up in Court, unnecessarily, and may not be available to the people you’ve named to care for your children.

Consider designating your life insurance and retirement accounts to be distributed to a trust for the benefit of your heirs, providing Court and creditor protection, and ensuring your children do not inherit money before they are properly prepared.

02 | Update Your Family Wealth Inventory

Your Family Wealth Inventory is where we document the assets that you own, so that in the event you become incapacitated or when you die, your family will know how to find what you own.

Without an updated Family Wealth Inventory, your assets could be lost to the State Department of Unclaimed Property. There are millions of dollars of assets in our state department of unclaimed property because most people do not leave a clear record of their assets at the time of their incapacity or death.

03 | Consider If You Need To Name Guardians (Long Or Short-Term)

Review your guardian nomination designations. Have you named guardians for both the short-term (local) and the long-term (people you would trust to raise your kids fully)? If so, do they need to change? Is there anyone you would wish to exclude? Does the ID card for your wallet need to be updated? This is the time to check.

04 | Check Out The Title Of Your House

Get a copy of the deed to your house and make sure that your trust is listed as the owner on the deed, if you want your house to stay out of court in the event of your incapacity or death. If you see your personal name on the deed, and there is not a trust listed, you can be sure that would result in your house having to go through the court process of probate in the event of your death. If you don’t want that, now is the perfect time to spruce up your planning.

05 | Come In And Meet With Us For A Legacy Vision Planning Session

Last, but far from least, this is the perfect time of year to come in and meet with us for a Legacy Vision Planning Session, whether you’ve done planning in the past or not. We will have a two-hour working meeting that will get you more financially organized than you’ve likely ever been before (unless you’ve already done planning with us) and give you the confidence of knowing you’ve made the most empowered, informed and educated legal and financial decisions for the people you love.

The post Spring Cleaning For Your Legal And Financial Affairs appeared first on Law Office of Ruby Steinbrecher.

From LegalZoom and Rocket Lawyer to TrustandWill.com and FreeWill.com, these DIY legal documents may seem like a cheap and easy way to finally cross estate planning off your to-do list—and do so without having to pay a lawyer big bucks to assist you. After all, you’ve been able to prepare and file your taxes online for years, is estate planning really that much different? And aren’t lawyers using the very same forms you find on these DIY document websites?

An Inconvenient Truth

This kind of thinking is exactly what DIY and online estate planning services would like you to believe, but it’s far from true. In fact, relying on DIY or online estate planning documents can be one of the costliest mistakes you can make for your loved ones.

Keep in mind, just because you created “legal” estate planning documents that doesn’t mean they will actually work when you—or most importantly, the people you love—need them. Without a thorough understanding of your family dynamics, the nature of your assets, and how the legal process works upon your death or incapacity, you are likely to make serious mistakes when creating a DIY or online estate plan.

Even worse, these mistakes won’t be discovered until it’s too late—and the loved ones you were trying to protect will be the very ones forced to clean up your mess or get stuck in a costly and traumatic court process that can drag out for months or even years.

In the end, relying on DIY or online estate planning documents can actually be worse than having no estate plan at all—and here’s why:

A False Sense of Security

Creating your estate plan using online document services can give you a false sense of security—you think you’ve got estate planning covered, when you most likely do not. DIY plans may even lead you to believe that you no longer need to worry about estate planning, causing you to put it off creating a proper plan off until it’s too late.

In this way, relying on DIY estate planning documents is one of the most dangerous choices you can make. In the end, such generic forms could end up costing your family even more money and heartache than if you’d never gotten around to doing any planning at all.

At least with no plan at all, estate planning would likely remain at the front of your mind, where it rightfully belongs until it’s been handled by you and trusted counsel to guide you.

Planning to Fail

The primary purpose of estate planning is to keep your family out of court and out of conflict in the event of your death or incapacity. Yet, as cheap online document services become more and more popular, millions of people are learning—or will soon learn—that taking the DIY route can not only fail to achieve this purpose, it can make things even more complex and costly for the people you love.

Most people assume that estate planning is all about filling out the right legal documents. But in reality, the true value of estate planning is not about the documents themselves—it’s the planning aspect that’s most important, not the documents. Documents are the byproducts of the plan and the outcome of counseling and decisions that require thought, consideration, and a true understanding of all the options and their potential consequences.

