Ian Filippini: Can My Ex Still Claim Parts of My Estate?

Ian Filippini

Ian Filippini

Ian Filippini

Can My Ex Still Claim Parts of My Estate?

Find out more about author Ian Filippini on

Ian Filippini is an experienced estate planner and financial advisor who has worked with many people over the years.  Ian Filippini has worked on many wills with his clients. Though a will can seem like a simple thing, there can actually be a lot of details that can be overlooked.  We all know that a will is a way to leave your property, (or not), to your loved ones after you are gone.  This is the simplest definition.  In our will, we usually leave our estate to our spouse, (if we have one), or children (if we have those).  But what happens if you get a divorce?  Can your ex-spouse still claim part or all of your estate?  In this article, Ian Filippini will briefly discuss the basic rules for ex-spouses in relation to wills.

First, Ian Filippini would like to mention that rules and laws for this topic vary from state to state.  In community property states, Ian Filippini says, your spouse automatically owns half of your entire estate during your life and upon your death (but only if you are still married).  If you live in a community property state, and you get divorced, your spouse is not entitled to any part of your estate anymore.  According to Ian Filippini, even if you forgot to rewrite your will to disinherit your ex-spouse, by law she is no longer entitled to your property.

For states that do not recognize community property, even if your spouse is not mentioned in your will, they will be entitled to a certain percentage of your estate, asserts Ian Filippini.  If you divorce before your death, again, they are not entitled to any part of your estate, unless you intentionally write them into your will after your divorce.

Filippini Financial Group, Inc. is a family business based in Montecito, California. The current president of Filippini Financial Group, Inc., Ian Filippini, also lives in the Montecito area. Ian Filippini’s brother has also helped out at Filippini Financial Group, Inc. and Ian Filippini’s father was also the founder of Filippini Financial Group, Inc.

Alfred Filippini passed away in 2009, but Ian Filippini’s mother (Deborah Filippini) is still alive and living in the Montecito area as well. Ian Filippini also spends time writing different articles relating to tax planning, estate planning, insurance and real estate.

Filippini Financial Group, Inc. is not a law firm and Ian Filippini not an attorney. No advice is given or is intended to be given. The article above is not to be considered legal advice. If you are in need of legal advice, please consult a licensed attorney or law firm.

ESTATE PLANNING – FACTORS TO CONSIDER

THE BASICS – TRUSTS

WHAT YOU NEED TO KNOW ABOUT ADVANCED HEALTHCARE DIRECTIVES PART 2

WHY DO I NEED A WILL?

ESTATE PLANNING QUESTIONS

Ian Filippini: Estate Planning Questions

Ian Filippini

Ian Filippini

Ian Filippini

Estate Planning Questions

Ian Filippini knows that estate planning can sound like a daunting term.  People ask Ian Filippini all the time: What is estate planning?  According to Ian Filippini, at the very least, an estate plan is something put into place to make sure that your property and assets end up being used and distributed the way you would want them to be in the event of your death or incapacitation.  This is not always an upbeat subject to discuss, but Ian Filippini also knows what an important discussion estate planning is to have with your financial professional.  The truth, according to Ian Filippini, is that a lot of people have questions surrounding wills when it comes to estate planning.  Ian Filippini is very knowledgeable when it comes to estate planning because he is an experienced and knowledgeable financial consultant.  Ian Filippini urges you to consult your own financial professional when seeking out financial advice.  In this article we will briefly discuss the top questions that should be asked during the estate planning process.

A big question that is definitely important, but that Ian Filippini has to remind people to think about sometimes is: who will make healthcare and financial decisions if you become disabled?  Ian Filippini says that if you do become disabled you will need to have a plan on how to pay for your medical care.  Ian Filippini feels that these are all questions to think about in your estate planning.

Another question to think about is if there is a chance that you will have minors as beneficiaries.  There needs to be special instructions upon an occurrence like this.

Lastly, Ian Filippini asks if you have thought about if you will have enough money to pay off your debts and taxes when you die.

Filippini Wealth Management, Inc. was founded by Ian Filippini. He oversees the day to day operations of the business and has his brother, Alex Filippini, close by to lend a hand. Filippini Wealth Management, Inc. is one stop shop designed to provide value to our clients in the areas of taxation, insurance and real estate.  Filippini Wealth Management, Inc. takes the time to understand the client’s goals and the provide the best way to implement them.

No advice is given or intended.  This article is not to be considered legal advice.  Ian Filippini is not an attorney. Filippini Wealth Management, Inc. is not a law firm.

