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Education Spotlight: Home Protection with Deeds

in Articles, Attorney Advisor Series by Greg McIntyre Leave a comment

Estate Planning & Elder Law Attorney, Brenton Begley gives a great education moment to our team and you on how to protect your home with deeds. Schedule your FREE consult today: 704-749-9244, or online at: mcelderlaw.com/freeconsult.


If you or your loved one has questions we would be glad to extend a FREE CONSULT to answer those estate planning and elder law questions and get your affairs in order. Let the experienced attorneys at McIntyre Elder Law help. Call (704) 259-7040.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

Brenton S. Begley, Elder Law Attorney

Book Your FREE CONSULT Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Can my trust protect my retirement accounts?

in Articles, Attorney Advisor Series by Greg McIntyre Leave a comment

When discussing an estate plan, there is almost always an important question from people around what to do with their retirement accounts.  They tend to be one of the major assets for an individual and it makes sense to want to protect them with a powerful legal tool like a trust.  However, while you are living you cannot place your retirement accounts directly into a trust.   But, as you may have guessed since we are still in the first paragraph, that does not mean the discussion stops there.  Even though the retirement accounts cannot go directly into the trust, it is worth strategizing to determine the best approach to ensure the protection and preservation of those assets.  The first question we have to address is whether those retirement accounts are tax deferred accounts or not.  

What is a tax deferred account?

Initially, we should be clear on what a tax deferred account is.  This refers to an account where you have not paid taxes on the money that has been placed into that account, an advantage afforded to accounts like your 401(k) or a Traditional IRA.  However, it is important to emphasize that it is tax deferred and not tax free.  It is deferred because someone, someday, is going to pay tax on that money when it is withdrawn.  That may be you paying tax on that money as it is withdrawn in your retirement, or it will be your beneficiaries paying tax on it as they are required to withdraw it after they inherit the account.

This is in contrast with an account such as a Roth IRA, where you have already paid tax on the money invested in the account.  If your retirement assets are housed in a Roth IRA currently, then you have a lot more flexibility with how you manage that account.  Even though the specific Roth IRA account cannot be placed into the trust, those assets you have invested in the Roth IRA can be moved into an account within the trust without having to pay the same penalties or level of tax that is due on a tax deferred account.

Can my tax deferred account be placed directly into a trust?

No, that tax deferred account cannot be transferred directly into your trust.  But that does not mean those assets are destined to count against you for medicaid qualification purposes, or that those assets do not have an avenue to protection and preservation. 

The main consideration at this stage is going to be defining your goal with those assets.  If your planning does not include medicaid qualification then your estate plan could rely on ensuring there are beneficiaries on your accounts so that the assets do avoid probate.  But it is worth considering the value of a program like long term care medicaid and the thousands of dollars that have to be spent every month for long term care.  Factoring in the value you receive compared to what it would cost to transfer your assets out of a retirement account into your trust allows you to reach a decision that makes the most sense for you.  

Are the tax consequences the same if I or my beneficiaries withdraw the assets from my tax deferred account?

The amount of tax paid is very likely to be different depending on who is withdrawing the assets.  As I stated at the outset here, someone has to pay the taxes on your retirement account someday.  The likely options are either you pay them during your life by withdrawing the assets yourself or that your beneficiaries pay them as they make required withdrawals after inheriting it.

Legislation was passed at the federal level in 2019, called the Secure Act, that requires beneficiaries of a tax deferred account to withdraw those inherited funds over the span of a ten year maximum period.  This ten year deadline is critical to be aware of for planning purposes because what that really means is that the assets in your tax deferred account may be more valuable to you than they will be to your beneficiaries when the rubber meets the road.  This is because you are not required as the initial investor to withdraw that entire asset over the course of ten years.  Additionally, it is assumed that when you are making most of your withdrawals from that account you are retired.  Making withdrawals during retirement means you are not earning additional income through a job and pushing your income tax rate to a higher level. 

However, the flip side is that your beneficiary is likely to receive this asset during their working years and therefore they will be taxed on these withdrawals at a higher rate as it is added to their income.  The ten year withdrawal requirement also limits the beneficiary’s ability to spread those withdrawals out over a longer period of time, consequently increasing the amount taken out each year and importantly, increasing the amount of taxable income to that individual. 