Without proper planning and consideration, the documents themselves—wills, trusts, health care directives, and powers of attorney—aren’t worth the paper they’re printed on. And by proper planning, we mean having a trusted advisor who can help you anticipate all of the potential problem areas and conflicts—as well as potential opportunities—that could impact your plan, and then help you adapt your plan accordingly and create documents to ensure the maximum benefit (and minimum heartache) for your loved ones.

When done right, the value of this kind of estate planning is truly priceless because it results in the right plan for your family at the right budget for you, and it leaves your loved ones with not just a set of documents, but with a trusted advisor who will be there for them when you cannot be. This is exactly what the Law Office of Ruby Steinbrecher provides every client we serve through our Life & Legacy Planning Process.

One Size Does Not Fit All

“In preparing for battle, I have always found that plans are useless, but PLANNING is indispensable.” –Dwight D. Eisenhower, Former U.S. President and Commander of Allied Forces during WWII

A typical set of documents that you get from an online DIY estate planning service (and even many estate plans created by lawyers) will usually include three to five basic legal documents: a will, a financial power of attorney, a healthcare directive, possibly a trust, and a legal guardian nomination, if you have minor children. By now, it’s fairly common knowledge that these are the legal documents needed in case you become incapacitated or when you die.

But what isn’t common knowledge and what isn’t adequately covered by any online legal document service or even by many lawyers is what needs to go into those documents, and what’s needed to ensure those documents actually work for the people you love when they need them.

You see, standard documents simply cannot address the real-life complexities of your family dynamics, your assets, and the ever-changing circumstances of your life. Contrary to what the DIY services would like you to believe, estate planning is not a one-size-fits-all, once-and-done kind of deal. Even if you think your particular assets and family situation are simple, that turns out to almost never be the case, and you are likely to face one of the following issues that can leave your loved ones at risk.

5 Ways Your DIY Plan Can Fail

1 | Thinking a Will is Enough

One of the ironic things about estate planning is that the one legal document everyone thinks they need most is the one legal document that actually accomplishes the least. Yes, you know you need a will, but a will alone doesn’t do much.

A will can ensure the people you choose are the ones who handle your affairs and who ensure your assets go where you want them to go in the event of your death. But a will does not keep your family out of court. In fact, relying on a will alone ensures your family and friends have to go to court when you die. Plus, a will doesn’t even come into play if you are incapacitated. And if you have minor children, relying on a will alone to designate their legal guardians could leave your kids vulnerable to being taken out of your home and into the care of strangers.

2 | Improper Execution

You could have the best documents in the world, but if you fail to sign them, or sign them improperly, they will fail. It may seem silly, but it’s true. We’ve seen family after family who brought us an estate plan after the death or incapacity of a loved one that we were not able to support them and act upon because the documents were either not signed, or were signed improperly.

To be considered legally valid, certain estate planning documents like wills must be executed (i.e. signed, witnessed, and/or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY will doesn’t mention that condition (or you don’t read the fine print) and you fail to follow this procedure, the document can end up worthless.

If you have created or started a DIY estate plan and wish to have it reviewed, contact us to see how you can get a Family Wealth Planning Session at no cost to you. During this 2-hour session, we will review what would happen to your family and your assets with your current plan and discuss the best next steps for protecting your family.

3 | Choosing The Wrong Executors or Trustees

State laws are also very specific about who can serve in certain roles like executor, trustee, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law, and if not, the person must live in your state. If your chosen executor doesn’t meet those requirements, he or she cannot serve.

Furthermore, some states require the person you name as your executor to get a bond, which is like an insurance policy, before he or she can serve. Such bonds can be difficult to get for someone who has a less-than-stellar credit score. If your executor cannot get a bond, it would be up to the court to appoint your executor, which could end up being someone you would never want managing your assets or a third-party professional, who could drain your estate with costly fees.

4 | Lost and Unclaimed Assets

Unless your family knows exactly what assets you own and how to locate and access those assets, that property is as good as gone when you die—and your online will won’t be of any use to your family. In fact, there’s currently more than $50 billion worth of unclaimed property sitting in the different state Departments of Unclaimed Property across the U.S. because a family member died and their loved ones lost track of their assets.

