How Divorce Affects Your Asset Protection Strategies

When you’re creating asset protection strategies, you must consider the possibility of divorce and how it can affect your financial health. In matters of the heart, no one ever wants to think about the worst-case scenario. Unfortunately, the odds are not in your favor, so it pays to be prepared. This is especially important for business owners and high-income earners. Unless you want the courts to decide how to divvy up your hard-earned wealth, you need to implement comprehensive strategies to preserve your assets.

Protect Assets before an Impending Divorce

If you are planning to file or you know the other side is, it may not be too late to take action to protect your assets. Asset preservation vehicles such as domestic and offshore trusts, single-purpose entities and even mortgage loans can contribute to an effective — and legal — asset protection plan. Consult an attorney who specializes in estate planning and wealth preservation before taking any action, however, because your assets will come under intense scrutiny as the divorce progresses. If you don’t keep everything legal and above-board, you could end up losing even more than you would have if you’d done nothing to protect yourself.

Act Quickly if You Get Served by Surprise

Hopefully you’ll never have to deal with the unexpected service of a divorce action, but it happens every day. If you find yourself caught unawares, it’s critical that you contact an asset protection lawyer as quickly as possible. Depending on where you live, the court could freeze your assets immediately. In that case, you must determine whether you have the legal right to remove half of any joint accounts. An attorney can help you set up new accounts and protect yourself from any additional debt your soon-to-be-ex-spouse may try to rack up. You may not be as clear-headed as usual during this stressful time, so let your legal advisor help you do what you can to preserve your assets.

Implement Proactive Divorce Asset Protection Strategies

The specific strategies you choose will depend on your portfolio of assets as well as your relationship status. The state in which you live also matters, specifically with regard to how its laws allocate property to divorcing spouses. Tax attorneys can recommend asset protection strategies based on these and other factors to create a plan tailored to your specific needs. If you’re planning a wedding, your attorney will likely broach the subject of a prenuptial agreement, which can be a touchy subject for many couples. If you’re already married without a prenup, you may want to explore the possibility of a postnuptial agreement. This may require some delicate negotiations with your spouse, but once in place, such as agreement can go a long way toward protecting your assets. The asset protection specialists at Cantley Dietrich understand the importance of preserving your wealth no matter what events transpire in your life. We work closely with you to develop strategies that work for all involved parties and allow you to resolve property disputes quickly while minimizing losses to the assets you’ve worked hard to accumulate. Contact us today to learn more about how a divorce affects your asset protection strategies.   NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.

3 Reasons You Should Make Charitable Contributions Now

Charitable contributions are a powerful tool for making positive changes in the world. For highly compensated individuals and business owners, the benefits of your financial donations can extend even further. Tax laws provide the opportunity for you to reduce your tax burden by making qualified donations. In many cases, the more you give, the better it is for your financial health. If you aren’t already putting your money to its best use helping others, perhaps these reasons will help change your mind.

No. 1: Charitable Monetary Contributions Are More Important than Ever

Recent changes to the tax laws raised the financial benefit threshold for charitable giving for cash contributions. Because it’s become harder to financially benefit from giving, fewer taxpayers are making donations this year. And that’s bad news for those with the greatest needs. Choosing the causes that mean the most to you will make your gifts even more meaningful. Knowing that you’re making a difference can provide intangible personal benefits that stick around long after the tax advantages.

No. 2: You Can Preserve Your Assets While Making Charitable Contributions

Charitable donations are best when made for altruistic reasons — and you always have the option of not claiming your contributions on your taxes. However, the tax advantages you can achieve from charitable giving are significant — significant enough, in fact, that it may encourage you to give more than ever. One of the ways to maximize the impact of your contributions is through a donor-advised fund. A donor-advised fund allows you to take a tax deduction the same year as you give to the fund. You then pick the charitable groups or organizations that you want your donation to benefit in the future. Your tax attorney can help you explore this and other options to determine what is right for you.

