The Wealth & Wisdom Blog

Charitable Planning as a Triple Threat to the Tax Code

Posted on September 13, 2022 by cwessman@veritagelaw.com — No Comments

In basketball, a player is known to be in a “triple threat” position when he or she is holding the basketball and in an athletic position with the ball, ready to (i) pass to a teammate, (ii) dribble drive to the basket to score, or (iii) immediately shoot a jump shot. In my past years of playing basketball, I possessed neither a good jump shot nor the quickness necessary to dribble drive to the basket. In my case, the triple threat position was simply the means to pass the ball to a more capable teammate.

In tax planning, a charitable gift of assets might pose a “triple threat” to the tax code through one or more of three separate benefits. These three tax-related benefits are as follows:

An immediate income tax charitable deduction;
Avoidance of future capital gains or future ordinary income tax liability; and
Avoidance of future estate tax liability.

In this month’s update, I briefly summarize how a donor can implement a charitable strategy to make use of one or more of these three benefits.

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Buy One, Get One Free: Using Separate Revocable Trusts for Married Clients

Posted on August 10, 2022 by cwessman@veritagelaw.com

Buy One, Get One Free. Who doesn’t like a good deal? Whether two-for-one amusement park tickets, sports tickets or my favorite, BOGO children’s meals, we appreciate “two for the price of one” deals. In this month’s update, I share why we recommend that married residents of the State of Minnesota create two trusts—in some respects, two trusts for the price of one.

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Veritage Law Group

Posted on July 15, 2022 by cwessman@veritagelaw.com

I am pleased to announce that our law firm is now “Veritage Law Group.” Veritage is a combination of two words – “Veritas,” which is Latin for “truth,” and “Heritage.” This new name conveys our firm’s mission: to implement an estate plan unique to a client’s faith beliefs, family relationships and community commitments –the components that comprise one’s true heritage.

While our law firm’s name and logo have changed, we have not changed our scope and delivery of legal services. We will continue to focus in the areas of estate planning and trust and estate administration. Within our firm, here are the areas of focus that each of our professionals have developed:

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Customized Trust Planning

Posted on June 28, 2022 by Cory Wessman

“We love our kids equally by treating each of them uniquely.” One of the numerous estate planning implications of the COVID-19 pandemic is the significant increase in mental health challenges and drug and alcohol addiction issues experienced by the adult children of our clients. The WHO reported a 25% increase in anxiety and mental health disorders since the onset of the pandemic. Similarly, one in five adults report a surge in heavy alcohol use since March of 2020. By reason of student loan debts, significant inflation, and other factors, many of our clients are providing significant financial support to adult children. As in other areas of life and law, there is not one trust solution to be applied to a myriad of different challenges. Instead, a client’s post-death “testamentary trust” plan should address each child’s unique challenges. In this month’s update, I describe four types of testamentary trusts that can be customized for each beneficiary’s unique situation.

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Residential Property Planning

Posted on May 19, 2022 by Cory Wessman

“They made us an offer we could not refuse.” One of our neighbors recently sold their residence after receiving an unsolicited offer. This neighbor took advantage of the significant increase in residential property values not just in our neighborhood, but across the country. Relatedly, our law firm is corresponding with numerous clients seeking advice on the most efficient means of transferring residential property to children. In this month’s update, I briefly summarize the tax implications of transferring ownership of residential property to children by sale, gift or following death.

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Prime Numbers and the Division of Unique Assets

Posted on April 10, 2022 by Cory Wessman

While recently helping my third-grade daughter with her math assignments, I had to “google” the exact definition of a “prime number.” If your memory is better than mine, you will recall that a prime number is any number that cannot be made by multiplying two other whole numbers. Just as prime numbers cannot be divided into whole numbers, some of our assets are not subject to an easy division among multiple beneficiaries following death. Some of our assets, especially sentimental assets, are simply indivisible. In this month’s update, I summarize a two-part planning process to manage our “prime number” assets.*

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The Tax Efficiency vs. Legal Control Tradeoff with IRA Assets

Posted on March 9, 2022 by Cory Wessman

“Nothing is for Free, Cory,” a physician once explained to me. “If we take steps to address this particular health problem, it will have adverse consequences on other organs.” Just as there is often a “cost” for a particular medical treatment option, there are certain tax and control tradeoffs in estate planning decisions. Tax-deferred retirement accounts can be owned by a trust following death, thereby providing control and protection benefits to the account owner’s family. However, this usually comes at a “cost” of higher taxes.