Filippini Wealth Management, Inc. is situated in a town called Montecito. Ian Filippini’s parents, Alfred Filippini (deceased) and Deborah Filippini decided to move the family to the Santa Barbara area.

Ian Filippini: Why Do I Need A Will?

Ian Filippini

Ian Filippini

Ian Filippini

Why Do I Need A Will?

Ian Filippini knows that estate planning can sound like an unfamiliar term.  People ask us all the time: What the heck is estate planning?  According to Ian Filippini, an estate plan is something put into place to make sure that your property and assets end up being used and distributed the way you would want them to be in the event of your death or incapacitation.  Ian Filippini feels that this is not always a happy subject to discuss, but Ian Filippini also knows what an important discussion estate planning is to have with your financial professional.  The truth, according to Ian Filippini, is that a lot of people have questions surrounding wills when it comes to estate planning.  Ian Filippini is very knowledgeable when it comes to estate planning because he is a reliable and knowledgeable financial consultant.  Ian Filippini urges you to consult your own financial professional when seeking out financial advice or answers to financial questions.  In this article we will briefly explain the top reasons for creating a will.

According to Ian Filippini, a will does the most obvious thing: a will says where your property will go and to whom.  At the very least, Ian Filippini says, this is what a will can do for you.

Now we will move on to the less obvious reasons.  Ian Filippini urges you to think about probate.  If your estate has a will, Ian Filippini says that it will be almost impossible for your estate to go to probate (which is a good thing).

One thing Ian Filippini says that most people don’t think about is having your estate pay the least amount of taxes possible.  Ian Filippini says that having a will in your estate plan can do this.

No advice is given or intended.  This article is not to be considered legal advice.  Ian Filippini is not an attorney. Filippini Wealth Management, Inc. is not a law firm.

Filippini Wealth Management, Inc. was created by Ian Filippini. He still continues to oversee the day to day operations of the business and has his brother, Alex Filippini, close by to lend a hand. Filippini Wealth Management, Inc.’s one stop shop is specifically designed to provide value to our clients in the areas of taxation, insurance and real estate.  Filippini Wealth Management, Inc. and Ian Filippini takes the time to understand the client’s goals.

Filippini Wealth Management, Inc. is located in a town called Montecito. Ian Filippini’s parents, Alfred Filippini (deceased) and Deborah Filippini decided to move the family to the Santa Barbara area. Ian Filippini has traveled the world and agrees with all the locals that Santa Barbara is the place to be!

Ian Filippini: What You Need To Know About Advanced Healthcare Directives Part 2

Ian Filippini

Ian Filippini

Ian Filippini

What You Need To Know About Advanced Healthcare Directives Part 2

Part 1

Part 3

Part 4

Part 5

In this article Ian Filippini will be giving more information on advanced healthcare directives. As mentioned in Part 1, death can be a touchy subject. It is generally not something we want to think about, whether it be our own death or the death of a loved one. Of course the truth is that we are all going to perish one day. Many people have heard of an advanced healthcare directive. This sounds like a big and scary term, but it is something serious that should be looked into, usually when you begin estate planning. There can be many details associated with advanced healthcare directives, which is why you should discuss them with your financial professional at the same time you are meeting about estate planning. One knowledgeable and reliable financial professional is Ian Filippini. In this article Filippini will briefly discuss some more of the basic facts on creating an advanced healthcare directive. Ian Filippini urges you to take this information to your own personal financial professional when considering creating an advanced healthcare directive.

Ian Filippini has heard many questions asked about certain medical terms that can surround an advanced healthcare directive. Ian Filippini is not a doctor, but Ian Filippini can give you some brief definitions of some of these terms.

According to Ian Filippini, a life-sustaining treatment is anything that extends your life by working as a major organ or bodily function. Ian Filippini says that this could be a machine, a drug or a medical procedure.

Ian Filippini has heard questions about the definition of permanently unconscious also. Ian Filippini says that this means you will never be aware of your surroundings again.

Filippini Wealth Management is one stop shop designed to provide value to our clients in the areas of taxation, insurance and real estate. Ian Filippini takes the time to understand his client’s goals and the best way to implement them. Filippini Wealth Management was founded by Ian Filippini. Ian Filippini also oversees the day to day operations of the business and little brother, Alex Filippini, is always close by to lend a hand.