THE BIG QUESTION

Is it the right decision to move my assets out of their tax-deferred status so that I can place them in my trust?

Here comes the classic lawyer answer, it depends!  The answer here depends on your individual goals and circumstances.  We are only here to recommend tools that fit your needs and will benefit you.  There are absolutely scenarios where the right financial move is going to involve withdrawing those assets out of their tax-deferred status and placing them into your trust.  That is because with your assets in a trust you are possibly setting yourself up to qualify for long term care medicaid to assist with paying for your expenses, limiting your tax liability from any changes to the estate and gift tax, and protecting those assets from other creditors or lawsuits so that they make it to the hands of your loved ones.  If this question is one you are considering yourself, one of our attorneys would be happy to assess your specific situation and work with you to come to the decision that is best for you.


Related Articles:


If you or your loved one has questions we would be glad to extend a FREE CONSULT to answer those estate planning and elder law questions and get your affairs in order. Let the experienced attorneys at McIntyre Elder Law help. Call (828) 233-5991.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

Book Your FREE CONSULT Today!

Jake Edwards, Attorney

Jake Edwards

Estate Planning & Elder Law Attorney

mcelderlaw.com

Hendersonville Office

136 S. King St. Hendersonville, NC 28792

828-233-5991

Now What? I’ve Been Appointed as Agent under a Power of Attorney. 4 Things to Consider.

in Articles, Attorney Advisor Series by Greg McIntyre Leave a comment

Article 1: Fiduciary Instruction Series.

So, you’ve been named as somebody’s agent under power of attorney. That person (the “Principal”) is beginning to need your help making financial and healthcare decisions. What are you next steps?

1. Make Sure the Power of Attorney is Valid and Works
You first want to make sure the POA is valid. Financial POAs must be signed by the Principal and notarized, and should be recorded at the register of deeds in the county where the Principal resides. The healthcare POA must be signed by the principal and witness by two independent individuals in addition to being notarized.
The POAs should also be broad and specific. They must lay out each power given to the Agent and must define each power. It’s also important to ensure that you know when the power becomes effective I.e., whether the Principal must be considered “incompetent” before it can be used.

 
If the POAs are either invalid or fall short, you should seek to have them redone by an attorney while the Principal is in their right mind. Note, that this MUST be done with the Principal’s full knowledge and cooperation.

 
2. Make Sure the Power of Attorney is on File with the Relevant Entities
You don’t want any hitches in attempting to use the POA. Typically, the bank or life insurance company, or any other entity won’t let you use the POA until they’ be had their in-house attorneys review and approve them. Depending on the company, this can take days or weeks. Thus, it’s important to go ahead and put the POAs on file with each and every relevant entity, including the bank, primary physician, investment company, life insurance company, and the register of deeds. This is best done by mailing, emailing, or faxing a copy of the POA with a cover letter indicating your purposes for sending the document. 


3. Make Sure You Know Where Everything Is
It will be difficult to act on behalf of the Principal if you don’t know where they bank, where they have their life insurance, who their primary care physician is etc. Thus, you should figure out, by talking to the Principal, where everything is. You should compile a list and keep it with the POA document. This list should also include medications, who they use for tax preparation, their attorney, the funeral home ( if they’ve prepaid their funeral), their bank accounts and number, their credit card accounts, their driver’s license information, a copy of their birth certificate, a copy of their marriage license, if any, and a copy of their social security card. 

4. Speak to a Professional about Asset Protection
Lastly, you should seek the advice of a professional. There are many considerations when evaluating how to best act on behalf of someone who may not be able to act for themselves—from protecting assets to figuring out how to pay for long-term care. 


An experienced Elder Law attorney should be consulted, so that you may lay out a clear and workable plan to ensure you’re doing the right thing to protect the Principal’s assets and ensure that they receive the highest possible level of care.

This gives us the legal basis for the Ladybird Deed that we now know and love.