To ensure that none of your assets end up in our state’s Department of Unclaimed Property, and your family will know exactly what you have and how to find everything if something happens to you, it’s essential that you keep a regularly updated inventory of all your assets. The Law Office of Ruby Steinbrecher will not only help you create a comprehensive asset inventory but also make sure it stays regularly updated throughout your lifetime.

5 | Unforeseen Conflict Between Family Members

Family dynamics are—to put it lightly—quite complex. This is particularly true for blended families, where spouses have children from previous relationships. A DIY service cannot help you consider all the potential areas where conflict might arise among your family members and help you plan ahead of time to avoid such disputes. Even the best set of documents will be unable to anticipate and navigate these complex emotional matters—but we can.

Every day we see families ripped apart due to poor estate planning. Yet, we also see families brought closer together as a result of handling these matters the right way. When done right, the estate planning process is actually a huge opportunity to build new connections within your family, and we are specifically trained to help you with that.

In fact, preventing family conflict with proactive estate planning is our special sauce and one of the primary reasons to work with us, as your Personal Family Lawyer, rather than relying on DIY planning documents.

The Kind of Planning Your Family Deserves

When it comes to estate planning, the documents you use are only as good as the understanding your lawyer has about your family dynamics, the nature of your assets, and how the law will apply to your situation upon your death or incapacity. And in most cases, you will need far more than just a few fill-in-the blank documents to properly address all of those complexities.

If you truly want things to be as simple as possible for the people you love when something happens to you, you want a trusted counsel who can prepare an estate plan that will achieve your desired objectives with a minimum amount of stress and conflict for the loved ones you are leaving behind, not just someone who has the best documents. This is where we come in.

If, as a result of this process, we determine that you really do have a very simple situation, and you want to create your own planning documents yourself online, we will support you to do that. However, if as a result of the process, you decide you would like us to draft a plan for you, we’ll support you to find the optimal level of planning for a price that’s right for you.

As part of our planning process, we will inventory all of your assets and ensure they are titled in a way that will keep your family out of court and out of conflict no matter what happens to you. Moreover, we take the time to get to know your family members and include them in the planning process, so everyone affected by your plan is well-aware of what your latest planning strategies are and why you made the choices you did, along with knowing exactly what they need to do if something happens to you. And if you are the parent of minor children, we will put safeguards in place to ensure that your kids are never placed into the care of strangers, even temporarily.

Finally, and perhaps most importantly, our Life & Legacy Planning process will ensure that it’s not just your money and tangible assets that get preserved and passed on, but also your family’s intangible legacy, which includes your family’s most treasured values, insights, stories, and mementos. We capture and record your family’s legacy using a unique process known as a Family Wealth Legacy Interview, which is included with every estate plan we create.

Life & Legacy Planning

Ultimately, we’ve discovered that estate planning is about far more than planning for your death and passing on your “estate” to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning.

As your Personal Family Lawyer, we are specifically trained to educate, empower, and support you to make the right decisions for the people you love, and get to know what really matters most to you. Furthermore, because your plan is designed to protect and provide for your loved ones in the event of your death or incapacity, we aren’t just here to serve you—we’re here to serve your entire family.

In the end, as your Personal Family Lawyer, our Life & Legacy Planning services go far beyond simply creating documents and then never seeing you again. We will develop a relationship with you and your family that lasts not only for your lifetime but for the lifetime of your children and their children if that’s your wish.

While the DIY approach might be a good idea if you’re looking to build a new deck for your backyard, when it comes to estate planning, it’s one of the worst choices you can make. Are you really willing to put your family’s well-being and wealth at risk just to save a few bucks? If you want to truly do right by those you love, contact us, to get your Life & Legacy Plan started today.

The post 5 Ways DIY Estate Plans Can Fail & Leave Your Family at Risk appeared first on Law Office of Ruby Steinbrecher.

If you missed part 1 of this series, be sure to read it here so you don’t miss out on these money-saving techniques.

5 | Make Charitable Gifts

Giving back to your community or supporting causes you care about is not only rewarding but can also provide tax benefits if your family’s tax deductions are close to exceeding the standard tax deduction. 

The standard deduction for 2024 is $12,950 for individuals and $25,900 for married couples filing jointly. Remember that the total of your itemized deductions, including charitable contributions, must exceed the standard deduction for your filing status to provide a tax benefit. 