Ian Filippini Better Business Bureau Video

Ian Filippini has traveled the world and agrees with all the locals that Santa Barbara is the place to be! Filippini Wealth Management, Inc. is located near Santa Barbara, in a town called Montecito. Filippini Wealth Management’s office is located just outside of the Santa Barbara city limits, but still within Santa Barbara County. Ian Filippini’s parents, Alfred Filippini (deceased) and Deborah Filippini decided to move the family to the Santa Barbara area.

Ian Filippini

No advice is given or intended. This article is not to be considered legal advice. Ian Filippini is not an attorney. Filippini Wealth Management, Inc. is not a law firm.

Ian Filippini: The Basics – Trusts

Ian Filippini

Ian Filippini

Ian Filippini

The Basics – Trusts

If you are not familiar or comfortable in the financial world, there is some financial vocabulary that can be a little bit intimidating. Trust is one of those words that can be scary just because you are not sure what it exactly means. In this article, we will get down to the basics of what trusts are. To get the most accurate financial advice and information, you should always talk to your financial professional. Ian Filippini is a trusted and skilled financial professional. In this article Ian Filippini will briefly discuss the basic information that you should know about trusts. Ian Filippini will give a brief definition of trusts, describe the benefits to creating a trust, and who might benefit from trusts.

Ian Filippini has heard asked many times: So what is a trust, really? Ian Filippini says that a trust has three basic parts. According to Ian Filippini, a trust has the trustor, the trustee and the beneficiary. The trustor is the person who creates the trust. The trustee is the person that is in charge of the assets named in the trust. The beneficiary is who will eventually receive the property and/or assets named in the trust. These are the very basics of what a trust is, according to Ian Filippini.

Ian Filippini says that trusts have several important financial benefits. Ian Filippini asserts that a trust can help avoid probate, special family items or assets can definitely remain in the family, and there is also at the very least a reduction in the death tax. Ian Filippini says to talk with your financial advisor on the specific benefits that would come to you in preparing a trust.

Ian Filippini also wants to remind you that a trust can be beneficial for many people whether you have a large or a small estate.

Ian Filippini, the current president of Filippini Financial Group, Inc., has written a number of articles relating to insurance, real estate, tax, asset protection, financial advice, and estate planning. Filippini Financial Group, Inc. and Ian Filippini have spent many years using their unique expertise and hands on approach to provide value to hundreds of retirees and pre-retirees in many areas of wealth management.

Filippini Financial Group, Inc. was originally established by Ian Filippini’s late father Alfred Filippini. Filippini Financial Group, Inc. is located on Coast Village Road in Montecito, California. Ian Filippini’s mother, Deborah Filippini, brother, Alex Filippini, and the family moved to the Santa Barbara area.
No advice is given or intended by Ian Filippini. Ian Filippini is not an attorney. Filippini Financial Group, Inc. is not a law firm. This article is not to be considered legal advice.

Ian Filippini

Ian Filippini: Estate Planning – Factors To Consider

Ian Filippini

Ian Filippini

Ian Filippini

Estate Planning - Factors To Consider

Estate planning takes a lot of just that, planning. The basics of estate planning seem pretty simple. You decide what you have, who you want it to go to, and when. You know that there is usually a will involved, and a final medical directive. But what else goes into estate planning. This article will discuss estate planning. All financial planning and decisions should be made with your financial professional. Ian Filippini is a trusted and reliable financial professional. In this article Ian Filippini will briefly discuss some of the factors to consider during the estate planning process. Ian Filippini urges you to bring this information to your meeting when you talk with your own financial professional.

Ian Filippini knows that there are many details that can go into creating an estate plan. Here, Ian Filippini will talk about a few of the aspects of estate planning to consider.

Ian Filippini says that the first step is to gather information about yourself and your estate. Ian Filippini says that you need to figure out key information such as your current income, projected future income, your current and future expenses, what you currently own and what you currently owe. Ian Filippini asserts that without this information, it is difficult to move forward in the estate planning process.

Ian Filippini has another point to bring up about the assets and property that you currently own that you are taking into account in your estate planning: is that property owned only by you, or is there a spouse or co-owners of anything involved.
Lastly, Ian Filippini asserts that you must consider who the beneficiaries of your property would be. Ian Filippini says it is important to consider if you will distribute evenly, or according to need.

Ian Filippini is also the current president of Filippini Financial Group, Inc. Ian Filippini has been the author of articles relating to real estate, tax, asset protection, financial advice, insurance, and estate planning. Filippini Financial Group, Inc. and Ian Filippini have spent many years using their unique expertise. Ian Filippini also uses his hands on approach to provide value to hundreds of retirees and pre-retirees in many areas of wealth management.