Related Articles:


If you or your loved one has questions we would be glad to extend a FREE CONSULT to answer those estate planning and elder law questions and get your affairs in order. Let the experienced attorneys at McIntyre Elder Law help. Call (704) 259-7040.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

Brenton S. Begley, Elder Law Attorney

Book Your FREE CONSULT Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Why doing the right thing could cost you? Caregiver Edition*

in Articles by Greg McIntyre Leave a comment

Picture this… Your elderly parent or loved one has been living at home, but they cannot completely care for themselves. They might need help cooking, cleaning, bathing, and assistance with other activities of daily living. You and your loved one may have come to a verbal agreement that you would be compensated for your time and efforts, or maybe your loved one has been paying a family friend to look after them. You don’t need an actual written contract because you are family, or you have known that family friend for years, right? WRONG. Your loved one may eventually need a higher level of care in an assisted living or skilled nursing facility and they may need to apply for benefits to assist with the cost of care. Many of you may have heard of that ominous “Look-back Period”. During the look-back period, any payment to caregivers without having a written contract in place prior to services being provided, could disqualify them for benefits for a period of time. The contract must also meet certain requirements in order to be accepted by the Department of Social Services.

Let’s just say, for example, that Mom has been paying you $500/week for the last year to provide care and other services, which comes out to $26,000 for the year and you did not have a written contract in place. There is a formula used to calculate the penalty period and that $26,000 would result in roughly a 4-month penalty period. The penalty period means that your loved one would have to pay out of pocket  for their cost of care in a facility for 4 months before their long-term care benefits would begin. But wait, it gets a little more complicated. That 4 month penalty period wouldn’t begin until Mom was “otherwise qualified” for benefits. That is a discussion for another time (perhaps at your hour-long, free consultation with one of our experienced attorneys). The average cost of care in a skilled nursing facility is around $7,500-$10,000, so at the very minimum, that $26,000 just cost Mom $30,000. 

Navigating the qualification and application process for Long-Term Care benefits can be challenging and sometimes the policies just don’t seem fair or make sense, especially when you were just trying to care for your family. This is just one of the ways that could cause your loved to potentially incur a penalty period when applying for benefits.

The solution? Come speak to one of our experienced attorneys about drafting an inexpensive caregiver agreement that could save your loved one tens of thousands of dollars. Our attorney’s can advise you on how to avoid other penalty-incurring transactions, and how to best prepare for your or your loved one’s long term care needs.


Related Articles:


If you or your loved one has questions we would be glad to extend a FREE CONSULT to answer those estate planning and elder law questions and get your affairs in order. Let the experienced attorneys at McIntyre Elder Law help. Call (704) 259-7040.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

Mary Kales, Firm Medicaid Director

Book Your FREE CONSULT Today!

Regards,

Mary Kales

Firm Medicaid Director

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

*Article proofed and approved by attorney, Gregory S. McIntyre.

Legality of the Ladybird Deed

in Articles, Attorney Advisor Series by Greg McIntyre Leave a comment

I get the question all the time: is the Ladybird Deed legal in NC? The answer is yes. But, I don’t want you to simply take my word without any further information. So, in an effort to settle the question once and for all, let me give you the legal basis for the Ladybird Deed. But first, why question it at all?

Maybe you did a Google search for Ladybird deeds in NC. Maybe you were talking to your neighbor. But someone somewhere said that Ladybird Deeds aren’t legal in NC. But here we are saving homes every day with this wonderful tool. Why the discrepancy? Well, the problem is that the people posting these articles on the internet aren’t doing their homework. Likely, they scanned the statutes in NC to see if it mentions “Ladybird Deed” and didn’t find it. Thus, they declare that NC doesn’t allow the Ladybird Deed.

The problem is: we don’t have a statute for the Ladybird Deed. In fact, most of our property law in NC is not codified in statute. Our property law is predominantly derived from common law or judge made law (also known as “legal precedent”). See Statute of Wills, 32, Hen. 8, c. 1 (enacted in 1540).

With that out of the way, what precedent allows for the Ladybird Deed.  To recap, a Ladybird deed allows you to put a beneficiary on property (who you can change any time) without giving away any property interest). 

