(Dinar Recaps Note: This post is for informational purposes only. It is not legal, tax or investment advice. Dinar Recaps advises that everyone should do their own due diligence and seek local Professional tax, legal and/or investment advisers.)
SpecialAgentGibbs] It's official: Deal reached on "fiscal cliff"
[SpecialAgentGibbs] Tax rates: Current tax rates will be extended for all wage earners making below $400,000 and couples making below $450,000.
[SpecialAgentGibbs] The estate tax: It was set to increase from rom 35 percent to 55 percent in 2013. Instead, the compromise sets the new rate at 40 percent with the first $5 million worth of property exempt from being taxed.
[SpecialAgentGibbs] PAY ATTENTION TO THAT ONE FOLKS
[SpecialAgentGibbs] Capital gains tax: Capital gains and dividend tax rates will increase from 15 to 20 percent.
Read More Link on Right
[SpecialAgentGibbs] Alternative Minimum Tax: A permanent fix to the tax that would hit middle class families
[SpecialAgentGibbs] "Doc Fix": Doctors will be shielded from a massive reimbursement gap for treating Medicare patients.
[SpecialAgentGibbs] Unemployment benefits: Unemployed workers will receive their benefits which expired over the weekend.
[sue47] Gibbs does that mean that we as medicare patients can still be assured of seeing our doctor?
[SpecialAgentGibbs] Renewable energy tax credit: The tax credit for renewable energy companies will be extended for another year.
[SpecialAgentGibbs] 40% Estate Tax, over $5M
[Spirit12] SpecialAgentGibbs Yep...been trying to decifer all the quick fixes...ummmm
[SpecialAgentGibbs] Everyone that gains $5M or more will be classified as an estate
[Spirit12] SpecialAgentGibbs What do you think about that "estate" one sag?
[SpecialAgentGibbs] Y'all might want to start thinking about those trusts
[SpecialAgentGibbs] Spirit12 If you have over $5M, it will be classified as an estate and face a 40% tax
[Spirit12] SpecialAgentGibbs yep have a trust ready to go...was thinking about not doing it, but now...do believe I will.
[sue47] Gibbs, sounds to me like o's finally figured out a way to take almost all we will have unless we prepare.
SpecialAgentGibbs] NOTE: NEITHER OOM OR MYSELF PROMOTE TAX EVASION TACTICS IN ANY WAY, SHAPE OR FORM!!! USE THEIR SYSTEM TO YOUR ADVANTAGE!
[SpecialAgentGibbs] Certain trusts remove you from estate classification, I suggest y'all start taking it seriously and do some heavy research (or give 40% to the GOV)
[SpecialAgentGibbs] You have been warned
[Spirit12] SpecialAgentGibbs Was listening to a talk show on radio yesterday and a caller said something that just hit me. Here we had 2 men deciding yesterday, what I can buy, own, eat, where I can sleep, and what I can do....doesn't sound like the America I thought I lived in. Just not right.
[SpecialAgentGibbs] In modern parlance, a “trust” has the connotation of extreme wealth, of an upper-crust legal refinement that most people in the middle-class wouldn’t be able to enjoy. But in reality, a legal trust is a powerful tool available to any one of us that truly wants to set one up.
[SpecialAgentGibbs] The only question remaining is: why set up a trust?
[SpecialAgentGibbs] The answer is simple: trusts are remarkable financial tools. They help you avoid more estate taxes (as you’ll learn here), they help you control your money, and they help you to provide for the care of loved ones who might not be able to take care of themselves.
[SpecialAgentGibbs] Let’s take a closer look at the art of the trust and figure out how you can start taking advantage of them to ensure that more of your property and money is left behind responsibly – and so that your family members can enjoy as much of your success as legally possible.
[SpecialAgentGibbs] It’s important to point out that having a trust will not actually reduce the rate of your estate taxes. Saving money on taxes isn’t done by creating a trust and then suddenly paying a smaller rate – the estate tax rate is the same for everyone, provided they meet the federal minimum estate value.
[SpecialAgentGibbs] One of the most popular ways to save money on estate taxes is to technically reduce the value of your estate. If you have an estate, for example, that can be valued at near the federal estate tax minimum, then reducing the value of your estate by moving money into other places can actually save you money by simply getting your estate to lower in value. This is not a common strategy, however, as no one can predict when you’ll pass on.
[SpecialAgentGibbs] Trusts can save some estate tax money by reducing the size of the estate (since the money technically belongs to the trust and not your estate) and therefore reducing the amount of money that is exposed to the estate tax rate. But it’s important to remember that trusts might face their own tax issues after you pass on, which is why it’s usually a good idea to consult an attorney whenever you want to create a trust.
[SpecialAgentGibbs] Many people then turn to the “Living Trust” in an effort to save money. But what exactly is a living trust and what can it do for you?
[SpecialAgentGibbs] A living trust is not very complicated – in fact, it simply refers to a trust that you create while you’re still alive. If you create a trust and fund it, with that money to be signed over to a beneficiary upon your passing, then you’re using a living trust to your full advantage.
[SpecialAgentGibbs] Of course, the questions about trusts and living trusts involve people. Who will be the beneficiary of a trust? Many parents will set up a living trust for the financial support of a developmentally –challenged child, for example. Others will do it to ensure that their money will be securely transferred to their family members upon their passing.
SpecialAgentGibbs] Living trusts can have enormous benefits because you can still retain control over them while you’re still alive, thus giving you a great degree of say-so when it comes to the ultimate destiny of your finances.
[SpecialAgentGibbs] The paperwork to establish a trust should be done with the cooperation and guidance of a trusted estate planning attorney – or at least a trusted general attorney who has some experience in these matters. They’ll often get the right paperwork for you and make sure you understand all of the roles that a trust requires people fill.