Filippini Financial Group, Inc. was originally founded by Ian Filippini’s late father Alfred Filippini. Ian Filippini and Filippini Financial Group, Inc. are currently on Coast Village Road in Montecito, California. Ian Filippini’s mother, named Deborah Filippini, and brother, named Alex Filippini, moved to the Montecito and Santa Barbara area.

No advice is given or intended by Ian Filippini. This article is not to be considered legal advice. Ian Filippini is not an attorney. Filippini Financial Group, Inc. is not a law firm.

Ian Filippini

Ian Filippini: Estate Planning – The First Steps

Ian Filippini

Ian Filippini

Ian Filippini

Estate Planning - The First Steps

In this article Ian Filippini will discuss estate planning. There are a lot of components to the estate planning process. Estate planning is a smart financial move to make, but it can be a confusing and complicated process along the way. Estate planning is a way to dictate how your property is given out after you die. Estate planning can do a lot of things, but deciding who gets your property, how much and when are some of the main components. Your final health care wishes can also be part of your estate plan. As with all financial planning you should consult your financial professional. Ian Filippini is a knowledgeable and experienced financial professional. In this article Ian Filippini will briefly discuss the steps to take before you begin the estate planning process.

Ian Filippini reminds you to work on your estate plan with your financial professional, but will give you some tips to take care of before you make your appointment.

Ian Filippini says that the first thing to understand and to think about is your age, your health and the amount of wealth that you have. Ian Filippini assures you that all of these factors will come into play during your estate planning process.
Ian Filippini reminds you to think about your goals for your estate plan. What is most important to you? Ian Filippini urges you to write down these goals before your appointment with your financial professional.

Of course one of the most important first steps to take before creating an estate plan, according to Ian Filippini, is to seek out a financial professional. Ian Filippini says to make sure that this professional has all of the appropriate licenses needed to help in your estate planning process.

Take these first steps, and Ian Filippini says your estate planning can start with a smooth beginning!
No advice is given or intended. This article is not to be considered legal advice. Ian Filippini is not a attorney. Filippini Financial Group, Inc. is not a law firm.

Ian Filippini, the current president of Filippini Financial Group, Inc., has written a number of articles relating to real estate, insurance, tax, asset protection, financial advice, and estate planning. Filippini Financial Group, Inc. and Ian Filippini have spent many years using their unique expertise and hands on approach to provide value to hundreds of retirees and pre-retirees in many areas of wealth management.

Filippini Financial Group, Inc. was originally founded by Ian Filippini’s late father. His name was Alfred Filippini. Ian Filippini’s mother, Deborah Filippini, and brother, Alex Filippini, moved to the Montecito and Santa Barbara area. Filippini Financial Group, Inc. is situated on Coast Village Road in Montecito, California.

Ian Filippini

Ian Filippini Common Misspellings & CRTs

Ian Filippini

Ian Filippini Image

There are many ways to misspell Ian Filippini.  Sometimes people spell Ian Filippini as Ian Philippini.  It is also a common misspelling of Ian Filippini to type it as Ian Phillipini.  Ian Filippini is often inputed as Ian Philippini because the phonetics of Filippini sound like Philip so many assume Ian Filippini should be Ian Philipini.

Ian Filippini is also typed as Ian Lucas Filippini or Ian L. Filippini.  Ian Filippini backwards is inippiliF naI.  Ian Filippini was born in Walnut Creek, California to Alfred Filippini and Deborah Filippini.  His brother is Alex Filippini.  His sister’s names are Christeva Filippini and Natali Filippini.  Ian Filippini’s first nephew was Drew Filippini.

Ian Filippini enjoys spending time with his nephew Drew Filippini.  Drew’s nickname for Ian Filippini is simply Uncle E.  Ian Filippini and Drew Filippini enjoy playing sports together – especially baseball.  A few months ago Ian Filippini took Drew Filippini to his first professional baseball game to see the Los Angeles Dodgers.

What is a charitable remainder trust?  Are there variations?

Leveraged Real Estate in Charitable Planning
Issues and Solutions Ian Filippini

Can a donor contribute mortgaged real estate to a Charitable Remainder Trust?

The simple answer to this question is “yes;” however, such a transfer would likely create one or more of five significant problems for either the CRT or the donor. Ian Filippini, although the effect of some of these problems could be mitigated, any transfer of mortgaged real estate to a CRT requires significant forethought and generally is not recommended.