Last month, I summarized the current tax rules for post-death IRA assets. As a follow up to last month’s update, on February 23, 2022, the IRS released 275 pages of “clarifications” to the 2019 SECURE Act. One noteworthy clarification relates to the required minimum distributions (“RMDs”) required of adult children beneficiaries who do not have a disability or chronic illness (“non-eligible beneficiaries”). According to the IRS, if the deceased account owner had reached the required beginning date, such non-eligible beneficiaries must continue to take RMDs annually in accordance with the deceased account owner’s RMD schedule. If the account owner has not yet reached the required beginning date, there are no such annual RMD requirements. However, regardless of when the account owner died, all remaining retirement account assets must be withdrawn by the December 31^st of the calendar year that contains the 10^th anniversary of the account owner’s death.

This month, I share three hypotheticals to illustrate the “trust control” versus “tax efficiency” tradeoff.

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Post-Death IRA Rules and New Life Expectancy Tables

Posted on February 13, 2022 by Cory Wessman

Who says that the glass is half empty at the IRS? While it is often said that the IRS views taxpayers as wealthier than we feel, the IRS now anticipates that taxpayers will enjoy a longer life expectancy than is supported by recent data.

According to the CDC, and as reported by CNN, the life expectancy at birth dropped by 1.8 years between 2019 and 2020, from 78.8 years in 2019 to 77 years in 2020. This was the single largest drop in life expectancy, year-to-year, since World War II. Effective as of January 1 of this year, we have new life expectancy tables for use in determining the minimum amount that must be withdrawn annually from all retirement accounts (IRAs, Simple IRAs, 401ks, etc.). These tables are applicable not just for determining the amounts that must be withdrawn once the current account owner reaches the required beginning date of age 72, but also the required minimum amounts that must be withdrawn annually following the original account owner’s death.

In this month’s update, I summarize the basic rules applicable to the “required minimum distributions” (“RMDs”) applicable to retirement accounts following death. In next month’s update, I will summarize the “tax efficiency v. trust control” tradeoff in making decisions about whether retirement account assets should be owned by a trust following death.

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Information Disclosure Following Death

Posted on January 18, 2022 by Cory Wessman

“This coordinated lying between us is exhausting, how do criminals manage?”

With careful coordination, my wife and I were able to keep the truth about Santa Claus from our children for several years. During that time, neither of us wanted to be the bearer of bad news about Santa to the kids. When they were eventually told the truth, how traumatic and disappointing it was for them to learn that it was their father, not Santa, who had enjoyed the cookies and milk left out on Christmas Eve.

In the estate planning context, I can understand the desire of some of our clients to avoid having to disappoint loved ones. Some clients don’t want to bear bad news to potential beneficiaries about an inheritance amount or percentage. These “Minnesota nice” clients would rather live in the more comfortable ambiguity by not facing the disappointment of potential beneficiaries.

In this month’s update, I briefly summarize who has the right to know the details related to the transfer of assets following death. While this question is of central focus following the death of a loved one, it is also of relevance for advising our living clients. As summarized below, the information disclosed following death will depend upon the legal ownership structure of the asset.

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The Benefits of Professional Advisory Insights

Posted on December 11, 2021 by Cory Wessman

“Hey honey, you can’t use the microwave now– I have to start a zoom call.”

Throughout much of the stay-at-home period in 2020 and into early 2021, my wife and I “suffered” (in a very first-world sense of the word, of course) from a few technology-related issues in our home. Until about six months ago, using our microwave for more than approximately 30 seconds effectively disabled all our wired devices. I learned that I could not conduct a zoom call at the same time as my wife was using the microwave to prepare breakfast for our kids. While I made some very feeble attempts to rectify the situation myself, I am glad to report that after hiring a home technology expert, we are no longer forced to choose between oatmeal for breakfast or an early morning zoom meeting. I never would have known how to fix our home technology on my own (“I didn’t know what I didn’t know”) and we greatly benefitted from a professional’s insights.

Just as “I don’t know what I don’t know” when it comes to technology matters, most of our clients approach us with the same “I don’t know what I don’t know” mentality on estate and gifting matters, open to our advice and counsel. In this month’s update, I summarize three commonly-misunderstood planning issues over which even the most astute clients have remarked, “I would not have known about that issue.”

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