We can trace the roots all the way back to jolly old England. English common law allows for something called a “power of appointment.” When you think of power of appointment, the best example is something like designating a beneficiary on a life insurance policy (note: this is not exactly a power of appointment but is good enough for this analogy). On a life insurance policy, you can pick a beneficiary to get the death benefit. However, that’s not set in stone. You can change that beneficiary any time. This is  because you have the power to appoint whoever you want. A power of appointment is similar.

Per N.C.G.S. Section 4‑1, adopted in 1778, English common law is the law of the land in NC unless something says otherwise. There are no laws in NC preventing a power of appointment. Thus, the next question is: what precedent allows for a power of appointment on a deed?

This is a legitimate question because deeds convey interest. Usually, when a deed is executed, something (some right or interest in real property) is given. If the property is given to your beneficiary, then how do you retain a power of appointment. It’s like giving away your life insurance policy, yet retaining the power to pick the beneficiary. Luckily, both issues were solved in a super old case: Troy v. Troy, 60 N.C. 624 (1864).

Troy basically said that you can: 1. assign a beneficiary to property without giving them any interest; and 2. maintain a power to appoint any other beneficiary at any time without another person’s consent.

This gives us the legal basis for the Ladybird Deed that we now know and love.


Related Articles:


If you or your loved one has questions we would be glad to extend a FREE CONSULT to answer those estate planning and elder law questions and get your affairs in order. Let the experienced attorneys at McIntyre Elder Law help. Call (704) 259-7040.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

Brenton S. Begley, Elder Law Attorney

Book Your FREE CONSULT Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

What type of Trust is Right for You?

in Articles by Greg McIntyre Leave a comment

Irrevocable Trust:

Join our Shelby attorney, Brenton Begley, as he sits down and talks about an Irrevocable Trust!


Revocable Living Trust:

A revocable living trust or RLT may be a great way for you to:

  1. Stay in control of assets.
  2. Avoid Probate.
  3. Maximize your taxable exemptions.

Testamentary Trust:

Testamentary Trusts: These can be a straightforward way to utilize your will to create trusts for your property lasting well into the future.


Related Articles:


If we can help you preserve assets before major changes in the law we would be glad to do so and would offer a FREE consult to sit down and discuss asset protection. Give s a call to schedule your free consult today or schedule online at: mcelderlaw.com. For a list of local numbers to our offices see below:

  • Charlotte: 704-749-9244
  • Shelby: 704-259-7040
  • Hendersonville: 828-233-5991

Please don’t wait ‘til it’s too late. Call McIntyre Elder Law today.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

What’s the deal with having two power of attorney documents?

in Articles by Greg McIntyre Leave a comment

Why can’t I just have one document that makes someone my power of attorney for everything? Well, technically you could do that.  However, there are some clear reasons why that is not common practice and why we don’t advise taking that approach.

            The first consideration is cost.  A very practical reason not to combine your General Durable Power of Attorney and your Healthcare Power of Attorney in the same document is that it would double your recording costs.  That is because although the Healthcare Power of Attorney does not need to be recorded at the Register of Deeds, the General Durable Power of Attorney is recorded.  When a document is recorded you typically have a charge based on the length of the document, so the inclusion of all of the necessary pages in a Healthcare Power of Attorney would add to the total recording fees you had to pay.  No one likes paying extra fees and so we don’t advise you to create a document that would result in unnecessary expense for you at the Register of Deeds.

A second major concern is efficiency.  You may be thinking, hold on, wouldn’t the efficient approach be having only one document?  However, the reality is that combining medical and financial information into one document would tend to make things harder on the agent that was granted those powers and on the institutions relying on those documents to allow your agent to act on your behalf.  Banks can be very picky about how they handle powers of attorney.  The inclusion of paperwork that is unnecessary for the financial institution is just asking for the possibility of a slow down in using your document.

Additionally, your Healthcare Power of Attorney could include very personal decisions and details about your medical situation that your financial institution does not need to know about.  Likewise, your healthcare provider does not need to have to sift through details and decisions related to your finances before verifying that someone can make a medical decision on your behalf.

Finally, the only thing worse than attempting to combine both powers of attorney into one document is having no power of attorney in place at all.  These documents can make a massive difference in a crisis situation, as they allow someone to act on your behalf efficiently and also in ways to reduce further costs on you.  Important medical decisions can be made quickly and actions can be taken regarding bills and expenses in order to avoid racking up late fees or liens on your property.  

