The Minnesota Supreme Court handed down its decision in Fielding v. MacDonaald et al. The decision rendered the statute that determines when a trust is taxed as a resident to the state unconstitutional as it applies to many different trusts. Previously, Minnesota would tax a trust as a resident perpetually if the Grantor was a Minnesota resident at the time it became irrevocable (among other times). This raised the question of whether this tie to the grantor was constitutional for due process reasons.
- Trusts can also get a 20% Qualified Business Income Deduction
- Trusts will likely also get their own SALT deduction
- This can cause more deduction to be had overall
- Planning for asset protection and business succession including trusts, now also benefits client’s income tax planning
- Clients should consider using trusts to get the most out of these deductions and to create the best value plans
Most folks have at least heard of an estate plan. But fewer realize that a simple will is not enough to prepare for your future. In fact, a combination of plans – financial, tax, legacy, and estate – are vital to your financial well-being and protection of your assets and family. All of these plans are closely linked, affecting one another but also serving different purposes.
Owning your own business can be a great endeavor that takes a lot of passion and drive. Many small business owners focus on the day-to-day management and growth of the business, rather than thinking about a time when he or she may not be in the business. This is a far too common mistake. Future plans for your enterprise are even more important when one child works in the business but the others do not. Keeping the peace among your children after you are no longer able to participate in the business requires careful balancing of your estate plan.
What happens to your business if you are hurt? Preparing your company for your incapacity or death is vital to the survival of the enterprise. Otherwise, your business will be disrupted, harming your customers, employees, vendors, and ultimately, your family. For this reason, proactive financial planning — including your business and your estate plan — is key. Below are some tips on how to protect your company and keep the business on track and operating day-to-day in your absence.
It’s the start of a new year, which means tax season—and this year’s April 17th IRS filing deadline—is just around the corner. Soon you’ll be receiving tax forms such as your W-2 or 1099s, and you’ll start thinking about the life events that could affect your taxes in various ways.
A trust is a fiduciary arrangement, established by a grantor or trustmaker, which gives a third party (known as a trustee) the authority to manage assets on behalf of one or more persons (known as a beneficiaries). Since every situation is different, there are different types of trusts to ensure the best outcome for each beneficiary. One type of trust, known as a spendthrift trust, is commonly used to protect a beneficiary’s interest from creditors, a soon-to-be ex-spouse, or his or her own poor management of money. Generally, these trusts are created for the benefit of individuals who are not good with money, might easily fall into debt, may be easily defrauded or deceived, or have an addiction that may result in squandering of funds.
Personal risk management is being aware of the risks in your home and in your life, and then planning how to handle those risks. Insurance plays a big part in managing risk. Most people don’t like paying insurance premiums, but when something happens and the insurance pays for a covered expense, they are relieved they had it.
The Key Takeaways
o Not recognizing and managing risk can set your family up for financial ruin.
o Recognizing and managing risk will give you and your family the freedom to live life, without worrying about how you would handle a catastrophic loss.
What kinds of risks should I be aware of?
Property and casualty risks include your car and other vehicles, home and furnishings, jewelry, cameras, and so forth. You would want to protect these from accidents, theft, fire, flood, and earthquake damage. Health and long-term care insurance help protect your finances if you become ill or injured. Disability income and life insurance help replace income in the event of a long-term illness or death. If you volunteer with children or youth, you may need personal liability insurance. An increase to your umbrella policy is warranted once you have teenage drivers. If you are a business owner, you may need insurance as part of a buy-sell agreement with a key employee or business partner in addition to business liability insurance. If you are in a high-risk profession (like health care, construction or real estate), you will probably need additional asset protection planning.
How much insurance do I need?
You need enough insurance to protect your assets in the worst-case scenario. At the same time, the premiums should be an amount you can comfortably afford in your budget. Decide what you need to insure, how much to insure it for, and how much you are able and willing to pay in deductibles and premiums.
What You Need to Know
Your family’s needs for insurance will change over time and will reflect your values at each stage in life. For example, you may need more life insurance when your children are young; you may want long-term care insurance as you near retirement (although it is less expensive when you are younger); you may not need as much personal liability insurance if you retire from volunteering or once your children become independent; and you may not need business insurance if you sell your business.
Actions to Consider
o Look at ways you can reduce premiums. For example, installing a home security alarm system or trimming shrubbery may save on your homeowner’s insurance. If you drive an older car, you may not need collision insurance. If you can handle higher deductibles, your premiums will likely be lower.
o Look for ways to reduce risk entirely. For example, you may want to sell a property that is high risk or even retire from a high-risk profession.
o Some risk may be perfectly acceptable to you. Consider what you might lose if the worst happens and see if you could live with the loss. This is called risk budgeting.
o Keep good records on personal property. Review the values and your insurance coverage annually. Values fluctuate, and you don’t want to over- or under-insure.
o Determine what you would lose if someone sued you with a liability claim. You worked hard to build your net worth and you do not want to lose wealth if someone files a claim against you. Even if it is a frivolous claim, you may have to spend a small fortune to defend yourself. Take action to protect your assets for yourself and your family.
o Health care and long-term care costs are increasing at an alarming pace, people are living longer, and many older Americans have seen their retirement savings decline in recent down markets. A professional can help you evaluate your health care risks and determine how to plan for them.