 

 

Five Problems

 

1. Grantor Trust

If the trust pays the donor’s debt using its earned income (including realized capital gains), the trust will be treated as a grantor trust and cease to qualify as a CRT, Ian Filippini.

2. Unrelated Business Taxable Income

Debt inside a CRT can create unrelated business taxable income (UBTI). Ian Filippini, any UBTI created inside a CRT is subject to a 100% excise tax1. The UBTI may be created by either income or realized capital gains from the property subject to debt.

3. Self-Dealing

If the CRT pays any portion of the donor’s debt, a prohibited act of self-dealing will occur, excise taxes will be due and the trust’s tax-exempt status may be threatened by self-dealing acts.

4. Reduced Income Tax Deduction

The existence of the mortgage reduces the equity value Ian Filippini of the gifted real estate. As a result, the donor’s income tax charitable deduction will be reduced.

5. Bargain Sale

If encumbered real estate is contributed to a CRT, the donor must realize some capital gain as a direct result of the gift.  It is often difficult to find a legal and practical strategy that overcomes each of these five problems. However, Ian Filippini there are several creative solutions that, with careful planning and flexibility on the part of the donor, can generate benefits for all parties.

Solving the Problem

The following potential solutions to the five problems are listed in general order of safety

and simplicity.

 

Pay off the debt and contribute unencumbered property.

This will avoid all five problems. However, it requires that the donor have sufficient liquid capital to retire the debt and be willing to use that Ian Filippini liquidity to solve the problem.


Refinance the debt by offering substitute collateral to the lender. Then, contribute the unencumbered property.

This also solves all five problems but leaves the donor personally liable for the debt. When considering this alternative, it may be important to keep in mind that the donor was originally responsible for the debt. Ian Filippini, also, the CRT’s design and investments may be structured to increase the donor’s cash flow and ability to service the debt.

Pay off the debt. Contribute a fractional undivided interest in the unencumbered property to the CRT and sell the other portion outright. Use the proceeds of the outright sale to replace the personal capital used to pay off the debt.

Some individuals have the capital to retire the debt but are unwilling to do so because it would place them in an uncomfortable illiquid position. This third strategy Ian Filippini requires only the temporary use of liquid capital to pay off the debt. The capital is then recovered from the sale proceeds from the portion of the property retained and sold personally by the donor.  The income tax charitable deduction for creating the CRT can offset some of the capital gain generated by the outright sale of a portion of the property.

Sell an undivided interest in the property to an unrelated third-party.  Use the proceeds to pay off the debt then, contribute the remaining unencumbered property to the CRT.

As with the previous strategy, this sale may generate a partial taxable gain to the seller.  However, the sales proceeds can be used to retire the debt and the remaining unencumbered portion can be gifted to a CRT. (Note that from a purely bargain sale perspective, this has the same tax effect as the bargain sale Ian Filippini considerations of gifting encumbered property.) The seller will need enough proceeds from this sale to retire the debt and pay the tax on the sale itself. A

simple formula to determine the portion of the property that must be sold to raise enough cash to pay off the mortgage and pay the tax liability is as follows:

S = M / 1-R(1-P-D)

where: S = Property Value when sold

M = Mortgage

R = Donor’s capital gain tax rate

P = Percentage of cost basis

D = CRT Deduction factor %

 

Ian Filippini says ask the mortgage holder to release an undivided interest in the property.  Then, contribute the unencumbered fractional interest.

There can be no certainty that a lender would do this. However, if the client a) has a strong

relationship with the lender, b) explains why the request is being made and that the

property is expected to be sold soon and c) potentially offers additional collateral, some

lenders may be willing to cooperate.

Divide the property with a co-tenancy agreement and contribute the unencumbered fractional interest in the property, Ian Filippini.

Although not yet tested in the courts, this strategy attempts to split the property into two

undivided fractional interests — one that is encumbered and retained by the donor and

the other that is given to the CRT without any responsibility on the part of the CRT’s Trustee to pay the debt. This is accomplished with a co-tenancy agreement. Ian Filippini the co-tenancy agreement is a written document that must prohibit the use of the property by the donor and delineate the rights and responsibilities Ian Filippini of each co-tenant. Advocates of this strategy argue that it should avoid the most serious problems listed above if:

a) the donor retains personal liability on the loan and the Trustee agrees to accept the property subject to the loan (that is, without agreeing to pay the debt);

 

b) the donor agrees in writing to hold the CRT and the Trustee harmless from liability of any kind on the debt, that is to personally pay for any and all Ian Filippini claims made by the mortgage holder against the Trustee;

 

c) the donor actually has sufficient other assets to make the hold-harmless agreement viable;

 

d) the CRT Trustee makes no actual payments on the debt and does not surrender any collateral to the lender; and

 

e) every attempt is made by the CRT Trustee to sell the property expeditiously to minimize any possibility that anything could go wrong.