If you don’t have the protections of a General Durable Power of Attorney or a Healthcare Power of Attorney in place, one of the attorneys in our offices would be happy to discuss these with you and see what best fits your needs.


Related Articles:


If you or your loved one has questions we would be glad to extend a FREE CONSULT to answer those estate planning and elder law questions and get your affairs in order. Let the experienced attorneys at McIntyre Elder Law help. Call (704) 259-7040.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

Book Your FREE CONSULT Today!

Jake Edwards, Attorney

Jake Edwards

Estate Planning & Elder Law Attorney

mcelderlaw.com

Hendersonville Office

136 S. King St. Hendersonville, NC 28792

828-233-5991

How Could Today’s Cancel Culture and Political Climate Affect Your Estate Plan?

in Articles, Attorney Advisor Series by Greg McIntyre Leave a comment

“With the constant challenges to free speech and rumors of drastically increasing the estate and gift tax, how does this affect you and your family?”

Trust me, I am all too familiar with challenges to free speech. It’s not specifically legal challenges anymore but the tendency for unpopular opinions to be shouted down and the people behind them to be cancelled from social media and somewhat erased or made irrelevant. How does this factor into estate planning? My fear is that the termination of dissenting political views may pave way to an unopposed government agenda which can include higher income tax, estate and gift tax and other regulations that could drastically affect the landscape of estate planning. The plan that was right for you 5 years ago may provide no protections against the coming tide of legislation.

There have been rumblings that the current administration wants to drastically reduce the estate and gift tax exemption. This could mean that almost one half (1/2) of your estate could be eaten up by taxes and go to the State. This country was built on the premise that you could keep your hard work and property in the family. You could pass along what you owned to your loved ones. In a climate where any dissenting opinion is stamped out and the person with that opinion barred from the public forum, anything is possible and more likely, probable. As an estate planning and elder law attorney, we have defenses against this.

Trusts:

Trusts can maximize your taxable exemption and therefore help minimize or avoid the death tax. Trusts also allow any property contained within, including real estate, to preserve a step-up in basis. A step-up in basis means that you will avoid unnecessary capital gains tax should your beneficiaries sell the property. You can appoint a trustee to be over your assets and distribute your assets after death. Trusts are also private documents and not administered through public court proceedings as opposed to Wills which do become public record.

Trusts are our secret weapon against the threats of high taxation from many angles and also allow you the ultimate in control of assets even beyond the grave for years into the future. You write the story of your family’s legacy.

If we can help you preserve assets before major changes in the law we would be glad to do so and would offer a FREE consult to sit down and discuss asset protection. Give s a call to schedule your free consult today or schedule online at: mcelderlaw.com. For a list of local numbers to our offices see below:

Charlotte: 704-749-9244

Shelby: 704-259-7040

Hendersonville: 828-233-5991

Please don’t wait ‘til it’s too late. Call McIntyre Elder Law today.

Schedule Free Consult

IN PERSON . VIDEO CONSULT . PHONE CONSULT

Book Your FREE CONSULT Today!

Greg McIntyre Elder Law Attorney

Greg McIntyre Elder Law Attorney

written by:

Greg McIntyre

Elder Law Attorney

704-749-9244

greg@mcelderlaw.com

Take Care Of Your Family in February

in Articles by Greg McIntyre Leave a comment

It’s the season of love with Valentine’s Day but you can give the gift to yourself and family of legacy that will last a lifetime; will last for generations. Call out office today: 704-749-9244, or online at mcelderlaw.com/February.

Get $200 Coupon for Estate Planning

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New Administration, New Estate Plan?

in Articles by Greg McIntyre Leave a comment

No good assessment can begin without first laying out a disclaimer.  In this instance, I must remind us that the campaign season has ended and that this article’s role is not to engage in advocacy for one administration’s ideas over another’s.  However, an important aspect of our role as attorneys at this firm is to stay up to date on any change in the wind which could affect our clients and be prepared to advise them accordingly.  This task is one we take on with extra focus as we observe the transition from one administration in Washington to the next.  President Biden will bring with him a host of new policies and goals as his administration takes their position in 2021. 