If you’re nearing the top of the standard deduction threshold, this year may be a great time to contribute to a charitable organization that is important to you. Doing so will help support a good cause and allow you to make itemized deductions for an extra reduction in your taxable income for the year.

If you make any charitable donations, keep detailed records of your donations, including receipts and acknowledgments from the charities. If you donate non-cash items (such as clothing or household goods), make sure to document their fair market value. 

If you aren’t sure how to document your donations or aren’t sure if a charitable donation will be advantageous to you this year, be sure to discuss this with your tax professional. You can always reach out to us.

6 | Consider Tax-Loss Harvesting

Tax-loss harvesting is a strategy designed to offset capital gains by selling underperforming investments. This technique can help you minimize the taxes you owe on your investment gains. 

The first step is to identify investments in your portfolio that have experienced losses and then sell those investments to realize the losses. After all, you haven’t actually lost or gained capital until the money enters or leaves your portfolio.

By selling underperforming investments, you can now use the lost capital to offset any capital gains from other investments that are doing well. Losses can be used to offset up to $1,500 for individuals filing separately or up to $3,000 for couples filing jointly.

It’s important to remember that there are rules and limitations when it comes to tax-loss harvesting. Consult with a financial advisor or tax professional to ensure you execute this strategy correctly and in a way that aligns with your overall financial goals. For California residents, our law office is open to help you in discussing this matter.

7 | Pay Your January Mortgage Payment in December

If you’re a homeowner with a mortgage, making your January mortgage payment in December can provide a valuable tax advantage. Mortgage interest is deductible on your income tax return, and prepaying your January mortgage payment in December gives you an extra month of interest to deduct on your 2024 taxes.

However, before implementing this strategy, check with your mortgage lender to ensure that they apply the payment correctly. Some lenders may automatically apply extra payments to your principal balance rather than counting them as interest for the next month.

8 | Max Out Your IRA (Individual Retirement Account) or Roth IRA

Retirement planning is crucial for long-term financial security, and IRAs are excellent vehicles for saving for your golden years. For the 2024 tax year, the maximum contribution limit for both traditional and Roth IRAs is $6,500, with an additional $1,000 allowed for those aged 50 or older. It’s essential to understand the differences between these two types of IRAs to choose the one that suits your needs best.

Traditional IRA contributions may be tax-deductible, potentially reducing your taxable income for the year. However, withdrawals in retirement are subject to taxation.

Roth IRA contributions are made with after-tax dollars, so they don’t provide an immediate tax deduction. However, qualified withdrawals in retirement are entirely tax-free.

By maximizing your contributions to your IRA of choice, you can secure a more comfortable retirement and possibly reduce your tax liability for this year.

The Foundation of Life-Long Support and Security

Proactive year-end tax planning can significantly impact your financial well-being. By implementing these eight tax-saving strategies, you may be able to keep more money in the bank and take a step toward a brighter financial future. 

But good money management is only one part of the equation for a life you love and a legacy that will guide and support your family for generations to come. 

Making the best strategic decisions to protect your family’s health, finances, and happiness is equally, if not more, important. If you want to make sure that both your financial and personal life are in order today and structured to give your family the best support possible tomorrow, give us a call.

I, Ruby would be honored to help you protect everything you own and everyone you love through heart-centered estate planning services.

The post Year-End Tax Planning Starts Now: 8 Things To Do Now to Lower Your 2024 Taxes (Part 2) appeared first on Law Office of Ruby Steinbrecher.

Year-end tax planning isn’t something you do at the last minute; it’s a series of thoughtful steps you can start taking right now. In this blog series, we’ll explain eight key actions you can take during this last quarter of the year to save money on your 2024 taxes.

Let’s get started.

1 | Contribute to Your HSA (Health Savings Account)

A Health Savings Account (HSA) can be a powerful tool for both managing your healthcare costs and reducing your taxable income. HSAs allow you to set aside pre-tax dollars to cover future qualified medical expenses. Contributions to your HSA are tax-deductible, and the earnings grow tax-free. To make the most of this tax-advantaged account, consider maximizing your contributions to your HSA before the year ends.

