IRS: Account transcripts can serve as estate tax closing letter
A recent IRS notice confirms that an account transcript issued by the IRS qualifies as a substitute for an estate tax closing letter, as long as the transcript includes the proper transaction code. An estate tax closing letter indicates that the IRS has accepted an estate tax return and that the estate’s federal tax liabilities have been satisfied. Once the letter has been received, it makes it clear to the executor of the estate that it can proceed with finalizing the estate administration process. The receipt of the closing letter is often needed to meet requirements for state law probate…..
Continue ReadingUnderstanding the tax consequences of inheriting a Roth IRA
Passing down a Roth IRA can seem like a good idea, but it doesn’t always make the most sense. Before converting a traditional IRA into a Roth IRA to benefit your heirs, you should consider the tax consequences. Earnings in a traditional IRA generally are not taxed until they are distributed to you. At age 70 1/2 you have to start taking distributions from a traditional IRA. By contrast, contributions to a Roth IRA are taxed, but the distributions are tax-free. You also do not have to take distributions from a Roth IRA. Leaving your heirs a tax-free Roth IRA…..
Continue ReadingIf your house burns down, do you still have to pay your mortgage?
At the closing for your home purchase or refinancing, you are required to sign a promissory note that says you’ll make the mortgage payments every month. That agreement remains in effect even if your house burns down. You’re also required to report any loss to the lender and your insurance carrier promptly. But a reprieve is still possible. For example, a lender might allow a borrower to suspend mortgage payments for a defined period of time or might put a hold on foreclosure activity. Based on the standard Fannie Mae or Freddie Mac mortgage form, a borrower must repair or…..
Continue ReadingCheck your bank’s real estate notices twice
When a bank goes through a merger or agrees to buy or sell mortgage loans, certain notices must be provided to borrowers before and after the transaction closes. Federal law states clearly what notices are required and how they must be worded, but sometimes the legal rules conflict with each other. It’s helpful to have an attorney review any notices you receive to ensure that they are in compliance with federal law and evaluate how they impact the terms of your loan. Under a federal law called the Real Estate Settlement Procedures Act of 1974 (RESPA), when a bank or…..
Continue ReadingRetirement accounts: Tips for taxpayers turning 70 1/2
It’s a big year for the first set of baby boomers: They’re turning 70 1/2. And that means getting prepared for their first mandatory distributions from tax-sheltered retirement accounts. The first thing to keep in mind is that the amount of your required annual withdrawal is based on the assets in the account as of the prior December 31. For a taxpayer with multiple 401(k) plans, he or she must take a proportional distribution from each of the accounts. If a taxpayer has multiple IRAs, the payouts can be uneven. That is, the entire amount can be taken out of…..
Continue ReadingDon’t let surprise costs of home purchase shock you
If you’re buying a house, the total price you’ll end up paying is more than meets the eye. Usually, a buyer pays between 2 percent and 5 percent of the home purchase price in closing costs. Lenders often disclose these costs, but they aren’t the only hidden fees you need to consider. Other fees to keep in mind include payments to appraisers, home inspectors and settlement agents, as well as the cost of title insurance, homeowners’ insurance and property taxes. The Wall Street Journal cited a survey of U.S. homeowners conducted for TD Bank in March of 2016, which found…..
Continue ReadingIn will contest, no need to oversell decedent’s capacity
Imagine a situation where a loved one dies and there is a contest over the validity of the will. The question arises: What was the decedent’s mental state in drafting the will? A typical, knee jerk answer is that the decedent had a perfectly clear state of mind. However, testamentary capacity doesn’t require such a high level of clarity in communication and comprehension. Further, overstating a decedent’s capacity might actually lead a trier of fact to become skeptical of the will proponent, especially if other evidence exists that the decedent’s mind wasn’t as clear as stated. When a will is…..
Continue ReadingNew law allows individuals to create special needs trusts
Buried in a new federal law is a tiny change that will now allow individuals to set up their own special needs trusts. The sum total of the change is two words — “the individual” — intended to correct a more than 20-year old error. The change is called the Special Needs Trust Fairness Act. Authorized under the Omnibus Budget Reconciliation Act of 1993, special needs trusts protect assets and allow an individual to maintain eligibility for governmental benefits such as Supplemental Security Income (SSI) and Medicaid. Prior to the law being enacted, a person with a disability under the…..
Continue ReadingWhat is undue influence, and how can it be avoided?
Saying that there has been “undue influence” is often used as a reason to contest a will or estate plan, but what does the term mean? Undue influence occurs when someone exerts pressure on an individual, causing that individual to act contrary to his or her wishes to the benefit of the influencer or the influencer’s friends. The pressure can take the form of deception, harassment, threats or isolation. Often the influencer separates the individual from loved ones in order to coerce him or her. The elderly and infirm are usually more susceptible to undue influence. To prove a loved…..
Continue ReadingChanges proposed by Trump could open up big estate planning opportunities
With proposals to repeal the federal estate tax and the generation-skipping transfer (GST) tax on the table, the new administration may be opening up some rare estate planning options. Under President Donald Trump’s proposal, the current step-up in basis for income tax purposes on assets owned at death would be limited to $10 million of assets. The intention, according to the proposal, is to exempt small businesses and family farms. It’s likely that assets exceeding $10 million in value would be either subject to carryover basis rules of some kind or would be subject to capital gains at death. Under…..
Continue Reading