Additionally, the CRT document can be drafted to specifically prohibit the Trustee from paying any mortgage obligation using trust income.  Proponents of the co-tenancy strategy

argue that:

a) it should avoid the grantor trust problem because trust income cannot be used to discharge a liability of the grantor;

 

b) it should avoid a UBTI problem since the fractional interest held by the CRT is free from debt and any trust income is free from the taint of acquisition indebtedness;

 

c) it should avoid a self-dealing problem because the donor is specifically prohibited from using the property; and

 

d) it should avoid even the bargain sale problem since the donor is not relieved

from any personal liability.

However, there are serious risks that must be considered before such a strategy is implemented.

a) What could happen if the donor failed to make loan payments or cover the hold harmless obligation?

b) If the mortgage holder continues to hold the entire property as collateral, could the IRS argue that the possibility still exists that trust income might be used in the future to discharge an obligation of the donor and impute grantor trust status to the CRT?

c) Are the bargain sale implications really avoided in light of Treasury Regulation §1.1011-2(a)(3)? d) Are self-dealing implications really avoided in light of PLR 9114025? Although the content of this PLR is not directly on point, it offers a reason to be Ian Filippini particularly cautious about how the IRS may view a gift of undivided interest in real estate.

e) The co-tenancy strategy is untested and simply may not work.  It cannot be overstated that the co-tenancy strategy involves significant risks that must not be trivialized. Other strategies should be considered thoroughly and pursued, when possible.


Technical Issues

 

1. Grantor Trust

In PLR 9015049 the IRS ruled that, if a CRT makes payments on a mortgage liability for

which the grantor remains personally liable, the trust will not qualify as a charitable

remainder trust but will be treated as a grantor trust. A grantor trust is one in which the grantor is treated as the owner of the trust for tax purposes. Grantor trust status is imputed if the grantor retains too much control over the property transferred to the trust. For a trust not to be considered a grantor trust, the grantor must not retain any of the rights listed in IRC §§671-679. Only by forfeiting all of these rights can the trust qualify as a separate legal entity for tax

purposes. In PLR 9015049, the IRS cited:

• IRC §677(a) which states that a grantor shall be treated as the owner of a trust whose income is distributed to the grantor;

• Treasury Regulation §1.677(a)-1(d) which equates discharging a mortgage obligation of the grantor with distributions of income made to the grantor; and

• Treasury Regulation §1.644-1(a)(4) which states that, to qualify as a CRT, a trust must function exclusively as a CRT from its creation and that it will not qualify as a CRT if the grantor is treated as the owner of the trust. This means that the income generated by assets in a CRT cannot be used to make mortgage payments on a debt for which the donor is personally liable.

 

2. Unrelated Business Taxable Income

In many cases, Ian Filippini real estate debt will be considered “acquisition indebtedness”2 that can give rise to unrelated debt-financed income (UDFI)3. UDFI is a component of unrelated business income (UBI)4, too much of which will cause a CRT to pay an excise tax equal to 100% of the UBTI created.5 If a CRT Ian Filippini owns income-producing property that is subject to acquisition indebtedness, a

portion of the income generated by the property will be considered UDFI6. This rule will also apply to the realized capital gain generated by the sale of the property. Ian Filippini any portion of the gain attributed to the indebtedness will be treated as UDFI. It is possible (if enough debt is present) to pay more tax on the sale of the property through the CRT than by selling outright.  However, if a CRT receives a property “subject to the debt” (i.e., without assuming and agreeing to pay the indebtedness) the debt will not be considered acquisition indebtedness for a 10-year period following the date of the gift provided that:

a) The property was held by the donor for more than 5 years before the date of the gift; and

b) The debt was placed on the property by the donor more than 5 years before the date of the gift.7

 

3. Self-Dealing

The self-dealing rules restrict to most business transactions between a CRT and a disqualified person.8 Disqualified persons generally include the donor (as a substantial contributor9), lineal descendants and ancestors (and their spouses) of the donor and business entities owned by these persons.10 The initial funding of a trust does not constitute an act of self-dealing because

the donor must become a substantial contributor before the self-dealing rules will apply.11