For the 2024 tax year, you can contribute up to $3,650 if you have self-only health insurance coverage or $7,300 for family coverage. If you are 55 or older, you can also make an additional $1,000 catch-up contribution. By increasing your HSA contributions, you not only reduce your taxable income this year but also build a valuable fund for future healthcare expenses.

If your employer offers an HSA account they may make an annual contribution to the account. If you’re self-employed or don’t have access to an employer-sponsored HSA, you can set up your own through most financial institutions.

Even better, the money you contribute to your HSA never expires and can be used years into the future. Just keep in mind that if you’ve taken money out of your HSA this year to pay a medical expense, that withdrawal will be counted as income on this year’s income tax return. 

2 | Contribute to a 529 College Fund

If you have aspirations of sending your children or grandchildren to college, establishing or contributing to a 529 college savings plan is a strategic financial move. These plans offer a tax advantage, as contributions are tax-deductible on the state level. While contributions aren’t deductible on the federal level, any earnings in the account grow tax-free as long as they are used for qualified education expenses.

In 2024, you can contribute as much as you like to a 529 plan, but contributions above $16,000 per year ($32,000 for married couples filing jointly) may be subject to gift tax. Nevertheless, contributing now can help you leverage potential state tax deductions while investing in your loved ones’ future education.

Not sure your child or grandchild will attend college? Funds in a 529 account can also be used for vocational and trade school tuition and fees or elementary and high school tuition costs.

3 | Adjust Your Tax Withholdings

If you are an employee, form W-4 determines how much income tax is withheld from your paycheck each month. It’s essential to review and, if necessary, update your withholding information, especially if you’ve experienced significant life changes such as marriage, divorce, the birth of a child, or changes in your income during the year.

Adjusting your tax withholdings can help you avoid overpaying taxes throughout the year, leaving you with more money in your pocket. On the other hand, failing to update your W-4 could result in underpaying your taxes, which means needing to make a tax payment instead of receiving a refund come tax season, as well as potential penalties. Consult with a tax professional or use the IRS’s online withholding calculator to determine the correct withholding for your specific circumstances.

If you work as a 1099-independent contractor or own a business, you should meet with your tax professional to determine if you need to make any changes to the structure of your business, or establish retirement accounts, before the end of the year. If you need help knowing what to bring to your tax professional, or how to ask the right questions, give us a call. I, Ruby will be more than happy to assist you.

4 | Schedule Medical Procedures Strategically

Medical expenses can add up quickly, and the tax code provides a deduction for qualified medical expenses that exceed 7.5% of your adjusted gross income (AGI) for the 2024 tax year. To maximize your deduction, consider scheduling necessary medical procedures before the year ends.

While not every medical need can be planned ahead of time, if you know you’ll need or want an elective surgery, try to schedule it before December 31. Similarly, if you’ve met your out-of-pocket maximums for health or dental insurance, now is the time to get all members of your family in for any remaining check-ups or follow-up procedures.

If you don’t think they’ll meet the threshold for medical deductions this year but anticipate a large medical bill like a birth or surgery next year, consider delaying any unnecessary medical work until January to take advantage of the medical expenses deductions next year.

Be sure to keep detailed records of your medical expenses, including bills, receipts, and insurance statements, to support your deduction claims.

Looking Out for Your Family and Your Finances

Looking at your finances and seeing where you can save money on your taxes isn’t just about finishing the year off strong and getting organized for tax season. It’s about making strategic moves that position you for success now and help protect and support your loved ones in the future. 

To make sure your family is cared for no matter what the future holds, schedule a complimentary call by clicking the button below. I would be happy to talk with you about how to guide our clients to create a plan that protects their assets and their family for years to come.

And don’t forget to tune in for part two of our year-end tax planning series, where we’ll explore even more strategies to help you keep more of your money where it belongs – in your pocket. 

The post Year-End Tax Planning Starts Now: 8 Things To Do Now to Lower Your 2024 Taxes (Part 1) appeared first on Law Office of Ruby Steinbrecher.

