CONSIDER ADDING POWERS OF ATTORNEY TO YOUR GRADUATE’S TO DO LIST

Posted on by

It’s that time of year when many high school graduates are preparing to leave home, whether it be to attend college or join the workforce.  While families prepare for this change in their child’s lives, many parents forget that they no longer possess the legal authority to make health care and financial decisions on behalf of their child once he or she turns 18.  Without the proper advanced planning documents in place, parents would need to obtain a court order to exercise this authority on behalf of their adult child, even if the child becomes incapacitated.  For this reason, we recommend that all parents encourage their children to implement a Durable Power of Attorney, Power of Attorney for Health Care, and HIPAA Authorization for Release of Protected Health Information upon attaining age 18.  In doing so, it may be helpful to more fully understand what these documents do.

Durable Powers of Attorney: Authorizes the designated attorney-in-fact to act on behalf of the adult child with respect to most financial matters.  This could include managing bank accounts, paying bills, signing tax returns, applying for government benefits, applying for a lease, forwarding mail, etc.  Durable Powers of Attorney can be either immediate or “springing”.  To activate a springing Durable Power of Attorney, the adult child must be deemed incapacitated by two different physicians (or pursuant to recent legislation, one physician and one psychologist, physician’s assistant, or nurse practitioner).

Power of Attorney for Health Care: Authorizes the designated health care agent to make medical decisions on behalf of the adult child if he or she is incapacitated.  Like a springing (as opposed to immediate) Durable Power of Attorney, a Power of Attorney for Health Care must be activated upon the adult child’s incapacitation.

HIPAA Authorization for Release of Protected Health Information: Authorizes an adult child’s health care providers to release information to and discuss the child’s medical care with the designated individuals.  Without this authorization, health care providers are legally prohibited from discussing the adult child’s care with third-parties, even if those third-parties are the child’s parents.  The HIPAA Authorizations is also effective even if the adult child’s Power of Attorney for Health Care has not yet been activated.

Most of the time, a parent will never need to utilize these documents (at least they hope not to) on behalf of their child.  However, it is better to hope for the best and plan for the worst.

If you should have questions regarding these issues, please contact Lin Law LLC at (920) 393-1190.

 

SECURE Act 2.0 – Will it affect your Retirement Plan?

Posted on by

On March 29, 2022, the U.S. House of Representatives voted in favor of the Securing a Strong Retirement Act of 2022 (the “SECURE Act 2.0”).  If this retirement savings legislation is passed by the U.S. Senate and signed into law by President Biden, SECURE Act 2.0 could represent an economic policy shift regarding retirement savings and investment.

SECURE Act 2.0 expands on the original SECURE Act and includes provisions to raise the required minimum distribution (RMD) age from 72 to 75 over time, broaden automatic enrollment in retirement plans and enhance 403(b) plans.

The original SECURE Act was passed into law by former President Trump in December of 2019.  The original SECURE Act modified the existing retirement savings plan system regarding RMD, contributions to traditional IRAs, 529 plan uses for student loans, and making annuities easier for 401(k) plan administrators to offer.  SECURE Act 2.0 expands on all of the foregoing provisions, including increasing the RMD age to 73 in 2022, to 74 in 2029, and to 75 in 2032.

SECURE Act 2.0 requires 401(k) and 403(b) plans to automatically enroll participants when they become eligible, though employees can opt out of this coverage.  The automatic enrollment amount starts at a minimum 3% of salary and can reach up to 10% of salary, followed by a 1% increase each year until it reaches the maximum 10% threshold.  There are exceptions to these SECURE Act 2.0 requirements regarding small businesses with 10 or fewer employees, new business (those less than 3 years old), church plans and governmental plans.

SECURE Act 2.0 also includes a proposal to increase catch-up contributions for eligible workers.  Currently, those aged 50 and older contributing to a 401(k) or 403(b) plan are allowed to contribute $6,500 in addition to their standard maximum contribution of $20,500.  Under SECURE Act 2.0, up to $10,000 in catch-up contributions may be allowed for workers aged 62-64.  This could possibly raise the maximum 401(k) contribution to over $30,000.  Workers contributing to an IRA would not receive a similar benefit from this proposed boost in catch-up contributions.  However, the current IRA catch-up provision of $1,000 per year upon reaching age 50 would be indexed for inflation.

Currently, if employers match employee contributions in plans like a 401(k), those contributions are made with pre-tax dollars, to be taxable when a worker withdraws them in retirement.  SECURE Act 2.0 allows employees to choose to receive after-tax Roth matching contributions instead.  These contributions would not be excluded from a worker’s taxable income.