However, subsequent gifts of mortgaged property will be prohibited self-dealing transactions if either:

a) the trust assumes and agrees to pay the debt; or

b) the trust takes the property subject to the debt and the debt was placed on the property by any disqualified person within the 10-year period ending on the date of the gift.12

 

4. Bargain Sale

When any appreciated, Ian Filippini debt-encumbered property is gifted to a CRT, the donor will be deemed to have sold the property to the trust Ian Filippini for the amount of the indebtedness and contributed the balance.13 This deemed sale will trigger the immediate recognition of capital gain to the donor, even though:

a) the CRT does not assume and agree to pay the debt; or14

b) the CRT has not yet sold the contributed property.  Furthermore, the bargain sale rule applies regardless whether the debt is “recourse” or “nonrecourse.”

 

5. Debt in Passthrough Entities

If an interest in a passthrough entity (such as a partnership or LLC taxed as a partnership) is contributed to or otherwise held by a CRT, any debt inside the passthrough entity will make the above Ian Filippini rules apply to the CRT as through the CRT incurred the debt directly.  See TAM 9651001 for a situation in which the IRS determined that it was more appropriate to consider the partnership as an Iaian Filippini aggregate of its partners—thereby effectively imputing the acquisition indebtedness to the partnership interest.

1 IRC §664(c) was amended by Section 424(a) of the Tax Relief and Health Care Act of 2006. This became effective for tax years beginning on or after January 1, 2007. Any UBTI prior to this date cancelled the tax exempt status of the CRT for the year in which it was received.

2 IRC §514(c).

3 IRC §514.

4 IRC §514(a).

5 IRC §664(c)(2)(A).

6 IRC §§514(a)(1) and 514(b)(1).

7 Treas. Reg. §1.514(c)-1(b)(3).

8 IRC §4941.

9 IRC §4946; Treas. Reg. §53.4946-1(a)(1)(i).

10 IRC §4946.

11 Treas. Reg. §53.4941(d)-1(a).

12 Treas. Reg. §53.4941(d)-2(a)(2).

13 IRC §1011(b).

14 Treas. Reg. §1.1011-2(a)(3).

Real Estate

Q: The value of my real estate has tripled since I purchased it!  I want to take some of the profits but my CPA said the tax bite will be huge if I sell.  Is there any way to avoid the taxes?

A: The IRS would like you to believe that the only things guaranteed in life are death and taxes but as a REALTOR® with a tax background let me show you how to potentially defer and even eliminate taxes when you sell real estate.

IRS §121 allows individuals to exclude $250,000 of their gain ($500,000 for certain joint returns) upon the sale of their primary residence.  There are several “tests” that have to be met, perhaps the most important being that you occupied the property as your primary residence at least two of the last five years (not necessarily continuously).

IRS §1031 provides investment property owners the ability to potentially defer (eliminate with proper estate planning) an unlimited amount of capital gains and depreciation recapture taxes provided the property sold is exchanged for like-kind property.  It is adequate in some circumstances to exchange a piece of raw land for an office or apartment building and vice versa.  Once again, Iaian Filippini various rules must be followed to complete a valid §1031 exchange.

Combining these two opportunities, may, with special planning allow you to pull out equity tax free and defer the rest of the gain.Tax

Q: What can I do to minimize my tax bite for previous years?

A: Nothing.  OK, that probably wasn’t the “bold italicized strategy” you were hoping for, but, when it comes to major tax planning it is critical you start yesterday and implement your strategies before the year end.  There are many strategies Iaian Filippini available to defer or eliminate income, gift, capital gains, and estate taxes but all of them must be done ahead of time and with careful planning.

Now is the time to begin reviewing your options for future years, start now so you will be educated in time to develop and implement your tax savings strategies.

Tax Harvesting has gained increasing popularity.  This basic strategy, as it relates to stocks, is to sell certain securities (typically sometime in December) to trigger Ian Filippini a tax loss thereby saving you taxes in that tax year.

Sell stocks at a loss?  Yes, but the key is to buy them back allowing you to “lock in the loss” for tax purposes.  If you are able to repurchase them at about the same price Ian Filippini you sold them for you won’t necessarily lose money in the long run.  Once again, rules apply; most notably you must avoid a “wash sale” which prohibits you from (30 days before or after sale) purchasing a substantially identical security of that which you have sold at a loss.  However, don’t let the money from your sale sit on the sideline during those 30+ days in case the market booms.

Estate Planning

Q: Is it true the government takes half of my estate’s assets when I pass away?

