September 2015

We often are asked questions about living trusts.  Here are a few of the more common ones:


    1. Is it difficult to set up a trust?
No.  You start by discussing your financial concerns and investment goals with a wealth management professional along with your attorney, who will prepare the trust agreement.

    2. What does the agreement say?
Generally, the agreement delineates that you, as grantor (creator) of the trust, are transferring assets to a legal entity (the trust) to be administered by a named trustee. A typical trust agreement arranges for income from the trust assets to be paid to a spouse (the income beneficiary) for his or her lifetime and then, after, to children (remainder beneficiaries).

     3. Do I give up permanent control of my assets when I set up a living trust?
Absolutely not. The beauty of a living trust is that it’s revocable at any time. What’s more, you are able to make changes to your trust agreement as family, economic or investment circumstances dictate.

      4. Who makes the investment decisions with regard to the assets in the trust?
Many people look for objective, unbiased portfolio supervision because they lack the time or specialized knowledge to do all the necessary investment homework themselves. We would be pleased to act in that capacity. But you may delegate as much or as little investment responsibility as you wish. You may ask that proposed investment changes be submitted for your approval. Or you may choose just to ask for recommendations and do your own research as well.

     5. How much must I transfer to the trust?
Many people mistakenly believe that trusts are only for the very rich. But the great majority of people who set up trusts don’t classify themselves as rich, and they don’t have multimillion-dollar trusts. Many of them set up a trust when they sell a business, receive an inheritance or want to safeguard a retirement nest egg.

     6. Why should I pick a corporate trustee rather than name an individual?
Briefly put, a corporate trustee has the financial strength, investment management capabilities, regulatory oversight, reliability and responsiveness to meet your needs.

We have built Garden State Trust Company on a foundation of Trust.  We work hard to develop trust with our clients and those that work with us.  The Garden State Trust Company service commitment emphasizes communication, objectivity and above all – Trust.

Looking forward to beautiful fall days,

With best wishes,

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Social Security Benefits For Same-sex Couples

 The Social Security Administration has announced that, as a consequence of the U.S. Supreme Court’s decision in June recognizing same-sex marriage throughout the country, Social Security benefits will be extended to same-sex married couples.  These include:

• survivor’s benefits;
• spousal benefits;
• divorced spousal benefits;
• children’s benefits;
• Supplemental Security Income; and
• Medicare benefits.

The Social Security Administration is working with the Department of Justice to develop instructions for processing claims.  In the meantime, same-sex couples are being encouraged to apply for benefits under existing procedures.  More information may be found at http://www.ssa.gov/people/same-sexcouples.

When both members of a married couple have significant earnings records, several important planning opportunities open up.  For example, one spouse may claim spousal benefits while deferring primary benefits, earning a significantly higher eventual Social Security benefit. These choices are now also available to same-sex married couples.

However, sorting through the choices can be daunting. Professional counsel will be important for those who are in this situation.

(September 2015) © 2015 M.A. Co. All rights reserved.

A New Worry For Executors

For several years President Obama has proposed adding a requirement to the tax code for consistent basis reporting for estate and income tax reporting.  There was a perception that basis mismatches were costing the Treasury considerable sums.  The proposal never went anywhere.

Until this summer, that is, when it was attached to a temporary extension of highway funding.  The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, signed by the President on July 31, 2015, includes a new requirement that taxpayers who receive property from a decedent use as their income tax basis the value of that property as finally determined for estate tax purposes.  New reporting requirements have been created for executors of estates, who must advise both the IRS and the estate’s beneficiaries of the values.  New regulatory projects will have to be under way shortly at the IRS.

Although relatively few taxpayers are likely to owe higher taxes because of this law, the more important burden may be the filing requirements for executors.  Fortunately, the new law only applies to property that increases federal estate taxes due. That means it doesn’t affect property from estates lower than the exemption amount or property excused from taxation via the marital or charitable deduction.

According to the Joint Committee on Taxation, the new provision will raise $117 million next year, more than $1.5 billion over the next ten years.  Note that although the highway funding is temporary, the “sunset” provisions don’t apply to the new basis-reporting portion of the law—those are permanent.

(September 2015) © 2015 M.A. Co. All rights reserved.

Joint Property

 There are three types of co-ownership of property:

Tenants in common each own a share of property in proportion to their contribution to its acquisition.  If John and Mary purchase Blackacre for $100, with John providing $30 and Mary the remaining $70, their ownership is also 30%-70%.  At Mary’s death, her 70% interest will pass to her heirs according to the terms of her will.

Joint tenancy with right of survivorship, sometimes abbreviated JTWROS, is the approach that most married couples take when they purchase their first home.  At the death of a joint owner, his or her share passes automatically to the surviving owner or owners.

Tenancy by the entirety is a form of JTWROS that is limited to married couples, and it is not available in all states.  This approach adds a layer of protection for the surviving spouse, as the property cannot be used to satisfy the debts of the deceased spouse until the death of the survivor.

Joint ownership can be convenient and easy.  However, there are some drawbacks to consider.

Permanence. Once a joint ownership interest has been created, it cannot be undone without the joint owner’s consent.  If Parent has put Daughter’s name on his checking account, he can’t later switch to Son as co-owner unless Daughter agrees.

Claims. Jointly owned property is subject to the creditor claims of all of the joint owners.  If Parent has put Child’s name on the title to the family home and Child later goes bankrupt, the family home will be vulnerable.

Fraud.  Financial abuse of the elderly is a growing problem.  Banks and other financial service providers are training their employees to spot troubling situations in which the elderly are being pressured into unwise transactions.  In fact, making a younger relative a co-owner of an account is often a red flag.

Taxes.    The tax ramifications of jointly owned property can be quite surprising and unexpected.  In the case of a married couple filing jointly, most of those complexities will disappear. For all other situations, the advice of a tax advisor should be worthwhile before going forward.

(September 2015) © 2015 M.A. Co. All rights reserved.

 

 

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