Year End Estate Planning Review:

It is advisable for individuals to review Wills, Trusts and other estate planning documents periodically. When reviewing estate plans, individuals should consider these questions:

  1. Do the provisions still accomplish your goals?
  2. Do your documents contain provisions that protect young or financial inexperienced children, grandchildren and other loved ones?
  3. Are the fiduciaries named (Executor, Trustee, Power of Attorney, Health Care Agent) still appropriate?
  4. Are your Durable Power of Attorney and Living Will on file with family members and health care providers?
  5. Have estate planning concepts, funeral arrangements and decisions on anatomical gifts been discussed with family?
  6. Have you created a list of online accounts, including user names and passwords so your fiduciaries can access your accounts if necessary?
  7. Have you reviewed your life insurance and retirement plan beneficiary designations to make certain they are in line with your overall estate plan?
  8. Are bank accounts and other assets titled in line with your overall estate plan?
  9. For business owners, are buy-sell agreements and the related valuations and life insurance policies up to date?

Year End Gift Tax Planning:

There are several types of payments you can make without having to worry about the gift tax.  “Annual exclusion” gifts utilize the annual exclusion against gift tax, which for 2015 is $14,000 per recipient. Thus, married couples can give up to$28,000 to each loved one they may choose.

In addition to annual exclusion gifts, you can also make unlimited payments on behalf of others directly to medical providers for qualified medical expenses or directly to educational institutions for tuition expenses without the gift counting towards the $14,000 annual exclusion gift.

When making gifts to loved ones, it is best to gift cash, as opposed to highly appreciated stocks or investments.  When you gift an appreciated asset, your cost basis in the stock “carries over” to the recipient.  This means that when it the stock is ultimately sold, the recipient will pay capital gains tax on the difference between the sales price and your original cost. It is better to allow your loved ones to inherit highly appreciated stock at your death because inherited stock receives a stepped-up cost basis so the capital gain is eliminated.

If you are considering making a substantial year end charitable gift it is best to gift appreciated stocks to the charity.  When you make charitable contributions of highly appreciated stock you will receive a deduction for the current fair market value of the donated stock, and neither you nor the charity will have to pay any capital gains tax on the appreciation.

Paul Kellogg is a lawyer with Phillips Law Firm, Inc., whose practice focuses on estate planning, probate and representing entrepreneurs and business owners.  He can be reached at (513) 985-2500 or via email at [email protected]

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