Latest from Tax & Wealth Advisor Blog

During the estate planning process, it is important to consider what types of assets make up your estate. Specifically, you should understand the difference between your “probate” and “non-probate” assets. As you might imagine, your probate assets are the ones that must go through probate, a time-consuming and costly process which we previously discussed here. Contrary to popular belief, a Last Will and Testament will not, on its own, help your estate avoid probate. Whether or not your estate is subject to probate depends on whether your estate consists of probate assets. Probate assets are those that are owned…
In general, states are considered either “common law property” or “community property” states. Wisconsin, along with a few other states, is a community property state (community property is referred to as “marital property” in Wisconsin). It is important to understand the difference between these two systems for purposes of wealth management planning, estate planning, and divorce. Under the common law property system, assets and debts earned or acquired by one spouse during the marriage belong only to that spouse. With this type of system, only assets and debts that are titled under the name of both spouses are owned by…
A proper estate plan covers not only what should happen upon your death, but also what should happen if you lose your decision-making skills. While planning for incapacity may be as unpleasant as planning for death, it is an important step in the estate planning process. Planning for incapacity ensures that someone you specifically choose and trust can act on your behalf while you are unable to do so for yourself. In another article, we discussed the importance of a Durable Financial Power of Attorney. Here, we discuss why a Power of Attorney for Health Care is equally as…
Various estate planning documents require you to appoint someone to act on your behalf. These appointees are your “fiduciaries” and include your personal representative, guardian for minor children, trustee, attorney-in-fact, and health care agent. Often times, people name certain individuals for these roles without much consideration, or they may consider the wrong criteria. Below is a general description of each fiduciary role and a few suggestions on what to consider when deciding who to appoint to those roles. In general, you should carefully consider the skillset each role requires and whether the person you would like to appoint possesses those…
With the economy still struggling, one bright spot remains for those who are willing to make an investment of time and money in estate planning. The combination of lowered asset values, reduced interest rates, and historically high estate and gift tax exemptions present a unique opportunity to implement estate planning techniques that will yield significant tax savings. But those looking to take advantage of this unique opportunity should act now, because a rebound in asset values and the outcome of the November 2020 election may make this unique opportunity go away. The Gift, Estate, and GST Tax Exemptions for 2020…
Some of your most significant assets, like your life insurance and retirement accounts, ask you to make beneficiary designations. If you make valid beneficiary designations on these assets, then upon your death they will pass directly to your named beneficiaries without being subject to the probate process. Click here to view our article on probate and why you might want to avoid it. Many people overlook the importance of beneficiary designations and neglect to name beneficiaries because they think their other estate planning documents will cover those assets. However, beneficiary designations operate independently from other estate planning documents, like a…
Probate is the legal process during which a court oversees the collection and transfer of a person’s assets upon his or her death. In general, the probate process includes filing a will, appointing a personal representative, inventorying the decedent’s assets, paying the decedent’s debts, filing taxes, and distributing the balance of the estate according to the decedent’s will. If the decedent did not leave a will, then the decedent’s property is distributed according to Wisconsin’s intestacy laws. Many people seek to avoid probate because probate documents are public record, so avoiding probate means maintaining a sense of privacy. Additionally, the…
(Part II) Objectives of the Succession Plan In our last article we discussed why a well-constructed succession plan is necessary. In this article, we review the essential objectives the plan needs to address. The objectives of succession planning and the methods used to accomplish these objectives are varied, but include the following: MAXIMIZE THE VALUE OF THE BUSINESS. During the owner’s tenure at the company, the owner must develop a strong management team involving those family members who are active in the business as well as key employees. This will maximize value and help ensure that upon his or her…
The Internal Revenue Service reminds taxpayers that estimated tax payments for tax year 2020, originally due April 15 and June 15, are now due July 15 due to the COVID-19 outbreak. Therefore, any individual or corporation that has a quarterly estimated tax payment due has until July 15 to make that payment without penalty. This relief applies to federal income tax returns and tax payments (including tax on self-employment income) otherwise due April 15, 2020. This relief does not apply to state tax payments, deposits, or payments of any other type of federal tax. Who needs to make estimated tax…
A proper estate plan covers not only what should happen upon your death, but also what should happen if you lose your decision-making skills. While planning for incapacity may be as unpleasant as planning for death, it is an important step in the estate planning process. Planning for incapacity ensures that someone you specifically choose and trust can act on your behalf while you are unable to do so for yourself. One key document to help you plan for incapacity is the Durable Financial Power of Attorney. A Durable Financial Power of Attorney allows you to appoint someone, your “agent”…
Many closely held businesses involve family members. The owner of such a business may wish to sell the business to some third party on or prior to death, or, more likely, may desire to transfer the business to the owner’s children. Although some business owners may believe little or no planning is required for this type of transaction to take place, the opposite is true. To successfully transfer a family business to the next generation, the owner should commence planning for succession as soon as the owner has a good indication of which family members may be interested in succeeding…
Do you want to leave your children with an inheritance, but are worried about creditors taking part of that inheritance? If so, you are not alone. Fortunately, a properly established protective trust can help safeguard the money you leave behind for your children from their creditors, including in a divorce. Creditors can more easily reach your children’s inheritances if it is given to them directly, outside of a trust. However, creditors would have more hurdles to jump through to reach your children’s inheritance if it is held in a protective trust. Therefore, many parents add extra protections for their children…
Yesterday, the IRS released guidance in Notice 2020-32 stating that expenses related to forgivable loans through the Paycheck Protection Program (PP) will not be tax-deductible. Under the PPP, a program created by the CARES Act to provide coronavirus relief, small businesses can receive forgivable loans of up to $10 million as long as the loan goes to essential expenses, such as maintaining payroll, rent, utilities, and mortgage interest. While it was clear from the CARES Act that PPP loan forgiveness is not taxable income, the CARES Act said nothing about deducting the expenses paid with such loan proceeds. However, the…
The Wisconsin Department of Revenue (DOR) has announced immediate help for small businesses on sales taxes in response to COVID-19. Small businesses can immediately request a one-month extension to file sales and use tax returns due March 31, 2020 until April 30, 2020 and due April 30, 2020 until June 1, 2020. The DOR will not assess late filing fees or penalties if sales and use tax returns are filed by April 30 or June 1. By law, payments are due March 31 and April 30 and 12% interest (lowered from 18%) will accrue beginning on the due date, unless…
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This article summarizes the tax relief provisions for businesses other than the payroll tax relief provisions that are contained in the Act. Modifications to Net Operating Losses (NOLs) The use of NOLs for businesses will be expanded with two amendments to Internal Revenue Code (IRC) Section 172(a). One amendment repeals the taxable income limitation for NOLs and the other modifies the rules relating to NOL carrybacks. Taxable Income Limitation Old Law: IRC Section 172(a) provides that the amount of the NOL deduction is…
In response to the ongoing pandemic, on March 13, 2020, President Trump declared the coronavirus or COVID-19, a national disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. This declaration put into play a little-known existing provision of the tax law –Section 139 of the Internal Revenue Code. Section 139 allows employers to assist employees during a federally declared disaster with “qualified disaster relief payments” that are tax-free to the employee and fully deductible to the employer. Employers wishing to aid employees impacted by COVID-19 should consider taking advantage of the Section 139 disaster relief provision by…