North Carolina Estate Planning Blog : North Carolina Estate Planning Lawyer & Attorney : Trust Counsel, PA : Trust Administration : Serving Chapel Hill, Durham, Raleigh, Pittsboro, Orange County, Chatham County

Yesterday a client brought in a copy of this New Times Article by Jane Brody:  Medical Due Diligence: A Living Will Should Spell Out the Specifics.  As an elderly man, he was concerned that his wishes might not be respected under his North Carolina statutory living will.  He was right to be concerned.  North Carolina's standard form, entitled Declaration of a Desire for a Natural Death, contains only statements that "extraordinary means" for keeping one alive are not desired and allows a choice as to whether artificial nutrition and hydration should be withheld or discontinued.  There are no provisions for more detailed instructions.  In my opinion, the state should revise the form to allow much more specificity.  Many states have such forms.

Because of the limitations of the North Carolina statutory form, I often provide clients with a "Medical Directive" which is designed to meet the requirements of NC law, but allows one to specify whether certain procedures or medications are desired or not.  The Medical Directive is often used with the Living Will.

Finally, it is imperative that each person also have a Health Care Power of Attorney.  The Health Care Agent can give direction to health care providers regarding end-of-life care.

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From an article by Kay Bell on Bankrate.com:

It took federal lawmakers almost two years of debate, half a dozen stabs at earlier legislation and an end-of-session deadline to finally agree on a law designed to shore up company pension plans.

But buried in the 900-plus pages of the Pension Protection Act of 2006 are several tax provisions that will benefit individuals who do their own golden years' saving.

The law also contains welcome news for folks looking for ways to cover the high cost of college. The philanthropic, however, face some new, good and not-so-good donation guidelines.

The new pension law primarily makes changes to retirement plans, on both corporate and individual levels. But several provisions also provide tax breaks for, and call more tax examiner attention to, other areas that affect individual taxpayers. Click on the title of provisions 1 through 10 for the article text.

The 10 new tax provisions 1. Automatic enrollments 2. Investment advice 3. Refunds to retirement 4. Easier rollovers to Roths 5. Permanent IRA contribution levels 6. Saving the Saver's Credit 7. Tax-free 529 distributions 8. Proving donated goods' value 9. More record keeping 10. Giving away IRA money

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For a state-by-state comparison of income and sales taxes, check out this article on Bankrate.com

When someone who lives in a state with a income tax is about to sell a multi-million dollar piece of appreciated property located in an income tax free state (such as Florida), sometimes it makes sense to consider relocating, at least for a year or so, to that state.  But, the move would have to be a true change of domicile, involving a new drivers license, vehicle registration, voter registration, etc.

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Owning real estate in a self-directed IRA can seem like a great way to save for retirement.  However, I have found that most clients want to structure the ownership and/or management of the real estate in such a way that they will run afoul of the prohibited transactions rules.  Once they learn of the restrictions involved, they are not so keen on the idea.  Real estate or business ownership in an IRA can work, but knowledgeable tax counsel should be consulted.  Many attorneys and CPAs are not familiar with the laws regulating self-directed IRAs.

Check out this article by Lynn O'Shaughnessy: Sweat Equity in IRA Real Estate can be no-no

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For most engaged couples, the break-up of a marriage is farthest thing from their minds during the months prior to the wedding. However, those who have experienced divorce or death of a spouse, either directly or through a family member or close friend, know how difficult and complicated it can be to sort out details such as property division and spousal support. As a result, many couples today chose to create written contracts, called premarital or prenuptial agreements, prior to marriage.

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• Each personal and dependency exemption will be $3,400, up $100 from 2006.
  
• The new standard deduction will be $10,700 for married couples filing a joint return (up $400), $5,350 for singles and married individuals filing separately (up $200) and $7,850 for heads of household (up $300).
  
• Tax-bracket thresholds will increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket will be $63,700, up from $61,300 in 2006.

In 2007, for the first time, inflation adjustments will increase the income limits that apply to the retirement savings contributions credit, contributions to a Roth IRA and deductible contributions to a traditional IRA where the taxpayer or the taxpayer's spouse is covered by a retirement plan at work.    