No. 3: You Can Contribute Assets as Charitable Donations

Your charitable acts are not limited to purely financial donations. Besides cash, did you know that you also have the option of donating other appreciated assets? In fact, you can donate assets ranging from real property and stocks to artwork and collectibles as non-cash, charitable contributions. For high net-worth individuals, this can be an effective way to make a positive difference in the world while also reaping the financial benefits. If you can help a cause you’re passionate about while mitigating your tax burden, you may want to give as freely as you can. The tax lawyers at Cantley Dietrich understand the importance of balancing philanthropy with sound asset protection strategies. Fortunately, these priorities are not at odds with one another — just the opposite, in fact. We are able to discuss a variety of charitable giving strategies that provide philanthropic benefits as well as potentially significant financial advantages. Contact us today to learn more about how you can incorporate charitable contributions into your asset management and estate-planning strategies.   NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.

Tax Attorney Tips: Keep 2019 Tax Deadlines in Mind to Avoid Penalties

As 2018 winds down, the 2019 tax deadlines loom large. Minding these deadlines is the best way to avoid penalties and stay off the IRS’s radar. The dates that matter for your filings vary based on whether you are:

• An individual filer
• A business owner
• A self-employed person
• An employer

The categories listed above apply to many taxpayers, which can make compliance a challenge. If you work with a tax attorney, they will help ensure you stay on schedule.

2019 Individual Tax Deadlines

Individual tax filing deadlines are fairly straightforward. If you pay quarterly taxes, the 2019 deadlines are:

• Jan. 15 (4Q18)
• April 15 (1Q19)
• June 15 (2Q19)
• Sept. 15 (3Q19)

Annual individual tax filings are due, as always, on April 15. This is also the deadline to apply for an extension for your 2018 filing. If you get an extension, your filing is due on Oct. 15. April 15 is also the last date that you can make a 2018 IRA contribution (traditional and Roth). If you have a SEP or Keogh IRA and you get an extension to your filing deadline, you can contribute until that date (Oct. 15).

2019 Business & Self-Employed Tax Deadlines

Small businesses and self-employed individuals potentially have many deadlines in 2019, depending on how you file and how much income you have. Some highlights include:

• W2s & 1099s — These forms must be issued by Jan. 31 for most employees/recipients and reported to the IRS at the same time.
• Payroll taxes — All withheld employee income taxes, Medicare and Social Security taxes must be deposited by the 15th day of each month if you follow the monthly deposit rule. If you must deposit semi-weekly, deposits are due by Wednesday for payroll issued the previous Wednesday through Friday and Friday for payroll issued the previous Saturday through Tuesday. Form 941 filings are due on the last day of January, April, July and October for the prior quarter.
• FUTA taxes — Deposits must be made by the last day of the month after quarter’s end. Form 940 filings are due Jan. 31.

Corporate taxes for companies that operate by the calendar year are typically due on April 15, or if you received an extension, Oct. 15. For calendar year partnerships, S corporations, the deadline to file a 2018 return or extension request is March 15. If you receive an extension, the filing deadline is Sept. 15. Trust and estate forms must be filed by April 15 or Sept. 30, with an extension. It’s important to note that these are general guidelines, for which there are many exceptions — including weekends and federal holidays. The due dates for you may be different. To ensure you maintain compliance with all 2019 deadlines and obligations, consult your tax attorney before the end of the year. The compliance expert tax attorneys at Cantley Dietrich are committed to keeping our clients on schedule with all tax-related obligations. Contact us to learn more about our services and how we can help you meet the requirements of the 2019 tax deadlines.

Advanced Estate Planning: 7 Things You Should Know About a Will

In advanced estate planning, tax advisors help high-net-worth clients identify the most effective strategies and tools for transferring their assets. Sometimes called inheritance planning or complex estate planning, this process helps to secure your loved ones’ future and ensures that your wishes become reality at (and before) the end of your life. But estate planning also has another purpose: wealth preservation. In other words, an advanced estate-planning specialist can help you achieve your goals for asset distribution while ensuring that you legally preserve as much of your wealth as possible. So how does a will — a last will and testament, that is — fit into this process? Wills are an interesting topic. You know you need one. But what might you not know about wills?

No. 1: Wills Are Only a Snapshot in Time

When you prepare a will, it reflects your personal, professional and financial status at that moment. If anything changes in your life — you get married or divorced, have a child, etc. — you must either revise your will or start anew.

No. 2: Addresses the Who and the What, but Not the How

You can specify in your will what assets go to which heirs, but you cannot typically choose how they will be transferred. It’s safe to assume that the method of conveyance will be the one that can be taxed the most.