As is so often the case, what is said on the campaign trail may not be what is ultimately written into the final law that a President signs.  The scope of this article is to contend with some of the proposed changes to the laws concerning retirement and taxes.  Proposals of this type could significantly impact the way that we assess our client’s circumstances and account for future implications for their assets, income, and retirement. 

Some of the highlights that have come from Biden’s tax related proposals are:

  • Repeal the components for high-income filers under the Tax Cuts and Jobs Act
  • Impose 12.4% Social Security payroll tax for wages above $400,000
  • Temporarily increase the amount of the Child Tax Credit and Dependent Credit
  • Increase the corporate income tax to 28%.
  • Payroll tax, individual income tax, estate and gift tax changes
  • A reduction of the exemption amount for the estate and gift tax
  • Provide a tax credit to caregivers of a spouse or parent

How could new policies affect what is taxed from the gifts I give and the estate that I leave behind?

When it comes to the estate and gift tax, the incoming administration has proposed reducing the estate tax exemption amount to $3.5 million, while increasing the top rate for the estate tax to 45%. This is a 5% decrease from the current top estate tax rate of 40% and an exemption reduction that stands in sharp contrast to the current exemption limits the IRS has in place for 2021 of $11.7 million for an individual and $23.4 million for a married couple.  This also ties into Biden’s proposal to lower the gift tax exemption to $1 million as opposed to the gift tax’s current exemption amount, which also currently sits at $11.7 million.  This would expose a lot of previously exempt estate and gift amounts to new tax liability.

It is also important to note that even if you read those numbers and think they could never apply to your own circumstances, the increased exposure to tax liability is important to consider for a broader spectrum of individuals than you may think at first glance.   These exemption values pertain to the entire value of your assets, and it does not simply mean cash or money that is stored in personal bank accounts.  This amount includes the sum of all your estate, which critically could include the home that you live in, any other land or real property, the value of retirement accounts, and other personal property such as your vehicles.  Additionally, a forward thinking approach should consider the possibility that these exemptions could decrease even further as the incoming administration moves forward on other policy goals.  This could be an area where additional taxes are levied in order to satisfy calls for a more balanced budget in response to the aid packages of this past year.  So, even as we assess whether these proposals in their current form may affect you after their implementation, it is an important time to take stock of your situation and plan accordingly with the possibility of sustained change on the horizon.

Can planning ahead improve my ability to limit the tax burdens on my estate and my gifts?

Yes! Initially, it is important to clarify that the gift tax exemption is a lifetime limitation.  This is important because through some advanced estate planning, you can identify the appropriate time to make a gift and the amount of that gift to best benefit your overall estate planning goals. 

For instance, there is a $15,000 annual limit for gifts made to any one recipient.  This means that the first $15,000 that you give to someone is an annual exclusion that is not taxable.  However, once your gift exceeds the $15,000 threshold in one year, then the remainder of your gift counts against your exemption for both the gift tax and the federal estate tax.  So, if you gifted someone $30,000 in one year, the first $15,000 would not be taxed but the remaining $15,000 would count towards your lifetime gift tax exemption and also towards your federal estate tax exemption. This would mean that any money in excess of your remaining exemption would be subject to federal taxes. 

Additionally, there are multiple estate planning options available to individuals for preparing to handle a change to the estate and gift tax exemption levels.  One avenue towards achieving that goal is to rely on certain types of tools like trusts or annuities.  These are legal vehicles that may allow you to preserve more of the benefits of assets which are placed into a trust or an annuity.  This strategy functions very specifically given an individual’s unique situation and advice varies depending on those facts.  One of our attorneys would be happy to assess your current estate picture to advise on whether one of these tools would be a good approach for your estate plan.  

With the right planning and knowledge, you can take steps to prepare for any decrease to the estate and gift tax exemptions. You can then have the peace of mind that you have minimized your potential liability that could result from an enactment of any of these legislative proposals and instead passed those benefits on to those that you love.

How could my income be affected?