Revenue Procedure 2006-53, containing a complete list of inflation adjustments, is on the IRS Web site and will appear in Internal Revenue Bulletin 2006-48, dated Nov. 27, 2006.

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From EstatePlanningLawFirms.com on November 6, 2006:

Washington D.C. – Congressman Ted Poe (TX-02) announced that the House of Representatives passed H.R. 5638, the Permanent Estate Tax Relief Act of 2006. This bill will make certain provisions in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) permanent. Without the passage of H.R. 5638, the estate tax repeal and all other provisions of EGTRRA would sunset on December 31, 2010. This would cause taxes placed on estates to revert back to their previous rates which were significantly higher. The current lower tax rate allows citizens who die to leave more to their beneficiaries, and less to the government. This is important to family owned businesses of all sizes, many were forced to sell their business because they couldn’t pay the taxes when the owner died.

“The old saying goes that the only two certainties in life are death and taxes. Under an estate or death tax, small farmers and family minded individuals who saved their whole lives to leave something to their children have to pay taxes, die, and then pay taxes again. It is unconscionable that the government punishes people by taxing them in life and in death. I urge the Senate to pass this bill quickly so that President Bush can sign it in to law,” Poe said.

Important Provisions of H.R. 5638:

1-Reunifies the estate, gift and generation-skipping transfer taxes - giving individuals greater flexibility to make estate planning decisions during life.

2-Increases the exemption amount to $5 million per person effective January 1, 2010.

3-Reduces the rate of tax on estates up to $25 million to the capital gains tax rate (15 percent).

4-Reduces the rate of tax on estates of $25 million or more to twice the capital gains rate (currently 30 percent).

5-Simplifies estate tax planning by allowing married couples to take full advantage of the $5 million exemption by carrying over any unused exemption to the surviving spouse.

Due to #5, advance estate tax planning would not be as important, and would obviate the need for credit-shelter (bypass) trusts in many cases.  Effectively, only couples with a net worth in excess of of $10 million would need to worry about estate taxes. 

Since the Senate appears to be Democrat-controlled now, the chances of this bill passing is somewhat less now that than before the election.  Prior estate tax relief has passed in the House, only to fail in the Senate. 

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A recent article by my associate, Rebecca Streamo, J.D:

Many of us have spent considerable time planning for the care of our spouse and or children at our deaths or in the event we become ill or incapacitated. However, since we usually assume we will outlive them, we often forget to provide for other important household members: our pets.

In order to ensure your pet is adequately provided for after your death or disability, you will likely need more than a promise from a friend or family member. Your chosen caregiver may not have the time or resources to follow through on the promise when their services are needed.

Fortunately, your estate plan can set aside money and include the instructions necessary to adequately provide for your pet in the event of your death or disability.       

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Developing a comprehensive estate plan requires a lot of thought and time, and sometimes a lot of money. It is not always a simple or easy task, so having the right advisor can make all the difference in the world. Most people do not have an established relationship with an estate planning attorney, or any lawyer, for that matter. How do you go about choosing the right attorney to help you implement an estate plan that will protect your family, preserve your assets, and possibly save hundreds of thousands of dollars in estate taxes?

The purpose of this article is to provide you with some guidance in choosing the right estate planning attorney for you.

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From the IRS Newswire:

IR-2006-168, Nov. 1, 2006

WASHINGTON - The Internal Revenue Service today issued the 2007 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning Jan. 1, 2007, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

48.5 cents per mile for business miles driven;
20 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service to a charitable organization.

The new rate for business miles compares to a rate of 44.5 cents per mile for 2006. The new rate for medical and moving purposes compares to 18 cents in 2006. The primary reasons for the higher rates were higher prices for vehicles and fuel during the year ending in October.

The standard mileage rates for business, medical and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile. Runzheimer International, an independent contractor, conducted the study for the IRS.

The mileage rate for charitable miles is set by statute.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously. Revenue Procedure 2006-49 contains additional information on these standard mileage rates.

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