No. 3: Wills Become a Matter of the Public Record

Upon your death, your will becomes a matter of public record as soon as it’s filed for probate. This means that anyone can see who inherited what. Not only does this present a privacy concern, but it also creates risk for heirs who may become the target of financial predators.

No. 4: Wills Can Be Contested and Potentially Thrown Out

No matter what exclusionary verbiage you may insert, you will can be contested and thrown out by the court. In that case, your assets will be distributed based on your state’s laws for those who die intestate (without a will).

No. 5: Subsequent Wills & Codicils Can Come Back to Haunt You

Any disinherited person who was mentioned in a prior will or codicil (amendment to a will) is eligible to contest. The odds of them succeeding aren’t great, but it does happen. And even if they fail, the legal wrangling could become unpleasant for your family.

No. 6: Wills Do Not Supersede Titling & Beneficiary Designations

Investment and brokerage accounts, life insurance policies and similar artifacts all have designated beneficiaries – hopefully the beneficiaries you have designated. We have seen many cases where clients forgot to change beneficiary designations to the name of a second spouse—creating a multitude of financial problems, but none that a legal system can fix. Your will does not supersede those designations as they are a contract with the bank, insurance company, or brokerage. In many cases, your will also does not supersede the titling of real property.

No. 7: Wills Don’t Govern Incapacitation

If you become incapacitated and unable to make decisions, your will won’t help. The will only becomes effective at your passing. If you think there’s a chance you’ll spend some time getting older or are unlikely to die instantaneously, you’ll want to discuss a Durable Power of Attorney for financial matters. As a side note, your will is also not the right place to specify your wishes for your funeral and interment. It likely won’t be read until those events have already taken place. Maybe you knew some of these interesting facts but there’s a good chance that others gave you pause. There’s also a good chance that you may want to revisit your will and consider using other vehicles – trusts, for example – to achieve your goals. At Cantley Dietrich, our complex estate planning strategies are elegantly designed, to assist you in legally – and privately – accomplishing your goals for asset transfer and wealth preservation. Contact us today to learn more about how our advanced estate planning services can help you.   NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.

Asset Transfer: Do You Trust the Next Generation to Manage Your Wealth?

Asset transfer is a straightforward process. However, for closely held business owners and highly compensated individuals, transferring assets can be a complex process. Without a formal estate and asset transfer plan, a large portion of your accumulated wealth could be lost to taxes. Worse, the assets you’ve worked your entire life to build may not end up where you envisioned them.

What Happens When You Have Not Made Provisions for Asset Transfer?

A 2017 study conducted by RBC Wealth Management revealed some surprising statistics. Only 54 percent of high-net-worth individuals have a will. And although 26 percent of respondents have a full asset transfer plan in place, almost a third (32 percent) have taken no action for estate planning or wealth transfer. Should you die intestate (without a will or asset transfer provisions), your estate will transfer to your heirs through the probate process. What they do with what’s left — after estate taxes, probate fees, etc. — is their choice. You have no assurance that your legacy will endure or benefit those you envisioned it would. Will there be money to send your grandchildren to college? Will the charitable causes you care about see any benefit? Will your family members become embroiled in disputes over who gets which of your valuable (financial or sentimental) possessions? Do you trust the next generation of your family to manage your wealth? Are you willing to let the government take the maximum share possible?

The Importance of Having a Formal Asset Transfer Plan

Even if your answer to the first question is a resounding “yes,” you likely do not want to diminish the value of your estate any more than necessary at the time of your passing. You must also consider the implications should you become incapacitated and unable to make your own decisions. In the RBC study, a full third of respondents with no wealth transfer plan in place admitted that they did not trust their children to preserve their wealth. And yet, they were ready to leave the fate of their accumulated wealth to chance. The complexity of family dynamics — and the likelihood that your family’s dynamics will change repeatedly over the years — requires that you not only establish a comprehensive estate and asset transfer plan, but that you update it regularly. The final bit of advice that emerged from the RBC study is the importance of financial literacy for young people. Start early in teaching the next generations about saving, giving and wealth preservation. Just because you aren’t confident in the next generation today doesn’t mean you can’t help them become more aware and responsible.