There’s Still Time for 2021 Individual Retirement Account Contributions

Posted on by

The last chance to contribute to a 2021 traditional or Roth individual retirement account (“IRA”) is April 18, 2022, which is also the tax-filing deadline for most Americans. 

With that tax deadline approaching, contributing to a traditional IRA may be a good way to trim your tax bill.  For a 2021 deduction, you can contribute up to $6,000, or $7,000 if you’re age 50 or older, provided you’ve earned that much from a job.  These IRA contribution limits are per taxpayer, not per IRA account.  Any IRA contribution would need to be designated for 2021 to the financial institution if your intent is to make a 2021 contribution.

These contribution limits apply to all IRA accounts for an individual taxpayer.  This means that a single taxpayer could split up to $6,000 between their Roth IRA and traditional IRA.  A married couple could invest up to $12,000 in their combined accounts.

While it’s easy to see the appeal of a lower tax bill, the federal tax rate for many Americans is at the lower end of historical ranges. The current rates, enacted by former President Trump’s tax overhaul, are scheduled to sunset after 2025, which could trigger higher tax rates for many Americans in 2026 and beyond.  It’s possible that post-tax IRA contributions may also be worth exploring due to these historically low federal tax rates.   

BUSINESS FORMATION – WHAT SHOULD I CONSIDER?

Posted on by
Forming a business involves many considerations and consists of multiple applications and legal processes.  This can be stressful for someone who is unfamiliar with this undertaking. That is why prospective business owners choose to hire counsel with experience and knowledge in the area of business formation.
Before you meet with an attorney, ask yourself the following questions:
  • What is my desired business name?
  • Is my chosen business name available? (You may do a “name check” through the Wisconsin Department of Financial Institutions Corporate Records.)
  • Who should be appointed as registered agent for the business?
  • What are some likely risks and opportunities related to the business?
  • What is my desired level of formality for the structure of the business?

A discussion with counsel regarding the background and goals with respect to the business helps in determining other issues, such as business structure (e.g., limited liability company, corporation, partnership, etc.) and tax elections to fit your business structure and goals, along with legal documents governing the business.  After your business is formed and other issues arise, counsel can provide ongoing support, including managing risks or liabilities, compliance and tax support.

If you should have questions regarding this topic, please contact Lin Law LLC at (920) 393-1190.

 

WHAT “NONFINANCIAL” ASSETS SHOULD YOU INCLUDE IN YOUR ESTATE PLAN?

Posted on by

When preparing your estate plan, you usually think about the financial aspects of your estate (e.g. bank accounts, retirement accounts, brokerage accounts, real estate, tangible personal property). However, there may be nonfinancial assets you could consider when preparing your estate plan.

Digital Assets

So much of our information is stored online. Your digital assets left behind can become a “Digital Legacy” for you upon your passing. A list of items that can contribute to your “Digital Legacy” includes, but is not limited to the following:

  • Social Media Accounts (e.g. Facebook, Instagram, Twitter, etc.)
  • Photos
  • Videos
  • Websites
  • Dating Profiles (e.g. Tinder, Bumble, etc.)
Consider this: What would you be comfortable with regarding your digital assets after your passing? Would you want your “Digital Legacy” to be shut down or remain activated? In this instance, it might be important to you to have detailed written directions for how you wish to have your digital assets handled after your passing.

Family Traditions

Your family traditions may include a secret family recipe that only you know (e.g., your delicious, mouthwatering turkey dinner) and that you can’t imagine your family going without. You may want to include your secret family recipe in your estate plan in order to pass on your holiday tradition.

Personal Beliefs

A personal legacy statement may include your beliefs, values and morals that you live by. By including a personal legacy statement in your estate plan, your personal beliefs can continue to reach and inspire your family and friends.

If you should have questions regarding this topic, please contact Lin Law LLC at (920) 393-1190.

Fireside Holiday Chat – Will You Be My Trustee?

Posted on by

Holiday gatherings can be a good time to reflect on many things, although considering the identity of a desired fiduciary for your will or trust-based estate plan may not be on your list of fun holiday activities.

Your fiduciary would have the authority and responsibility to administer your assets and carry out your wishes once you pass away. Your fiduciary is referred to as a “personal representative” under a will instrument and a “trustee” under a trust instrument. Your personal representative or trustee can be anyone you want who is at least eighteen (18) years old. A personal representative or trustee can be your spouse, child, sibling, other family member, close friend or neutral third party.