If your spouse’s will or trust, or your joint trust, has a disclaimer provision, one of the time-sensitive decisions you will need to make is whether to disclaim (refuse to accept) money or property that you will otherwise receive as a trust beneficiary. State and federal law set forth the requirements that you must meet in order for the disclaimer to work as intended. Under Internal Revenue Code (I.R.C.) § 2518, a qualified disclaimer is simply an irrevocable, unqualified refusal to accept a gift or bequest of a property interest. The disclaimer allows the interest in property to pass to someone other than the beneficiary who originally would have received it, and it is not considered a taxable gift from the first beneficiary to the next beneficiary in line. There is a special exemption under I.R.C. § 2518(b)(4) that allows a surviving spouse to benefit from disclaimed money or property, but taking advantage of the exemption requires careful planning.

A qualified disclaimer must meet the following requirements:

• It must be made in writing as required by state law.
• It must be made within nine months after your spouse’s date of death.
• You must not accept the property interest or its benefits.
• The interest must pass to someone other than you without any direction by you (the person who is disclaiming the interest).

There are several steps you should take to ensure that you make timely decisions and properly disclaim a property interest if you choose to do so:

Step 1: Locate the estate planning documents. Your estate planning documents are one of the first sources of direction about what should happen next. Your spouse’s documents contain the roadmap that indicate what your spouse wanted to happen to their property and money, and they were likely designed in coordination with your own estate plan. A will or trust may include a provision specifying how particular property should be handled if the original beneficiary disclaims their interest in it. Your estate planning attorney will need to have those documents to advise you about the best course of action.

Step 2: Meet with your estate planning attorney. The legal process that those who are left behind when someone dies is often complicated, and it is important to seek the help of your estate planning attorney. Because of the limited time during which you must elect to disclaim accounts and property, you will need to make an appointment with your attorney as soon as you can. Your attorney will review your spouse’s estate plan with you and help you determine if it contains disclaimer provisions, and if so, whether you should consider disclaiming your interest in a will or trust and the effect of such a disclaimer.

Because of the unlimited marital deduction under federal tax law for US citizens, your spouse was permitted to transfer an unrestricted amount of accounts and property to you at any time during their life or at their death, free of taxes. However, the transferred amounts will usually be included in your estate. If you and your spouse had a large amount of wealth, using a disclaimer is one strategy for taking advantage of the lifetime estate tax exemption.

Currently, the exemption amount is historically high. In 2023, the federal estate tax exclusion amount is $12.92 million for an individual and $25.84 million for a married couple, and only estates that exceed this amount are subject to estate tax. However, the current estate tax exclusion amount is scheduled to be reduced by half at the end of 2025, so many more estates will soon be subject to estate taxes unless the law is changed. In addition, some states have their own estate or inheritance taxes applicable to estates of a much lower value. If your estate is likely to be subject to federal or state estate taxes, disclaiming an inheritance may make sense, especially if the beneficiary specified in the trust document as the next in line is less likely to be subject to estate taxes, or if the trust specifies that the disclaimed property can be transferred to another trust that will benefit you without being included in your estate.

Keep in mind, however, that for federal estate and gift taxes purposes, after your spouse’s death, you must file an estate tax return and make a portability election that will allow your deceased spouse’s unused exclusion amount (known as the deceased spousal unused exclusion (DSUE) amount) to be applied to your subsequent transfers during life or at death. For example, if your spouse’s gross estate is valued at $5 million and does not qualify for the unlimited marital deduction, you can elect to have their unused estate tax exemption of $7.92 million transferred to you. As a result, your estate would have a total exemption of $20.84 million ($12.92 million plus $7.92 million) in 2023, so a disclaimer may not be necessary unless you and your spouse have very large estates.

Your estate planning attorney will help you determine the best strategy to minimize your estate taxes or whether a disclaimer may be useful to achieve other goals, for example, to provide funds to a beneficiary that is next in line to receive the benefits of the trust and has a greater need for it than you.

Step 3: Include financial and tax professionals in the conversation. In addition to your attorney, involve your financial advisor, accountant, and other financial or tax professionals in the conversation. This team of professionals will help you determine the value of the accounts and property you will inherit from your spouse, as well as the value of your own estate, to determine if a portability election will provide adequate protection or if disclaiming some of the accounts and property in your spouse’s estate or held in trust for your benefit is the better strategy. They will help you consider all the important variables, including the impact of a disclaimer on your family members: Will they have to pay estate tax at your death if you do not disclaim your interest in the trust? Or will the beneficiary who receives the inheritance after a disclaimer be negatively impacted, for example, by increased income taxes if they receive trust income that pushes them into a higher tax bracket?