[SpecialAgentGibbs] Do some digging, educate yourselves on ALL of the various types of trusts available. Ignore it and watch your money go bye bye
[SpecialAgentGibbs] . I suggest that everyone start getting themselves educated about the estate tax and it's classification. If not, face the 40% tax. You snooze, you'll lose
[SpecialAgentGibbs] The PROPER trust will remove your assets from your personal liability and place them into the trust. You can't be taxed on what you do not own!
[SpecialAgentGibbs] consult a trusted attorney. You may go to the Bar Association website and do a specified search (tax, trust, estate)
[skipperrv] Would that not be considered tax evasion? Asking because I really dont know....
[SpecialAgentGibbs] skipperrv NO, use the system rules
[Spirit12] skipperrv I believe it is just smart planning
texmex01] SAG thank you for all your help and for trying to get us all prepared thank you
[SpecialAgentGibbs] Asset protection trusts are estate planning mechanisms which allow for individuals to keep their property and assets protected from liability, bankruptcy, long term care and other situations which would potentially reduce one’s asset level. Requirements for Asset Protection Trusts
[SpecialAgentGibbs] The asset protection trust is frequently utilized with intricate estate planning where the estate is expected to exceed at least one million dollars. The asset protection trust can contain basically all types of property, including the home, vehicles, bank accounts and other assets. The asset protection trust is established pursuant to the particular laws of the state in which the individual seeks to establish the trust. Some states refer to this type of trust by the state’s name, such as the “Delaware T
[SpecialAgentGibbs] Moreover, the trust is sometimes called a “spendthrift trust” or a “self settled spendthrift trust.” The trust is established pursuant to a legal document in conjunction with the retitling of assets which are placed into the trust. In addition, the trust is usually created in connection with a last will and testament, which refers to the trust. The will may also be a “pourover” will, which will automatically place any untitled assets into the name of the trust at the death of the owner.
[SpecialAgentGibbs] Items placed in the trust are not subject to probate, which is the process by which a will is reviewed and administered via the court’s oversight. Help With Medicaid Planning
[SpecialAgentGibbs] Asset protection trusts are useful when doing Medicaid planning. Assets in the trust are generally protected from long term care expenses, if the assets have been placed in the trust properly and have been contained in the trust for a certain statutorily proscribed period of time.
[SpecialAgentGibbs] Asset protection trusts are not appropriate for every estate plan; therefore, a consultation with an experienced estate planning attorney will ensure that your specific needs and interests are fulfilled by creating an estate plan which is tailored to your particular requirements.
[SpecialAgentGibbs] Bypass Trust:
[SpecialAgentGibbs] A bypass trust is a long-term planning device. If you leave property to someone in the form of a bypass trust, that property will not be subject to estate taxes when that person dies. (The property will still be taxed in your estate, however; to save tax in your own estate, other methods must be used.)
[SpecialAgentGibbs] A bypass trust is particularly useful for spouses who plan their estates together. By leaving property to each other in bypass trust form, they can guarantee that the property will only be taxed once between the two of them.
[SpecialAgentGibbs] To effectively save taxes, a bypass trust must follow certain rules laid out by the IRS. Let's suppose your will sets up a bypass trust for your husband, and you die first. In order to keep the trust from being subject to estate tax when your husband dies, your will must place the following conditions on the trust:
[SpecialAgentGibbs] 1. You must limit your husband's power to access the trust during his lifetime.
[SpecialAgentGibbs] Your husband must not have an unrestricted right to withdraw principal. However, you can give him the right to withdraw principal to provide for his health, education, maintenance, or support, and you can also give him the right to withdraw up to $5,000 of principal per year for any purpose, or 5% of the total principal, whichever is greater.
[SpecialAgentGibbs] You can also give him the right to all of the interest and dividends earned in the trust each year, and you can appoint him trustee. As trustee, he would have full discretion to decide whether principal is needed for his "maintenance" or "support." Thus, this condition is ultimately quite flexible.
[SpecialAgentGibbs] 2. You must limit your husband's power to distribute trust assets upon his death.
[SpecialAgentGibbs] Except as provided above, your husband cannot have the right to give the trust assets to himself, his creditors, his estate, or his estate's creditors. You can, however, give him the right to name in his will specific persons who will succeed to the trust upon his death.
[SpecialAgentGibbs] For example, you could authorize him to leave the trust to any of your nieces and nephews, or to divide it as he pleases among your children. Alternately, you can specify who gets the trust next and leave him no discretion.
[SpecialAgentGibbs] Although a bypass trust can be very flexible in practice, it is critical that the trust be drafted with absolute precision. The IRS has specified the words that may be used in a bypass trust, and if these words aren't duplicated perfectly, the trust might not be excluded from tax in the second estate.
[SpecialAgentGibbs] Even the slightest drafting error can cost over a million dollars in taxes, so be sure your bypass trust is being drafted by an attorney who is knowledgeable about federal tax law.
[SpecialAgentGibbs] There are several other types of trusts but, I do not want to hog the chat
SpecialAgentGibbs] If you wish to review a few of the trust types, go here: http://www.okieandfriends.com/t1357-several-types-of-trusts-to-consider-for-estate-planning
[SpecialAgentGibbs] Short link: http://tinyurl.com/bkv6vyv
[SpecialAgentGibbs] Do the math peeps! If your estate is worth $10M, the GOV will take 40% of it the first tax year. That leaves you $6M and they will take 40% of that the next tax year!
[SpecialAgentGibbs] But, don't worry. By the third tax year, your $10M estate will be whittled down to $3.6M and you will then be under the $5M threshold!
[SpecialAgentGibbs] And, the GOV might even send you a thank you note for your generous contribution.