There are many options you could consider regarding the choice of a personal representative or trustee, so how will you decide who to choose? The decision is ultimately yours, but what follows are a few things to consider before selecting a fiduciary for your estate plan:

  • Is the person someone you trust and/or trustworthy?
  • Is the person ethical?
  • Is the person familiar and comfortable with handling finances?
  • Will the person follow and respect your wishes?
  • Is the person familiar with your family dynamics?
  • Will the person be willing and able to navigate the administration of a trust or estate, including working and dealing with third parties, e.g., financial or legal institutions and entities?

It is prudent to select a fiduciary who is diligent, respectful, ethical, objective and level-headed. Who would you choose as your fiduciary? Holiday season reflection may be as good of an opportunity as any to consider that question.

If you should have questions or concerns regarding these issues, please contact Lin Law LLC at (920) 393-1190.

When Your Beneficiaries Could Receive An Inheritance – Which Distribution Method Is Best?

Posted on by
The method in which you choose to distribute a beneficiary’s inheritance upon your passing is an important part of the estate planning process. There are a variety of ways to do this, and you should consider the method that best meets your estate planning goals.

Distributed Outright  After all bills and expenses are paid, assets are divided and distributed to your beneficiary(ies) directly. This distribution method is an option for parents who have financially responsible adult children.

In Trust, Distributed Outright at a Certain Age, at Certain Ages, or Upon a Life Event  The assets that are held in trust for a beneficiary’s lifetime are distributed by a trustee in accordance with the trust’s provisions. Usually the provisions of a children’s trust or beneficiary’s trust provide that when the beneficiary attains a certain age (common age distribution choices are thirty (30) or thirty-five (35)), the trustee will distribute the assets of the trust outright to the beneficiary at the specified age, thus terminating the trust. Trust assets can also be distributed at multiple distribution ages. For example, the provisions of a trust can provide that the beneficiary shall receive one-third (1/3) of the trust assets at the age of twenty-five (25), one-third (1/3) at the age of thirty (30) and the residue of the trust outright at age thirty-five (35). A less common, but still useful option, would be to distribute the assets of a trust outright upon an event, such as graduating from college.

Asset Protection Trust  Another common distribution structure is an asset protection trust that is held and maintained for the lifetime of a beneficiary with no mandatory distributions of principal and income.  An asset protection trust can provide for the beneficiary to become co-trustee or sole trustee of his or her trust upon attaining a certain age. Upon the death of the beneficiary, unless the beneficiary exercises a valid power of appointment, the assets would continue to be held in trust for the benefit of the beneficiary’s issue by representation.  The benefit of this option is that the beneficiary of the trust, if he or she is also acting as the trustee, has control of the trust assets and can protect the trust assets in the event of creditors’ claims or divorce. The right method depends on your unique circumstances and goals. The best strategy to leave assets to your beneficiaries may change over time. To ensure that your estate plan meets your needs, be sure to review your estate plan on a regular basis.

If you should have questions regarding this topic, please contact Lin Law LLC at (920) 393-1190.

Taking Care of the Family Cottage

Posted on by

As Wisconsin residents close up their family cottages for the winter, it may be a good time to consider a structure to conveniently allow your family to continue to enjoy the cottage for future generations.

In some cases, it may make sense to set up a limited liability company or trust to facilitate indirect ownership of the cottage and protect it from certain liabilities.  This would allow a current owner to provide a structure for transfer of cottage ownership, use and management of the cottage and payment of expenses.

Both a limited liability company (“LLC”) and trust can provide the owner some liability protection, but there are some differences between the two structures.  If an owner wants to leave some money or investments for future generations to utilize for cottage expenses, such funds could, in most instances, be protected within a trust.  However, structuring cottage ownership in a trust may provide less flexibility for future generations than an LLC would because a trust becomes irrevocable (and thus harder to modify its terms) upon an owner’s passing.  So, in the event of a dispute over, for example, maintenance and expenses, a trust can be more cumbersome than an LLC regarding settling or bypassing such disputes.

On the other hand, an LLC’s advantage is its flexibility.  LLC’s are governed by operating agreements, which can be modified by current members of the LLC.  Because an LLC is a flexible entity, it can be a particularly helpful vehicle when it comes to handling unforeseen circumstances, facilitating ownership transfers, particularly if a family member does not want to be involved with the cottage, and managing usage of the cottage.

Whichever route an owner may choose, there are certain fundamental considerations for inclusion into the operative language for trusts or LLC’s.  Those include provisions regarding maintenance, cost sharing and budgeting, dispute resolution and creditor protection and tax implications with respect to the cottage.

