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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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Will You Be Impacted by the New Jersey Death Transfer Tax?

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Category: DING Estate Taxes Inheritance Taxes New Jersey Planning NING

When it comes to high-dollar decisions about estate planning, many people wrongfully believe they are not included because the federal tax exemption of $5.34 million is so high. While this is true, in New Jersey, you should be aware of the transfer tax because far more people are included under that umbrella.

In New Jersey, an estate larger than $675,000 at the time of your death can trigger the New Jersey Transfer Estate Tax. If you think you’re close, but not sure: cars, cash, bonds, life insurance, retirement accounts, real estate, bonds, stocks, and personal items are all included. A fair number of New Jersey residents hit that threshold with just their retirement plan and real estate. Depending on who will be the Beneficiary, there may be a separate inheritance tax of up to 18%. (See out prior blog post: https://lawesq.net/blog/2014/05/the-n-y-state-of-mind-changes-to-new- york-gift-tax-and-estate-laws/) 

Photo Credit: thedailyriff.com

There are a few things worth bringing up if you’re concerned about this tax. First of all, it is possible to plan around it. Using DING or NING trusts, which involve establishing trusts out of state, can be a great tool for addressing state tax concerns. Gifting and special plans for your retirement accounts can also address concerns for the future.

Setting things up in advance through a trust can also make it easier on your loved ones if you have passed away. There are many cases in which a simple will just won’t suffice. To talk specifics for your assets and plans, call us today 732-521-9455.

 

Do you feel lucky? What is a Quick Draw Buy-Sell Agreement?

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Category: Finances Income Tax Planning Inheritance Taxes Insurance Life Insurance Small Business Owner Taxes

Many business owners have a buy-sell arrangement set up for the future. It’s helpful to draw out these directions in advance, especially when there is the potential that future owners or part-owners might get gridlocked with one another. In these situations, buy-sell directions can help disputing parties move forward.

Do you feel lucky What is a Quick Draw Buy-Sell Agreement

It’s possible that you’ve already heard about a shotgun buy-sell arrangement, but a quick draw agreement is a bit different. Under a shotgun, the offering individual stipulates a price. The offerree then has the option to buy those shares or to sell their own shares to the offeror. The exact timing isn’t a major issue in this situation, since the offeree retains the option to either buy or sell. In some ways, this can even be seen as a disincentive to pull the trigger.

All that changes under a quick draw arrangement. Under a quick draw, either side can provide a notice to purchase the other’s shares at a price that is determined through an appraisal process. This can happen after a contractually defined “trigger event”, but the timing of the trigger pull is essential in quick draw. Simply put, timing is everything.

Under quick draw, buyer and seller designation is determined simply by who submits their notice to purchase the other’s shares first. A difference of even just minutes can determine who gets to buy and who gets to sell. This complex process was recently held up in Mintz v Pazer, in which the judge supported this out of the box buy-sell arrangement.

If you’d like to learn more about your buy-sell options and put a plan for the future in motion today, reach out to us at 732-521-9455 or email us at info@lawesq.net

How to Plan for, or Avoid, Transfer Taxes

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Category: Estate Taxes Family Limited Partnerships Family LLCs Gift Taxes Inheritance Taxes Life Insurance Trusts

As a recent article suggests, estate planning encompasses a lot more than most people would think. Not only does estate planning allow you to structure the final distribution of your assets upon your death, but it also allows you to provide for the management of your assets during life, plan for the care of your children, and make important decisions about what kind of medical care you would like to receive at the end of your life. Although estate planning encompasses all of these things, most people come to the table with an overwhelming goal of avoiding transfer taxes, namely Estate Taxes, Inheritance Taxes and Gift Taxes.

There are plenty of ways that estate planning can be used to minimize the tax liability an estate will face after the owner’s death. In many situations, it is possible to plan for zero estate taxes. Some strategies involve giving up control of certain assets. For example, a person could zero out their tax liability by setting up a charitable trust. Others, such as Family LLCs (FLLCs) and Family Limited Partnerships (FLPs) allow owners to maintain more control..

For the ultra-wealthy, there are many sophisticated asset transfer mechanisms that can be used to avoid transfer taxes. These mechanisms include foreign grantor trusts, dynasty trusts and private placement trusts. Again, these mechanisms often mean that a person has limited or no access to the assets within the trusts.

For those who want to maintain full control of their assets, life insurance is another way to provide money for anticipated taxes. These policies are often used to provide quick cash for a person’s heirs to pay any taxes and fees on the estate.