We Are Here to Help
Disclaiming your interest in a will or trust is a strategy that you may not have considered, but it may be a great way for you to achieve your estate planning and tax-savings goals. We can help you evaluate your unique circumstances to determine whether a disclaimer will benefit you and your loved ones, as well as assist you in meeting any looming deadlines and avoiding possible pitfalls. Give us a call today to set up a meeting.

The post Three Things You Need to Do When Your Spouse Dies and Their Will or Trust Has a Disclaimer Provision appeared first on Law Office of Ruby Steinbrecher.

Marital Deduction Planning and Marital Share Funding Formulas

Before diving into some of the particulars of using a disclaimer and the Clayton election, let us first lay some conceptual groundwork. The main objective of using a marital funding formula in estate tax planning is to take advantage of both (1) the estate tax marital deduction and (2) the estate tax exemption to eliminate the federal estate tax due at the first spouse’s death and to reduce or eliminate federal estate tax due at the surviving spouse’s death.

What is the marital deduction? In general, as long as they meet the requirements under federal estate tax law, transfers from a decedent spouse to a surviving spouse (provided the surviving spouse is a US citizen) are excluded from the decedent spouse’s estate and are not subject to estate taxes at the first spouse’s death. This is the unlimited estate tax marital deduction. The unlimited estate tax marital deduction essentially postpones the payment of any estate taxes until after the second spouse’s death.

The general concept of the estate tax exemption is that, if the value of your estate is less than the exemption amount, no federal estate tax is due. The 2022 exemption amount for an individual is $12.06 million. Under current law, the exemption amount will be reduced to $5 million (adjusted for inflation) on January 1, 2026. Currently, a 40 percent tax is imposed on the estate to the extent that its value exceeds the exemption amount.

Marital share funding formulas use both concepts to eliminate federal estate tax to the greatest extent possible. In essence, because the unlimited estate tax marital deduction allows estate tax liability to be postponed until the second spouse’s death, the first decedent spouse’s estate plan should use a formula to divide the their estate into two shares: (1) the marital share, which is the part of the decedent spouse’s estate that passes to the surviving spouse in a form that qualifies for the unlimited estate tax marital deduction, and (2) the nonmarital share, which is the part of the decedent spouse’s estate that does not qualify for the unlimited marital deduction but is instead sheltered by the decedent spouse’s remaining estate tax exemption amount.

Example without a marital share funding formula. Bill and his wife, Cindy, each own half of their $25 million estate. Bill dies in 2022, when the estate tax exemption amount is $12.06 million. Cindy dies in 2026, when the estate tax exemption amount is only $5 million, the inflation-adjusted amount then in effect. Their estate plan leaves the first decedent’s estate to the surviving spouse with everything going to their children at the surviving spouse’s death.

When Bill dies in 2022, his $12.5 million portion of the estate passes to Cindy estate-tax free under the unlimited estate tax marital deduction. Because all of Bill’s $12.5 million passes to Cindy under the marital deduction, when Cindy dies in 2026, the applicable $5 million exemption amount will only protect $5 million of the $25 million estate. Applying a 40 percent estate tax rate, Cindy’s estate would owe $8 million in estate tax.

Example with a marital share funding formula. The facts are the same as in the above example, except that Bill and Cindy’s estate plan uses a marital funding formula that divides Bill’s estate into marital and nonmarital shares. At Bill’s death, $12.06 million is apportioned in trust to the nonmarital share, using all of Bill’s estate tax exemption amount, and the remaining $440,000 is apportioned to the marital share. When Cindy dies in 2026, her estate will be worth $12,940,000, consisting of her $12.5 million portion of the estate and the $440,000 apportioned to the marital share. Cindy’s $5 million estate tax exemption amount in 2026 will protect $5 million of Cindy’s $12.94 million estate. Applying a 40 percent estate tax rate, Cindy’s estate would owe $3,176,000 in estate tax.

By using a marital share funding formula as part of their estate tax planning, Bill and Cindy can prevent their heirs (their children) from having to pay $4,824,000 in estate taxes.