If you should have questions or concerns regarding these issues, please contact Lin Law LLC at (920) 393-1190.

 

 

Should Your Graduate’s To-do List Include Powers of Attorney?

Posted on by

It’s that time of year when many high school graduates are preparing to leave home, whether it be to attend college or join the workforce.  While families prepare for this change in their child’s lives, many parents forget that they will no longer be able to make health care and financial decisions on behalf of their child once he or she turns 18.  Without the proper advanced planning documents in place, parents would need to obtain a court order to exercise this authority on behalf of their adult child, even if the child becomes incapacitated.  For this reason, we recommend that all parents encourage their children to implement a Durable Power of Attorney, Power of Attorney for Health Care, and HIPAA Authorization for Release of Protected Health Information upon attaining age 18.  In doing so, it may be helpful to more fully understand what these documents do.

Durable Powers of Attorney: Authorizes the designated attorney-in-fact to act on behalf of the adult child with respect to most financial matters.  This could include managing bank accounts, paying bills, signing tax returns, applying for government benefits, applying for a lease, etc.  Durable Powers of Attorney can be either immediate or “springing”.  To activate a springing Durable Power of Attorney, the adult child must be deemed incapacitated by two different physicians (or pursuant to recent legislation, one physician and one psychologist, physician’s assistant, or nurse practitioner).

Power of Attorney for Health Care: Authorizes the designated health care agent to make medical decisions on behalf of the adult child if he or she is incapacitated.  Like a springing (as opposed to immediate) Durable Power of Attorney, a Power of Attorney for Health Care must be activated upon the adult child’s incapacitation.

HIPAA Authorization for Release of Protected Health Information: Authorizes an adult child’s health care providers to release information to and discuss the child’s medical care with the designated individuals.  Without this authorization, health care providers are legally prohibited from discussing the adult child’s care with third-parties, even if those third-parties are the child’s parents.  The HIPAA Authorizations is also effective even if the adult child’s Power of Attorney for Health Care has not yet been activated.

Most of the time, a parent will never need to utilize these documents (at least they hope not to) on behalf of their child.  However, it is better to hope for the best and plan for the worst.

If you should have questions regarding these issues, please contact Lin Law LLC at (920) 393-1190.

U.S. Congressional Bills Introduced Regarding Estate, Gift and Generation-skipping Taxes

Posted on by

A bill was introduced in the Senate to reduce estate, gift, and generation-skipping transfer tax exemption amounts and increase tax rates.  The bill would also eliminate or reduce the tax benefits received from certain estate planning techniques.

Senator Bernie Sanders (I-VT) introduced Senate bill 994, also known as the “For the 99.5 Percent Act”, which would amend the Internal Revenue Code to increase the rates regarding taxes on the transfer of the taxable estate of decedents who are US citizens or residents.

For estates over the basic exclusion amount, the rate would be 39%.  For estates over the basic exclusion amount and not over $10 million, the rate would be 45%.  For estates over $10 million and not over $50 million, the rate would be 50%.  For estates over $50 million and not over $1 billion, the rate would be 55%; and for estates over $1 billion, the rate would be 65%.

The bill would also reduce the basic exclusion amount, which for 2021 is $10,000,000, adjusted for inflation, to $3,500,000 for estates of decedents dying, and generation-skipping transfers and gifts made, after December 31, 2021.  (The text of the bill does not include an annual inflation adjustment for the basic exclusion amount).

The bill would also eliminate a step-up in basis for certain grantor trusts, the assets of which are not includible in the grantor’s estate.  This foregoing change would make clear that assets in an intentionally defective grantor trust (IDGT) would not receive a step-up in basis at the death of the grantor unless the assets were includible in the grantor’s estate.

Additionally, the bill would apply an inclusion ratio of one to any generation-skipping transfer trust that is longer than 50 years, and would impose a limit of two donees for annual exclusion gifts.

A bill was also introduced in the U.S. House (H.R. 2576) to amend the Internal Revenue Code “to reinstate estate and generation-skipping taxes, and for other purposes”, although text has not been received for this bill as of this date.

THE BOTTOM LINE

Under the proposed legislation, estate tax exemption levels would fall and rates would rise.  It is important to remember that each bill has only been introduced and may have only a small chance of passage into law.  However, the proposed legislation represents another indicator that revisions to the tax code will likely remain a Congressional priority.

If you should have questions or concerns regarding these issues, please contact Lin Law LLC at (920) 393-1190.