Estate Planning Seminar at Pleasant Grove Library

I’ll be presenting a seminar on DIY — Do It Yourself — Estate Planning at the Pleasant Grove Library on Wednesday, March 8, 2017 at 7 PM. Come an enjoy the discussion. The address is 30 E Center St, Pleasant Grove.

If you have a question about wills, trusts, and other aspects of estate planning, maybe I can answer it.

Enforcing Charitable Pledges: Well, You Said You Would Give Them Money. What Did You Expect?

An interesting piece at Wealthmanagement.com about how and why charities seek to enforce charitable pledges and what theories courts use to accommodate their claims. The first two paragraphs are key:

In August, it was widely reported in the media that Duke University had filed a claim against the estate of Aubrey McClendon, the former CEO of Chesapeake Energy Corp., for payment of nearly $10 million in outstanding charitable pledges, once again raising the question of whether and to what extent charitable pledges are legally enforceable.

States typically rely on one of three theories to find that a charitable pledge is enforceable.  A pledge may be enforceable as a bilateral contract, as when a donor pledges a sum of money in exchange for the charity’s naming a building after the donor.1 A second theory treats a charitable pledge as a unilateral contract.  A donor offers to make a gift in the future that’s accepted when the charity incurs a liability in reliance on the offer.2When the charity provides no consideration for a contract, a pledge may be enforceable under the doctrine of promissory estoppel, an equitable remedy applied when a charity would suffer damages if the pledge weren’t enforced.

The rest of the piece is worth a read, especially if you’re interested in how the law is developing or in why charities should care about those developments.

Trustees and Beneficiaries: More Good News than Bad?

I really like the idea behind “The Positive Story Project,” a new monthly column at Wealthmanagement.com. Here’ the first three paragraph from the opening salvo:

My goal in writing this column is to focus thinking within our community of practitioners—important players in the transfer of wealth to younger generations.   And, with so much at stake for our clients and their families—a good deal more than preservation of financial assets—let’s make this column a conversation.

Can the widespread dissatisfaction and all the talk of “problem” beneficiaries and “problem” trustees, give way to more creative and productive relationships?  I say:  “Absolutely.”  And, if your intuition is the same as mine, the harder question becomes “how do we get from here to there?”

To begin to find out, my colleague, Kathy Wiseman, and I have been going to the source—beneficiaries, trustees and their advisors—asking them for positive stories about moments in time when their relationships have worked well.  I’ll discuss what can be learned from these individuals and their stories in this column each month.

I look forward to more on this subject, both to help me as a practitioner and to inspire my clients and potential clients to use trusts to better carry out their wishes.

Conservation Easements: Go Big or Go Home

Briefly, creating a conservation easement can allow you to receive good by doing good. Consider creating one on your  property to protect

“natural, scenic, or open space values of [that] real property, assuring its availability for agricultural, forest, recreational or open space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural, archeological or cultural aspects of real property”

HeartMt_431511_10150848522799638_729014637_12580484_639413481_nand you might receive a variety of tax benefits, including a reduction in property taxes and a charitable deduction that can be carried forward on future tax returns, among other things. For a farmer or rancher, the easement can have the added benefit of ensuring the farm or ranch stays in the family, because, according to G. Bruce Chilcott and Erin Johnson,

“with most or all of the development potential given away in the easement, the next generation doesn’t have the usual incentive to sell or develop [the property] in a residential or commercial manner.” (Long-Term Planning Issues for Farm and Ranch Owners, Wealth Counsel Quarterly)

The steps to create one are outlined in the Utah and Wyoming state codes and are not particularly hard to follow. But, Chilcott and Johnson caution, don’t go the cheap route. Get it done correctly. In particular, they say,

“In creating a conservation easement, the key to achieving the desired tax benefits is the appraisal. This is no place to skimp on costs or quality, and the appraiser must have special qualifications and significant experience in this arena.”

Make sure you choose an appraiser with a good track record regarding farm and ranch appraisals for conservation easement purposes because “the quality of the appraisal can be instrumental in getting the eventual approval of the department of revenue.”

Tax Savings: Estate Planning “Coupons”

Under current gift and estate tax law, if you pay a gift or estate tax, it will be at a flat rate of 40%. Forty percent. But most people will never pay that rate, or any rate at all, because their estates are not large enough and what estate or gift taxes they could have to pay, they can pay with coupons.

Now, the IRS doesn’t call them coupons, but coupons they are. Here’s how they work.

couponsSay you and your spouse have four children. Together, you could give each of them $28,000 a year, and you would pay no gift tax on those gifts. That’s because the IRS grants each of you a coupon worth $14,000 each year, a coupon the IRS calls an “annual exclusion.” You can use as many of those $14,000 coupons as you want ($28,000 if done jointly as spouses). Got 10 friends? You’ve got 10 coupons. Got 20? You’ve can give away $280,000 total to them and pay no gift tax.

But what if you want to give your favorite son or daughter $50,000 one year? Surely there’s a tax there, right? Probably not. You see, Uncle Sam has also given each of us a lifetime, but reducing, coupon of $5,450,000 (in 2016; it’s adjusted for inflation each year), a coupon the IRS calls the Applicable Exclusion Amount or AEA. Thus, the math in the example I just described would be $50,000 – $14,000 – $14,000 = $22,000. You could either pay the gift tax on the $22,000 or subtract it from your lifetime coupon: $5,450,000 – $22,000 = $5,428,000 remaining on your lifetime coupon. That is, the AEA reduces each time you have to use some of it to cover gifts in excess of your annual exclusion amounts.

You can use your lifetime coupon while you’re alive or save it all till you die to pay any estate tax you may yet owe. As I said at the beginning, that won’t be much if any for most people because we won’t have estates that large. (And if you’ve been paying attention, you’ll realize that for a married couple, their estate would have to be almost $11,000,000 before they’d have to pay any estate tax under current law.)

There are other coupons as well. A gift to charity? Use an unlimited coupon. A gift to your spouse? Unlimited as well–unless your spouse is not a citizen of the United States, then it’s only $145,000 per year. Pay your children’s education and medical expenses directly–that is directly to the school or hospital–use an unlimited coupon.

Neat, huh? And I haven’t even discussed portability yet. I’ll save that for later.

Quote for the Day

“Money-giving is a very good criterion, in a way, of a person’s mental health. Generous people are rarely mentally ill people.”

Dr. Karl Menniger, Forbes magazine.

Quote for the Day

 I have shewed you all things, how that so labouring ye ought to support the weak, and to remember the words of the Lord Jesus, how he said, It is more blessed to give than to receive. Acts 20:35

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