Seek Asset Transfer Advice & Assistance from a Tax Attorney

To create and maintain a comprehensive estate plan, you’ll need to have a team of trusted advisors. A key member of your team should be an experienced tax attorney. Your estate plan will likely include a will and various types of trusts, insurance policies and whatever other types of financial vehicles make sense for you. Your lawyer may also recommend a plan for transferring some portion of your assets during your lifetime, to help prevent unnecessary erosion of your wealth later. Your tax attorney will help ensure that your wealth transfer and estate plan complies with all applicable codes and laws. Keeping your financial planning activities legal and aboveboard will help prevent unnecessary taxation and IRS scrutiny. Cantley Dietrich assists business owners and highly compensated individuals with asset protection, wills, trusts and complex estate planning. Contact us today to schedule a consultation to discuss your asset transfer plans.   NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.

Donor-Advised Funds Provide Clear Advantages

Donor-advised funds, or DAFs, are becoming more popular with business owners and highly compensated individuals because of their many advantages. DAFs have been compared to a savings account dedicated to charitable contributions. Although that’s an overly simplified analogy, the concepts are not dissimilar. Although they have been around for decades, these philanthropic funds are more popular than ever, in large part because they provide a high degree of flexibility. DAFs also reward donors by providing significant tax advantages.

What Are Donor-Advised Funds?

The basic definition of a donor-advised fund is an investment account used exclusively for making irrevocable charitable contributions. With a DAF, you can advise the fund’s managers about how to donate funds. Or, if you prefer, you can leave those decisions to the account’s sponsor. You can contribute cash to the fund as well as other valuable assets, including stocks and other securities, real estate, collectibles, cryptocurrency, shares of privately held corporations, etc. DAFs require a 501(c)(3) to act as their sponsoring organization. This can be a public charity, a community foundation or an investment firm. You can choose when the funds are donated and in what quantities. You can also leave some portion of the funds in the account and use investment strategies to grow the balance tax-free.

Philanthropic Advantages of Donor-Advised Funds

Donor-advised funds provide substantial benefits for the charitable causes you care about most. You can direct your contribution to virtually any cause or organization that qualifies under the IRS rules for tax-exempt status. Compared to private foundations, DAFs offer the same primary benefit — deciding specifically how you want your contributions to be distributed — but without the time, administrative requirements or costs associated with a foundation. The fund’s sponsor manages the investments, grants and all administrative tasks, allowing the donor to devote their time and attention to the most important part: charitable giving. You can donate to an existing DAF. However, many business owners and high-net-worth individuals choose to set up their own funds with other family members or associates. You can establish a low contribution threshold to help introduce even the youngest family members to the importance of charitable giving.

Tax Advantages of Donor-Advised Funds

You can take advantage of the available income tax deductions for the year in which you contribute to a DAF and you can deduct the full market value of real estate and shares of closely held stock — subject to adjusted gross income (AGI) limits. You will incur no capital gains liability for any appreciated assets you contribute, and DAF contributions are not subject to estate taxation. Compared to contributions to a private foundation, AGI limits are essentially twice as high for DAFs. DAFs have no minimum annual grant requirement and they are not subject to excise taxes. The tax attorneys of Cantley Dietrich understand how important your charitable contributions are. You’ve worked hard for your money and you should be able to put it to work as you see fit. We can help you incorporate charitable giving as a part of your estate planning, tax planning and wealth preservation strategies. Contact us today to learn more about how donor-advised funds can assist you in this endeavor.   NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.

Estate Planning Changes You Need to Consider Before 2020

Now that 2019 has arrived, your estate planning strategies need a rigorous review — and possibly some revisions and updating — before next year. If you’re like most highly compensated individuals and business owners, you haven’t revised your estate and overall tax planning significantly since the new tax laws passed in late 2017. This year, it’s time to prepare for what could happen when the 2020 election rolls around. Without a crystal ball, it’s impossible to know what may happen with tax laws. However, as with all financial matters, it’s important to prepare and protect your hard-earned assets.

