Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

Year-End Tax Planning

Annual Exclusion Gifts. The gift tax annual exclusion is $14,000 for 2016, and stays the same for 2017. You can make gifts of this amount to each of any number of people in a calendar year and not have to file a gift tax return, and the gifts will not use up part of your estate tax exemption. You can also make gifts of an unlimited amount by directly paying a donee's medical expenses to the provider, or tuition to the educational institution. If you make the gift by a check, the donee must deposit the check and the amount must clear your account prior to the end of the year.

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Is It Time to Update Your Estate Plan?

We recommend that our clients review their estate plan every few years to make sure that it remains current. Here is a list of “life events” and other things that should trigger a review of your estate plan.

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House Fails to Pass Charitable Extender Bill

On December 11, the U.S. House of Representatives failed to pass the "Supporting America's Charities Act" that would have made permanent the ability of a taxpayer at least age 70 1/2 to make a direct charitable contribution from his or her IRA.  This provision expired at the end of 2013.  A majority of representatives voted for it, but House rules required a 2/3 vote.  The President had indicated his intention to veto the bill because it did not include any revenue provisions to offset the deductions.

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House Passes "Permanent" Bills as Opposed to Extenders

Congress did not pass an extension of the opportunity for taxpayers age 70-1/2 and older to contribute up to $100,000 from an IRA directly to charity, so that income exclusion expired at the end of 2013. On May 29, 2014, the House passed H.R. 4619 (The "Permanent IRA Charitable Contribution Act of 2014") that would make that income exclusion permanent. In addition, the House also passed H.R. 3134 (The "Charitable Giving Extension Act") which would allow an individual taxpayer to deduct charitable contributions made after December 31, but before the due date of the individual's return; and H.R. 2807 (The "Conservation Easement Incentive Act of 2013") that would make permanent some of the liberalized rules for deducting the value of charitable contributions of conservation easements (that also expired at the end of 2013). Tax extender bills have stalled in the Senate, so it is unknown whether this will pass in time to permit taxpayers to make this kind of contribution in 2014.

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1657 Hits

Inherited IRA Not Protected From Bankruptcy

In Clark v. Rameker, 113 AFTR 2d 2014-889 (June 12, 2014), the U.S. Supreme Court unanimously ruled that inherited IRAs do not qualify for the bankruptcy exemption that applies to a debtor's own retirement accounts. Some states have their own exemptions from creditor claims that may include inherited IRAs, but the debtors in this state does not. The Supreme Court's decision was based solely on the federal exemptions in the bankruptcy code. In C.R.S. §13-54-102, Colorado has a list of state exemptions for protection from creditor claims. That list includes "property, including funds, held in or payable from any pension or retirement plan or deferred compensation plan..., any individual retirement account, as defined in 26 U.S.C. Sec. 408, any Roth individual retirement account as defined in 26 U.S.C. Sec. 408A..." In 2010, Laurie Hunter proposed in the Statutory Revisions Committee of the Trust & Estate Section of the Colorado Bar Association that Colorado's list of exemptions be clarified to specifically include a reference to inherited IRAs, as a result of conflicting decisions in federal Circuit Courts. Colorado had earlier amended this statute to include the specific reference to Roth IRAs quoted above. That proposal was not adopted by SRC, although a number of members thought our statute was broad enough to include inherited IRAs, which are defined in 26 U.S.C. Sec. 408(d)(3)(C) (a part of Section 408 mentioned with respect to IRAs). However, if creditor protection is important for beneficiaries, it may be preferable to have IRAs payable to trusts created for the benefit of those beneficiaries instead of payable outright to individuals who then "roll them over" into inherited IRAs. If a surviving spouse rolls over an IRA to his or her own IRA, then it should be protected as a part of that spouse's own retirement account. Other individual beneficiaries do not have that option.

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The Charitable IRA Rollover is back for 2012 and 2013!

The American Taxpayer Relief Act of 2012 (ATRA) enacted January 2, 2013, extended the IRA charitable rollover rules which were originally put in place in 2006, and expired at the end of 2011. This provision allows individuals who are 70 ½ or older to transfer (or "rollover") up to $100,000 per year from their IRAs to most charities if the transfer is a "qualified charitable distribution" and certain rules are followed. Not only can taxpayers use the charitable rollover for 2013 distributions, but distributions from IRAs made after November 20, 2012 and before January 31, 2013 may be treated as a charitable IRA rollover for 2012, if that distribution is made in cash to charity before January 31, 2013. Thus, you could give up to $200,000 to charity from your IRA in 2013 (with $100,000 treated as given in 2012) if you act quickly. Contact us or your IRA plan administrator to learn more.
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