Disclaimer

There are numerous different ways to divide a couple’s trust property into marital and nonmarital shares upon the first spouse’s death, but the disclaimer option gives the surviving spouse the most flexibility. Using the disclaimer option, the trustee or executor distributes all the decedent spouse’s trust property to the marital share. The surviving spouse may then exercise a qualified disclaimer (refusal to take ownership of money or property left to them by their deceased spouse) under Internal Revenue Code section 2518, and the trustee distributes any property disclaimed by the surviving spouse to the nonmarital share, which can be either held in trust for the benefit of the surviving spouse (and other beneficiaries if desired) or otherwise administered under the trust agreement’s residuary provisions.

With the disclaimer option, the surviving spouse can choose to give any amount or property they wish to the nonmarital share, depending on the estate tax law in effect at the time of the first spouse’s death, the value of the decedent spouse’s estate, and the surviving spouse’s financial needs.

Clayton Election

The Clayton election, named after the court case Estate of Clayton, Jr. v. Commissioner,[1] is another formula used to divide a couple’s trust property into marital and nonmarital shares. It also provides maximum flexibility to engage in marital deduction planning after the first spouse’s death. The way the Clayton election works is almost the opposite of the disclaimer option. Instead of distributing all the decedent spouse’s trust property to the marital share, the trustee distributes it to the nonmarital share. The trustee may then list any property on Schedule M—Bequests, etc., to Surviving Spouse (Marital Deduction) of the decedent spouse’s IRS Form 706 (the federal estate tax return) to allocate it to the marital share instead.

An advantage of the Clayton election, in contrast to the disclaimer option, is that its technical requirements and timelines are less rigid. While a disclaimer must be made within nine months after the first spouse’s death, a Form 706 is not due until up to fifteen months (or possibly twenty-four months if the executor is not required to file an estate tax return but files to elect portability) after the first spouse’s death, allowing more time to grieve and for making a less emotion-driven decision. Another advantage of the Clayton election is that it allows someone other than the surviving spouse to objectively decide what property should be apportioned to the marital and nonmarital shares. In addition, because a Form 706 must be filed when using the Clayton election option, there is the opportunity to claim for future use any unused amount of the decedent spouse’s estate tax exemption. Finally, because the Clayton election sends the decedent spouse’s property into a nonmarital share trust by default, the surviving spouse automatically receives those accounts and property in a form that offers a degree of creditor protection.

Whether to use a marital formula in your estate plan, and which marital formula to use, requires considerable analysis of your estate, your goals, and the law. Contact us to put in place or review your plan to ensure that it will meet all your goals, including deferring, minimizing, or eliminating the estate tax that your heirs will pay.

[1] Estate of Clayton, Jr. v. Comm’r,976 F.2d 1486 (1992).

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1. Gather Your Necessary Documents

In preparation of your return, it is wise to have supporting documentation for all items listed on your income tax return.  These include your W-2s, 1099s, and receipts for any deductions. If you are a business owner looking to take advantage of the new Section 199A Deduction, it will be crucial that you have the appropriate documentation from your bookkeeper to accurately calculate your deduction. Section 199A is a fairly complex calculation, so work with a professional if you have questions.

2. Rebalance Your Investment Portfolio

In coordination with your financial advisor, you should sit down and analyze your current investments to determine whether any rebalancing needs to be done based on the year’s past performance. Your financial advisor will be able to assist you in making sure that your financial objectives are being met and provide you with the best strategy for meeting your goals while minimizing taxes.

3. Spend Money on Your Business

For business owners, if you are in need of additional business expense deductions, you may want to consider making some equipment investments or prepaying some expenses so that they will be deductible instead of waiting until the following year.  However, you should consult with a professional to ensure that all of the IRS requirements are met and that you’re properly reporting the transactions on your tax return. The last thing you want is for your tax planning to turn into an audit where you’re unprepared.

4. Track and Review Your Charitable Contributions

With the standard deduction increasing as part of the Tax Cuts and Jobs Acts, fewer people are likely to itemize on their income taxes this year.  However, if you find that your anticipated deductions, including your charitable gifts, is more than the standard deduction, it may still make sense for you to itemize.  You will want to make sure that you are tracking your charitable contributions and have the appropriate documentation to substantiate whatever number you are placing on your return.

Preparing for tax season is never fun but we are here to help.  If you have any questions or need any assistance, please feel free to give us a call.

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