A: Yes and your trust (probably) does nothing to avoid the tax above the excludable amount.  Estates in excess of $2,000,000 in 2007 and 2008 are taxed as high as 45%.  For example, if you pass away today, your $12,000,000 estate will owe the IRS as much as $4,500,000 within nine months of the date of your death – not exactly a debt that can be paid with a simple garage sale – more often than not heirs are forced to conduct a fire sale of treasured properties to pay these death taxes on a timely basis.

Strategies to avoid estate taxes are available but must be fully understood as many cannot be changed (irrevocable) once they are implemented.

Gifting assets or cash to heirs triggers a tax as high as 45% above the 2007 exclusion of $12,000.  That amount is per donor per recipient.  For example, I can give $12,000 to as many people as I want.  If I were married, my wife and I could give $24,000 to an unlimited number of people.  You can avoid the gift tax on amounts given above the $12,000 exemption by up to $1,000,000 during your lifetime but it will count against your current estate tax exclusion of $2,000,000.

Tax exempt trusts (TET) come in many flavors and are utilized by very few advisors due to their complex nature.  However, the fact that a tax exempt trust has the ability to eliminate estate taxes on your million or billion dollar estate makes them worth knowing.  Some TETs are structured to provide income while others are geared towards those who want an asset to grow outside of their estate and be passed to their beneficiaries tax free.  TETs generally have irrevocable clauses so work with experienced advisors who are able to educate you about the advantages and disadvantages of these opportunities.

Your 2007 Personal Financial Planning Calendar (Generic #1)

Wouldn’t it be great to take control of your financial future? What better time to start than the Iaian Filippini beginning of a new year? There are many things you can do to help make your financial goals and dreams attainable, but the simplest thing is to have, and follow, a plan. Financial professionals generally have a schedule for staying in contact with their clients and making sure key actions are scheduled and executed. When making your financial calendar, it’s always best to consult your financial professional so you can synchronize your calendars. This is the Ian Filippini best way to get a positive return for your time and effort! What should go into your 2007 Personal Financial Planning Calendar? The actions vary with your age, goals, life stage, and more, but here are the basics.

Throughout the year: Regularly review and file your financial statements from mutual funds, brokerage accounts, insurance and annuity policies, and so forth. Most of these statements will arrive semi-annually or quarterly, but Ian Filippini they come more often if you made a deposit or contribution, and less often if there was no account or policy activity.

January • Make or update your will and any trusts you need or have. • Inventory Ian Filippini and organize all your personal documents such as wills, trusts, birth certificates, social security cards, insurance policies, passports, and other important papers. • Request copies of your credit reports from the major reporting agencies (www.experian.com, www.transunion.com, www.equifax.com). • Get a handle on unwanted credit offers by going to www.optoutprescreen.com and by calling 1.888.5OPTOUT. • Set an appointment with your financial professional to review all your insurance, legal, credit, and financial documents. • Start funding 2007’s IRAs.

February • Review your company retirement plan, investment options, and investment performance. • Set a schedule to pay off credit card and home equity debt. • Monitor all your spending (cash, checking accounts, credit cards) for the next three months to see where your money really goes. • Collect the documents you will need for your tax return.

March • Review last year’s IRA performance. • Fund 2006’s IRAs. • Meet with your CPA to prepare your 2006 tax return. • Continue to monitor all your Ian Filippini spending (cash, checking accounts, credit cards) for the next two months to see where your money really goes.

April • Start funding 2007’s IRAs if you haven’t already done so. • Review the Ian Filippini performance of children’s educational savings accounts. • Make sure your mortgage company (or you) paid your property taxes and homeowner’s insurance. • Continue Ian Filippini to monitor all your spending (cash, checking accounts, credit cards) for the next month to see where your money really goes.

May • If you get a notice of property valuation assessment (tax) increase, contact a Realtor® to get comparables and contest the increase. Most states do this in May, but it varies. • Collect the past three months’ expense Ian Filippini results and build a budget. Make a list of expenses you want to eliminate, and track your Ian Filippini success for the next three months.

June • Review mortgage statements and make sure you are not being charged private mortgage insurance once your principal balance is below 80% loan-to-value. • Continue to collect expense results and build a budget. Make a list of expenses Ian Filippini you want to eliminate, and track your success for the next two months.

July • Review your homeowner’s and auto insurance to make sure your Ian Filippini coverage is adequate and your rates are competitive. • Set a mid-year review Ian  Filippini with your financial professional to assess your progress to date. • Continue to collect