Potential Estate Tax Exemption Changes

The tax law changes that passed in late 2017 failed in repealing the estate tax, but the exemption threshold virtually doubled. The estate tax exemption, currently at $11.4 million per individual and $22.8 million for married couples, as of Jan. 1, 2019, also applies to lifetime gifts as well as generation-skipping transfers. These provisions are not scheduled to expire until December of 2025, at which time Congress could vote to extend them. However, depending on what happens in the 2020 election, a new administration could quickly implement tax law changes that negatively affect estate tax exemptions.

Potential Valuation Discount Restrictions

In 2017, the IRS and U.S. Treasury Department withdrew proposed valuation discount restrictions for interests in closely held entities, pursuant to an executive order. The proposed changes to the regulation (specifically tax code Section 2704) were issued in 2016, under the Obama administration, and were specifically intended to eliminate (or significantly limit) both DLOC and DLOM. Their withdrawal was a substantial relief for family-owned businesses, estate planners and tax attorneys alike. However, under a new administration, we could see these or similar restrictions reappear.

Estate Planning for the Unknown

Although no one knows when or if any of these potential scenarios could come to pass, crossing your fingers or leaving it to chance is not worth the risk. What steps should you take this year to prepare for a worst-case scenario? The answers depend on your assets and how you have your estate structured. To leverage the current estate tax exemption, you could consider moving assets now — although retaining access to them may pose a challenge. You’ll likely need to explore different trust structures as well as the tax basis and appreciation levels of various assets. This is also a good time to review any of your older trusts, to identify any that could benefit from a change in structure. Finally, review any recent changes to your state’s tax laws that may have taken effect at the beginning of the year. Your estate plan could potentially benefit from any such changes. Cantley Dietrich provides asset protection and estate planning services. We assist with wills, trusts and complex estate plans, preserving as much of your asset portfolio as possible while helping ensure that you remain in compliance with all applicable laws and regulations. Contact us today to learn more or to schedule an estate planning consultation with one of our tax attorneys.   NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.

Why You Need an Asset Protection Plan Right Now

Whatever your net worth may be, an asset protection plan helps you reduce risk and preserve as much of your wealth as possible. For small-business owners and highly compensated individuals, protecting your assets is even more important. Surprisingly, according to a 2018 Bank of America study, more than 25 percent of high-net-worth individuals are not doing anything to protect their wealth. Are you in that group? You’ve worked hard to get where you are. If you don’t have an asset protection or estate plan in place, you’re unnecessarily exposed to legal risks and financial liability. You also have no assurance that your accumulated wealth will go where you intend it to or accomplish the goals you’ve envisioned it will.

An Asset Protection Plan Minimizes Risk

Every day, you face a variety of risks, all of which pose a threat to your asset portfolio. You can insure around some risks, but should your liability exceed your insurance limits, your unprotected assets become fair game. You could lose your home, your business, your bank accounts and—possibly—your investments. If you are a business owner, your risk may increase substantially, depending on your industry and the products or services you provide. The litigious nature of our culture, combined with growing anti-capitalism sentiments, puts successful business owners in the bullseye for potential lawsuits.

Asset Protection Planning Reduces Tax Liability

One of the most serious threats to your accumulated wealth is tax liability. Capital gains taxes, estate taxes and other potential liabilities can substantially erode your accumulated wealth. Structuring your assets and estate to minimize the amount you have to pay the IRS and your state taxing authority is an effective way to protect your assets. It is imperative that all tax-planning strategies comply with applicable laws and regulations. Otherwise, you will incur the scrutiny of the IRS and potentially set yourself up for stiff penalties and fines.

Protecting Your Assets for the Future

Whether you envision putting your accumulated wealth to work for the good of the world or transferring it to future generations — or both — asset protection ensures that your money ultimately ends up where you want it to be. You can take steps to manage and preserve your wealth during your life, but if the bulk is lost to estate taxes upon your death, those efforts will have been in vain. For that reason, a comprehensive estate plan should be a critical component of your asset protection plan. You cannot wait until a potential threat looms before implementing your asset protection plan. Otherwise, it may appear to the court that you were attempting to hide assets. Act now to ensure that you preserve as much of your accumulated wealth as possible. For professional asset protection, tax and estate planning, call on the tax attorneys at Cantley Dietrich. As nationally recognized experts in our field, we also assist business owners and high-net-worth individuals with wills, trusts and complex estate matters. Contact us today to learn more about how we can assist you with an asset protection plan.   NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.