Stewart Law, P.A., a boutique corporate, trusts, and estates firm in Charlotte, North Carolina is proud to announce that Founding Partner, Todd A. Stewart has been recognized as Best Lawyers in America® 2020 in Charlotte, NC. The Best Lawyers in America® program is the oldest and among the most respected attorney ranking services in the world. Todd was selected in the trusts and estates category. Attorneys named to Best Lawyers lists are recognized by their peers in the legal industry for their professional excellence in specific practice areas. To read their recently released press release click here.
Author: tstewartlaw.com
Dealing With Incapacity
We receive more calls these days from clients who have parents, spouses or other loved ones dealing with temporary and permanent incapacity. In cases where the individual does not have an updated estate plan, these can be challenging. There are court-supervised processes that enable appointed individuals to act on behalf of incapacitated persons. The problems with these proceedings are many. First, the initial part, determining incapacity, can be trying as it is a public process designed to protect the individual who may be incapacitated. Normally multiple attorneys are involved to represent all the parties and interests in the case.
In addition, even after a guardian is appointed, the court stays involved in supervision and this often requires participation of lawyers and other professionals, thus entailing ongoing costs. Not a pretty picture, but it does allow the person’s assets and affairs to be dealt with by a competent individual.
A much brighter picture is available to those who engage in at least some basic planning. The key documents for solid outcomes, which are common in many of the plans we produce every month, are: Revocable Living Trusts, Financial Powers of Attorney and Health Care Powers of Attorney. The latter two, the powers of attorney, allow a person (the principal) to appoint another (the agent) to bind them legally. In both cases, you have a good deal of flexibility in customizing the authorization you give the agent. For example, there may be certain cases or times when you want the agent to act or you may want to limit their ability to authorize certain types of treatment for you.
While not necessarily required to deal with incapacities, a Revocable Living Trust can give your chosen successor the ability to deal with your assets in a fairly seamless manner. This is true because the Trust can become the owner of the asset at any point after the plan is executed and this means that even after the incapacity, the same owner is still speaking for the asset. In other words, the Trust owns the asset before and after the incapacity. Things are different after the incapacity only in the sense that the person who controls the trust (the Trustee) has changed according to the terms of the document. Normally, such terms will set out a private procedure to determine incapacity (e.g., an exam by the family physician of the person who established the trust.) The fact that asset ownership stays in the same hands throughout the incapacity can facilitate smooth administration for the persons involved.
If you are interested in learning more about any of these documents or are dealing with issues such as the ones referenced here, please give us a call at (704) 552-5160 or send us an email.
*Intended as general guidance only and not as legal advice.
Asset Protection And Retirement Accounts
Divorce is detrimental in a number of emotional and financial ways and court cases continue to add to the list. The key question in a recent case was whether a person’s interest in his ex-spouse’s retirement accounts (e.g., through Qualified Domestic Relations Orders or QDROs) are protected as “retirement funds” under the federal bankruptcy code. This court again decided they are not protected. One message is that even though ERISA plans can provide certain bankruptcy protection for “participants” of retirement plans, this is not necessarily extended to alternate payees, such as beneficiaries who inherit them or ex-spouses.
Planning Point: In some cases, trusts can be used to help add protection for the benefits.
*Intended as general guidance only and not as legal advice.
State Tax on Trust Income
The U.S. Supreme Court recently handed down an important decision declaring North Carolina’s taxation of certain trusts unconstitutional. The name of the case is: NC Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust. If you are a beneficiary of an out-of-state trust that was subject to taxation merely because a portion of the trust income was “for the benefit of” a North Carolina resident, then this decision likely impacts you, or at least the trust of which you are a beneficiary. In essence, the U.S. Supreme Court said that merely having a beneficiary in this state does not constitute a sufficient connection with North Carolina to justify it taxing the trust’s income.
If you have an interest in a trust like this, you’ll want to talk with the trust’s CPA about amending prior-year tax returns and seeking refunds. In addition, the case presents opportunities to increase family wealth going forward. For new trusts, and in some cases for existing trusts with North Carolina beneficiaries, you may be able to reduce or eliminate state income taxation with proper planning.
If you would like to discuss the impact Kaestner may have on your existing trusts or estate plan, please contact us.
*Intended as general guidance only and not as legal advice.
Q&A: Qualified Opportunity Zones
Why would I be interested in Qualified Opportunity Zones (QOZs)?
This new tax provision was created to spur investment in certain under-performing economic areas known as Qualified Opportunity Zones. You can find a map of North Carolina’s zones here.
Investing in a QOZ is one of the few opportunities in the tax code to defer (and possibly eliminate) tax on gains. Thus, you can put the whole amount of your proceeds from a sale to work rather than the proceeds less income taxes.
How long can I defer paying taxes on my gain?
Until you sell or exchange your interest in the fund that invests in the QOZ or until the deferral period ends on December 31, 2026, whichever comes first.
Besides deferral, are there other tax advantages?
Yes – 10% of the gain will be completely eliminated (not just deferred) if your eligible investment is held for at least 5 years. If you hold for 7 years, then another 5% of the deferred gain will be eliminated. After holding the investment for 10 years, tax on appreciation of your investment in the fund is eliminated, though at this point the investment would need to be sold or exchanged before December 31, 2047 to achieve this.
What gains can be deferred?
Capital gains, such as gains from the sale of stocks, bonds, and mutual funds. Individuals selling businesses or highly appreciated publicly-held stocks will likely be among those most often looking to explore this tax incentive.
If you have any questions regarding Qualified Opportunity Zones, or if you are interested in techniques to defer, or possibly eliminate, income tax on certain gains from sales, please contact us to speak with one of our attorneys.
*Intended as general guidance only and not as legal advice.
High-Level Negotiation
By Todd A. Stewart, Founding Partner
Recently, Joe Hernandez talked with our Vistage group about “High Level Negotiation.” One key takeaway for me runs counter to something that you hear a lot. His point is that you should use anchoring (i.e., the idea that people rely heavily on an idea or number they’ve heard recently) to your benefit and be the person who makes the first offer. Our informal class exercise supported this and the final negotiated value for most groups clustered around the first offer, whether it was near $20,000 or three times this amount.
For more information: https://www.lionsharenegotiations.com/.
*Intended as general guidance only and not as legal advice.