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Tax and estate planning for Financial Planning Mcom sem 1 Delhi University

tax and estate planning for Financial Planning MCOM sem 1 Delhi University:- we will provide complete details of tax and estate planning for Financial Planning MCOM sem 1 Delhi University in this article.

tax and estate planning for Financial Planning MCOM sem 1 Delhi University

tax and estate planning for Financial Planning MCOM sem 1 Delhi University

tax and estate planning for Financial Planning Mcom sem 1 Delhi University

The Financial Planner’s Role in Estate Planning

After practicing financial planning for almost 25 years, I’ve learned that having estate-planning documents doesn’t always mean the estate planning goals are being accomplished. Usually, this is a result of not clarifying objectives before legal documents are drafted. To implement solid plans on behalf of your client, here are five issues to keep in mind.

Unnecessary Death Tax

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One of the most important things for a planner to check in this area is if a married couple is properly using a credit shelter trust when their assets exceed the estate death tax exclusion amount, which next year may be $1 million (if Congress doesn’t act). While the unlimited marital deduction protects widowed spouses when assets are passed, advisors need to keep later generations in mind. By working with a client in advance and recognizing potential asset challenges that come with death tax, advisors can use a credit shelter trust and protect heirs from future tax bombs on the state and federal level.

Unnecessary Probate Costs

Many experts claim that the average U.S. probate cost is 6 percent of the gross estate. This means it’s a percent of the assets, regardless of what the liabilities are. This can create unnecessary expenses, especially where leveraged property is involved. The most common thing that leads to probate is the titling of non-retirement assets with either a single name or joint tenancy. With such titling, when the last account owner dies, typically those assets will go through probate.

Financial planners should be aware of such issues and make sure to point out potential titling problems. Be sure to pass the client to an attorney, who would then very likely draft a revocable living trust to make sure assets are properly re-titled.

Properly Titled Retirement Account Beneficiaries

This is an area that’s often overlooked when an estate plan is drafted. According to a number of recent studies, less than 40 percent of retirement accounts use secondary beneficiaries. In this type of a situation, if the primary beneficiary pre-deceased the retirement plan owner and the beneficiaries weren’t updated, which is often the case, those assets would be subject to probate before they would go to the heirs.

Also, there are at least five common types of beneficiaries that can be used on a retirement account:  a spouse, children, a charity, a trust or a non-family member. The rules for each group are different and, therefore, require altered strategies to minimize unnecessary costs and potentially wasted time for heirs.

Important Note – Preparing for MCom?
CAKART provides Indias top faculty each subject video classes and lectures – online & in Pen Drive/ DVD – at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
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Assets in Other States

Make sure that all assets owned in other states are using the correct legal documents to insure those assets will get to the right heirs in a timely manner. Trusts are valid under state law, not federal law. If an individual drafts the trust in the state he lives in and he titles property owned in other states into that trust, the trust may be invalid because of different state laws and, therefore, subject the property to probate. It’s not the job of the planner to decipher all the state laws, but to identify the problem and get the client to an estate-planning attorney familiar with a particular state’s laws.

Partnership Between Planner and Attorney

Recognize the value in a strong partnership between financial planner and estate planning attorney.  It’s vital that clients have not only a strong estate plan, but have their finances secured as well. Financial planners and advisors should work hand in hand with estate-planning attorneys in certain areas, as it’s beneficial to the client’s financial wellbeing. Often, attorneys may be reluctant to refer clients to a financial planning firm, due to lack of relationship or experience. However, when determining which financial firm to partner with, attorneys should:

  • Check a financial planner’s background to make sure he has a legitimate designation, such as a ChFC or CFP.
  • Make sure the planner has at least five years of experience.
  • Make sure the average assets under management for each planner is at least $50 million, to ensure reasonable assurance that the firm’s service is in demand.

tax and estate planning for Financial Planning MCOM sem 1 Delhi University

The estate tax is a type of “death tax”, whereby taxes are imposed on the right to transfer or receive property at the property owner’s death. This tax can come in the form of:

  • Inheritance tax
  • Estate tax, which is assessed on everything you own or have interest at the time of your death

The inheritance tax is generally imposed by some states on the recipient of inherited property as a right to receive wealth, while the estate tax, which is imposed at the federal level and in some states, is imposed on the decedent’s estate for the right to transfer property. (Tax-Efficient Wealth Transfer can help higher net worth individuals reduce their estate taxes.)

The federal unified-transfer-tax system, which links the federal gift tax to the estate tax system, requires that all taxable gifts must be added to the taxable estate before calculating the estate tax due or applying any appropriate credits. In other words, if a decedent made taxable gifts above the annual exemption amounts of $12,000 per year (for 2008) it would have to be applied against their applicable exclusion amount, which is $2 million.

In general, a federal estate tax Form 706 must be filed for all decedents who are U.S. citizens or residents. The estate tax liability amount on Form 706 will be the total gross estate plus adjustable taxable gifts equaling or exceeding the amount of the applicable credit equivalent for the year of death. The executor of the estate is responsible for paying the tax.

tax and estate planning for Financial Planning MCOM sem 1 Delhi University

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About Author: vinay karwasra

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