Current proposals from the incoming Biden administration indicate that income earned above $400,000 could be affected in multiple ways.  One proposal is to implement a 12.4% payroll tax on income earned above $400,000 that would be evenly split between employees and their employers.  This would be earmarked as an Old-Age, Survivors, and Disability Insurance payroll tax, otherwise known as Social Security.  Under current regulations, only wages up to the amount of $137,700 are subject to this tax.  So the current proposal would leave wages earned above $137,700 and below $400,000 without an additional tax levied against those wages.

Another proposed change in tax to income above $400,000 is to return the top individual income tax rate to 39.6% from its current level of 37% that was enacted under the Tax Cuts and Jobs Act of 2017.  This would result in a 2.6% income tax increase to any amount earned above the threshold of $400,000. 

In addition to the proposals that would affect the tax levied on income earned above $400,000, there are also proposals that would affect what an individual earning that amount would be able to take in itemized deductions.  The proposed cap would limit itemized deductions to 28% of value for filers earning more than $400,000.

Long-term capital gains and qualified dividends would also likely see some changes.  The proposal in this area is to tax those sources at the ordinary income tax rate of 39.6% for individuals with incomes above $1 million, while also eliminating the availability of a step-up in basis for capital gains taxation.

At the same time, there are proposals to expand tax credits such as the Earned Income Tax Credit for childless workers over the age of 65 and for individuals utilizing renewable energy.  Additionally, there is a proposal to expand the Child and Dependent Care Tax Credit (CDCTC) to $8,000 ($16,000 for multiple dependents) from its current maximum of $3,000.  The maximum reimbursement associated with the CDCTC is currently set at 35% while Biden proposes raising it to 50%. 

New proposals also involve the popular Child Tax Credit.  This proposal is specifically meant for 2021 and would continue as long as economic conditions require it.  Under this, the maximum value of the credit would increase from $2,000 to $3,000 for children age 17 and younger.  It would also provide for a $600 bonus credit for children under the age of 6.  Another aspect of the proposal calls for the Child Tax Credit to be made fully refundable and remove the $2,500 reimbursement threshold and the 15 percent phase-in rate that currently exist. 

A few other increases in tax credits may come in the form of a proposal to reestablish the First-Time Homebuyers’ Tax Credit, this would provide up to $15,000 for an individual purchasing their first home.  Or it may come in the form of a proposed $5,000 tax credit for caregivers that are looking after their spouses or parents.  Although this tax credit might be a great resource for individuals providing care, it is important to note that the proposal would likely require that a health care practitioner verify that you are providing care to meet specific needs in addition to providing receipts of any care related expenses.

Can estate planning provide any benefits when it comes to my earned income?

            Yes!  Although one typically associates the term estate planning to mean planning that is concerned with what you leave behind, planning for the here and now is a vital part of the work as well.  Aside from the benefits that come from simple awareness of regulation changes, so that you can be on the lookout for tax credits for specific activities that would benefit your returns, there are opportunities to plan ahead regarding your income as well. 

            Some important tools mentioned above, such as trusts, can come into play with preparing for where and how your income is claimed on your taxes.  Some trusts can work to your advantage where that legal tool can displace the ownership of some earned income to spread around the tax liabilities.  With the foresight of possible income tax increases, you can proactively set up structures that work for you or the business that you run.  Armed with the knowledge that a certain bracket of your income is about to be taxed at a higher rate, or that the profits of your business are going to be treated differently, you may be able to structure your sources of income in a manner that maximizes what benefits you are preserving for yourself and your family. 

            It is true that some of these legal tools can be very fact specific and a plan needs to be customized to properly address your own situation.  However, that is exactly one of the services that our attorneys are here to provide.  Our role is to advise you on your specific situation and work with you to plan for all of life’s twists and turns, not only those that come from a new administration in Washington.  Our goal is that you will be able to make fully informed decisions that benefit not only you in this year, but that reverberate into the future to benefit those that you love as well.


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If you or your loved one has questions we would be glad to extend a FREE CONSULT to answer those estate planning and elder law questions and get your affairs in order. Let the experienced attorneys at McIntyre Elder Law help. Call (704) 259-7040.

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Jake Edwards, Attorney

Jake Edwards

Estate Planning & Elder Law Attorney

mcelderlaw.com

Hendersonville Office

136 S. King St. Hendersonville, NC 28792

828-233-5991

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