The Wealth & Wisdom Blog

How are you going to remember these tumultuous days of the 2020 coronavirus pandemic?  My three kids were each given a writing journal by my mother, who encouraged each of them to write about daily life in the midst of a pandemic, both for themselves and for future generations.  Earlier this week, I also helped my kids bury a time capsule—a shoe box full of items that my kids envision would be of interest to future generations who are trying to understand how a family of five is living through a 2020 pandemic.  Over these past few weeks, I have interacted with a few clients who have decided that, by reason of the most significant economic downtown in our lifetimes, now is the time to provide financial assistance to their adult children.  Some clients are helping a child with an intra-family loan, while others are gifting assets to the child.  In this month’s update, I provide a brief overview of the tax and legal implications of transferring assets to adult children, either by loan or gift, and stress the importance of documenting the client’s intentions in this regard.

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Congress and President Trump recently enacted legislation that, while providing some candy in the average taxpayer’s Christmas stocking, also includes a small lump of coal.  This post (i) makes you aware of the recent legislation that marks the official death of the so-called “stretch IRA,” and (ii) provides the relevant federal and Minnesota state transfer tax thresholds for 2020.

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I am not here to see you, son, I’m here to see your kids!  Anyone in my family knows my mother does not play “Minnesota nice;” she says it how it is.  Over Thanksgiving, and really during any family gathering, my mother makes it a point to prioritize time with her beautiful, athletic, and well-adjusted grandchildren.  My siblings and I don’t need to be present for my mother to enjoy Thanksgiving.

Perhaps by reason of seeing their own grandchildren over the Thanksgiving holiday, it seems like I have many discussions this time of year with my clients about how to best provide for their grandchildren through their estate plan. In this month’s update, I provide (i) some of the reasons for why clients decide to provide directly for grandchildren; (ii) the tax rules relevant to making lifetime gifts for grandchildren, and (iii) emphasize the importance of coordinating an estate plan with lifetime gifts.

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Have you listened to any good books on tape recently?

Neither have I, and yet I have not stopped using the term “books on tape” when referencing the audiobooks on my Audible subscription.  My use of the term “books on tape” has caused no shortage of confusion with my children, who have never used a CD player, let alone a cassette player. Just as physicians and biologists are interested in determining what functional use a body part may or may not have, our firm attempts to identify aspects of a client’s estate plan that are only vestiges of the past; that is, anything that has no real current purpose and is just weighing down the clients and their advisors.  Outdated (or “vestigial”) estate planning structures can take several forms, including:  (1) outdated provisions within a client’s legal documents, (2) the investment or bank accounts owned by a client that no longer serve the purpose originally intended, and even (3) an outdated physical medium by which information is being held or communicated.

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“It turns out your friend is only mostly dead.”

In the 1987 fairly tale adventure movie, Princess Bride, Billy Crystal plays Miracle Max, an unemployed magician who is able to concoct a magic potion in order to return Wesley, the movie’s protagonist, to life again.  Wesley’s friends had brought Wesley’s body to Miracle Max after Wesley had been tortured to death by the evil Prince Humperdink.  Upon arrival, Miracle Max tells the friends that Wesley was only “mostly dead” and not “all dead.”  “If it turns out your friend is all dead,” Miracle Max explains, “there is only one thing you can do, which is to go through his pockets and look for loose change.” Like all good fairy tales, Miracle Max is able to concoct the magic potion, bring the “mostly dead” Wesley back to life, and Wesley and his friends have fun storming the castle to save the Princess Bride from Prince Humperdink.

In the course of estate planning discussions, some of our clients might tell us that they do not wish to “rule from the grave” or exercise a so-called “dead hand.”  When they are “all dead,” they might not wish to act like they are only “mostly dead” by directing children or other beneficiaries as to how their remaining assets should be managed.   While I certainly appreciate the desire to provide adult beneficiaries assets without limitations, there could be tremendous advantages to creating on ongoing trust structure (what I call a “testamentary trust”) for the benefit of a child, grandchild or other beneficiary.

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