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Important IRS Update: Significant Interest Penalty Increase for Tax Underpayments

The Internal Revenue Service (IRS) has recently announced a critical change that could significantly impact taxpayers who underpay their taxes. This update is particularly relevant as we approach the next tax filing season. Previously, the IRS charged a 3% interest penalty on estimated tax underpayments. However, this rate has now been increased to a substantial

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Will Inflation Hurt Stock Returns? Not Necessarily

Investors may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news: Inflation isn’t necessarily bad news for stocks. A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns. Since 1993, one-year returns on

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Maximize Your Charitable Impact with These Four Strategies

As the year draws to a close, it’s a perfect opportunity to rethink how you give to charity. This is important for managing how much tax you pay and how much help reaches those in need. Here are four effective strategies: Need Guidance? Reach Out to Us! These strategies are just a starting point. There

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Estate Planning and Reproductive Technology

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Category: Estate Planning Estate Planning for Attorney Estate Planning For Business Owners Estate Planning for Children

Unfortunately, estate planning law hasn’t really stayed on pace with reproductive technology and rights, generating quandaries about inheritance rights. It would make sense that children conceived after the death of an individual (or statements denying inheritance rights about these individuals) should be included in estate planning documents.

forbes.com
(Photo credit: forbes.com)

A trust might be a more appropriate vehicle for managing inheritance rights in this way when compared with a will. A comprehensive estate plan, too, can also be valuable with regard to genetic material. Much the law with regard to inheritance rights and genetic material is very specific to each state, which is why it’s recommended to work with a professional if you’re concerned about children conceived posthumously. In many states, the law has not provided a framework for the disposition of embryos or gametes at the death of the donor.

While not every estate plan will include such instructions and details, it’s critical that those in this situation think about whether those individuals conceived later will have any inheritance rights. Planning in advance for this and documenting your wishes is a vital step in ensuring that your wishes are carried out after you have passed away. Advance planning can be complex, but the process is made easier when working with an experienced estate planning lawyer. To learn more about complex estate planning needs involving reproductive issues, contact us at 732-521-9455 or email us at info@lawesq.net

529 Plans Benefit Grandparents and Grandchildren

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Category: Estate Planning Estate Planning for Children Planning for Minors

As a recent article explains, a majority of wealthier investors prefer to transfer money to their grandchildren through 529 college savings plans. In part, 529 college savings plans are popular because they allow the grandparents to reduce the value of their taxable estate, while also maintaining control of the funds removed from the estate.

A person can open a 529 College Savings Plan for each of his or her grandchildren. The grandparents can then transfer up to the current annual gift tax exemption amount to each account, tax-free. Not only will the 529 account grow tax-free, but any withdrawals made by the grandchildren will be tax-free, as well.

English: A grandfather teaching his little gra...
(Photo credit: Wikipedia)

Importantly, the donors to the account are the ones who determine how the assets will be distributed. For example, if a grandparent unexpectedly has a stay in an emergency room and requires the money, he or she can take the assets back. If this happens, however, any investment gains would be taxed to the grandparents when the assets are withdrawn. This penalty tax, however, is only ten percent. Many donors attempt to “frontload” the 529 account so that they can make a lump sum gift of $65,000, tax free.

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Thanks Gramps! Planning Gifts to Grandchildren

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Category: Beneficiaries Estate Planning Estate Planning for Children Planning for Minors

Often, grandparents who have extra money wish to assist their grandchildren financially. A recent article discusses three ways through which grandparents can give to their grandchildren.

Grandparents with a child
Grandparents with a child (Photo credit: Nestlé)

Write a Check

Many grandparents simply write checks to their grandchildren without thinking twice about it. Under current tax rules, a person can give as much as $14,000 per recipient per year, without tax consequences. If you would like to give an individual grandchild more than $14,000, consider using another vehicle to avoid tax consequences. Finally, remember that this type of gift is often calculated into a giver’s estate for the calculation of whether a person is eligible for means-tested government programs such as Medicaid.

Invest in a College Savings Plan

If you want to assist your children with paying for a college education, consider a 529 account rather than simply writing a check. With a 529, you can be certain that the money is spent exactly how you would like it to be spent. Additionally, 529 accounts offer important tax benefits that will not have any impact on your grandchild’s ability to apply for means-tested financial aid.

Use a Gift Trust

Finally, you can transfer money to your grandchild through a gift trust. A gift trust is an account that you set up where you or a named individual serves as the trustee. The trustee can direct the timing and use of any distributions made from the trust.

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Planning With a Baby on Board

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Category: Beneficiaries Estate Planning for Children Guardianship Planning for Minors Trusts Wills

The birth or adoption of a new child is a frenzied and joyous time in the parents’ lives. Understandably, estate planning is often the last thing on the minds of expectant parents. However, as a recent article explains, certain parts of estate planning are essential for a growing family. Expectant parents should consider at least the following two questions, and plan accordingly before it is too late.

Children, Baby new born
Children, Baby new born (Photo credit: Wikipedia)

Who Would You Trust to Care For Your Children?

Should the unthinkable happen and neither you nor your partner are able to care for your children, it is important that you have a plan in place. If you do not designate a guardian for your children, or the guardian you have designated declines to serve, the court will select the person who will care for your children. This may or may not be the person that you would have chosen.

Do You Have Life Insurance?

Life insurance is an important part of the estate of many parents. Life insurance provides a guaranteed sum of money that can finance the care of your spouse and children. For extra protection, you can designate that if you and your spouse pass on before your children reach the age of majority, the money will be kept in trust and distributed only by a designated trustee. You can further designate that, should you die after your children reach the age of majority, they can simply receive the sum outright or in installments at various ages such as 21, 25, and 30.  Yet another popular option is to allow the money to stay in trust forever to maximize asset protection, while ensuring financial needs are met.

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Are the Kids Alright? – Your Children Need an Independent Estate Plan

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Category: Estate Planning Estate Planning for Children HIPAA

Middle-aged Americans are constantly reminded that they need to create estate plans in order to protect their family from the unexpected. As a recent article explains, however, it is just as important for your adult children to create an estate plan as well, even if it’s a simple one.

Once your child turns 18, you lose any authority you had to view his or her medical records or make decisions about his or her medical treatment. The only way to avoid this is to encourage your child to participate in some simple estate planning maneuvers.

The Cool Kids
(Photo credit: TheMarque)

This planning is especially important as your child heads off to college. If your child suffers a major accident and is left unable to communicate, you would have to go through the daunting process of petitioning a court to appoint you the legal guardian of your child before you could make any medical decisions for him or her.

For less serious medical incidents, the Health Information Portability and Accountability Act (“HIPAA”) makes it difficult, or sometimes impossible, for a parent to receive critical medical information, including whether or not your child was admitted to a hospital, and to which one. If you and your child wish to avoid this, ask your adult child to complete a health care proxy and HIPAA release, which allows you to receive medical information concerning your child and to make medical decisions should he or she become incapacitated.

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