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

On June 25 the U.S. Supreme Court agreed to hear a case on whether the investment expenses of trusts are fully deductible or subject to a 2% floor. The Circuit Courts are in disagreement on this issue. The case is Michael J. Knight, Trustee of the William L. Rudkin Testamentary Trust v. Comm'r of Internal Revenue.

North Carolina is in the Fourth Circuit, which has held that the fees are subject to the 2% floor.  If the Supreme Court rules the other way, it will be a big benefit for beneficiaries of North Carolina trusts.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Today I came across a question and answer column on the Raleigh News and Observer website called "Ask Holly."  The answers are written by a Holly Nicholson, a Raleigh Certified Financial Planner who also has a law degree.  The person posing the question about avoiding probate and finding a good lawyer erroneously referred to revocable trusts as "reversible" trusts.  Ms. Nicholson counseled her to begin the attorney selection process by asking the lawyer about reversible trusts, and then consider using any lawyer who nicely explains that the term is actually "revocable" trusts.

I must respectfully disagree with Ms. Nicholson's recommendation.  I believe that it is best to educate oneself about estate planning terms and techniques before attempting to choose a qualifed lawyer.  Purposely acting ignorant serves no useful purpose, is deceptive, and is not a good way to start off what should be a relationship of mutual trust.  Any attorney worth hiring will be polite and patient regardless of how much or how little a prospective client knows about estate planning.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Do you have a dispute or other matter pending with the IRS and are tired of dealing with them over the phone?  There are a number of IRS offices in North Carolina

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Effective January 1, 2008, the "kiddie tax," which applies the parent's tax rate to children's unearned income over $1,700 (for 2007) will apply to dependent children under age 19 and dependent full-time college students under 24.  Prior to 2006, the tax only applied to children under 14, but it was raised to 18 in 2006.  See this article on Kiplinger.com for details and planning tips.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Gifting property can be an effective way to spend down assets for future Medicaid eligibility and to reduce estate tax liability. Many people are not aware, however, that unless an exclusion or exemption applies, one must file federal and state tax returns on all gifts of property. Failing to file returns and paying gift tax when required can result in hefty penalties and interest.   

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Here's another article from the National Care Planning Council:

Seniors Relocation and Real Estate Services

As people age, they often become overly attached to their homes and even though there may be compelling reasons to find other living arrangements, these folks will go to extreme lengths to remain in their homes.

Notwithstanding the affection for their dwellings, there is oftentimes undeniable pressure for seniors to move out and into a different living arrangement. Consider the following:

• The challenge of maintaining a yard and providing upkeep has become too great.
• There is a need for long term care that can't be handled in the home.
• The older person needs supervision that can't be provided in the home.
• The neighborhood has deteriorated and safety is a concern.
• There is a desire to be near children or grandchildren (70% of those 65+ live within 1 hour of a child).
• The home cannot accommodate disability needs.
• There is a need to avoid climbing stairs.
• Assets are tied up in the home and cash is needed through selling the property.
• Driving is no longer possible and available local transportation is not adequate.
• There is a desire for a warmer climate, a yearning for new vistas or a need for challenging new experiences.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last week the North Carolina Senate produced its version of the state budget, which included:

• Reducing the state sales tax and the top income tax rate each by 1/4 percentage point, eliminating the last of a 2001 increase in both taxes. This would bring the highest income tax rate down to 8%.  The top rate only applies to those with income over $120,000 per year. The House version of the budget did not reduce either.

        - While the sales tax cut would benefit everyone, a quarter percent would not provide significant relief for anyone.  A low-income person spending $10,000 annually on items subject to sales tax would only save $25 over the course of the year!  Likewise, the cut in the income tax will not produce appreciable savings for high income earners.  For someone with taxable income of $220,000 per year, there would be a savings of just $250.  A taxpayer with income of $150,000 would pay only $75 less.  Not that I'm complaining....

• No state version of the federal Earned Income Tax Credit and no funds to help counties pay their share of rising Medicaid costs. The House version did both.

• Email This
• Print
• Comments
• Trackbacks
• Share Link