Posts Tagged ‘Estate Planning’

Why Senior Citizens Should Consider their Financial Planning Options

Written by Apartment Management Magazine on . Posted in Blog

By Jess Walter


The idea of retirement often conjures up scenes of golden sunsets spent on a porch in California. The days flow by and there is not a care in the world, apart from ensuring that the cookies come out of the oven on time. This may seem like the ideal scenario, however, there is a slightly darker side to retirement that people are loathe to consider. The inevitability of death always weighs heavily on the minds of those who have reached a mature age, and provision for loved ones needs to be considered.

Seniors and Debt – What You Need to Know

Going into retirement without debt used to be the norm, but with the changes in the economy and the ease of obtaining debt, many seniors now have to face their golden years with debt repayments looming overhead. Although there are age restrictions on many types of debt, retirement often occurs before the age cut-off. Seniors are faced with steep monthly expenditures without the corresponding higher income that they’re used to. Furthermore, mounting costs in terms of healthcare often necessitate incurring further debt.

Property Still Remains a Worthwhile Investment

After the 2008 economic crisis, property markets experienced spates of volatility. Purchasing a home has its advantages and affords the owner more flexibility and security than a rental. With this in mind, it’s important to understand that the obligation of the repayment will still continue in the event of an owner’s death. The debt will form part of the estate, and if the remaining spouse is unable to meet the obligations of the loan, they may lose their home. Furthermore, property happens to be an asset in the estate as well, which provides a legacy for the heirs.

Creating a Legacy

Apart from the inherent risks that debt poses for senior citizens, there is also the desire to leave a legacy for their children. Those who are unable to provide a legacy for their children with their assets have the option to take out certain life insurance policies to cover this wish.

Furthermore, investments and assets often form part of the estate, whereas insurances have the option to pay out to the beneficiary directly. This reduces the liability on the estate, which provides heirs with a tax-free inheritance. That discussion with a financial adviser can be the difference between a healthy or insolvent estate.

Jess Walter  is a freelance writer and mother. She loves the freedom that comes with freelance life and the additional time it means she gets to spend with her family and pets.

Tax Alert! New Proposed IRC 2407 Regulations May Impact Your Estate Planning Strategy

Written by Apartment Management Magazine on . Posted in Blog

By Michael Trainotti


It has been over two weeks since the U.S. Treasury Department issued on August 4, 2016 proposed regulations under Internal Revenue Code Section 2704 that, when finalized, may substantially increase your wealth transfer taxes by blocking a common estate planning strategy. The new regulations would only apply to individuals whose family assets are more than $5,450,00 or married couples above $10,900,000.

Some commentators believe that if they are finalized this would be the most significant change in the estate planning area since 1986.  You may have read that planning ahead is key. Since the new regulations will not be finalized until early next year, everyone who would be subject to estate taxes should strongly be thinking about making gifts this year based upon the planning example below that will not be available after the new regulations are finalized.

Historically, taxpayers could reduce the value of their taxable estates by placing assets in partnerships, LLCs or closely held corporations and claiming lack of marketability and/or lack of control discounts. These discounts typically reduced the value of the ownership interests by 25% to 45%.

Thus, for example, placing $10 million worth of assets inside a closely-held entity might reduce the value of the estate by $2.5 million to $4.5 million and, given the current 40% estate tax rate, reduce the estate tax payable by $1 million to $1.8 million.

The above example is also true for making current gifts or sale of assets that you believe will appreciate in value over your life expectancy.  Gifting or selling of assets freezes the value of your assets today and shifts the appreciation to other family members.  The sale concept is true for the sale of assets to children, especially if there is a sale to a grantor trust where there is no recognition of income or the assets sold has a high basis and no or little income tax is recognized.

I will be preparing an article shortly explaining in more detail some of the planning opportunities that can be key if the new regulations are finalized. I want to point out that there have already been comments that the proposed regulations in current form, if finalized, may violate the congressional legislative history of allowing discounts, ignoring state law provisions governing business entities and general valuation principals occurring daily in the marketplace.  If that is the case, legal challenges will be a certainty.

You should contact your advisor(s) regarding whether or not the new proposed regulations may have any impact on your family assets if they become finalized.

Don’t miss this Important Tax Article in the September 2016 Issue of Apartment Management Magazine!

Michael Trainotti, Inc., A Law Corp
400 Oceangate, Suite 520
Long Beach, CA 90802
Work: (562) 590-8621
Fax: (562) 590-8181